S-1/A

As filed with the Securities and Exchange Commission on October 12, 2021

Registration No. 333-237634

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

PRE-EFFECTIVE AMENDMENT NO. 7 TO

Form S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

SIMPLICITY ESPORTS AND GAMING COMPANY

(Exact name of registrant as specified in its charter)

Delaware	6770	82-1231127
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

7000 W. Palmetto Park Rd., Suite 505

Boca Raton, FL 33433

Telephone: (855) 345-9467

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Roman Franklin

Chief Executive Officer

625 N. Flagler Drive, Suite 600

West Palm Beach, FL 33401

Telephone: (855) 345-9467

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Laura Anthony, Esq. Craig D. Linder, Esq. Anthony L.G., PLLC 625 N. Flagler Drive, Suite 600 West Palm Beach, Florida 33401 Telephone: (561) 514-0936 Steven Uslaner, Esq. Mark Coldwell, Esq. Littman Krooks LLP 655 Third Avenue, 20^th Floor New York, New York 10017 Telephone: (212) 490-2020

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check market if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)			Amount of Registration Fee
Units(2)	$	11,500,000		$	1,493
Common stock, par value $0.0001 per share, included in the units		—	(4)		—	(4)
Warrants to purchase common stock, par value $0.0001 per share, included in the units		—	(4)		—	(4)
Common stock, par value $0.0001 per share, underlying the warrants included in the units(3)	$	12,650,000		$	1,642
Representative’s Warrant to purchase common stock	$	—	(5)	$	—	(5)
Common stock issuable upon exercise of Representative’s Warrants to purchase common stock (6)	$	1,851,500		$	240
TOTAL	$	26,001,500		$	3,375	(7)

(1)	Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended (the “Securities Act”).
(2)	Each unit consists of one share of common stock, par value $0.0001 per share, and one warrant to purchase one share of common stock, par value $0.0001 per share. Includes shares of common stock and/or warrants to purchase shares of common stock, which may be issued upon exercise of a 45-day option granted to the underwriters to cover over-allotments, if any.
(3)	The warrants are exercisable at a per share exercise price equal to 110% of the public offering price per share of common stock. The proposed maximum aggregate public offering price of the shares of common stock issuable upon exercise of the warrants was calculated to be $12,650,000 (which is 110% of $11,500,000 since each investor will receive a warrant to purchase one share of common stock for each share of common stock purchased in this offering). Pursuant to Rule 416, the registrant is also registering an indeterminate number of additional shares of common stock that are issuable by reason of the anti-dilution provisions of the warrants.
(4)	Included in the price of the units. No fee required pursuant to Rule 457(g) under the Securities Act.
(5)	No fee required pursuant to Rule 457(g) under the Securities Act.
(6)	The Representative’s Warrants are exercisable at a per share exercise price equal to 115% of the public offering price per share. As estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the representative’s warrants is $1,851,500, which is equal to 115% of $1,610,000 (7% of $11,500,000 of shares of common stock sold in this offering and 7% of $11,500,000 of shares of common stock underlying the Warrants sold in this offering). Pursuant to Rule 416, the registrant is also registering an indeterminate number of additional shares of common stock that are issuable by reason of the anti-dilution provisions of the Representative’s Warrants.
(7)	Previously paid $3,375.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a) may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities, in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED OCTOBER 12, 2021

1,111,111 Units

Each Unit Consisting of One Share of Common Stock and

One Warrant to Purchase One Share of Common Stock

We are offering 1,111,111 units of Simplicity Esports and Gaming Company, a Delaware corporation. For purposes of this prospectus, the assumed public offering price per unit is $9.00, the last reported sale price for our common stock as reported on OTCQB on October 8, 2021. Each unit consists of one share of our common stock, par value $0.0001 per share, and one warrant to purchase one share of our common stock at an exercise price per share of $9.90 (110% of the assumed public offering price of one unit in this offering). The warrants will expire on the five-year anniversary of the initial exercise date. The units will have no stand-alone rights and will not be issued or certificated as stand-alone securities. Purchasers will receive only shares of common stock and warrants. The shares of common stock and warrants may be transferred separately, immediately upon issuance. The offering also includes the shares of common stock issuable from time to time upon exercise of the warrants.

Our common stock is currently quoted on the OTCQB tier of the OTC Market Group, Inc. under the symbol “WINR.” The last reported sale price of our common stock on October 8, 2021 was $9.00 per share. Our warrants issued in connection with our initial public offering in August 2017 are currently listed on, and will continue to be listed on, OTCQB under the symbol “WINRW.” The last reported sale price of our warrants on October 8, 2021 was $0.155 per warrant. At present, there is a very limited market for our common stock and warrants. We have applied to list our common stock and warrants (forming part of the units offered hereby) on The Nasdaq Capital Market (“Nasdaq Capital Market”) under the symbols “WINR” and “WINRZ,” respectively. There is no assurance that our listing application will be approved by the Nasdaq Capital Market. The approval of our listing on the Nasdaq Capital Market is a condition of closing this offering.

The actual offering price per unit will be as determined among Maxim Group LLC and Joseph Gunnar & Co. LLC (the “Underwriters”) and us based on market conditions at the time of pricing and may be issued at a discount to the current market price of our common stock. Factors to be considered will include our historical performance and capital structure, prevailing market conditions and overall assessment of our business. The market price of our common stock will be one of several factors to be considered in determining the actual offering price. Therefore, the recent market price used throughout this prospectus may not be indicative of the final offering price.

We are also seeking to register the issuance of warrants to purchase 178,888 shares of Common Stock (the “Representative’s Warrants”) to the Underwriters (assuming the exercise of the over-allotment option by the Underwriters in full) as well as the 178,888 shares of Common Stock issuable upon exercise by the Underwriters of the Representative’s Warrants at an exercise price of $10.35 per share (115% of public offering price).

We are an “emerging growth company” under applicable federal securities laws and are subject to reduced public company reporting requirements.

The 1,111,111 unit amount referenced above is based on the units being sold at the estimated offering price of $9.00 per unit and such unit amount shall change if the actual unit price is less than or more than $9.00 in such manner to maintain the gross proceeds at $10,000,000. For instance, if the unit price is $8.00 per unit, the number of units to be sold in the offering shall be 1,250,000.

Investing in our securities involves a high degree of risk. See “Risk Factors” on page 10 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

	Per Unit	Total
Public offering price (1)	$	$
Underwriting discounts and commissions (2)	$	$
Proceeds, before expenses, to us (3)	$	$

(1)	The public offering price and underwriting discount and commissions in respect of each unit correspond to a public offering price per share of common stock of $               and a public offering price per accompanying warrant of $0.01.
(2)	This table depicts broker-dealer commissions of 7.00% of the gross offering proceeds. Underwriting discounts and commissions do not include a non-accountable expense allowance equal to 1.0% of the public offering price payable to Maxim Group LLC, the representative (“Representative”) of the Underwriters. See “Underwriting” beginning on page 104 for disclosure regarding compensation payable to the Underwriters by us.
(3)	We estimate the total expenses of this offering will be approximately $474,107. Assumes no exercise of the over-allotment option we have granted to the Underwriter as described below.

We have granted the Representative of the Underwriters an option for a period of 45 days from the date of this prospectus to purchase up to an additional 166,666 shares of common stock and/or warrants to purchase 166,666 shares of common stock at the public offering price less the underwriting discount and commissions solely to cover over-allotments, if any.

The Underwriters expect to deliver our securities to purchasers in the offering on or about , 2021.

Lead Book-Running Manager	Co-Book-Running Manager
Maxim Group LLC	Joseph Gunnar & Co. LLC

The date of this prospectus is                            , 2021

TABLE OF CONTENTS

	Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	ii
INDUSTRY AND MARKET DATA	ii
TRADEMARKS AND COPYRIGHTS	ii
PROSPECTUS SUMMARY	1
RISK FACTORS	10
USE OF PROCEEDS	35
DIVIDEND POLICY	35
CAPITALIZATION	36
MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	36
DILUTION	45
DESCRIPTION OF BUSINESS	46
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	68
MANAGEMENT	78
EXECUTIVE COMPENSATION	84
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	99
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	101
UNDERWRITING	104
DESCRIPTION OF SECURITIES	109
LEGAL MATTERS	115
EXPERTS	115
DISCLOSURE OF COMMISSION’S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES	115
WHERE YOU CAN FIND ADDITIONAL INFORMATION	115
INDEX TO FINANCIAL STATEMENTS	F-1

No dealer, salesperson or other individual has been authorized to give any information or to make any representation other than those contained in this prospectus in connection with the offer made by this prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by us. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in our affairs or that information contained herein is correct as of any time subsequent to the date hereof.

For investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside the United States.

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Cautionary Note Regarding Forward-Looking Statements

This prospectus contains forward-looking statements. Specifically, forward-looking statements may include statements relating to:

● our future financial performance;

● changes in the market for our products and services;

● our expansion plans and opportunities; and

● other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.

These forward-looking statements are based on information available as of the date of this prospectus and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

● the level of demand for our products and services;

● competition in our markets;

● our ability to grow and manage growth profitably;

● our ability to access additional capital;

● changes in applicable laws or regulations;

● our ability to attract and retain qualified personnel;

● the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and

● other risks and uncertainties indicated in this prospectus, including those under “Risk Factors.”

INDUSTRY AND MARKET DATA

We are responsible for the disclosure in this prospectus. However, this prospectus includes industry data that we obtained from internal surveys, market research, publicly available information and industry publications. The market research, publicly available information and industry publications that we use generally state that the information contained therein has been obtained from sources believed to be reliable. The information therein represents the most recently available data from the relevant sources and publications and we believe remains reliable. We did not fund and are not otherwise affiliated with any of the sources cited in this prospectus. Forward-looking information obtained from these sources is subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this prospectus.

TRADEMARKS AND COPYRIGHTS

We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products and the formulations for such products. This prospectus may also contain trademarks, service marks and trade names of other companies, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and should not be read to, imply a relationship with or endorsement or sponsorship of us. Solely for convenience, some of the copyrights, trade names and trademarks referred to in this prospectus are listed without their ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade names and trademarks. All other trademarks are the property of their respective owners.

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PROSPECTUS SUMMARY

This summary highlights certain information about us, this offering, and selected information contained in this prospectus. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in our Units. For a more complete understanding of the Company and this offering, we encourage you to read and consider the more detailed information in this prospectus, including “Risk Factors” and the financial statements and related notes. Unless the context otherwise requires, “we,” “us,” “our,” or “the Company” refers to “Simplicity Esports and Gaming Company,” a Delaware corporation, and its consolidated subsidiaries. “Simplicity Esports LLC” means our wholly owned subsidiary, Simplicity Esports, LLC, a Florida limited liability company, and its consolidated subsidiaries. “PLAYlive” means our wholly owned subsidiary PLAYlive Nation, Inc., a Delaware corporation and its consolidated subsidiaries. “Simplicity One” means our 76% owned subsidiary Simplicity One Brasil Ltda, a Brazilian limited liability company and its consolidated subsidiaries.

Unless otherwise noted, the share and per share information in this prospectus reflects a reverse stock split of the outstanding common stock of the Company at a one for eight (1-for-8) ratio, which was effected on November 20, 2020.

Industry Overview

Esports is the competitive playing of video games by amateur and professional teams for cash prizes. Esports typically takes the form of organized, multiplayer video games that include real-time strategy, fighting, first-person shooter, and multiplayer online battle arena games. As of October 12, 2021, the three largest selling esports games are Dota 2®, League of Legends® (both multiplayer online battle arena games) and Counter Strike: Global Offensive® (a first-person shooter game). Other popular games include SMITE®, StarCraft II®, Call of Duty®¸ Heroes of the Storm®, Hearthstone® and Fortnite®. Most major professional esports events and a wide range of amateur esports events are broadcast live via streaming services including twitch.tv, azubu.tv, ustream.tv and youtube.com. Esports also includes games which can be played, primarily by amateurs, in multiplayer competitions on the Sony PlayStation®, Microsoft Xbox® and WII Nintendo® systems.

Although official competitions have long been a part of video game culture, participation and spectatorship of such events have seen a global surge in popularity over the last few years with the rapid growth of online streaming. The advent of online streaming technology has turned esports into a global industry that includes professional players and teams competing in major events that are simultaneously watched in person in stadiums, and by online viewers, which regularly exceed 1,000,000 viewers for major tournaments. According to Business Insider, over 100 million viewers saw the 2019 League of Legends® World Championships in person and online. CNBC reported in April 2019 that League of Legends® World Championships attract more viewers than the Super Bowl. Much like how there is a worldwide gaming market for the sports industry, there has now developed a worldwide gaming market for the esports industry. The impact has been so significant that many video game developers are now building features into their games designed to facilitate competition.

According to Newzoo, a global leader in esports, games and mobile intelligence, the total global esports audience is projected to grow to 474 million in 2021, with an anticipated 27.5 million American gamers, and such global audience is expected to reach 577 million by 2024. In addition, according to Newzoo, esports produced over $947 million in 2020 revenue and are projected to reach $1.08 billion in 2021 and $1.617 billion in 2024. Esports enthusiasts, which are people who watch professional esports content at least once a month, are expected to reach 234 million of the audience total in 2021, up from 215 million in 2020. With a compound annual growth rate (“CAGR”) (2019-2024) of +7.7%, this number is expected to reach almost 286 million in 2024. The global average revenue per esports enthusiast, which includes not only gaming revenue, but also sponsorships advertising and all other esports related revenues, is projected to reach $4.63 in 2021, and is projected to jump to $5.25 in 2022 after more live events are restored. The number of occasional esports viewers, (people who watch professional esports content less than once a month), is expected to reach 240 million in 2021, up from 220.5 million in 2020, and is projected to grow to surpass 291 million in 2024. According to Newtech Mag, China and the U.S. have the largest populations of esports fans, with Brazil ranking first in Latin America, which is the fastest growing gaming market, and third globally, with 20 million fans. The increasing prominence of esports as a mainstream entertainment industry is driving the growth in awareness in most regions. Audience and awareness growth in the emerging regions of Latin America, Middle East and Africa is largely driven by improving IT infrastructure and urbanization. According to estimates by PwC, Latin America is one of the fastest-rising regions for revenue growth. PwC estimates esports revenue in Latin America to rise from $18 million in 2019 to $42 million by 2023. We believe the rise of new franchises, such as Player Unknown’s Battlegrounds® or PubG®, is an important global growth factor as the influx of millennials should continue to drive the growth of the esports industry’s audience and in turn, the esports gaming industry.

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In 2019, globally there were 885 major esports events that generated an estimated $56.3 million in ticket revenues. The total prize money of all esports events held in 2019 reached $167.4 million, a slight increase from $150.8 million in 2018. The League of Legends® World Championship was 2020’s biggest tournament by live viewership hours on Twitch and YouTube, with 91.9 million hours. It also produced $1.9 million in ticket revenues. League of Legends Champions Korea Sumer was the most-watched league by live viewership hours on Twitch and YouTube, generating 53.9 million hours. A report by Forbes estimates that the top 5 esports teams had 2020 revenues of between $16 million and $45 million and were valued at between $190 million and $410 million.

Business Overview

We are a global esports organization, that is capitalizing on the growth in esports through three business units, Simplicity One Brasil Ltda (“Simplicity One”), Simplicity Esports, LLC (“Simplicity Esports LLC”) and PLAYlive Nation, Inc. (“PLAYlive”). We believe that we are the only Securities and Exchange Commission (“SEC”) reporting, completely integrated-esports company that owns a League of Legends franchise. Additionally, we believe we have the largest network of corporate and franchisee owned esports gaming centers in North America.

Our Esports Teams

We own and manage seven professional esports teams domestically and internationally. Revenue is generated from prize winnings, corporate sponsorships, advertising, league subsidy payments and potential league revenue sharing payments from the publishers of video games.

Domestic Esports Teams – Simplicity Esports LLC

Through our wholly owned subsidiary, Simplicity Esports LLC, we own and manage multiple professional esports teams competing in games such as Heroes of the Storm. We are committed to growing and enhancing the esports industry, fostering the development of amateurs to compete professionally and signing established professional gamers to support their paths to greater success.

International Esports Team - Simplicity One

Since January 2020, through our 76% owned subsidiary Simplicity One, we manage Flamengo eSports, one of the leading Brazilian League of Legends® teams competing in the top tier league CBLoL. CBLoL was the most talked about esports league in the world, on Twitter for the first half of 2021, with Call of Duty League and Overwatch League ranking 2^nd and 3^rd, respectively. Flamengo eSports was established in 2017 as the Esports division of Clube de Regatas do Flamengo, a successful Brazilian sports organization, with over 30 million followers across social media accounts, known for its world-famous soccer team. Flamengo eSports’ League of Legends® team won the CBLoL Championship in September 2019, which qualified the team to compete at the 2019 League of Legends® World Championship in Europe as one of 24 teams from 13 different regions around the world. Flamengo Esports @flaesports was ranked as the 6th most tweeted about esports organization in the world, ahead of Team Liquid and Cloud 9, ranking 7th and 10^th, respectively, for the first half of 2021.

Online Tournaments

In response to demand from customers for online esports tournaments which was in all likelihood triggered by the social distancing protocols attendant to the COVID-19 pandemic, we introduced in March 2020 an initiative of online esports tournaments. Since March 2020, through our wholly owned subsidiary, Simplicity Esports LLC, we have been holding online esports tournaments in the United States. In addition, we commenced promoting these periodic tournaments via text messages to our database of over 400,000 paying esports gaming center customers, which we acquired in our acquisition of PLAYlive. If we can convert merely 1% of these existing customers from the PLAYlive database to play in our paid online tournaments, we anticipate this business unit may generate approximately $1 million in annual revenues. At a 5% conversion rate, this business segment may generate approximately $5 million in annual revenue. Management also intends to sell sponsorship and marketing activations for these online tournaments which would create additional revenue. We also announced our initiative to offer play at home online tournaments in Brazil. These tournaments are a way for us to engage with our customer base from home during periods of required social distancing or quarantine.

Our Gaming Centers

As of August 31, 2021, we have 28 operational locations (16 corporate locations and 12 franchise locations), through our subsidiaries throughout the U.S., giving casual gamers the opportunity to play in a social setting with other members of the gaming community. In addition, aspiring and established professional gamers have an opportunity to compete in local and national esports tournaments held in our gaming centers for prizes, notoriety, and potential contracts to play for one of our professional esports teams. In this business unit, revenue is generated from franchise royalties, the sale of game time, memberships, tournament entry fees, birthday party events, corporate party events, concessions and gaming-related merchandise.

Our business plan encompasses a brick and click physical and digital approach to further recognize revenue from all verticals, which we believe to be unique in the industry. The physical centers, together with our esports teams, lifestyle brand and marketing campaigns offer opportunities for additional revenue via strategic partnerships with both endemic and non-endemic brands. Our ultimate goal is to further engage a diverse fan base with a 360-degree approach driving traffic to both our digital platform, tournaments (online and in-person) and physical real estate to maximize the monetization opportunities with these relationships. In addition, we have proprietary intellectual capital, fan engagement strategies and brand development blueprints which complement our publicly available information.

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Optimally, the esports gaming centers of Simplicity Esports LLC (“Simplicity Esports Gaming Centers”) will measure between 2,000 and 4,000 square feet, with dozens of gaming stations. The Simplicity Esports Gaming Centers will feature cutting edge technology, futuristic aesthetic décor and dynamic high-speed gaming equipment. We believe our brick-and-click strategy will present attractive opportunities for sponsors and advertisers to connect with our audience, creating an intriguing monetization opportunity for sponsors and advertisers. Currently our company owned stores operate in approximately 40,000 square feet of retail space in desirable, high traffic locations.

Creating content that engages fans, sponsors and developers, while promoting our brand is one of our primary goals. In August 2021, we announced a partnership with Television Korea 24 (“  ESTV”) to provide esports and gaming content for their 24-7 live linear channel around the world. ESTV can be viewed in over 45 countries including the U.S. and Brazil. We seek to reach a broad demographic encompassing the casual, amateur and professional gaming community. Our philosophy is to enhance our footprint for both endemic and non-endemic partnerships. We believe we possess a deep perception of our markets and understand the new age of branding while maintaining authenticity to the gaming community that comprises our fanbase.

As a result of COVID-19 (discussed below), all of our corporate and franchised Simplicity Gaming Centers were closed effective April 1, 2020. We commenced reopening Simplicity Gaming Centers on May 1, 2020 and have since reopened all 16 corporate and 12 franchised Simplicity Gaming Centers as of August 31, 2021, the majority of which are operating at restricted capacity based on local COVID-19 regulations. See “Risk Factors—Public health epidemics or outbreaks, such as COVID-19, could materially and adversely impact our business.”

Corporate Gaming Centers

As of August 31, 2021, through our subsidiary entities, we currently operate 16 corporate-owned retail Simplicity Esports Gaming Centers, three of which were acquired during the fiscal year ended May 31, 2021 and one of which was acquired in the first fiscal quarter ended August 31, 2021. . Furthermore, we have engaged a national tenant representation real estate broker to assist in the strategic planning and negotiations for our future Simplicity Esports Gaming Center locations. We contemplate that new Simplicity Esports Gaming Centers will be funded by us as well as a combination of tenant improvement allowances from landlords and sponsorships. The Company intends to continue the expansion of its corporate owned esports gaming center footprint through the buildout of new esports gaming centers. The disruptions in commercial real estate caused by COVID-19 lockdowns have allowed the Company to strengthen its existing relationships with national landlords by signing new locations with a percentage of gross rent lease structures. The locations will range between 2,000 and 4,000 sq ft and be primarily located inside of shopping malls.

As announced in June 2020, we are in discussions with commercial property owners regarding their desire to have us open 7,000 to 12,000 square foot arenas at their properties. There are multiple locations available to us with a percentage of gross sales rent lease structure (as opposed to fixed rent payments), and construction funds offered by the landlord to assist with the build out and equipping of our planned arenas. These arenas are planned as hubs in our hub and spoke model that will see smaller corporate and franchisee owned gaming centers as spokes connected to Arenas as hubs for larger events and tournaments.

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Franchised Gaming Centers

Due to interest from potential franchisees, in 2019 we launched a franchising program to accelerate the expansion of our planned nationwide footprint. We sell specific franchise territories, through our wholly owned subsidiary PLAYlive, and assist with the establishment and buildout of esports gaming centers to potential business owners that desire to use our branding, infrastructure and process to open and operate gaming centers. We currently operate 12 fully constructed franchise esports gaming centers. Due to interest from potential franchisees, we have launched a franchising program to accelerate the expansion of our planned nationwide footprint. We sell specific franchise territories, through our wholly owned subsidiary PLAYlive, and assist with the establishment and buildout of esports gaming centers to potential business owners that desire to use our branding, infrastructure and process to open and operate gaming centers. Franchise revenue is generated from the sale of franchise territories, supplying furniture, equipment and merchandise to the franchisees for buildout of their centers, a gross sales royalty fee and a national marketing fee. We license the use of our branding, assist in identifying and negotiating commercial locations, assist in overseeing the buildout and development, provide access to proprietary software for point of sale, inventory management, employee training and other HR functions. Franchisees also have an opportunity to participate in our national esports tournament events, and benefit from the growing profile of our professional esports teams. Once an esports gaming center is opened, we provide operational guidance, support and use of branding elements in exchange for a monthly royalty fee calculated as 6% of gross sales. On January 1, 2020, we implemented a national marketing fee of 1% of gross sales. To date, we have sold five of these franchise territories. COVID-19 travel restrictions caused us to suspend the sale of new franchise territories from April 1, 2020 until October 1, 2020. During this time, a pipeline of interested applicants has accumulated, and we anticipate new franchise territory sales over the next 12 months as a result.

The combination of the esports gaming centers, owned or franchised by our wholly owned subsidiaries Simplicity Esports LLC or PLAYlive, provides us with what we believe is one of the largest esports gaming center footprints in North America. Over the next 12 months, existing PLAYlive esports gaming centers will be rebranded to Simplicity Esports gaming centers. All newly opened franchise esports gaming centers will be branded as Simplicity Esports gaming centers and have numerous gaming PC’s. All gaming centers in our footprint will be participating venues in our national esports tournaments.

Franchise Roll Up Strategy

We began implementing a franchise roll-up strategy in July 2020 as a result of the disruption caused by COVID-19 related stay at home orders, and the disruption it caused to the commercial real estate market. The reduction in revenues for some franchisees because of stay-at-home orders, and government mandates to remain closed created significant accrued rent payments due to landlords. We have been able to come to terms with many franchisees to acquire the assets of their gaming centers and make them corporate owned. We have simultaneously negotiated new leases with some of the largest national mall chains, including Simon Property Group and Brookfield Asset Management, and are in the process of negotiating additional locations with other landlords. The new leases involve significant reductions in or elimination of fixed rent and the addition of percentage of revenues rent terms. During the fiscal year ended May 31, 2021, we signed 13 letters of intent and executed definitive agreements for all of those locations, most of which were operational prior to year-end. We expect each of these locations to be profitable as a result of the significant reduced rent expense via the percentage rent structure.

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Our Stream Team

The Simplicity Esports LLC and Flamengo Esports stream teams encompass over 20 commentators (commonly known as “casters”), influencers and personalities who connect to a dedicated fan base. Our electric group of live personalities represent our organization to the fullest with their own unique style. We are proud to support and present a diverse group of gamers as we engage fans across a multiple of esports genres. Our Twitch affiliation has enabled our stream team influences to reach a broad fan base. Additionally, we have created several niches within the streaming community which has enabled us to engage fans within certain titles on a 24/7 basis. Our notoriety in the industry is evidenced by our audience that views millions of minutes of Simplicity Esports’ and Flamengo Esports’ content monthly, via various social media outlets including YouTube, Twitter and Twitch. Through Simplicity Esports LLC, we have 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.

COVID-19

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 on May 1, 2020 and have since reopened 16 corporate and 12 franchised Simplicity Gaming Centers, the majority of which are operating at restricted capacity based on local COVID-19 regulations. 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, a limited number of the franchisees of Simplicity Gaming Centers have defaulted on their obligations to pay their minimum monthly royalty payment to us. This has resulted 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. As of August 31, 2021, we have recorded an allowance for doubtful accounts of approximately $42,000. We have experienced a decrease in our account receivables, net of the allowance for doubtful accounts of approximately $21,000 during the quarter ended August 31, 2021 and an increase of $17,000 for the quarter ended August 31, 2020. Notwithstanding our efforts to support franchisees and still collect on receivables, it is unclear exactly how much of the increase in accounts receivables is attributable to the impact of COVID-19. We have waived the minimum monthly royalty payment obligations from July 2020 through present day and are instead billing the franchisees a true-up of 6% of gross sales without a minimum. We continue to assess possible similar accommodations to the franchisees in light of the impact of COVID-19. Additionally, the disruptions in commercial real estate caused by COVID-19 lockdowns have allowed the Company to strengthen its existing relationships with national landlords by signing new locations with percentage rent leases.

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 adversely impacted the Company’s business during the year ended May 31, 2021 and the three months ended August 31, 2021 will potentially continue to impact the Company’s business. Management expects that all of its business segments, and 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.

RECENT DEVELOPMENTS

For a detailed description of recent developments of the Company, see “Description of Business—Recent Developments” on page 59 of this prospectus.

Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those in the section entitled “Risk Factors” and elsewhere in this prospectus. These risks include, but are not limited to, the following:

● our history of losses;

● our inability to attract sufficient demand for our services and products;

● our ability to successfully execute our growth and acquisition strategy and manage effectively our growth;

● changes in the competitive environment in our industry and the markets we serve, and our ability to compete effectively;

● our dependence on a strong brand image;

● our cash needs and the adequacy of our cash flows and earnings;

● our ability to access additional capital;

● our dependence upon our executive officers, founders and key employees;

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● our ability to attract and retain qualified personnel;

● our reliance on our technology systems, the impact of technological changes and cybersecurity risks;

● changes in applicable laws or regulations;

● our ability to protect our trademarks or other intellectual property rights;

● potential litigation from competitors or customers;

● public health epidemics or outbreaks (such as the novel strain of coronavirus (COVID-19)) and our responses to such events could materially and adversely impact our business;

● our substantial amount of indebtedness may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness; and

● the possibility that we may be adversely affected by other economic, business, and/or competitive factors.

In addition, our management has concluded that our historical recurring losses from operations and negative cash flows from operations as well as our dependence on securing private equity and other financings raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit reports for the fiscal years ended May 31, 2021 and 2020.

Corporate Information

Our principal executive offices are located at 7000 W. Palmetto Park Road, Suite 505, Boca Raton, Florida 33433, and our telephone number at that location is (855) 345-9467. The address of our website is www.ggsimplicity.com. The inclusion of our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus.

The name of the Company, the logos of the Company, and other trade names, trademarks or service marks of the Company appearing in this prospectus are the property of the Company. Trade names, trademarks and service marks of other organizations appearing in this prospectus are the property of their respective holders.

Nasdaq Listing, Reverse Stock Split and Increase in Authorized Shares of Common Stock

We have applied to list of our common stock and warrants on the Nasdaq Capital Market. There is no assurance that our listing application will be approved by the Nasdaq Capital Market. The approval of our listing on the Nasdaq Capital Market is a condition of closing. If our application to the Nasdaq Capital Market is not approved or we otherwise determine that we will not be able to secure the listing of the common stock and warrants on the Nasdaq Capital Market, we will not complete the offering.

On November 17, 2020, our board of directors approved the reverse stock split (“Reverse Stock Split”) in a ratio of 1-for-8 and on November 17, 2020, we filed an amended and restated certificate of amendment to our Third Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), implementing the Reverse Stock Split in a ratio of 1-for-8, effective November 19, 2020; provided, however, the Reverse Stock Split became effective for trading purposes on November 20, 2020 when it had been processed by the Financial Industry Regulatory Authority (“FINRA”). The Reverse Stock Split is intended to allow us to meet the minimum share price requirement of the Nasdaq Capital Market. There is no assurance that our listing application will be approved by the Nasdaq Capital Market.

Except as otherwise indicated, all references to our common stock, share data, per share data and related information has been adjusted for the Reverse Stock Split ratio of 1-for-8 as if it had occurred at the beginning of the earliest period presented. The Reverse Stock Split, combined each eight shares of our outstanding common stock into one share of common stock, without any change in the par value per share, and the Reverse Stock Split correspondingly adjusted, among other things, the exercise rate of our warrants into our common stock. No fractional shares were issued in connection with the Reverse Stock Split, and any fractional shares resulting from the Reverse Stock Split were rounded up to the nearest whole share.

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The Offering
Issuer:	Simplicity Esports and Gaming Company
Securities offered by us:	1,111,111 Units, each unit consists of one share of our Common Stock and one (1) warrant to purchase one (1) share of common stock (or 1,277,777 Units if the Underwriters exercise the over-allotment option in full). The Units will not be certificated and the shares of our common stock and the warrants are immediately separable at closing and will be issued and tradeable separately, but will be purchased together as a unit in this offering.
Public Offering Price:	$9.00 per Unit (based on an assumed public offering price per unit of $9.00, the last reported sale price for our common stock as reported on OTCQB on October 8, 2021). The actual offering price per unit will be as determined among Maxim Group LLC and Joseph Gunnar & Co. LLC (the “Underwriters”) and us based on market conditions at the time of pricing and may be issued at a discount to the current market price of our common stock. Therefore, the recent market price used throughout this prospectus may not be indicative of the final offering price.
Description of warrants included in units offered by us:	The exercise price of the warrants is $9.90 per share (110% of the assumed public offering price of one Unit). Each warrant is exercisable for one share of common stock, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common stock as described herein. A holder may not exercise any portion of a warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding common stock after exercise, as such percentage ownership is determined in accordance with the terms of the warrants, except that upon notice from the holder to us, the holder may waive such limitation up to a percentage, not in excess of 9.99%. Each warrant will be exercisable immediately upon issuance and will expire five years after the initial issuance date. The terms of the warrants will be governed by a Warrant Agent Agreement, dated as of the effective date of this offering, between us and Continental Stock Transfer & Trust Company, as the warrant agent (the “Warrant Agent”). This prospectus also relates to the offering of the shares of common stock issuable upon exercise of the warrants. For more information regarding the warrants, you should carefully read the section titled “Description of Securities—Warrants” in this prospectus.
Over-allotment option:	We have granted the Representative an option to purchase up to an additional 166,666 shares of common stock and/or warrants to purchase up to 166,666 shares of common stock (equal to 15% of the number of shares of common stock and warrants underlying the Units sold in the offering), from us in any combination thereof, at the public offering price less the underwriting discount and commissions solely to cover over-allotments, if any. The Representative may exercise this option in full or in part at any time and from time to time until 45 days after the date of this prospectus.

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Common stock outstanding before this offering:	1,594,803 shares of common stock
Common stock to be outstanding after this offering:	2,705,914 shares (assuming that none of the warrants offered hereby are exercised) and 3,817,025 if the warrants offered hereby are exercised in full. If the Underwriters’ over-allotment option is exercised in full, the total number of shares of common stock outstanding immediately after this offering would be 2,872,580 (assuming that none of the warrants offered hereby are exercised) and 4,150,357 if the warrants offered hereby are exercised in full.
Representative’s Warrant:	The registration statement of which this prospectus is a part also registers for sale warrants (the “Representative’s Warrants”) to purchase 178,888 shares of our common stock (7% of the shares of common stock sold in this offering and 7% of the shares of common stock underlying the Warrants sold in this offering) to the Underwriters, as a portion of the underwriting compensation payable in connection with this offering (assuming the exercise of the over-allotment option by the Underwriters in full). The Representative’s Warrants will be exercisable at any time, and from time to time, in whole or in part, during the three year period commencing 180 days following the effective date of the registration statement of which this prospectus is a part at an exercise price of $10.35 (115% of the assumed public offering price of the Units). Please see “Underwriting—Representative’s Warrants” for a description of these warrants.
Use of proceeds:	We expect to receive net proceeds from this offering of approximately $8,825,893 (or approximately $10,220,893 if the Representative exercises in full its over-allotment option) after deducting estimated underwriting discounts and commissions (7.00% of the gross proceeds of the offering) and after our offering expenses, estimated at $474,107. We intend to use a portion of the net proceeds from this offering to repay approximately $2,000,000 of principal and accrued interest outstanding on Convertible Notes, and the rest of the net proceeds from this offering to fund the expansion of our operations by the acquisition and/or build-out of new gaming center locations, strategic acquisition of other companies, products or technologies, working capital and general corporate purposes. See “Use of Proceeds.”
Risk factors:	See “Risk Factors” beginning on page 10 of this prospectus for a discussion of some of the factors you should carefully consider before deciding to invest in our common stock.
Trading symbols:	Our common stock is presently quoted on the OTCQB Market under the symbol “WINR.” Our warrants issued in connection with our initial public offering in August 2017 are currently listed on, and will continue to be listed on, the OTCQB under the symbol “WINRW.”
Listing Application; Separation:	We have applied to list our common stock and the warrants comprising the Units on the Nasdaq Capital Market under the symbols “WINR,” and “WINRZ,” respectively. The approval of our listing on the Nasdaq Capital Market is a condition of closing this offering. We will not be issuing physical units in this offering. At closing, we will issue to investors only the shares of common stock and warrants underlying the units offered hereby.
Lock-Ups:	We and our directors, officers and certain principal shareholders have agreed with the Representative not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into common stock for a period of 180 days after the date of this prospectus. See “Underwriting—Lock-Up Agreements.”
Dividend policy:	We do not anticipate declaring or paying any cash dividends on our common stock following our public offering.

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Unless we indicate otherwise, all information in this prospectus:

● is based on 1,594,803 shares of common stock issued and outstanding as of October 12, 2021;

● assumes no exercise by the Underwriters of their option to purchase up to an additional 166,666 shares of common stock and/or warrants to purchase 166,666 shares of common stock to cover over-allotments, if any;

● excludes 1,277,777 shares of common stock issuable upon the full exercise of the warrants (included as part of the units and over-allotment option) offered hereby;

● excludes 806,126 shares of our common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $82.43 per share as of October 12, 2021;

● excludes an estimated 13,938 shares (based on certain formulaic assumptions) of our common stock issuable upon exercise of certain warrants at an estimated exercise price of $21.99 per share (based on certain formulaic assumptions) as of October 12, 2021;

● excludes an estimated 2,267,897 shares (based on certain formulaic assumptions) of our common stock issuable upon exercise of certain warrants at an estimated exercise price of $11.05 per share (based on certain formulaic assumptions) as of October 12, 2021

● excludes an estimated 609,888 shares (based on certain formulaic assumptions) of our common stock issuable upon conversion of certain convertible promissory notes at an estimated conversion price of $10.00 per share (based on certain formulaic assumptions) as of October 12, 2021; and

● excludes 178,888 shares of our common stock underlying the Representative’s Warrant to be issued to the Underwriters in connection with this offering (assuming the exercise of the over-allotment option by the Underwriters in full).

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table presents our selected historical consolidated financial data for the periods indicated. The selected historical consolidated financial data for the years ended May 31, 2021 and 2020 and the balance sheet data as of May 31, 2021 and 2020 are derived from the audited financial statements. The summary historical financial data for the three months ended August 31, 2021 and 2020 and the balance sheet data as of August 31, 2021 and 2020 are derived from our unaudited financial statements.

Historical results are included for illustrative and informational purposes only and are not necessarily indicative of results we expect in future periods, and results of interim periods are not necessarily indicative of results for the entire year. The data presented below should be read in conjunction with, and are qualified in their entirety by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto included elsewhere in this prospectus.

	Year Ended						Three Months Ended
	May 31, 2021			May 31, 2020			August 31, 2021			August 31, 2020
							(unaudited)
Statement of Operations Data
Total revenues	$	1,551,923		$	861,410		$	904,840		$	200,601
Cost of goods sold		1,014,310			591,541			607,122			67,645
Gross profit		537,613			269,869			297,718			132,956
Total operating expenses		5,335,112			3,001,990			2,196,174			618,228
Loss from operations		(4,797,499	)		(2,732,121	)		(1,898,456	)		(485,272	)
Total other income / (expense)		(1,397,329			66,342			(2,367,288	)		(185,828	)
Loss before provision for taxes		(6,194,828	)		(2,665,779	)		(4,265,744	)		(671,100	)
Income tax provisions		0			0			0			0
Net loss	$	(6,096,855	)	$	(2,620,238	)	$	(4,210,907	)	$	(655,214	)
Basic and diluted net loss per share	$	(4.91	)	$	(2.71	)	$	(2.89	)	$	(0.61	)
Balance Sheet Data (at period end)
Cash and cash equivalents	$	414,257		$	160,208		$	673,693		$	498,645
Working capital (deficit) (1)		(3,401,303	)		(2,662,032	)		(1,952,342	)		(2,025,147	)
Total assets		10,207,412			8,591,774			10,460,171			9,128,837
Total liabilities		5,617,368			3,676,102			4,760,320			3,363,961
Stockholders’ equity (deficit)		4,590,044			4,915,672			5,699,851			5,764,876

(1) Working capital represents total current assets less total current liabilities.

RISK FACTORS

An investment in our securities carries a significant degree of risk. You should carefully consider the following risks, as well as the other information contained in this prospectus, including our historical financial statements and related notes included elsewhere in this prospectus, before you decide to purchase our securities. Any one of these risks and uncertainties has the potential to cause material adverse effects on our business, prospects, financial condition and operating results which could cause actual results to differ materially from any forward-looking statements expressed by us and a significant decrease in the value of our common shares and warrants. Refer to “Cautionary Statement Regarding Forward-Looking Statements.”

We may not be successful in preventing the material adverse effects that any of the following risks and uncertainties may cause. These potential risks and uncertainties may not be a complete list of the risks and uncertainties facing us. There may be additional risks and uncertainties that we are presently unaware of, or presently consider immaterial, that may become material in the future and have a material adverse effect on us. You could lose all or a significant portion of your investment due to any of these risks and uncertainties.

Summary of Material Risks

Below is a summary of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:

● our history of losses;

● our inability to attract sufficient demand for our services and products;

● our ability to successfully execute our growth and acquisition strategy and manage effectively our growth;

● changes in the competitive environment in our industry and the markets we serve, and our ability to compete effectively;

● our dependence on a strong brand image;

● our cash needs and the adequacy of our cash flows and earnings;

● our ability to access additional capital;

● our dependence upon our executive officers, founders and key employees;

● our ability to attract and retain qualified personnel;

● our reliance on our technology systems, the impact of technological changes and cybersecurity risks;

● changes in applicable laws or regulations;

● our ability to protect our trademarks or other intellectual property rights;

● potential litigation from competitors or customers;

● public health epidemics or outbreaks (such as the novel strain of coronavirus (COVID-19)) and our responses to such events could materially and adversely impact our business;

● our substantial amount of indebtedness may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness; and

● the possibility that we may be adversely affected by other economic, business, and/or competitive factors.

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Risks Related to Our Business

We have a relatively limited operating history and limited revenues to date and thus are subject to risks of business development and you have no basis on which to evaluate our ability to achieve our business objective.

Because we have a relatively limited operating history and limited revenues to date, you should consider and evaluate our operating prospects in light of the risks and uncertainties frequently encountered by early-stage operating companies in rapidly evolving markets. These risks include that:

● we may not have sufficient capital to achieve our growth strategy;

● we may not develop our product and service offerings in a manner that enables us to be profitable and meet our customers’ requirements;

● our growth strategy may not be successful; and

● fluctuations in our operating results will be significant relative to our revenues.

Our future growth will depend substantially on our ability to address these and the other risks described in this section. If we do not successfully address these risks, our business could be significantly harmed.

We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended May 31, 2021 and 2020.

To date, we have not been profitable and have incurred significant losses and cash flow deficits. For the fiscal years ended May 31, 2021 and 2020, we reported net losses of $6,096,855 and $2,620,238, respectively, and negative cash flow from operating activities of $1,391,938 and $1,523,262, respectively. For the three months ended August 31, 2021, we reported a net loss of $4,210,907, and had negative cash flow from operating activities of $943,694. As of August 31, 2021, we had an aggregate accumulated deficit of $16,502,806. We anticipate that we will continue to report losses and negative cash flow for the foreseeable future. Our management has concluded that our historical recurring losses from operations and negative cash flows from operations as well as our dependence on private equity and other financings raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended May 31, 2021 and 2020.

Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These adjustments would likely include substantial impairment of the carrying amount of our assets and potential contingent liabilities that may arise if we are unable to fulfill various operational commitments. In addition, the value of our securities, including common stock issued in this offering, would be greatly impaired. Our ability to continue as a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional capital and financing, including funds to be raised in this offering. If our ability to generate cash flow from operations is delayed or reduced and we are unable to raise additional funding from other sources, we may be unable to continue in business even if this offering is successful. For further discussion about our ability to continue as a going concern and our plan for future liquidity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Ability to Continue as a Going Concern.”

We are a holding company and depend upon our subsidiaries for our cash flows.

We are a holding company. All of our operations are conducted, and almost all of our assets are owned, by our subsidiaries. Consequently, our cash flows and our ability to meet our obligations depend upon the cash flows of our subsidiaries and the payment of funds by these subsidiaries to us in the form of dividends, distributions or otherwise. The ability of our subsidiaries to make any payments to us depends on their earnings, the terms of their indebtedness, including the terms of any credit facilities and legal restrictions. Any failure to receive dividends or distributions from our subsidiaries when needed could have a material adverse effect on our business, results of operations or financial condition.

Future acquisitions or strategic investments could disrupt our business and harm our business, results of operations or financial condition.

We may in the future explore potential acquisitions of companies or strategic investments to strengthen our business. Even if we identify an appropriate acquisition candidate, we may not be successful in negotiating the terms or financing of the acquisition, and our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business.

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Acquisitions involve numerous risks, any of which could harm our business, including:

● straining our financial resources to acquire a company;

● anticipated benefits may not materialize as rapidly as we expect, or at all;

● diversion of management time and focus from operating our business to address acquisition integration challenges;

● retention of employees from the acquired company;

● cultural challenges associated with integrating employees from the acquired company into our organization;

● integration of the acquired company’s accounting, management information, human resources and other administrative systems;

● the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies; and

● litigation or other claims in connection with the acquired company, including claims from terminated employees, former stockholders or other third parties.

Failure to appropriately mitigate these risks or other issues related to such strategic investments and acquisitions could result in reducing or completely eliminating any anticipated benefits of transactions, and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses or the impairment of goodwill, any of which could have a material adverse effect on business, results of operations or financial condition.

We may require additional funding for our growth plans, and such funding may result in a dilution of your investment.

We attempted to estimate our funding requirements in order to implement our growth plans. If the costs of implementing such plans should exceed these estimates significantly or if we come across opportunities to grow through expansion plans which cannot be predicted at this time, and our funds generated from our operations prove insufficient for such purposes, we may need to raise additional funds to meet these funding requirements even if this offering is consummated.

These additional funds may be raised by issuing equity or debt securities or by borrowing from banks or other resources. We cannot assure you that we will be able to obtain any additional financing on terms that are acceptable to us, or at all. If we fail to obtain additional financing on terms that are acceptable to us, we will not be able to implement such plans fully if at all. Such financing even if obtained, may be accompanied by conditions that limit our ability to pay dividends or require us to seek lenders’ consent for payment of dividends, or restrict our freedom to operate our business by requiring lender’s consent for certain corporate actions.

Further, if we raise additional funds by way of a rights offering or through the issuance of new shares, any shareholders who are unable or unwilling to participate in such an additional round of fund raising may suffer dilution in their investment.

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We may not have sufficient capital to fund our ongoing operations, effectively pursue our strategy or sustain our growth initiatives.

Our current liquidity and capital resources may not be sufficient to allow us to fund our ongoing operations, effectively pursue our strategy or sustain our growth initiatives. If we require additional capital resources, we may seek such funds directly from third party sources; however, we may not be able to obtain sufficient equity capital and/or debt financing from third parties to allow us to fund our expected ongoing operations or we may not be able to obtain such equity capital or debt financing on acceptable terms or conditions. Factors affecting the availability of equity capital or debt financing to us on acceptable terms and conditions include:

● our current and future financial results and position;

● the collateral availability of our otherwise unsecured assets;

● the market’s, investors and lenders’ view of our industry and products;

● the perception in the equity and debt markets of our ability to execute our business plan or achieve our operating results expectations; and

● the price, volatility and trading volume and history of our Common Stock.

If we are unable to obtain the equity capital or debt financing necessary to fund our ongoing operations, pursue our strategy and sustain our growth initiatives, we may be forced to scale back our operations or our expansion initiatives, and our business and operating results will be materially adversely affected.

Our growth strategy depends on the availability of suitable locations for our Simplicity Esports Gaming Centers and our ability to open new Simplicity Esports Gaming Centers and operate them profitably.

A key element of our growth strategy is to extend our brand by opening corporate owned as well as franchising retail Simplicity Esports Gaming Centers in locations in the United States that we believe will provide attractive returns on investment. We have identified numerous sites for potential corporate Simplicity Esports Gaming Centers and many other sites for potential franchised esports gaming centers, in the United States, however, desirable locations for additional Simplicity Esports Gaming Center openings may not be available at an acceptable cost when we identify a particular opportunity for a new Simplicity Esports Gaming Center.

In addition, our ability to open new Simplicity Esports Gaming Centers on a timely and cost-effective basis, or at all, is dependent on a number of factors, many of which are beyond our control, including our ability or the ability of the selected franchisee to:

● reach acceptable agreements regarding the lease of the locations;

● comply with applicable zoning, licensing, land use and environmental regulations;

● raise or have available an adequate amount of cash or currently available financing for construction and opening costs;

● timely hire, train and retain the skilled management and other employees necessary to meet staffing needs;

● obtain, for acceptable cost, required permits and approvals, including liquor licenses; and

● efficiently manage the amount of time and money used to build and open each new Simplicity Esports Gaming Center.

If we succeed in opening new Simplicity Esports Gaming Centers on a timely and cost-effective basis, we may nonetheless be unable to attract enough customers to the new Simplicity Esports Gaming Centers because potential customers may be unfamiliar with our brands or concepts, or our entertainment and menu options might not appeal to them. Our new Simplicity Esports Gaming Centers may not meet or exceed our performance targets, including target cash-on-cash returns. New Simplicity Esports Gaming Centers may even operate at a loss, which could have a significant adverse effect on our overall operating results.

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Our operations of Simplicity Esports Gaming Centers are significantly dependent on changes in public and customer tastes and discretionary spending patterns. Our inability to successfully anticipate customer preferences or to gain popularity for such Simplicity Esports Gaming Centers games may negatively impact our profitability.

Our success depends significantly on public and customer tastes and preferences, which can be unpredictable. If we are unable to successfully anticipate customer preferences or increase the popularity of the games offered at the Simplicity Esports Gaming Centers, the per capita revenue and overall customer expenditures at the Simplicity Esports Gaming Centers may decrease, and thereby negatively impact our profitability. In response to such developments, we may need to increase our marketing and product development efforts and expenditures, adjust our game or product sale pricing, modify the games themselves, or take other actions, which may further erode our profit margins, or otherwise adversely affect our results of operations and financial condition. In particular, we may need to expend considerable cost and effort in carrying out extensive research and development to assess the potential interest in a game, testing and launching new games, and to remain abreast with continually evolving technology and trends, as well as the success and popularity of Simplicity stream team’s casters, influencers and personalities among Simplicity Esports LLC’s dedicated fan base.

While we may incur significant expenditures of this nature, including in the future as we continue to expand our operations, there can be no assurance that any such expenditures or investments by us will yield expected or commensurate returns or results, within a reasonable or anticipated time, or at all.

The nature of our business exposes us to negative publicity or customer complaints, including in relation to, among other things, accidents, injuries or thefts at the Simplicity Esports Gaming Centers, or health and safety concerns arising from improper use of our game equipment or at our food and beverage venues.

Our business inherently exposes us to negative publicity or customer complaints as a result of accidents, injuries, or in extreme cases, deaths, arising from instances of air-borne, water-borne or food-borne contagion or illness, food contamination, spoilage, tampering, equipment failure, improper use of our equipment, fire, explosion, terrorist attacks or civil riots, and other safety or security issues, such as kidnapping, or associated risks arising from other actual or perceived non-compliance with safety, quality or service standards or norms in relation to the various game, entertainment and food and beverage attractions at the Simplicity Esports Gaming Centers. Even isolated or sporadic incidents or accidents may have a negative impact on our brand image and reputation, and the Simplicity Esports Gaming Centers’, or games’ or our own popularity with customers. The considerable expansion of social media in recent years has compounded the effect of any potential negative publicity.

We cannot guarantee that our or our franchisee’s employee training, internal controls and other precautions will be sufficient to prevent any such occurrence at the Simplicity Esports Gaming Centers, in relation to our Simplicity global virtual reality gaming and fully integrated esports platform, or to control or mitigate any negative consequences. In addition, we or our franchisees rely on third-party security and housekeeping staff for certain non-core functions, as well as certain technology vendors and partners. Although we monitor vendors and partners and, in certain cases, may have a contractual indemnity or recourse in case of any default on their part, our ability to assure a safe and satisfactory experience to our customers is necessarily limited to the extent of our or our franchisees’, dependence on third parties, from time to time. Moreover, we may not be able to distance or insulate ourselves from any adverse publicity or reputational damage arising from any act, omission or negligence on the part of a vendor or other third party, which may negatively affect a customer’s experience at any of the Simplicity Esports Gaming Centers.

14

We or our franchisees may not be able to operate in the United States, or obtain and maintain licenses and permits necessary for such operation, in compliance with laws, regulations and other requirements, which could adversely affect our business, results of operations or financial condition.

Each Simplicity Esports Gaming Center will be subject to licensing and regulation by alcoholic beverage control, amusement, health, sanitation, safety, building code and fire agencies in the country, state, county and/or municipality in which the Simplicity Esports Gaming Center is located. In the United States, each Simplicity Esports Gaming Center with a restaurant or bar will be required to obtain a license to sell alcoholic beverages on the premises from a state authority and, in certain locations, county and municipal authorities. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. In some states, the loss of a license for cause with respect to one Simplicity Esports Gaming Center may lead to the loss of licenses at all Simplicity Esports Gaming Centers in that state and could make it more difficult to obtain additional licenses in that state. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of each Simplicity Esports Gaming Center, including minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling and storage and dispensing of alcoholic beverages. Our failure or a failure by a franchisee in obtaining and maintaining the required licenses, permits and approvals at any one Simplicity Esports Gaming Center could impact the continuing operations of existing Simplicity Esports Gaming Centers, or delay or prevent the opening of new Simplicity Esports Gaming Centers. Although we do not anticipate any material difficulties occurring in the future, the failure to receive or retain a liquor license, or any other required permit or license, in a particular location, or to continue to qualify for, or renew licenses, could have a material adverse effect on operations and our ability to obtain such a license or permit in other locations.

As a result of operating certain entertainment games and attractions, including skill-based games that offer redemption prizes, the Simplicity Esports Gaming Centers in the United States are subject to amusement licensing and regulation by the countries, states, provinces, counties and municipalities in which our Simplicity Esports Gaming Centers are located. These laws and regulations can vary significantly by country, state, province, county, and municipality and, in some jurisdictions, may require us to modify our business operations or alter the mix of redemption games and simulators we offer. Moreover, as more states in the United States and local communities implement legalized gambling, the laws and corresponding enabling regulations may also be applicable to our redemption games and regulators may create new licensing requirements, taxes or fees, or restrictions on the various types of redemption games we offer. Furthermore, other states, provinces, counties and municipalities may make changes to existing laws to further regulate legalized gaming and illegal gambling. Adoption of these laws, or adverse interpretation of existing laws, after we have established a Simplicity Esports Gaming Center in the jurisdiction could require the existing center in these jurisdictions to alter the mix of games, modify certain games, change the mix of prizes that we may offer or terminate the use of specific games, any of which could adversely affect our operations.

We are also subject to laws and regulations governing our relationship with our employees, including those related to minimum wage requirements, exempt status, overtime, health insurance mandates, working and safety conditions, immigration status requirements, child labor, and non-discrimination. Additionally, changes in federal labor laws, including card verification regulations, could result in portions of our workforce being subjected to greater organized labor influence, which could result in an increase to our labor costs. A significant portion of Simplicity Esports Gaming Center personnel will be paid at minimum wage rates established by federal, state and municipal law. Increases in the minimum wage result in higher labor costs, which may be only partially offset by price increases and operational efficiencies.

We are also subject to the rules and regulations of the Federal Trade Commission and various state laws regulating the offer and sale of franchises. The Federal Trade Commission and various state laws require that we furnish a franchise disclosure document containing certain information to prospective franchisees, and a number of states require registration of the franchise disclosure document with state authorities. State laws that regulate the franchisor-franchisee relationship presently exist in a substantial number of states, and bills have been introduced in Congress from time to time that would provide for federal regulation of the franchisor-franchisee relationship. The state laws often limit, among other things, the duration and scope of non-competition provisions, the ability of a franchisor to terminate or refuse to renew a franchise and the ability of a franchisor to designate sources of supply. We shall endeavor to make sure that any franchise disclosure document we provide, together with any applicable state versions or supplements, and franchising procedures, comply in all material respects with both the Federal Trade Commission guidelines and all applicable state laws regulating franchising in those states in which we have offered franchises.

If we and our franchisees fail to comply with such laws and regulations, we may be subject to various sanctions and/or penalties and fines or may be required to cease operations until we achieve compliance, which could have an adverse effect on our business and our financial results.

15

Our growth through franchising may not occur as rapidly as we currently anticipate and may be subject to additional risks.

As part of our growth strategy, we will continue to seek franchisees to operate Simplicity Esports Gaming Centers in certain strategic domestic locations or venues. We believe that our ability to recruit, retain and contract with qualified franchisees will be increasingly important to our operations as we expand. Our franchisees are dependent upon the availability of adequate sources of financing in order to meet their development obligations. Such financing may not be available to our franchisees, or only available upon disadvantageous terms. Our franchise strategy may not enhance our results of operations.

Expanding through franchising exposes our business and brand to risks because the quality of the franchised operations will be beyond our immediate control, including risks associated with our confidential information, intellectual properties (including trademarks) and brand reputation. Even if we have contractual remedies to cause franchisees to maintain operational standards, enforcing those remedies may require litigation and therefore our image and reputation may suffer, unless and until such litigation is successfully concluded.

We could face liability from or as a result of our franchisees.

Various   state and federal laws will govern the relationship between us and our franchisees and the potential sale of a franchise. If we fail to comply with these laws, we could be liable for damages to franchisees and fines or other penalties. A franchisee or government agency may bring legal action against us based on the franchisee/franchisor relationship. Also, under the franchise business model, we may face claims and liabilities based on vicarious liability, joint-employer liability, or other theories or liabilities. Such legal actions could result in expensive litigation with our franchisees or government agencies that could adversely affect both our profit and our important relations with our franchisees. In addition, regulatory or legal developments could result in changes to laws or the franchisor/franchisee relationship that could negatively impact the franchise business model and, accordingly, our profit.

We may not be able to compete favorably in the highly competitive out-of-home and home-based entertainment market in the United States, which could have a material adverse effect on our business, results of operations or financial condition.

The out-of-home entertainment market in the United States is highly competitive. Simplicity Esports Gaming Centers that we or our franchisees operate will compete for customers’ discretionary entertainment dollars with providers of out-of-home entertainment, including localized attraction facilities such as movie theatres, sporting events, bowling alleys, sports activity centers, arcades and entertainment centers, nightclubs and restaurants as well as theme parks. Many of the entities operating these businesses are larger and have significantly greater financial resources, a greater number of locations, have been in business longer, have greater name and brand recognition and are better established in the local markets where Simplicity Esports Gaming Centers are planned to be located. As a result, they may be able to invest greater resources than we can in attracting customers and succeed in attracting customers who would otherwise come to the Simplicity Esports Gaming Centers we or our franchisees operate. In the United States, the legalization of casino gambling in geographic areas near any future Simplicity Esports Gaming Center would create the possibility for adult entertainment alternatives, which could have a material adverse effect on our business and financial condition. We will also face competition from local, regional and national establishments that offer entertainment experiences similar to us. Simplicity Esports Gaming Centers we or our franchisees operate will also face competition from increasingly sophisticated home-based forms of entertainment, such as internet and video gaming and home movie streaming and delivery. If we fail to compete favorably in the competitive out-of-home and home-based entertainment markets it could have a material adverse effect on our business, results of operations and financial condition.

Our senior management team has limited experience in establishing, operating, licensing rights to and franchising entertainment centers and related products.

The members of our senior management team have extensive backgrounds in finance and the management of financial services businesses, however, they have limited prior experience in establishing, operating, licensing rights to and franchising entertainment centers. We will need to expand our management team, to include individuals with expertise in establishing and operating entertainment centers as well as individuals with expertise in product licensing and franchise operations. If we are unable to recruit professionals with acceptable backgrounds in establishing and operating entertainment centers and with backgrounds in product licensing and financing, we may not be able to pursue our growth strategy which could have a material adverse effect on our business and results of operations.

16

Our success depends upon our ability to recruit and retain qualified management and operating personnel at Simplicity Esports Gaming Centers.

We and our franchisees must attract, retain and motivate a sufficient number of qualified management and operating personnel in order to maintain consistency in our service, hospitality, quality and atmosphere of our Simplicity Esports Gaming Centers. Qualified management and operating personnel are typically in high demand. If we and our franchisees are unable to attract and retain a satisfactory number of qualified management and operating personnel, labor shortages could delay the planned openings of new Simplicity Esports Gaming Centers which could have a material adverse effect on our business and results of operations.

Acquisitions, other strategic alliances and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business and results of operations.

Acquisitions are an important element of our overall corporate strategy and use of capital, and these transactions could be material to our financial condition and results of operations. We expect to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions. The process of integrating an acquired company, business, or product has created, and will continue to create, unforeseen operating difficulties and expenditures. The areas where we face risks may include, but are not limited to:

● diversion of management’s time and focus from operating our business to acquisition integration challenges;

● failure to successfully further develop the acquired business or product lines;

● implementation or remediation of controls, procedures and policies at the acquired company;

● integration of the acquired company’s accounting, human resources and other administrative systems, and coordination of product, engineering and sales and marketing functions;

● transition of operations, users and customers onto our existing platforms;

● reliance on the expertise of our strategic partners with respect to market development, sales, local regulatory compliance and other operational matters;

● failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval, under competition and antitrust laws which could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition;

● in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;

● cultural challenges associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire;

● liability for or reputational harm from activities of the acquired company before the acquisition or from our strategic partners, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and

● litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former shareholders or other third parties.

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments or strategic alliances could cause us to fail to realize the anticipated benefits of such acquisitions, investments or alliances, incur unanticipated liabilities, and harm our business generally.

Our acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or impairment of goodwill and purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results of operations and cash flows. Also, the anticipated benefits of many of our acquisitions may not materialize.

17

Our insurance coverage may not adequately protect us against all future risks, which may adversely affect our business and prospects.

We maintain insurance coverage  , including for fire, acts of god and perils, terrorism, burglary, money, loss of profit, fidelity guarantee, fixed glass and sanitary fitting, electronic equipment, machinery breakdown, portable equipment, sign boards, commercial general liability, marine transit, and directors’ and officers’ liability insurance, as well as employee health and medical insurance, with standard exclusions in each instance. While we maintain insurance in amounts that we consider reasonably sufficient for a business of our nature and scale, with insurers that we consider reliable and credit worthy, we may face losses and liabilities that are uninsurable by their nature, or that are not covered, fully or at all, under our existing insurance policies. Moreover, coverage under such insurance policies would generally be subject to certain standard or negotiated exclusions or qualifications and, therefore, any future insurance claims by us may not be honored by our insurers in full, or at all. In addition, our premium payments under our insurance policies may require a significant investment by us.

To the extent that we suffer loss or damage that is not covered by insurance or that exceeds our insurance coverage, the loss will have to be borne by us and our business, cash flow, financial condition, results of operations and prospects may be adversely affected.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations.

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.

We are dependent upon our executive officers and directors and their departure could adversely affect our ability to operate.

Our operations are dependent upon a relatively small group of individuals and, in particular, our executive officers and directors. We believe that our success depends on the continued service of our executive officers and directors. We do not have key-man insurance on the life of any of our directors or executive officers. The unexpected loss of the services of one or more of our directors or executive officers could have a detrimental effect on us.

Our executive officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.

We have not adopted a policy   that expressly prohibits our directors, executive officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. While our employment agreements with our key executive officers contain non-compete provisions, we do not have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.

18

We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are an “emerging growth company” within the meaning of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor internal controls attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Common Stock held by non-affiliates exceeds $700 million as of any November 30 before that time, in which case we would no longer be an emerging growth company as of the following May 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.

Further, Section 102(b)(1) of 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 Securities Act registration statement 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 election to opt out is irrevocable. We have 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, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Compliance obligations under the Sarbanes-Oxley Act may require substantial financial and management resources.

Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls. As long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting.  

Provisions in our third amended and restated certificate of incorporation, as amended, and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Common Stock and could entrench management.

Our third amended and restated certificate of incorporation, as amended, contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.

If we fail to keep pace with changing industry technology and consumer preferences, we will be at a competitive disadvantage.

The Simplicity products and services compete within industries that are characterized by swiftly changing technology, evolving industry standards, frequent new and enhanced product introductions, rapidly changing consumer preferences and product obsolescence. In order to continue to compete effectively, we need to respond quickly to technological changes and to understand their impact on customers’ preferences. We may take significant time and resources to respond to these technological changes and changes in consumer preferences. Our business and results of operations may be negatively impacted if our products and services fail to keep pace with these changes.

19

Various product safety laws and governmental regulations applicable to the distributor of Simplicity Esports LLC’s and/or PLAYlive Nation, Inc.’s products may adversely affect our business, results of operations and financial condition.

Our distribution of Simplicity Esports LLC’s and/or PLAYlive Nation, Inc.’s products will be subject to numerous federal, state, provincial, local and foreign laws and regulations, including laws and regulations with respect to product safety, including regulations enforced by the United States Consumer Products Safety Commission. We and our franchisees could incur costs in complying with these regulations and, if they fail to comply, could incur significant penalties. A failure to comply with applicable laws and regulations, or concerns about product safety, may also lead to a recall or post-manufacture repair of selected Simplicity Esports LLC’s and/or PLAYlive Nation, Inc.’s products, resulting in the rejection of the products by our franchisees, lost sales, increased customer service and support costs, and costly litigation.

Public health epidemics or outbreaks, such as COVID-19, could materially and adversely impact our business.

COVID-19

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 on May 1, 2020 and have since reopened 16 corporate and 12 franchised Simplicity Gaming Centers, the majority of which are operating at restricted capacity based on local COVID-19 regulations. 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, a limited number of the franchisees of Simplicity Gaming Centers have defaulted on their obligations to pay their minimum monthly royalty payment to us. This has resulted 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. As of August 31, 2021, we have recorded an allowance for doubtful accounts of approximately $42,000. We have experienced a decrease in our account receivables, net of the allowance for doubtful accounts of approximately $21,000 during the quarter ended August 31, 2021 and an increase of $17,000 for the quarter ended August 31, 2020. Notwithstanding our efforts to support franchisees and still collect on receivables, it is unclear exactly how much of the increase in accounts receivables is attributable to the impact of COVID-19. We have waived the minimum monthly royalty payment obligations from July 2020 through present day and are instead billing the franchisees a true-up of 6% of gross sales without a minimum. We continue to assess possible similar accommodations to the franchisees in light of the impact of COVID-19. Additionally, the disruptions in commercial real estate caused by COVID-19 lockdowns have allowed the Company to strengthen its existing relationships with national landlords by signing new locations with percentage rent leases.

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 adversely impacted the Company’s business during the year ended May 31, 2021 and the three months ended August 31, 2021 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.

20

Our substantial amount of indebtedness may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness.

As of October 12, 2021, we have outstanding convertible notes payable in the principal amount of $5,744,979 and accrued interest of approximately $850,524. Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due with respect to our indebtedness. Our indebtedness could have other important consequences to you as a stockholder. For example, it could:

● make it more difficult for us to satisfy our obligations with respect to our indebtedness and any failure to comply with the obligations of any of our debt instruments, including financial and other restrictive covenants, could result in an event of default under the senior secured credit facility and the senior subordinated note;

● make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;

● require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes;

● limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

● place us at a competitive disadvantage compared to our competitors that have less debt; and

● limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other purposes.

Any of the above listed factors could materially adversely affect our business, financial condition and results of operations.

Risks Relating to Our Esports Business

Our esports businesses are substantially dependent on the continuing popularity of the esports industry as a whole.

The esports industry is in the early stages of its development. Although the esports industry has experienced rapid growth, consumer preferences may shift and there is no assurance this growth will continue in the future. We have taken steps to mitigate these risks to an extent and continue to seek out new opportunities in the esports industry. However, due to the rapidly evolving nature of technology and online gaming, the esports industry may experience volatile and declining popularity as new options for online gaming and esports become available, or consumer preferences shift to other forms of entertainment, and as a consequence, our businesses and results of operations may be materially negatively affected.

Our esports business faces intense and wide-ranging competition, which may have a material negative effect on our business and results of operations.

The success of our esports business is dependent upon the performance and/or popularity of its teams. Simplicity Esports LLC’s teams compete, in varying respects and degrees, with other live sporting events, and with sporting events delivered over television networks, radio, the Internet and online services, mobile applications and other alternative sources. For example, our esports teams compete for attendance, viewership and advertising with a wide range of alternatives available in major metropolitan areas. During some or all of the esports season, our teams face competition, in varying respects and degrees, from professional and collegiate basketball, hockey, baseball, football, and soccer, among others.

As a result of the large number of options available, we face strong competition for the sports and gaming fan. We must compete with other esports teams, traditional sports teams and sporting events, in varying respects and degrees, including on the basis of the quality of the teams we field, their success in the leagues, tournaments and genres in which they compete, our ability to provide an entertaining environment at any esports games that we host at our centers, prices charged for tickets and the viewing availability of our teams on multiple media alternatives. Given the nature of esports and sports in general, there can be no assurance that we will be able to compete effectively, including with companies that may have greater resources than we have, and as a consequence, our business and results of operations may be materially negatively affected by competition.

Our businesses are substantially dependent on the continued popularity and/or competitive success of Simplicity Esports LLC’s teams, which cannot be assured.

Our future financial results will be dependent on the Simplicity teams becoming and remaining popular with our fan base and, in varying degrees, on the teams achieving in-game success, which can generate fan enthusiasm, resulting in sustained ticket and merchandise sales during the season. Furthermore, success in the regular season at certain tournaments may qualify one or more of our esports teams for participation in post-season playoffs, which provides us with additional revenue from prize money by increasing the number of games played by our sports teams and, more importantly, by generating increased excitement and interest in our esports teams, which can improve attendance in subsequent seasons. There can be no assurance that any of our esports teams, will develop a significant fan base, maintain continued popularity or compete in post-season play in the future.

21

Defection of our esports players to other teams or managers could hinder our success.

We compete with other esports athlete management businesses to sign and retain world class esports players, some of which have greater resources or brand recognition and popularity than ours. Our players may choose to defect to other esports organizations for various reasons, including that they have been made a superior offer or they have chosen to pursue new or other opportunities. The loss or defection of any of our esports players could have negative consequences on our businesses and results of operations. While we take or intend to take, all appropriate steps to retain our players and protect their interests, there can be no assurances that players will not defect to other esports organizations.

The actions of the various esports leagues and tournaments may have a material negative effect on our business and results of operations.

The governing bodies of the various esports leagues and tournaments, under certain circumstances, can take actions that they deem to be in the best interests of their respective leagues or tournaments, which may not necessarily be consistent with maximizing our results of operations and which could affect our esports teams in ways that are different than the impact on other esports teams. For example, they can take actions relating to the rights to telecast the games of league members or tournament participants, including the Simplicity team, licensing of the rights to produce and sell merchandise bearing the logos and/or other intellectual property of our esports teams and the leagues or tournaments, and the internet-based activities of our esports teams. Certain of these decisions by the esports leagues and tournaments could have a material negative effect on our business and results of operations. From time to time, we may disagree with or challenge actions that the leagues or tournaments take or the power and authority they assert.

We may be unable to effectively manage the growth in the scope and complexity of our business, including our expansion into the esports business which is untested and into adjacent business opportunities.

Our future success depends, in part, on our ability to manage our expanded business, including our aspirations for continued expansion. We intend to dedicate resources to a new business model that is largely untested, as is the case with esports. We do not know to what extent our future expansions will be successful. Further, even if successful, the growth of our business could create significant challenges for our management, operational, and financial resources, and could increase existing strain on, and divert focus from, our core businesses. If not managed effectively, this growth could result in the over-extension of our operating infrastructure, and our management systems, information technology systems, and internal controls and procedures may not be adequate to support this growth. Failure to adequately manage our growth in any of these ways may cause damage to our brand, damage our reputation or otherwise negatively impact our business.

Our industry is subject to rapid technological change, and if we do not adapt to, and appropriately allocate our resources among, emerging technologies and business models, our business may be negatively impacted.

Technology changes rapidly in the interactive entertainment industry. We must continually anticipate and adapt our products, services and business models to emerging technologies and delivery platforms in order to stay competitive. Forecasting our revenues and profitability for these new products, services and business models is inherently uncertain and volatile, and if we invest in the development of interactive entertainment products or services incorporating a new technology or for a new platform that does not achieve significant commercial success, whether because of competition or otherwise, we may not recover the often substantial “up front” costs of developing and marketing those products and services, or recover the opportunity cost of diverting management and financial resources away from other products or services. Further, our competitors may adapt to an emerging technology or business model more quickly or effectively than we do, creating products that are technologically superior to ours, more appealing to consumers, or both.

If, on the other hand, we elect not to pursue the development of products or services incorporating a new technology or for new platforms, or otherwise elect not to pursue new business models, that achieve significant commercial success, it may have adverse consequences. It may take significant time and resources to shift product development resources to that technology, platform or business model, as the case may be, and may be more difficult to compete against existing products and services incorporating that technology or for that platform or against companies using that business model.

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Many elements of our business are unique, evolving and relatively unproven. Our business and prospects depend on the continuing development of live streaming of competitive esports gaming. The market for esports and amateur online gaming competition is relatively new and rapidly developing and are subject to significant challenges. Our business relies upon our ability to cultivate and grow an active gamer community, and our ability to successfully monetize such community through tournament fees, subscriptions for our esports gaming services, and advertising and sponsorship opportunities. In addition, our continued growth depends, in part, on our ability to respond to constant changes in the esports gaming industry, including rapid technological evolution, continued shifts in gamer trends and demands, frequent introductions of new games and titles and the constant emergence of new industry standards and practices. Developing and integrating new games, titles, content, products, services or infrastructure could be expensive and time-consuming, and these efforts may not yield the benefits we expect to achieve at all. We cannot assure you that we will succeed in any of these aspects or that the esports gaming industry will continue to grow as rapidly as it has in the past.

We may encounter difficulties in integrating Simplicity Esports LLC’s esports businesses or otherwise realizing the anticipated benefits of the transaction.

As part of our business strategy, from time to time, we acquire, make investments in, or enter into strategic alliances and joint ventures with, complementary businesses, such as the acquisition of the Simplicity esports business in January 2019. The acquisition of Simplicity Esports LLC involves significant risks and uncertainties, including: (i) the potential for Simplicity Esports LLC’s business to underperform relative to our expectations and the acquisition price, (ii) the potential for Simplicity Esports LLC’s business to cause our financial results to differ from expectations in any given period, or over the longer-term, (iii) unexpected tax consequences from the acquisition, or the tax treatment of Simplicity Esports LLC’s business’s operations going forward, giving rise to incremental tax liabilities that are difficult to predict, (iv) difficulty in integrating Simplicity Esports LLC’s business, its operations and its employees in an efficient and effective manner, (v) any unknown liabilities or internal control deficiencies assumed as part of the acquisition, and (vi) the potential loss of key employees of Simplicity Esports LLC’s businesses. Further, the transaction may involve the risk that our senior management’s attention will be excessively diverted from our other operations, the risk that the gaming industry does not evolve as anticipated and that any intellectual property or personnel skills acquired do not prove to be those needed for our future success, and the risk that our strategic objectives, cost savings or other anticipated benefits are otherwise not achieved.

Our business may be harmed if our licensing partners, or other third parties with whom we do business, act in ways that put our brand at risk.

We anticipate that our business partners shall be given access to sensitive and proprietary information or control over our intellectual property in order to provide services and support to our teams. These third parties may misappropriate our information or intellectual property and engage in unauthorized use of it or otherwise act in a way that places our brand at risk. The failure of these third parties to provide adequate services and technologies, the failure of third parties to adequately maintain or update their services and technologies or the misappropriation or misuse of this information or intellectual property could result in a disruption to our business operations or an adverse effect on our reputation, and may negatively impact our business.

Our business is highly dependent on the success and availability of video game platforms manufactured by third parties.

We expect to derive a substantial portion of our revenues from esports games played on game platforms manufactured by third parties, such as Sony’s PS4®, Microsoft’s Xbox One®, and Nintendo’s Wii U® and Switch®, and PCs. The success of our business will be driven in large part by our ability to accurately predict which platforms will be successful in the marketplace. We also rely on the availability of an adequate supply of these video game consoles and the continued support for these consoles by their manufacturers. We may be required to commit significant resources well in advance of the anticipated introduction of a new platform. If increased costs are not offset by higher revenues and other cost efficiencies, our business could be negatively impacted. If the platforms for which we invested resources do not attain significant market acceptance, we may not be able to recover our costs, which could be significant.

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The games we support are subject to scrutiny regarding the appropriateness of their content. If the publishers and distributors we partner with fail to receive their target ratings for certain titles, or if retailers refuse to sell such titles due to what they perceive to be objectionable content, it could have a negative impact on our business.

Console and PC games are subject to ratings by the Entertainment Software Rating Board (the “ESRB”), a self-regulatory body based in the U.S. that provides U.S. and Canadian consumers of interactive entertainment software with ratings information, including information on the content in such software, such as violence, nudity or sexual content, along with an assessment of the suitability of the content for certain age groups. Certain other countries have also established content rating systems as prerequisites for product sales in those countries. In addition, certain stores use other ratings systems, such as Apple’s use of its proprietary “App Rating System” and Google Play’s use of the International Age Rating Coalition (IARC) rating system. If the software publishers that supply our games are unable to obtain the ratings they have targeted for their products, it could have a negative impact on our business. In some instances, the software publishers and developers may be required to modify their products to comply with the requirements of the rating systems, which could delay or disrupt the release of any given product, or may prevent its sale altogether in certain territories, which would limit its availability for use in the games that our teams play.

We will depend on servers to operate our games with online features. If we were to lose server functionality for any reason, our business may be negatively impacted.

Our business at our game centers will rely on the continuous operation of servers, some of which are owned and operated by third parties. Although we shall strive to maintain more than sufficient server capacity, and provide for active redundancy in the event of limited hardware failure, any broad-based catastrophic server malfunction, a significant service-disrupting attack or intrusion by hackers that circumvents security measures, a failure of disaster recovery service or the failure of a company on which we are relying for server capacity to provide that capacity for whatever reason would likely degrade or interrupt the functionality of our games with online features, and could prevent the operation of such games altogether, any of which could result in the loss of sales for, or in, such games.

We also rely on networks operated by third parties, such as the PlayStation® Network, Xbox Live® and Steam®, for the functionality of the games we use which have online features. An extended interruption to any of these services could adversely affect our ability to operate our games with online features, negatively impacting our business.

Further, insufficient server capacity could also negatively impact our game center business. Conversely, if we overestimate the amount of server capacity required by our business, we may incur unnecessary additional operating costs.

The esports gaming industry is very “hit” driven. We may not have access to “hit” games or titles.

Select game titles dominate competitive esports and online gaming, including League of Legends, Minecraft, Fortnite and Overwatch, and many new games titles are regularly introduced in each major industry segment (console, mobile and PC free-to-download). Despite the number of new entrants, only a very few “hit” titles account for a significant portion of total revenue in each segment.

The size and engagement level of our online and in person gamers are critical to our success and are closely linked to the quality and popularity of the esports game publishers with which we have licenses. Esports game publishers on our gaming platform, including those who have entered into license agreements with us, may leave us for other gaming platforms or leagues which may offer better competition, and terms and conditions than we do. Furthermore, we may lose esports game publishers if we fail to generate the number of gamers to our tournaments and league competitions expected by such publishers. In addition, if popular esports game publishers cease to license their games to us, or our live streams fail to attract gamers, we may experience a decline in gamer traffic, subscriptions and engagement, which may have a material and adverse impact on our results of operations and financial conditions.

We must continue to attract and retain the most popular esports gaming titles in order to maintain and increase the popularity of our leagues, tournaments and competitions, and ensure the sustainable growth of our gamer community. We must continue to identify and enter into license agreements with esports gaming publishers developing “hit’ games that resonate with our community on an ongoing basis. We cannot assure you that we can continue to attract and retain the same level of first-tier esports game publishers and our ability to do so is critical to our future success.

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If we fail to keep our existing gamers highly engaged, to acquire new gamers, to successfully implement a membership model for our gaming community, our business, profitability and prospects may be adversely affected.

Our success depends on our ability to maintain and grow the number of gamers attending and participating in our in-person and online tournaments and competitions, and using our gaming platform, and keeping our gamers highly engaged. Of particular importance is the successful deployment and expansion of our membership model to our gaming community for purposes of creating predictable recurring revenues.

In order to attract, retain and engage gamers and remain competitive, we must continue to develop and expand our leagues, including internationally, produce engaging tournaments and competitions, successfully license the newest “hit” esports games and titles, implement new technologies and strategies, improve features of our gaming platform and stimulate interactions in our gamer community.

A decline in the number of our gamers in our ecosystem may adversely affect the engagement level of our gamers, the vibrancy of our gamer community, or the popularity of our league play, which may in turn reduce our monetization opportunities, and have a material and adverse effect on our business, financial condition and results of operations. If we are unable to attract and retain gamers, our revenues may decline and our results of operations and financial condition may suffer.

We cannot assure you that our online and in person gaming platform and centers will remain sufficiently popular with gamers to offset the costs incurred to operate and expand them. It is vital to our operations that we remain sensitive and responsive to evolving gamer preferences and offer first-tier esports game content that attracts our gamers. We must also keep providing gamers with new features and functions to enable superior content viewing, and social interaction. Further, we will need to continue to develop and improve our gaming platform and centers and to enhance our brand awareness, which may require us to incur substantial costs and expenses. If such increased costs and expenses do not effectively translate into an improved gamer experience and long-term engagement, our results of operations may be materially and adversely affected.

Risks Related to International Operations

The risks related to international operations, in particular in countries outside of the United States, could negatively affect the Company’s results.

It is expected that the Company will derive between 15% to 20%   of its revenue from transactions denominated in currencies other than the United States dollar, such as Brazil, and the Company expects that receivables with respect to foreign sales will account for a significant amount of its total accounts and receivables. As such, the Company’s operations may be adversely affected by changes in foreign government policies and legislation or social instability and other factors which are not within the control of the Company, including, but not limited to, recessions in foreign economies, expropriation, nationalization and limitation or restriction on repatriation of funds, assets or earnings, longer receivables collection periods and greater difficulty in collecting accounts receivable, changes in consumer tastes and trends, renegotiation or nullification of existing contracts or licenses, changes in gaming policies, regulatory requirements or the personnel administering them, currency fluctuations and devaluations, exchange controls, economic sanctions and royalty and tax increases, risk of terrorist activities, revolution, border disputes, implementation of tariffs and other trade barriers and protectionist practices, taxation policies, including royalty and tax increases and retroactive tax claims, volatility of financial markets and fluctuations in foreign exchange rates, difficulties in the protection of intellectual property particularly in countries with fewer intellectual property protections, the effects that evolving regulations regarding data privacy may have on the Company’s online operations, adverse changes in the creditworthiness of parties with whom the Company has significant receivables or forward currency exchange contracts, labor disputes and other risks arising out of foreign governmental sovereignty over the areas in which the Company’s operations are conducted. The Company’s operations may also be adversely affected by social, political and economic instability and by laws and policies of such foreign jurisdictions affecting foreign trade, taxation and investment. If the Company’s operations are disrupted and/or the economic integrity of its contracts is threatened for unexpected reasons, its business may be harmed.

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The Company’s international activities may require protracted negotiations with host governments, national companies and third parties. Foreign government regulations may favor or require the awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. In the event of a dispute arising in connection with the Company’s operations in a foreign jurisdiction where it conducts its business, the Company may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdictions of the courts of United States or enforcing American judgments in such other jurisdictions. The Company may also be hindered or prevented from enforcing its rights with respect to a governmental instrumentality because of the doctrine of sovereign immunity. Accordingly, the Company’s activities in foreign jurisdictions could be substantially affected by factors beyond the Company’s control, any of which could have a material adverse effect on it. The Company believes that management’s experience to date in commercializing its products, services and solutions in Brazil may be of assistance in helping to reduce these risks. Some countries in which the Company may operate may be considered politically and economically unstable.

Doing business in the industries in which the Company operates often requires compliance with numerous and extensive procedures and formalities. These procedures and formalities may result in unexpected or lengthy delays in commencing important business activities. In some cases, failure to follow such formalities or obtain relevant evidence may call into question the validity of the entity or the actions taken. Management of the Company is unable to predict the effect of additional corporate and regulatory formalities which may be adopted in the future including whether any such laws or regulations would materially increase the Company’s cost of doing business or affect its operations in any area.

The Company may in the future enter into agreements and conduct activities outside of the jurisdictions where it currently carries on business, which expansion may present challenges and risks that the Company has not faced in the past, any of which could adversely affect the results of operations and/or financial condition of the Company.

The Company is subject to foreign exchange and currency risks that could adversely affect its operations, and the Company’s ability to mitigate its foreign exchange risk through hedging transactions may be limited.

The Company expects that it will derive between 15% and 20%   of its revenues in currencies other than the United States dollar; however, a substantial portion of the Company’s operating expenses are incurred in United States dollars. Fluctuations in the exchange rate between the U.S. dollar, the Real (Brazil) and other currencies may have a material adverse effect on the Company’s business, financial condition and operating results. The Company’s consolidated financial results are affected by foreign currency exchange rate fluctuations. Foreign currency exchange rate exposures arise from current transactions and anticipated transactions denominated in currencies other than United States dollars and from the translation of foreign-currency-denominated balance sheet accounts into United States dollar-denominated balance sheet accounts. The Company is exposed to currency exchange rate fluctuations because portions of its revenue and expenses are denominated in currencies other than the United States dollar, particularly the Real. In particular, uncertainty regarding economic conditions in Brazil pose risk to the stability of the Real. Exchange rate fluctuations could adversely affect the Company’s operating results and cash flows and the value of its assets outside of United States. If a foreign currency is devalued in a jurisdiction in which the Company is paid in such currency, then the Company’s customers may be required to pay higher amounts for the Company’s products or services, which they may be unable or unwilling to pay.

While the Company may enter into forward currency swaps and other derivative instruments intended to mitigate the foreign currency exchange risk, there can be no assurance the Company will do so or that any instruments that the Company enters into will successfully mitigate such risk. If the Company enters into foreign currency forward or other hedging contracts, the Company would be subject to the risk that a counterparty to one or more of these contracts defaults on its performance under the contracts. During an economic downturn, a counterparty’s financial condition may deteriorate rapidly and with little notice, and the Company may be unable to take action to protect its exposure. In the event of a counterparty default, the Company could lose the benefit of its hedging contract, which may harm its business and financial condition. In the event that one or more of the Company’s counterparties becomes insolvent or files for bankruptcy, its ability to eventually recover any benefit lost as a result of that counterparty’s default may be limited by the liquidity of the counterparty. The Company expects that it will not be able to hedge all of its exposure to any particular foreign currency, and it may not hedge its exposure at all with respect to certain foreign currencies. Changes in exchange rates and the Company’s limited ability or inability to successfully hedge exchange rate risk could have an adverse impact on the Company’s liquidity and results of operations.

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We may be unable to obtain licenses in new jurisdictions where our customers operate.

We are subject to regulation in any jurisdiction where our customers access our website. To expand into any such jurisdiction we may need to be licensed, or obtain approvals of our products or services. If we do not receive, or receive a revocation of a license in a particular jurisdiction for our products or services, we would not be able to sell or place our products or services in that jurisdiction. Any such outcome could materially and adversely affect our results of operations and any growth plans for our business.

Privacy concerns could result in regulatory changes and impose additional costs and liabilities on the Company, limit its use of information, and adversely affect its business.

Personal privacy has become a significant issue in the United States, Brazil, Europe, and many other countries in which the Company currently operates and may operate in the future. Many federal, state, and foreign legislatures and government agencies have imposed or are considering imposing restrictions and requirements about the collection, use, and disclosure of personal information obtained from individuals. Changes to laws or regulations affecting privacy could impose additional costs and liability on the Company and could limit its use of such information to add value for customers. If the Company were required to change its business activities or revise or eliminate services, or to implement burdensome compliance measures, its business and results of operations could be harmed. In addition, the Company may be subject to fines, penalties, and potential litigation if it fails to comply with applicable privacy regulations, any of which could adversely affect the Company’s business, liquidity and results of operation.

The Company’s results of operations could be affected by natural events in the locations in which it operates or where its customers or suppliers operate.

The Company, its customers, and its suppliers have operations in locations subject to natural occurrences such as severe weather and other geological events, including hurricanes, earthquakes, or flood that could disrupt operations. Any serious disruption at any of the Company’s facilities or the facilities of its customers or suppliers due to a natural disaster could have a material adverse effect on the Company’s revenues and increase its costs and expenses. If there is a natural disaster or other serious disruption at any of the Company’s facilities, it could impair its ability to adequately supply its customers, cause a significant disruption to its operations, cause the Company to incur significant costs to relocate or re-establish these functions and negatively impact its operating results. While the Company intends to seek insurance against certain business interruption risks, such insurance may not adequately compensate the Company for any losses incurred as a result of natural or other disasters. In addition, any natural disaster that results in a prolonged disruption to the operations of the Company’s customers or suppliers may adversely affect its business, results of operations or financial condition.

Risks Related to Regulation

The Company is subject to various laws relating to trade, export controls, and foreign corrupt practices, the violation of which could adversely affect its operations, reputation, business, prospects, operating results and financial condition.

We are subject to risks associated with doing business outside of the United States, including exposure to complex foreign and U.S. regulations such as the Foreign Corrupt Practices Act (the “FCPA”) and other anti-corruption laws which generally prohibit U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions and other penalties. It may be difficult to oversee the conduct of any contractors, third-party partners, representatives or agents who are not our employees, potentially exposing us to greater risk from their actions. If our employees or agents fail to comply with applicable laws or company policies governing our international operations, we may face legal proceedings and actions which could result in civil penalties, administration actions and criminal sanctions. Any determination that we have violated any anti-corruption laws could have a material adverse impact on our business. Changes in trade sanctions laws may restrict the Company’s business practices, including cessation of business activities in sanctioned countries or with sanctioned entities.

Violations of these laws and regulations could result in significant fines, criminal sanctions against the Company, its officers or its employees, requirements to obtain export licenses, disgorgement of profits, cessation of business activities in sanctioned countries, prohibitions on the conduct of its business and its inability to market and sell the Company’s products or services in one or more countries. Additionally, any such violations could materially damage the Company’s reputation, brand, international expansion efforts, ability to attract and retain employees and the Company’s business, prospects, operating results and financial condition.

Regulations that may be adopted with respect to the internet and electronic commerce may decrease the growth in the use of the internet and lead to the decrease in the demand for esports products and services.

The Company may become subject to any number of laws and regulations that may be adopted with respect to the internet and electronic commerce. New laws and regulations that address issues such as user privacy, pricing, online content regulation, taxation, advertising, intellectual property, information security, and the characteristics and quality of online products and services may be enacted. As well, current laws, which predate or are incompatible with the internet and electronic commerce, may be applied and enforced in a manner that restricts the electronic commerce market. The application of such pre-existing laws regulating communications or commerce in the context of the internet and electronic commerce is uncertain. Moreover, it may take years to determine the extent to which existing laws relating to issues such as intellectual property ownership and infringement, libel and personal privacy are applicable to the internet. The adoption of new laws or regulations relating to the internet, or particular applications or interpretations of existing laws, could decrease the growth in the use of the internet, decrease the demand for esports’ products and services, increase esports’ cost of doing business or could otherwise have a material adverse effect on esports’ business, revenues, operating results and financial condition.

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Risks Relating to Our Common Stock, Our Warrants and the Offering

Once our common stock and warrants (forming part of the units offered hereby) are listed on Nasdaq Capital Market, there can be no assurance that we will be able to comply with Nasdaq Capital Market’s continued listing standards.

As a condition to consummating this offering, our common stock and the warrants offered in this prospectus must be listed on the Nasdaq Capital Market or another national securities exchange. Accordingly, in connection with the filing of the registration statement of which this prospectus forms a part, we have applied to list our common stock and warrants (forming part of the units offered hereby) on the Nasdaq Capital Market under the symbols “WINR” and “WINRZ”, respectively. Assuming that our common stock and warrants are listed and after the consummation of this offering, there can be no assurance any broker will be interested in trading our stock. Therefore, it may be difficult to sell your shares of common stock or warrants if you desire or need to sell them. Our underwriters are not obligated to make a market in our securities, and even if it makes a market, it can discontinue market making at any time without notice. Neither we nor the underwriters can provide any assurance that an active and liquid trading market in our securities will develop or, if developed, that such market will continue.

Once our common stock and warrants (forming part of the units offered hereby) are approved for listing on the Nasdaq Capital Market, there is no guarantee that we will be able to maintain such listing for any period of time by perpetually satisfying Nasdaq Capital Market’s continued listing requirements. Our failure to continue to meet these requirements may result in our securities being delisted from Nasdaq Capital Market.

The Company will use a portion of the net offering proceeds to repay certain principal and accrued interest outstanding under Convertible Promissory Notes.

The Company intends to use no more than $2,000,000 of the net proceeds of this offering to repay a portion of principal and accrued interest outstanding on Convertible Promissory Notes issued by the Company. As of October 12, 2021, $5,744,979 in principal and approximately $850,524 of accrued interest is outstanding on the Convertible Promissory Notes. The Convertible Promissory Notes bear interest at 12% per annum, payable as described in the Convertible Promissory Notes, and have a maturity date on that date which is two years from the date of their respective issuances.

The market price of our common stock and warrants (forming part of the units offered hereby) is likely to be highly volatile because of several factors, including a limited public float.

The market price of our common stock has been volatile in the past and the market price of our common stock and our warrants is likely to be highly volatile in the future. You may not be able to resell shares of our common stock or our warrants (forming part of the units offered hereby) following periods of volatility because of the market’s adverse reaction to volatility.

Other factors that could cause such volatility may include, among other things:

● actual or anticipated fluctuations in our operating results;

● the absence of securities analysts covering us and distributing research and recommendations about us;

● we may have a low trading volume for a number of reasons, including that a large portion of our stock is closely held;

● overall stock market fluctuations;

● announcements concerning our business or those of our competitors;

● actual or perceived limitations on our ability to raise capital when we require it, and to raise such capital on favorable terms;

● conditions or trends in the industry;

● litigation;

● changes in market valuations of other similar companies;

● future sales of common stock;

● departure of key personnel or failure to hire key personnel; and

● general market conditions.

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Any of these factors could have a significant and adverse impact on the market price of our common stock and/or warrants. In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock and/or warrants, regardless of our actual operating performance.

Our common stock has in the past been a “penny stock” under SEC rules, and our warrants (forming part of the units offered hereby) may be subject to the “penny stock” rules in the future. It may be more difficult to resell securities classified as “penny stock.”

In the past, our common stock was a “penny stock” under applicable SEC rules (generally defined as non-exchange traded stock with a per-share price below $5.00). While our common stock (and trading warrants (forming part of the units offered hereby)) will not be considered “penny stock” following this offering since they will be listed on the Nasdaq Capital Market, if we are unable to maintain that listing and our common stock and warrants are no longer listed on the Nasdaq Capital Market, unless we maintain a per-share price above $5.00, our common stock and warrants will become “penny stock.” These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.

Legal remedies available to an investor in “penny stocks” may include the following:

● If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.

● If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.

These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock or our warrants and may affect your ability to resell our common stock and our warrants.

Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.

For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock or our warrants will not be classified as a “penny stock” in the future.

If the benefits of any proposed acquisition do not meet the expectations of investors, stockholders or financial analysts, the market price of our Common Stock may decline.

If the benefits of any proposed acquisition do not meet the expectations of investors or securities analysts, the market price of our Common Stock prior to the closing of the proposed acquisition may decline. The market values of our Common Stock at the time of the proposed acquisition may vary significantly from their prices on the date the acquisition target was identified.

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In addition, broad market and industry factors may materially harm the market price of our Common Stock irrespective of our operating performance. The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

Changes in accounting principles and guidance, or their interpretation, could result in unfavorable accounting charges or effects, including changes to our previously filed financial statements, which could cause our stock price to decline.

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles and guidance. A change in these principles or guidance, or in their interpretations, may have a significant effect on our reported results and retroactively affect previously reported results.

Being a public company results in additional expenses, diverts management’s attention and could also adversely affect our ability to attract and retain qualified directors.

As a public reporting company, we are subject to the reporting requirements of the Exchange Act. These requirements generate significant accounting, legal and financial compliance costs and make some activities more difficult, time consuming or costly and may place significant strain on our personnel and resources. The Exchange Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to establish the requisite disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight are required.

As a result, management’s attention may be diverted from other business concerns, which could have an adverse and even material effect on our business, financial condition and results of operations. These rules and regulations may also make it more difficult and expensive for us to obtain director and officer liability insurance. If we are unable to obtain appropriate director and officer insurance, our ability to recruit and retain qualified officers and directors, especially those directors who may be deemed independent, could be adversely impacted.

We are an “emerging growth company” and our election to delay adoption of new or revised accounting standards applicable to public companies may result in our financial statements not being comparable to those of some other public companies. As a result of this and other reduced disclosure requirements applicable to emerging growth companies, our securities may be less attractive to investors.

As a public reporting company with less than $1,070,000,000 in revenue during our last fiscal year, we qualify as an “emerging growth company” under the JOBS Act. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company we:

● are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act;

● are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives (commonly referred to as “compensation discussion and analysis”);

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● are not required to obtain a non-binding advisory vote from our stockholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes);

● are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;

● may present only two years of audited financial statements and only two years of related Management’s Discussion & Analysis of Financial Condition and Results of Operations (“MD&A”); and

● are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act.

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act.

Certain of these reduced reporting requirements and exemptions were already available to us due to the fact that we also qualify as a “smaller reporting company” under SEC rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding management’s assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or Chief Executive Officer pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act or such earlier time that we no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1,070,000,000 in annual revenues, have more than $700 million in market value of our Common Stock held by non-affiliates, or issue more than $1.0 billion in principal amount of non-convertible debt over a three-year period. Further, under current SEC rules we will continue to qualify as a “smaller reporting company” for so long as we have a public float (i.e., the market value of common equity held by non-affiliates) of less than $250 million as of the last business day of our most recently completed second fiscal quarter.

We cannot predict if investors will find our securities less attractive due to our reliance on these exemptions.

If we fail to maintain effective internal control over financial reporting, the price of our securities may be adversely affected.

Our internal control over financial reporting has weaknesses and conditions that require correction or remediation. For the year ended May 31, 2021 and the quarter ended August 31, 2021, we identified a material weakness in our assessment of the effectiveness of disclosure controls and procedures. We did not effectively segregate certain accounting duties due to the small size of our accounting staff. We are dependent upon our Chief Financial Officer, who is knowledgeable and experienced in the application of U.S. Generally Accepted Accounting Principles, to maintain our disclosure controls and procedures and the preparation of our financial statements for the foreseeable future. We plan to increase the size of our accounting staff at the appropriate time for our business and its size to ameliorate our concern that we do not effectively segregate certain accounting duties, which we believe would resolve the material weakness in disclosure controls and procedures, but there can be no assurances as to the timing of any such action or that we will be able to do so.

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We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act and if we fail to continue to comply, our business could be harmed, and the price of our securities could decline.

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act require an annual assessment of internal control over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm. The standards that must be met for management to assess the internal control over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards. We expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis. In the event that our Chief Executive Officer or Chief Financial Officer determines that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of our securities will be affected; however, we believe that there is a risk that investor confidence and the market value of our securities may be negatively affected.

Our management team will have immediate and broad discretion over the use of the net proceeds from this offering and we may use the net proceeds in ways with which you disagree.

The net proceeds from this offering will be immediately available to our management to use at their discretion. We currently intend to use the net proceeds from this offering to fund the expansion of our operations by the acquisition and/or build-out of new gaming center locations, strategic acquisition of other companies, products or technologies, repay approximately $2,000,000 of principal and accrued interest outstanding on the Convertible Promissory Notes issued by the Company, working capital and general corporate purposes. See “Use of Proceeds.” We have not allocated specific amounts of the net proceeds from this offering for any of the foregoing purposes. Accordingly, our management will have significant discretion and flexibility in applying the net proceeds of this offering. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us or our stockholders. The failure of our management to use such funds effectively could have a material adverse effect on our business, prospects, financial condition, and results of operation.

You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.

You will incur immediate and substantial dilution as a result of this offering. After giving effect to the sale by us of up to $10,000,000 in units (of which our common stock forms a part) offered in this offering, at a public offering price of $9.00 per unit, and after deducting the underwriters’ discounts and commissions and other estimated offering expenses payable by us, investors in this offering can expect an immediate dilution of approximately $7.53 per share, or 84%, at the assumed public offering price.

Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate stockholders may sell freely after six months, subject only to the current public information requirement. Affiliates may sell after six months, subject to the Rule 144 volume, manner of sale (for equity securities), current public information, and notice requirements. Of the approximately 1,492,595 shares of our common stock outstanding as of August 31, 2021, approximately 817,328 shares are tradable without restriction. Given the limited trading of our common stock, resale of even a small number of shares of our common stock pursuant to Rule 144 or an effective registration statement may adversely affect the market price of our common stock.

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Anti-takeover provisions contained in our Certificate of Incorporation, as amended, and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

The Company’s Certificate of Incorporation, as amended, and bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors. These provisions include:

● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

● the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

● the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

● limiting the liability of, and providing indemnification to, our directors and officers;

● controlling the procedures for the conduct and scheduling of stockholder meetings;

● providing that directors may be removed prior to the expiration of their terms by stockholders only for cause; and

● advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.

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These provisions, alone or together, could delay hostile takeovers and changes in control of the Company or changes in our board of directors and management.

Any provision of our Certificate of Incorporation, as amended, or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our security holders to receive a premium for their securities and could also affect the price that some investors are willing to pay for our securities.

We have never paid dividends on our common stock and have no plans to do so in the future.

Holders of shares of our common stock are entitled to receive such dividends as may be declared by our board of directors. To date, we have paid no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to provide funds for operations of our business. Therefore, any return investors in our common stock may have will be in the form of appreciation, if any, in the market value of their shares of common stock. See “Dividend Policy.”

We will indemnify and hold harmless our officers and directors to the maximum extent permitted by Delaware law.

Our bylaws provide that we will indemnify and hold harmless our officers and directors against claims arising from our activities, to the maximum extent permitted by Delaware law. If we were called upon to perform under our indemnification agreement, then the portion of our assets expended for such purpose would reduce the amount otherwise available for our business.

Even if our recent Reverse Stock Split achieves the requisite increase in the market price of our Common Stock, there can be no assurance that we will be approved for listing on a national securities exchange or able to comply with other continued listing standards of a national securities exchange.

Even if our recent Reverse Stock Split increased the market price of our Common Stock sufficiently so that we comply with the minimum market price requirement, we cannot assure you that we will be able to comply with the other standards that we are required to meet in order to be approved for listing on a national securities exchange or maintain a listing of our Common Stock on such exchange. Our failure to meet these requirements prior to listing will result in the offering not occurring and our failure to meet these requirements following listing may result in our Common Stock being delisted from a national securities exchange.

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If an active, liquid trading market for our warrants (forming part of the units offered hereby) does not develop, you may not be able to sell your warrants quickly or at a desirable price.

The warrants forming a part of the units issued in this offering will be immediately exercisable and expire on the fifth anniversary of the date of issuance. The warrants will have an initial exercise price per share equal to $9.90. In the event that the stock price of our common stock does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrants may not have any value.

There is no established trading market for the warrants sold in this offering, and the market for the warrants may be highly volatile or may decline regardless of our operating performance. We have applied for the warrants offered in this offering to be listed on the Nasdaq Capital Market under the symbol “WINRZ”. However, an active public market for our warrants may not develop or be sustained. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market in our warrants or how liquid that market might become. If a market does not develop or is not sustained, it may be difficult for you to sell your warrants at the time you wish to sell them, at a price that is attractive to you, or at all.

Holders of our warrants (forming part of the units offered hereby) will have no rights as a common stockholder until they acquire our common stock.

Until you acquire shares of our common stock upon exercise of your warrants, you will have no rights with respect to the common stock issuable upon exercise of such warrants. Upon exercise of your warrants, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the units we are offering will be approximately $8,825,893. If the Representative fully exercises the over-allotment option, the net proceeds of the units we sell will be $10,220,893. “Net proceeds” is what we expect to receive after deducting the underwriting discount and commission and estimated offering expenses payable by us.

We intend to use no more than $2,000,000 of the net proceeds of this offering to repay a portion of principal and accrued interest outstanding on the Convertible Promissory Notes issued by the Company. As of October 12, 2021, $5,744,979 in principal and approximately of $850,524 of accrued interest is outstanding on the Convertible Promissory Notes. The Convertible Promissory Notes bear interest at 12% per annum, payable as described in the Convertible Promissory Notes and have a maturity date on that date which is two years from the date of their respective issuances.

We intend to use the balance of the net proceeds of this offering primarily to fund the expansion of our operations by the acquisition and/or build-out of new gaming center locations, strategic acquisition of other companies and/or esports teams, products or technologies, debt service and for working capital and other general corporate purposes. The amounts that we actually spend for any specific purpose may vary significantly, and will depend on a number of factors including, but not limited to, the pace of progress of our research and development, market conditions, and our ability to qualify vendors. In addition, we may use a portion of any net proceeds to acquire complementary compounds; however, we do not have plans for any acquisitions at this time.

This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering for other purposes, and we will have broad discretion in the application of net proceeds from this offering.

Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

DIVIDEND POLICY

We have not paid any cash dividends on our common stock and do not currently anticipate paying cash dividends in the foreseeable future. The agreements into which we may enter in the future, including indebtedness, may impose limitations on our ability to pay dividends or make other distributions on our capital stock. Payment of future dividends on our common stock, if any, will be at the discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business.

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CAPITALIZATION

The following table shows:

● Our capitalization as of August 31, 2021; and

● On a pro forma basis, our unaudited capitalization as of August 31, 2021, as adjusted to reflect the receipt of the net proceeds from the sale by us in this offering of units, after deducting $1,174,107 in estimated underwriting discounts and commissions and estimated offering expenses payable by us and the repayment of the principal and accrued interest outstanding on Convertible Promissory Notes issued by the Company in the amount of approximately $2,000,000.

We derived this table from, and it should be read in conjunction with and is qualified in its entirety by reference to, our historical and unaudited pro forma consolidated financial statements and the accompanying notes included elsewhere in this prospectus. You should also read this table in conjunction with “Selected Historical Consolidated Financial and Operating Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	As of August 31, 2021
	Actual			As Adjusted (1)
	(unaudited)
Cash and cash equivalents	$	673,693		$	7,499,586
Current portion of convertible note payable, net of discount		1,323,051			0
Long term convertible notes payable, net of discount		235,030			235,030
Stockholders’ equity:
Common stock, $0.0001 par value; 36,000,000 shares authorized and 1,492,595 and 2,603,706 shares issued and outstanding on an actual basis and adjusted basis, respectively, and		149			260
Common stock issuable		850,775			850,775
Preferred stock, $0.0001 par value 1,000,000 shares authorized and 0 shares issued and outstanding, respectively		-			-
Additional paid-in capital		21,233,531			28,059,313
Accumulated deficit		(16,502,806	)		(16,502,806	)
Total stockholders’ equity		5,699,851			12,525,744
Total capitalization	$	7,356,707		$	14,182,600

(1) The number of shares of common stock to be outstanding after the offering is based on 1,492,595, which is the number of shares outstanding on August 31, 2021, assumes no exercise by the underwriters of their option to purchase up to an additional 166,666 shares of common stock and/or warrants to purchase an additional 166,666 shares of common stock to cover over-allotments, if any, and excludes:

● 806,126 shares of our common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $82.43 per share as of August 31, 2021;

● an estimated 13,938 shares (based on certain formulaic assumptions) of our common stock issuable upon exercise of certain warrants at an estimated exercise price of $21.99 per share (based on certain formulaic assumptions) as of August 31, 2021; and

● an estimated 2,267,897 shares (based on certain formulaic assumptions) of our common stock issuable upon exercise of certain warrants at an estimated exercise price of $11.05 per share (based on certain formulaic assumptions) as of August 31, 2021

● an estimated 609,888 shares (based on certain formulaic assumptions) of our common stock issuable upon conversion of certain convertible promissory notes at an estimated conversion price of $10.00 per share (based on certain formulaic assumptions) as of August 31, 2021;

● 1,277,777 shares of common stock issuable upon the full exercise of the warrants (forming part of the units) offered hereby; and

● 178,888 shares of common stock issuable upon exercise of the Representative’s Warrant granted to the Underwriters upon completion of this offering (assuming the exercise of the over-allotment option by the Underwriters in full).

MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock is currently quoted on the OTCQB tier of the OTC Market Group, Inc. under the symbol “WINR.” Our warrants issued in connection with our initial public offering in August 2017 are currently listed on OTCQB under the symbol “WINRW.” The OTC Market is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks”, as well as volume information.

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On October 9, 2017, our common stock and warrants commenced public trading on the NASDAQ Capital Market under the symbols “IAM” and “IAMXW”, respectively. On November 20, 2018, we changed the symbols of our common stock and warrants to “SMSH” and “SMSHW”, respectively, in conjunction with our name change from “I-AM Capital Acquisition Company” to “Smaaash Entertainment, Inc.” On January 10, 2019, we changed the symbols of our common stock and warrants to “WINR” and “WINRW”, respectively, in conjunction with our name change from “Smaaash Entertainment, Inc.” to “Simplicity Esports and Gaming Company.” However, on January 25, 2019, the NASDAQ suspended our common stock and warrants from trading on the NASDAQ Capital Market and the OTCQB commenced the quotation of our common stock and warrants. On April 2, 2019, the NASDAQ Capital Market filed a Form 25 for our common stock and warrants, which became effective ten days thereafter.

We have applied to list our common stock and warrants forming part of the Units on The Nasdaq Capital Market (“Nasdaq Capital Market”) under the symbols “WINR” and “WINRZ,” respectively. There is no assurance that our listing application will be approved by the Nasdaq Capital Market. The approval of our listing on the Nasdaq Capital Market is a condition of closing this offering. Our warrants issued in connection with our initial public offering in August 2017 will continue to be listed on OTCQB under the symbol “WINRW.”

The following table includes the high and low bids for our common stock and warrants issued in connection with our initial public offering in August 2017 for the periods presented, since the consummation of our IPO on August 22, 2017. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Prices in the tables below have been presented to reflect the Reverse Stock Split of our outstanding shares of common stock.

Common Stock

	High		Low
Fiscal Year 2022
September 1 to October 8, 2021	$	10.60	$	8.00
June 1 to August 31, 2021	$	14.30	$	9.05
Fiscal Year 2021
March 1 to May 31, 2021	$	22.00	$	10.60
December 1, 2020 to February 28, 2021	$	21.08	$	11.00
September 1 to November 30, 2020	$	16.30	$	6.68
June 1 to August 31, 2020	$	18.64	$	6.44
Fiscal Year 2020
March 1 to May 31, 2020	$	13.76	$	5.36
December 1, 2019 to February 29, 2020	$	13.52	$	6.40
September 1 to November 30, 2019	$	21.52	$	12.00
June 1 to August 31, 2019	$	19.68	$	10.56
Fiscal Year 2019
March 1 to May 30, 2019	$	17.60	$	4.48
December 1, 2018 to February 28, 2019	$	52.96	$	9.84
September 1 to November 30, 2018	$	88.40	$	25.20
June 1 to August 31, 2018	$	88.40	$	78.88
Fiscal Year 2018
March 1 to May 31, 2018	$	84.16	$	79.20
December 1, 2017 to February 28, 2018	$	80.16	$	78.40
September 1 to November 30, 2017 (1)	$	79.84	$	78.40
August 16 to August 31, 2017 (2)	$	N/A	$	N/A

(1)	Our common stock began separate trading on the Nasdaq Capital Market on October 9, 2017.
(2)	Our common stock did not trade separately from the Public Units until October 9, 2017.

On October 8, 2021, the closing price for our common stock on the OTCQB was $9.00 per share.

The volume of shares of common stock traded on the OTCQB was insignificant and therefore, does not represent a reliable indication of the fair market value of these shares.

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Warrants

	High		Low
Fiscal Year 2022
September 1 to October 8, 2021	$	0.19	$	0.10
June 1 to August 31, 2021	$	0.35	$	0.11
Fiscal Year 2021
March 1 to May 31, 2021	$	0.75	$	0.29
December 1, 2020 to February 28, 2021	$	0.87	$	0.28
September 1 to November 30, 2020	$	0.41	$	0.17
June 1 to August 31, 2020	$	0.39	$	0.17
Fiscal Year 2020
March 1 to May 31, 2020	$	0.39	$	0.08
December 1, 2019 to February 29, 2020	$	0.45	$	0.11
September 1 to November 30, 2019	$	0.66	$	0.16
June 1 to August 31, 2019	$	0.58	$	0.25
Fiscal Year 2019
March 1 to May 30, 2019	$	0.49	$	0.04
December 1, 2018 to February 28, 2019	$	0.52	$	0.06
September 1 to November 30, 2018	$	0.46	$	0.17
June 1 to August 31, 2018	$	0.50	$	0.20
Fiscal Year 2018
March 1 to May 31, 2018	$	0.50	$	0.34
December 1, 2017 to February 28, 2018	$	0.60	$	0.21
September 1 to November 30, 2017 (1)	$	0.34	$	0.26
August 16 to August 31, 2017 (2)	$	N/A	$	N/A

(1)	Our warrants began separate trading on NASDAQ on October 9, 2017.
(2)	Our warrants did not trade separately from the Public Units until October 9, 2017.

On October 8, 2021, the closing price for our warrants on the OTCQB was $0.155 per warrant.

The volume of warrants traded on the OTCQB was insignificant and therefore, does not represent a reliable indication of the fair market value of these warrants.

Holders of Common Stock

As of October 12, 2021, there were approximately 134 record holders of our common stock and 61 record holders of our warrants. The number of record holders does not include beneficial owners of common stock and warrants whose shares and warrants are held in the names of banks, brokers, nominees or other fiduciaries.

We have not paid any cash dividends on our common stock and do not currently anticipate paying cash dividends in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business.

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Historical Common Equity Transactions

The following is a summary of transactions by us since our inception on April 17, 2017 involving registered and unregistered issuances and redemption of our common equity securities.

On May 31, 2017, we issued 179,688 Founder Shares to I-AM Capital Partners LLC (“Sponsor”) in exchange for a capital contribution of $25,000. Upon the partial exercise of the underwriters’ over-allotment option on September 13, 2017, 17,188 Founder Shares were forfeited by the Sponsor, for a balance of 162,500 Founder Shares held by our Sponsor. Such securities were issued in connection with our organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Our sponsor is an accredited investor for purposes of Rule 501 of Regulation D. No underwriting discounts or commissions were paid with respect to such sales.

On August 22, 2017, we sold 5,000,000 units at a purchase price of $10.00 per unit in our initial public offering (“IPO”) of public units (“Public Units”), generating gross proceeds of $50.0 million. Each Public Unit consisted of one share of our Common Stock (“Public Shares”), one right to receive one-tenth of one share our Common Stock upon consummation of an initial business combination (“Public Right”), and one redeemable warrant (“Public Warrants”). Each warrant entitled the holder to purchase one share of common stock at an exercise price of $92.00 per share, subject to adjustment.

On August 22, 2017, simultaneously with the consummation of the IPO and the sale of the Public Units, we consummated the private placement of 254,500 units (“Private Placement Units”) at a price of $10.00 per unit, generating total gross proceeds of $2,545,000. Each unit consisted of (i) one share of Common Stock, (ii) one right to receive one-tenth (1/10) of one share of Common Stock upon the consummation of an initial business combination (“Private Placement Rights”), and (iii) one 5-year warrant to purchase one share of Common Stock at an exercise price of $92.00 per share. The Private Placement Units, which were purchased by the Sponsor, are identical to the Public Units, except the Private Placement Warrants underlying the Private Placement Units are non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its affiliates or designees. If the Private Placement Units are held by someone other than the initial holder, or its permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by such holders on the same basis as the Public Warrants.

On August 22, 2017, we issued 6,250 shares of Common Stock to Maxim in connection with its services as underwriter for the IPO.

Contained in the underwriting agreement for the IPO was an over-allotment option allowing the underwriters to purchase from the Company up to an additional 750,000 Public Units (the “Over-Allotment Units”) and, in addition, the Company received a commitment from the Sponsor to purchase up to an additional 26,250 Private Placement Units. On September 13, 2017, the underwriters partially exercised their option and purchased 200,000 Over-Allotment Units, which were sold at an offering price of $10.00 per unit, generating gross proceeds of $2,000,000.

On September 13, 2017, simultaneously with the underwriter’s partial exercise of the over-allotment option, we consummated the sale of an additional 875 Private Placement Units, generating gross proceeds of $70,000.

On September 13, 2017, we issued Maxim an additional 250 shares of our Common Stock upon partial exercise of the over-allotment. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.

At the Special Meeting on November 20, 2018, holders of 556,033 Public Shares exercised their right to redeem those shares for cash at a price of $81.75 per share, for an aggregate of approximately $45,455,596.

On November 20, 2018, we issued 250,000 shares of our Common Stock to AHA Holdings Private Limited as an upfront portion of the newly issued shares of our Common Stock to be exchanged for all of the ownership interest in Smaaash Private within 6 months after the closing of the Business Combination.

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On November 20, 2018, we issued 26,000 shares of Common Stock to Chardan Capital Markets, LLC (“Chardan”) in consideration of services rendered. The shares issued to Chardan are subject to the same lock-up and will have the same registration rights as the shares of the Company held by the Sponsor.

On November 20, 2018, we issued 65,000 shares of Common Stock upon conversion of the Public Rights.

On November 20, 2018, upon the consummation of the transaction (“Business Combination”) with Smaaash Entertainment Private Limited (“Smaaash Private”), we issued 3,269 shares of Common Stock underlying the Private Placement Rights to the holders of the Private Placement Rights.

In connection with the closing of the Acquisition of Simplicity Esports LLC, we issued 37,500, 87,500, and 250,000 shares of Common Stock, respectively, to the Simplicity Owners on January 4, 2019, January 7, 2019, and March 27, 2019 in exchange for all of the issued and outstanding equity interest of Simplicity Esports LLC held by Simplicity Owners.

On January 4, 2019, upon the closing of the Acquisition of Simplicity Esports LLC, the Series A-1 Note in the amount of $500,000 and held by Maxim automatically converted into 24,206 shares of Common Stock.

During the period from March 1, 2019 through July 1, 2019, we sold an aggregate of 987,500 units at a purchase price of $2.00 per unit to 12 accredited investors in exchange for receipt of $1,975,000. Each unit consisted of (i) one share of Common Stock, and (ii) a 5-year warrant to purchase one share of Common Stock at a purchase price of $32.00.

On March 27, 2019, pursuant to a Restricted Stock Award, we issued Jed Kaplan, our then-Chief Executive Officer and interim Chief Financial Officer and a member of our board of directors, 15,000 shares of our restricted Common Stock. Such shares vested over the succeeding nine month period. As of July 7, 2021, all of such shares have vested. Mr. Kaplan currently serves as our Chairman of the Board.

On March 27, 2019, pursuant to a Restricted Stock Award, we issued Roman Franklin, our then-President and a member of our board of directors, 4,500 shares of our restricted Common Stock. Such shares vested over the succeeding nine month period. As of July 7, 2021, all of such shares have vested. Mr. Franklin currently serves as our Chief Executive Officer and a member of our board of directors.

On March 27, 2019, pursuant to a Restricted Stock Award, we issued Steve Grossman, our then Corporate Secretary, 3,000 shares of our restricted Common Stock. Such shares vested over the succeeding nine-month period. As of July 7, 2021 all of such shares have vested.

Each of the Restricted Stock Awards was entered into in connection with entry into employment agreements with each of Messrs. Kaplan, Franklin and Grossman on December 31, 2018.

On May 31, 2019, we issued 12,500 shares of Common Stock to Polar in exchange for Polar Asset Management Partners Inc.’s (“Polar”) forgiveness of $143,476 owed by us to Polar under that that certain Debt Conversion Agreement entered into in May 2019 between Polar and us.

On July 30, 2019, in connection with the acquisition of a 100% interest in PLAYlive Nation, Inc. (“PLAYlive”) by way of merger, the Company issued 93,750 shares of the Company’s common stock in exchange for 100% of the issued and outstanding common stock from the owners of PLAYlive.

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On September 16, 2019, pursuant to a Restricted Award, we issued to Jed Kaplan, our then-Chief Executive Officer and Interim Chief Financial Officer and a member of our board of directors, of 8,750 shares of our restricted Common Stock. Mr. Kaplan currently serves as our Chairman of the Board.

On September 16, 2019, pursuant to a Restricted Award, we issued to Roman Franklin, our then-President and a member of our board of directors, of 2,625 shares of our restricted Common Stock. Mr. Franklin currently serves as our Chief Executive Officer and a member of our board of directors.

On September 16, 2019, pursuant to a Restricted Award, we issued to Steven Grossman, our then Corporate Secretary, 1,750 shares of our restricted Common Stock. These shares were issued in reliance on Section 4(a)(2) of the Securities Act. Mr. Grossman has informed the Company that he will resign as Corporate Secretary effective April 15, 2021.

On March 11, 2020, in connection with the execution of the Common Stock Purchase Agreement with Triton Funds, LP, the Company issued 625 shares of the Company’s common stock to Triton Funds, LP (“Triton”) as a donation.

On April 9, 2020, the Company delivered a Purchase Notice to Triton pursuant to the terms of the Common Stock Purchase Agreement requiring Triton to acquire 15,625 shares of common stock, which resulted in $87,700 in proceeds to the Company. Pursuant to the terms of the Common Stock Purchase Agreement, on April 9, 2020, the Company instructed the transfer agent to issue 15,625 shares of common stock to a custodial account of Triton. Unfortunately, the transfer agent erroneously transferred the entire 90,625 shares of common stock under the Equity Line to the custodial account of Triton, resulting in an over-issuance of 75,000 shares to Triton. The Company notified Triton of this error and that the Company terminated the Common Stock Purchase Agreement with Triton. On November 18, 2020, the 75,000 shares issued in error were returned by Triton and cancelled and returned to the treasury of the Company.

On May 4, 2020, pursuant to the terms of that certain 10% Fixed Convertible Promissory Note dated April 29, 2020 in the principal amount of $152,500 issued by the Company in favor of Harbor Gates Capital, LLC, the Company issued 1,250 shares of the Company’s common stock to Harbor Gates Capital, LLC as additional consideration for the purchase of such note.  

On May 7, 2020, we issued 2,977 shares of our restricted Common Stock, at a price of 8.40 per share, to William H. Herrmann, Jr., a member of our board of directors, for an aggregate purchase price of $25,000.

On June 4, 2020, we issued 10,739 shares of common stock in connection with the conversion of $100,000 in principal of a convertible note issued in favor of Maxim.

On June 15, 2020, we issued 3,125 shares of common stock in satisfaction of an outstanding balance owed to a vendor.

On June 18, 2020, pursuant to the terms of that certain Securities Purchase Agreement between the Company and an accredited investor, pursuant to which the Company issued a 12% self-amortization promissory note in the principal amount of $550,000, the Company issued 6,875 shares of the Company’s common stock to such accredited investor as additional consideration for the purchase of such note.

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On June 29, 2020, the Company acquired the assets of one its franchisee owned esports gaming centers located on the Fort Bliss U.S. Military base in El Paso, TX. In connection with the acquisition the Company issued 18,750 restricted shares.

On June 30, 2020, the Company issued 12,334 shares of common stock at $7.76 per share to various employees of the Company as compensation. In connection with the issuance of these shares, the Company recorded stock-based compensation of $95,700.

On July 29, 2020, the Board issued 41,875 shares of common stock to Jed Kaplan, our then-Chief Executive Officer and Interim Chief Financial Officer and a member of our board of directors. Mr. Kaplan now serves as our Chairman of the Board. Of these shares, (i) 31,250 shares of common stock related to services provided by Mr. Kaplan to the Company during the 2020 fiscal year, (ii) 8,750 shares of common stock related to grants that should have been, but were not, made pursuant to the Kaplan 2018 Agreement (as hereinafter defined), and (iii) 1,875 shares of common stock related to grants made pursuant to the Kaplan 2020 Agreement (as hereinafter defined). The Kaplan 2018 Agreement provided for the grant to Mr. Kaplan of 1,250 shares of common stock per month. For the months of January 2020 through July 2020, however, such shares had not been granted. Accordingly, the July 29, 2020 grant included an aggregate of 8,750 shares of common stock that should have been granted for the months of January 2020 through July 2020. The Kaplan 2020 Agreement provides for the grant to Mr. Kaplan of 1,875 shares of common stock per month. Such shares were fully vested and earned as of the issuance thereof.

On July 29, 2020, the Board also issued 34,813 shares of common stock to Roman Franklin, our then-President and a member of our board of directors. Mr. Franklin now serves as our Chief Executive Officer and a member of our board of directors. Of these shares, (i) 31,250 shares of common stock related to services provided by Mr. Franklin to the Company during the 2020 fiscal year, (ii) 2,625 shares of common stock related to grants that should have been, but were not, made pursuant to the Franklin 2018 Agreement (as hereinafter defined), and (iii) 938 shares of common stock related to grants made pursuant to the Franklin 2020 Agreement (as hereinafter defined). The Franklin 2018 Agreement provided for the grant to Mr. Franklin of 375 shares of common stock per month. For the months of January 2020 through July 2020, however, such shares had not been granted. Accordingly, the July 29, 2020 grant included an aggregate of 2,625 shares of common stock that should have been granted for the months of January 2020 through July 2020. The Franklin 2020 Agreement provides for the grant to Mr. Franklin of 782 shares of common stock per month. Such shares were fully vested and earned as of the issuance thereof.

On July 29, 2020, we issued an aggregate of 24,000 shares of common stock to an employee and the members of the Board of Directors of the Company.

On July 31, 2020, we entered into a marketing agreement whereby we issued 3,473 shares of common stock.

On August 7, 2020, pursuant to the terms of that certain Securities Purchase Agreement between the Company and an accredited investor pursuant to which we issued a 12% self-amortization promissory note in the principal amount of $333,333, the Company issued 4,167 shares of common stock.

On September 16, 2020, we issued 13,209 shares of common stock to employees and consultants.

On September 16, 2020, the Company issued an aggregate of 2,813 restricted common shares of the Company to executive officers and employees of the Company for services rendered. More specifically, the Company issued 1,875 of these shares to Jed Kaplan and issued 938 of these shares to Roman Franklin. These shares were valued at $25,420, or $9.04 per share, based on the quoted trading price on the date of grant. In connection with the issuance of these shares, during the nine months ended February 28, 2021, the Company recorded stock-based professional fees of $25,420.

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On September 22, 2020, in connection with an Asset Purchase agreement with Ignatious O’Riley, an existing franchisee to acquire such franchisee’s assets in exchange for 2,989 shares of the Company’s common stock with fair value of $29,416 or $9.84 per share.

On September 23, 2020, the Company’s wholly owned subsidiary, Simplicity Union Gap, entered into an Asset Purchase agreement with Five Point Legacy Corp., an existing franchisee, to acquire such franchisee’s assets in exchange for 4,506 shares of the Company’s common stock with a fair value of $43,974 or $9.76 per share.

On October 1, 2020, the Company entered into an Asset Purchase agreement with Parryproject LLC, Owen Parry and Jennie Parry, an existing franchisee, to acquire such franchisee’s assets in exchange for 3,688 shares of the Company’s common stock with a fair value of $38,650 or $10.48 per share.

On October 1, 2020, the Company’s wholly owned subsidiary, Simplicity Humble, entered into an Asset Purchase agreement with Team Centore Entertainment Corp., and Charles Centore, an existing franchisee, to acquire such franchisee’s assets in exchange for 8,402 shares of the Company’s common stock with a fair value of $88,052 or $10.48 per share.

On October 12, 2020, the Company’s wholly owned subsidiary, Simplicity Frisco, entered into an Asset Purchase agreement with JAR Mathis Holdings, Jared Mathis and Amy Mathis, an existing franchisee, to acquire such franchisee’s assets in exchange for 6,202 shares of the Company’s common stock with a fair value of $74,423 or $12.00 per share.

On October 30, 2020, the Company’s wholly owned subsidiary, Simplicity Santa Rosa, entered into an Asset Purchase agreement with B&R Franchise Investments, LLC, Brian Chu and Richard Loo, an existing franchisee, to acquire such franchisee’s assets in exchange for 4,202 shares of the Company’s common stock with a fair value of $46,068 or $11.44 per share.

On October 30, 2020, the Company’s wholly owned subsidiary, Simplicity Brea, entered into an Asset Purchase Agreement with Nextgen Gaming, LLC, Ajay Chunilal Shah and Shweta Shah, an existing franchisee, to acquire such franchisee’s assets in exchange for 3,255 shares of the Company’s common stock with a fair value of $37,237 or $11.44 per share.

On October 30, 2020, the Company’s wholly owned subsidiary, Simplicity Billings, entered into an Asset Purchase agreement with Button Mashers, Inc, Jon Bessmer and Brandy Bessmer, an existing franchisee, to acquire such franchisee’s assets in exchange for 4,697 shares of the Company’s common stock with a fair value of $52,725 or $11.44 per share.

During the three months ended November 30, 2020, the Company issued an aggregate of 9,844 restricted common shares of the Company to executive officers of the Company for services rendered. Of these shares, the Company issued 5,625 shares to Jed Kaplan and issued 2,344 shares to Roman Franklin. These shares were valued at $119,632, or per share prices ranging from $9.04 per share to $11.44 per common share, based on the quoted trading price on the date of grant.

On December 1, 2020, the Company’s wholly-owned subsidiary, Simplicity St. Louis, LLC, entered into an Asset Purchase Agreement with Metta Gaming, LLC, Brian Paul Van Wyk, an existing franchisee, to acquire such franchisee’s assets in exchange for 3,523 shares of the Company’s common stock with fair value of $52,845, or $15.00 per share  .

On December 3, 2020, the Company issued 5,000 shares of its common stock in satisfaction of $50,000 in legal fees. These shares were valued at $80,000, or $16.00 per share, based on the quoted trading price on the date of grant. In connection with the issuance of these shares, the Company reduced accounts payable by $50,000 and recorded legal fees of $30,000.

On March 10, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and FirstFire Global Opportunities Fund, LLC, the Company issued a 12% convertible promissory note in the principal amount of $560,000. In addition, the Company issued 3,394 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement.

On March 11, 2021, the Company’s wholly-owned subsidiary, Simplicity Fullerton, LLC, entered into an Asset Purchase Agreement with Say K 2 Play, LLC a California limited liability company, Paresh Mital an individual and Smeeta Mital, an existing franchisee, to acquire such franchisee’s assets in exchange for 1,600 shares of the Company’s common stock with fair value of $20,800 or $13.00 per share.

During the three months ended February 28, 2021, the Company issued an aggregate of 108,641 restricted common shares of the Company to executive officers of the Company for services rendered. These shares were valued at $1,545,467, or per share prices ranging from $13.25 per share to $19.75 per common share, based on the quoted trading price on the date of grant. In connection with the issuance of these shares, during the three months ended February 28, 2021, the Company recorded stock-based compensation of $1,545,467.

On March 26, 2021, the Company’s wholly-owned subsidiary, Simplicity Vancouver, LLC, entered into an Asset Purchase Agreement with Bhavin Shah, an individual and Parshwa, Inc., a Washington corporation, an existing franchisee, to acquire such franchisee’s assets in exchange for 2,900 shares of the Company’s common stock with fair value of $42,900 or $16.50 per share.

On March 31, 2021, pursuant to the terms of that certain Stock Purchase Agreement, the Company issued and sold 41,667 shares of Common Stock to Tiger Trout Capital Puerto Rico, LLC at a purchase price of $12.00 per share  .

On April 6, 2021, the Company issued an aggregate of 2,657 restricted common shares of the Company to executive officers and employees of the Company for services rendered. More specifically, the Company issued 1,875 of these shares to Jed Kaplan and issued 782 these shares to Roman Franklin. These shares were valued at $34,488, or $12.98 per share, based on the quoted trading price on the date of grant.

On June 11, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and FirstFire Global Opportunities Fund, LLC, the Company issued a 12% convertible promissory note in the principal amount of $1,266,666.67. In addition, the Company issued 11,875 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 593,750 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

On June 16, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and GS Capital Partners, LLC, the Company issued a convertible promissory note in the principal amount of $333,333.33. In addition, the Company issued 3,125 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 156,250 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

On July 22, 2021, the Company’s wholly-owned subsidiary, Simplicity Salinas, LLC, entered into an Asset Purchase Agreement with an existing franchisee, to acquire the franchisee’s assets in exchange for 6,000 shares of the Company’s common stock with fair value of $65,100, or $10.85 per share, based on the fair value of assets acquired.

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On August 19, 2021, the Company and Maxim entered into the fourth amendment to the Series A-2 Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Note, as amended, shall be extinguished, and the Series A-2 Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock at an exercise price of $13.00 per share.

On August 23, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and Jefferson Street Capital, LLC, the Company issued a 12% convertible promissory note in the principal amount of $333,333.33. In addition, the Company issued 3,125 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 156,250 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

On August 31, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and Lucas Ventures, LLC, the Company issued a 12% convertible promissory note in the principal amount of $200,000. In addition, the Company issued 3,749 shares of its common stock to the investor 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 at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

On August 31, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and LGH Investments, LLC, the Company issued a 12% convertible promissory note in the principal amount of $200,000.

On September 1, 2021, the Company issued an aggregate of 82,500 restricted common shares of the Company to executive officers and directors of the Company for services rendered during the fiscal year ended May 31, 2021.

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, at an exercise price of $10.73 per share, to FirstFire Global Opportunities Fund, LLC (“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.On September 28, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and Ionic Ventures, LLC, the Company issued a 12% convertible promissory note in the principal amount of $1,555,555.56. In addition, the Company issued 14,584 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 729,167 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

On October 1, 2021, the Company issued a common stock purchase warrant for the purchase of an additional 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  .

On October 7, 2021, the Company’s wholly owned subsidiary Simplicity Tracy, LLC, entered into an Asset Purchase Agreement with an existing 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.

The above issuances/sales were made pursuant to an exemption from registration as set forth in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.

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Nasdaq Delisting

The Company’s management decided that moving from Nasdaq to the OTCQB was more appropriate for the Company at that time, while the Company built out its planned network of retail esports centers.

On April 1, 2019, the Company was notified by Nasdaq that it would delist the Company’s common stock and public warrants. The Company’s common stock and public warrants were previously suspended from trading on Nasdaq, effective January 25, 2019.

On April 2, 2019, Nasdaq filed a Notification of Removal from Listing and/or Registration under Section 12(b) of the Exchange Act on Form 25 with the SEC relating to the Company’s common stock and public warrants. As a result, the Company’s common stock and public warrants were delisted from Nasdaq effective April 2, 2019.

The Company’s common stock and public warrants currently are quoted on the OTCQB under the symbols “WINR” and “WINRW,” respectively.

DILUTION

If you invest in our units (comprised of our common stock and warrants) in this offering, your interest will be diluted to the extent of the difference between the public offering price per share of common stock (which forms a part of a unit) and the pro forma net tangible book value per share of our common stock immediately after this offering.

The net tangible book value of our common stock as of August 31, 2021 was $(2,998,884) or approximately $(2.01) per share. Net tangible book value per share represents our total tangible assets less our total tangible liabilities, divided by the number of shares of common stock.

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Net tangible book value dilution per share of common stock in each unit to new investors represents the difference between the amount per share of common stock in each unit paid by purchasers in this offering and the pro forma net tangible book value per share of our common stock immediately after the completion of this offering. After giving effect to our issuance and sale of units in this offering at the assumed public offering price of $9.00 per unit, and after deducting estimated underwriting discounts and commissions and estimated offering expenses, our pro forma net tangible book value as of August 31, 2021 would have been $3,826,989 or approximately $1.47 per share. This represents an immediate increase in net tangible book value of $3.48 per share to existing stockholders and an immediate dilution in net tangible book value of $7.53 per share to purchasers of units in this offering, as illustrated in the following table:

Assumed public offering price per unit				$	9.00
Net tangible book value per share as of August 31, 2021	$	(2.01	)
Increase in net tangible book value per share attributable to new investors	$	3.48
Less: pro forma net tangible book value per share after giving effect to the offering				$	1.47
Immediate dilution in net tangible book value per share to new investors				$	7.53

The foregoing illustration also does not reflect the dilution that would result from the exercise of any of the warrants sold in the offering.

The following table sets forth, as of August 31, 2021, the assumed number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders and to be paid by new investors purchasing units (of which shares of common stock form a part) in this offering, after giving pro forma effect to the new investors in this offering at the public offering price of $9.00 per unit, together with the total consideration paid an average price per share paid by each of these groups, before deducting underwriting discounts and commissions and estimated offering expenses.

	Shares Purchased					Total Consideration					Average Price
	Number		Percent			Amount		Percent			per Share
Existing stockholders as of August 31, 2021		1,492,595		57.3	%	$	22,084,455		68.8	%	$	14.80
New investors		1,111,111		42.7	%	$	10,000,000		31.2	%	$	9.00
Total		2,603,706		100.00	%	$	32,084,455		100.00	%	$	12.32

If the Representative’s over-allotment option is exercised in full for shares of common stock at the assumed offering price, the number of shares held by new investors will increase to 1,277,777 (assuming no exercise of the warrants), or approximately 46.1% of the total number of shares of common stock outstanding after this offering and the shares held by existing stockholders will be 1,492,595 shares of common stock but the percentage of shares held by existing stockholders will decrease to 53.9% of the total shares outstanding.

The foregoing discussion and tables above do not give effect to the dilution that would result from (i) 806,126 shares of our common stock issuable upon the exercise of our issued and outstanding warrants at an average exercise price of $82.43 per share; (ii) estimated 13,938 shares (based on certain formulaic assumptions) of our common stock issuable upon exercise of certain warrants at an estimated exercise price of $21.99 per share (based on certain formulaic assumptions), (iii) estimated 2,267,897 shares (based on certain formulaic assumptions) of our common stock issuable upon exercise of certain warrants at an estimated exercise price of $11.05 per share (based on certain formulaic assumptions) as of August 31, 2021, (iv) estimated 609,888 shares (based on certain formulaic assumptions) of our common stock issuable upon conversion of certain convertible promissory notes at an estimated conversion price of $10.00 per share (based on certain formulaic assumptions) as of August 31, 2021, (v) 1,277,777 shares of common stock issuable upon the full exercise of the warrants (forming part of the units) offered hereby; and (vi) 178,888 shares of common stock issuable upon exercise of the Representative’s Warrant granted to the Underwriter upon completion of this offering, assuming the exercise of any over-allotment in full.

DESCRIPTION OF BUSINESS

Unless the context otherwise requires, “we,” “us,” “our,” or “the Company” refers to (i) “Simplicity Esports and Gaming Company” after the consummation of the acquisition of Simplicity Esports, LLC, (ii) “Smaaash Entertainment Inc.” before the consummation of the Acquisition of Simplicity Esports, LLC but after the closing of the Transactions with Smaaash Entertainment Private Limited, and (iii) I-AM Capital Acquisition Company prior to the closing of the Transactions with Smaaash Entertainment Private Limited. “Simplicity Esports LLC” means our wholly-owned subsidiary Simplicity Esports, LLC, a Florida limited liability company, and its consolidated subsidiaries. “PLAYlive” means our wholly-owned subsidiary PLAYlive Nation, Inc., a Delaware corporation, and its consolidated subsidiaries. “Simplicity One” means our 76% owned subsidiary, Simplicity One Brasil Ltda, a Brazilian limited liability company, and its consolidated subsidiaries. “Smaaash Private” means Smaaash Entertainment Private Limited, a private limited company incorporated under the laws of India, and its consolidated subsidiaries.

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Industry Overview

Esports is the competitive playing of video games by amateur and professional teams for cash prizes. Esports typically takes the form of organized, multiplayer video games that include real-time strategy, fighting, first-person shooter, and multiplayer online battle arena games. As of October 12, 2021, the three largest selling esports games are Dota 2®, League of Legends® (both multiplayer online battle arena games) and Counter Strike: Global Offensive® (a first-person shooter game). Other popular games include SMITE®, StarCraft II®, Call of Duty®¸ Heroes of the Storm®, Hearthstone® and Fortnite®. Most major professional esports events and a wide range of amateur esports events are broadcast live via streaming services including twitch.tv, azubu.tv, ustream.tv and youtube.com. Esports also includes games which can be played, primarily by amateurs, in multiplayer competitions on the Sony PlayStation®, Microsoft Xbox® and WII Nintendo® systems.

Although official competitions have long been a part of video game culture, participation and spectatorship of such events have seen a global surge in popularity over the last few years with the rapid growth of online streaming. The advent of online streaming technology has turned esports into a global industry that includes professional players and teams competing in major events that are simultaneously watched in person in stadiums, and by online viewers, which regularly exceed 1,000,000 viewers for major tournaments. According to Business Insider, over 100 million viewers saw the 2019 League of Legends® World Championships in person and online. CNBC reported in April 2019 that League of Legends® World Championships attract more viewers than the Super Bowl. Much like how there is a worldwide gaming market for the sports industry, there has now developed a worldwide gaming market for the esports industry. The impact has been so significant that many video game developers are now building features into their games designed to facilitate competition.

According to Newzoo, a global leader in esports, games and mobile intelligence, the total global esports audience is projected to grow to 474 million in 2021, with an anticipated 27.5 million American gamers, and such global audience is expected to reach 577 million by 2024. In addition, according to Newzoo, esports produced over $947 million in 2020 revenue and are projected to reach $1.08 billion in 2021 and $1.617 billion in 2024. Esports enthusiasts, which are people who watch professional esports content at least once a month, are expected to reach 234 million of the audience total in 2021, up from 215 million in 2020. With a compound annual growth rate (“CAGR”) (2019-2024) of +7.7%, this number is expected to reach almost 286 million in 2024. The global average revenue per esports enthusiast, which includes not only gaming revenue, but also sponsorships advertising and all other esports related revenues, is projected to reach $4.63 in 2021, and is projected to jump to $5.25 in 2022 after more live events are restored. The number of occasional esports viewers, (people who watch professional esports content less than once a month), is expected to reach 240 million in 2021, up from 220.5 million in 2020, and is projected to grow to surpass 291 million in 2024. According to Newtech Mag, China and the U.S. have the largest populations of esports fans, with Brazil ranking first in Latin America, which is the fastest growing gaming market, and third globally, with 20 million fans. The increasing prominence of esports as a mainstream entertainment industry is driving the growth in awareness in most regions. Audience and awareness growth in the emerging regions of Latin America, Middle East and Africa is largely driven by improving IT infrastructure and urbanization. According to estimates by PwC, Latin America is one of the fastest-rising regions for revenue growth. PwC estimates esports revenue in Latin America to rise from $18 million in 2019 to $42 million by 2023. We believe the rise of new franchises, such as Player Unknown’s Battlegrounds® or PubG®, is an important global growth factor as the influx of millennials should continue to drive the growth of the esports industry’s audience and in turn, the esports gaming industry.

In 2019, globally there were 885 major esports events that generated an estimated $56.3 million in ticket revenues. The total prize money of all esports events held in 2019 reached $167.4 million, a slight increase from $150.8 million in 2018. The League of Legends® World Championship was 2020’s biggest tournament by live viewership hours on Twitch and YouTube, with 91.9 million hours. It also produced $1.9 million in ticket revenues. League of Legends Champions Korea Sumer was the most-watched league by live viewership hours on Twitch and YouTube, generating 53.9 million hours. A report by Forbes estimates that the top 5 esports teams had 2020 revenues of between $16 million and $45 million and were valued at between $190 million and $410 million.

Business Overview

We are a global esports organization, that is capitalizing on the growth in esports through three business units, Simplicity One Brasil Ltda (“Simplicity One”), Simplicity Esports, LLC (“Simplicity Esports LLC”) and PLAYlive Nation, Inc. (“PLAYlive”). We believe that we are the only Securities and Exchange Commission (“SEC”) reporting, completely integrated-esports company that owns a League of Legends franchise. Additionally, we believe we have the largest network of corporate and franchisee owned esports gaming centers in North America.

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Our Esports Teams

We own and manage seven professional esports teams domestically and internationally. Revenue is generated from prize winnings, corporate sponsorships, advertising, league subsidy payments and potential league revenue sharing payments from the publishers of video games.

Domestic Esports Teams – Simplicity Esports LLC

Through our wholly owned subsidiary, Simplicity Esports LLC, we own and manage multiple professional esports teams competing in games such as Heroes of the Storm. We are committed to growing and enhancing the esports industry, fostering the development of amateurs to compete professionally and signing established professional gamers to support their paths to greater success.

International Esports Team - Simplicity One

Since January 2020, through our 76% owned subsidiary Simplicity One, we manage Flamengo eSports, one of the leading Brazilian League of Legends® teams competing in the top tier league CBLoL. CBLoL was the most talked about esports league in the world, on Twitter for the first half of 2021, with Call of Duty League and Overwatch League ranking 2^nd and 3^rd, respectively. Flamengo eSports was established in 2017 as the Esports division of Clube de Regatas do Flamengo, a successful Brazilian sports organization, with over 30 million followers across social media accounts, known for its world-famous soccer team. Flamengo eSports’ League of Legends® team won the CBLoL Championship in September 2019, which qualified the team to compete at the 2019 League of Legends® World Championship in Europe as one of 24 teams from 13 different regions around the world. Flamengo Esports @flaesports was ranked as the 6th most tweeted about esports organization in the world, ahead of Team Liquid and Cloud 9, ranking 7th and 10^th, respectively, for the first half of 2021.

Online Tournaments

In response to demand from customers for online esports tournaments which was in all likelihood triggered by the social distancing protocols attendant to the COVID-19 pandemic, we introduced in March 2020 an initiative of online esports tournaments. Since March 2020, through our wholly owned subsidiary, Simplicity Esports LLC, we have been holding online esports tournaments in the United States. In addition, we commenced promoting these periodic online tournaments via text messages to our database of over 400,000 paying esports gaming center customers, which we acquired in our acquisition of PLAYlive. If we can convert merely 1% of these existing customers from the PLAYlive database to play in our paid online tournaments, we anticipate this business unit may generate approximately $1 million in annual revenues. At a 5% conversion rate, this business segment may generate approximately $5 million in annual revenue. Management also intends to sell sponsorship and marketing activations for these online tournaments which would create additional revenue. We also announced our initiative to offer play at home online tournaments in Brazil. These tournaments are a way for us to engage with our customer base from home during periods of required social distancing or quarantine.

Our Gaming Centers

As of August 31, 2021, we have 28 operational locations (16 corporate locations and 12 franchise locations), through our subsidiaries throughout the U.S., giving casual gamers the opportunity to play in a social setting with other members of the gaming community. In addition, aspiring and established professional gamers have an opportunity to compete in local and national esports tournaments held in our gaming centers for prizes, notoriety, and potential contracts to play for one of our professional esports teams. In this business unit, revenue is generated from franchise royalties, the sale of game time, memberships, tournament entry fees, birthday party events, corporate party events, concessions and gaming-related merchandise.

Our business plan encompasses a brick and click physical and digital approach to further recognize revenue from all verticals, which we believe to be unique in the industry. The physical centers, together with our esports teams, lifestyle brand and marketing campaigns offer opportunities for additional revenue via strategic partnerships with both endemic and non-endemic brands. Our ultimate goal is to further engage a diverse fan base with a 360-degree approach driving traffic to both our digital platform, tournaments (online and in-person) and physical real estate to maximize the monetization opportunities with these relationships. In addition, we have proprietary intellectual capital, fan engagement strategies and brand development blueprints which complement our publicly available information.

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Optimally, the esports gaming centers of Simplicity Esports LLC (“Simplicity Esports Gaming Centers”) will measure between 2,000 and 4,000 square feet, with dozens of gaming stations. The Simplicity Esports Gaming Centers will feature cutting edge technology, futuristic aesthetic décor and dynamic high-speed gaming equipment. We believe our brick-and-click strategy will present attractive opportunities for sponsors and advertisers to connect with our audience, creating an intriguing monetization opportunity for sponsors and advertisers. Currently our company owned stores operate in approximately 40,000 square feet of retail space in desirable, high traffic locations.

Creating content that engages fans, sponsors and developers, while promoting our brand is one of our primary goals. In August 2021, we announced a partnership with Television Korea 24 (“ESTV”) to provide esports and gaming content for their 24-7 live linear channel around the world. ESTV can be viewed in over 45 countries including the U.S. and Brazil. We seek to reach a broad demographic encompassing the casual, amateur and professional gaming community. Our philosophy is to enhance our footprint for both endemic and non-endemic partnerships. We believe we possess a deep perception of our markets and understand the new age of branding while maintaining authenticity to the gaming community that comprises our fanbase.

As a result of COVID-19 (discussed below), all of our corporate and franchised Simplicity Gaming Centers were closed effective April 1, 2020. We commenced reopening Simplicity Gaming Centers on May 1, 2020 and have since reopened 16 corporate and 12 franchised Simplicity Gaming Centers as of August 31, 2021, the majority of which are operating at restricted capacity based on local COVID-19 regulations. See “Risk Factors—Public health epidemics or outbreaks, such as COVID-19, could materially and adversely impact our business.”

Corporate Gaming Centers

As of August 31, 2021, through our subsidiary entities, we currently operate 16 corporate-owned retail Simplicity Esports Gaming Centers, three of which were acquired during the fiscal year ended May 31, 2021and one of which was acquired in the first fiscal quarter ended August 31, 2021. . Furthermore, we have engaged a national tenant representation real estate broker to assist in the strategic planning and negotiations for our future Simplicity Esports Gaming Center locations. We contemplate that new Simplicity Esports Gaming Centers will be funded by us as well as a combination of tenant improvement allowances from landlords and sponsorships. The Company intends to continue the expansion of its corporate owned esports gaming center footprint through the buildout of new esports gaming centers. The disruptions in commercial real estate caused by COVID-19 lockdowns have allowed the Company to strengthen its existing relationships with national landlords by signing new locations with a percentage of gross rent lease structures. The locations will range between 2,000 and 4,000 sq ft and be primarily located inside of shopping malls.

As announced in June 2020, we are in discussions with commercial property owners regarding their desire to have us open 7,000 to 12,000 square foot Arenas at their properties. There are multiple locations available to us with a percentage of gross sales rent lease structure (as opposed to fixed rent payments), and construction funds offered by the landlord to assist with the build out and equipping of our planned Arenas. These Arenas are planned as hubs in our hub and spoke model that will see smaller corporate and franchisee owned gaming centers as spokes connected to Arenas as hubs for larger events and tournaments.

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Franchised Gaming Centers

Due to interest from potential franchisees, in 2019 we launched a franchising program to accelerate the expansion of our planned nationwide footprint. We sell specific franchise territories, through our wholly owned subsidiary PLAYlive, and assist with the establishment and buildout of esports gaming centers to potential business owners that desire to use our branding, infrastructure and process to open and operate gaming centers. We currently operate 12 fully constructed franchise esports gaming centers. The 12 franchise owned gaming centers that we have acquired to date generated prior to our acquisition of them over $1 million of revenue in the fiscal year ended May 31, 2021 despite operating with limited capacity due to COVID-19 restrictions. Due to interest from potential franchisees, we have launched a franchising program to accelerate the expansion of our planned nationwide footprint. We sell specific franchise territories, through our wholly owned subsidiary PLAYlive, and assist with the establishment and buildout of esports gaming centers to potential business owners that desire to use our branding, infrastructure and process to open and operate gaming centers. Franchise revenue is generated from the sale of franchise territories, supplying furniture, equipment and merchandise to the franchisees for buildout of their centers, a gross sales royalty fee and a national marketing fee. We license the use of our branding, assist in identifying and negotiating commercial locations, assist in overseeing the buildout and development, provide access to proprietary software for point of sale, inventory management, employee training and other HR functions. Franchisees also have an opportunity to participate in our national esports tournament events, and benefit from the growing profile of our professional esports teams. Once an esports gaming center is opened, we provide operational guidance, support and use of branding elements in exchange for a monthly royalty fee calculated as 6% of gross sales. On January 1, 2020, we implemented a national marketing fee of 1% of gross sales. To date, we have sold five of these franchise territories. COVID-19 travel restrictions caused us to suspend the sale of new franchise territories from April 1, 2020 until October 1, 2020. During this time, a pipeline of interested applicants has accumulated, and we anticipate new franchise territory sales over the next 12 months as a result.

The combination of the esports gaming centers, owned or franchised by our wholly owned subsidiaries Simplicity Esports LLC or PLAYlive, provides us with what we believe is one of the largest esports gaming center footprints in North America. Over the next 12 months, existing PLAYlive esports gaming centers will be rebranded to Simplicity Esports gaming centers. All newly opened franchise esports gaming centers will be branded as Simplicity Esports gaming centers and have numerous gaming PC’s. All gaming centers in our footprint will be participating venues in our national esports tournaments.

Franchise Roll Up Strategy

We began implementing a franchise roll-up strategy in July 2020 as a result of the disruption caused by COVID-19 related stay at home orders, and the disruption it caused to the commercial real estate market. The reduction in revenues for some franchisees because of stay-at-home orders, and government mandates to remain closed created significant accrued rent payments due to landlords. We have been able to come to terms with many franchisees to acquire the assets of their gaming centers and make them corporate owned. We have simultaneously negotiated new leases with some of the largest national mall chains, including Simon Property Group and Brookfield Asset Management, and are in the process of negotiating additional locations with other landlords. The new leases involve significant reductions in or elimination of fixed rent and the addition of percentage of revenues rent terms. During the fiscal year ended May 31, 2021, we signed 13 letters of intent and executed definitive agreements for all of those locations, most of which were operational prior to year-end. We expect each of these locations to be profitable as a result of the significant reduced rent expense via the percentage rent structure.

Our Stream Team

The Simplicity Esports LLC and Flamengo Esports stream teams encompass over 20 commentators (commonly known as “casters”), influencers and personalities who connect to a dedicated fan base. Our electric group of live personalities represent our organization to the fullest with their own unique style. We are proud to support and present a diverse group of gamers as we engage fans across a multiple of esports genres. Our Twitch affiliation has enabled our stream team influences to reach a broad fan base. Additionally, we have created several niches within the streaming community which has enabled us to engage fans within certain titles on a 24/7 basis. Our notoriety in the industry is evidenced by our audience that views millions of minutes of Simplicity Esports’ and Flamengo Esports’ content monthly, via various social media outlets including YouTube, Twitter and Twitch. Through Simplicity Esports LLC, we have 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.

Material Acquisitions and Licensing

Acquisition of Simplicity Esports, LLC

On January 4, 2019, the Company consummated the transactions contemplated by that certain share exchange agreement, dated December 21, 2018 (as amended by Amendment No. 1 to Share Exchange Agreement, dated December 28, 2018 and by Amendment No. 2 to Share Exchange Agreement, dated December 30, 2018, the “Share Exchange Agreement”) by and among the Company, Simplicity Esports, LLC, a Florida limited liability company (“Simplicity Esports LLC”), each of the equity holders of Simplicity Esports LLC (“Simplicity Owners”) and Jed Kaplan, in the capacity as the representative of the Simplicity Owners (the “Representative”). Pursuant to the Share Exchange Agreement the Simplicity Owners transferred all the issued and outstanding equity interests of Simplicity Esports LLC to the Company in exchange for an aggregate of 375,000 shares of common stock of the Company (the “Simplicity Esports Acquisition”). As of January 4, 2019, upon the completion of the Simplicity Esports Acquisition, esports gaming became the primary business of the Company.

On January 4, 2019, the Simplicity Owners received an aggregate of 37,500 shares of common stock at the closing of the Acquisition and an additional aggregate of 87,500 shares of common stock on January 7, 2019. The Simplicity Owners were initially entitled to receive an additional 250,000 shares upon the Company’s receipt of the approval of its stockholders to such issuance. This condition was removed as the stockholder approval was only necessary due to the Company’s stock being listed on Nasdaq. Upon completion of the Simplicity Esports LLC acquisition, the Company decided that moving off the Nasdaq was appropriate, and the 250,000 shares were issued to the Simplicity Owners on March 27, 2019.

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In connection with the acquisition of Simplicity Esports LLC, on January 2, 2019, the Company filed a Certificate of Amendment to the Company’s Certificate of Incorporation (the “Certificate Amendment”) with the Delaware Secretary of State to change the Company’s name from “Smaaash Entertainment, Inc.” to “Simplicity Esports and Gaming Company”. In addition, the Company changed the ticker symbols of its common stock and public warrants to “WINR” and “WINRW,” respectively, and commenced trading of its common stock and public warrants under such new ticker symbols on the OTCQB on January 10, 2019.

Acquisition of PLAYlive Nation, Inc.

On July 30, 2019, we acquired a 100% interest in PLAYlive by way of merger pursuant to an Agreement and Plan of Merger, dated July 25, 2019, whereby we acquired 100% of the issued and outstanding common stock of PLAYlive from the selling stockholders (“PLAYlive Stockholders”) of PLAYlive in exchange for 93,750 shares of our common stock. Following this merger, PLAYlive became our wholly owned subsidiary. On the closing date of this merger, each of the PLAYlive Stockholders entered into a one-year lock-up agreement with the Company and each of Duncan Wood, Jordan C. Jenson, and Alec T. Carpenter entered into an employment agreement with PLAYlive.

Licensing of Flamengo Esports

Effective January 20, 2020, Simplicity One entered into an Exclusive Trademark and Symbol Use License Agreement, and Other Covenants (the “License Agreement”), dated November 5, 2019 with Clube de Regatas do Flamengo (one of the most successful Brazilian sports organizations, known for its world-famous soccer team), whereby Clube de Regatas do Flamengo agreed to exclusively license its intellectual property rights (“Flamengo IP Rights”) to Simplicity One (an entity which the Company and Team One E-Sports Ltda – ME owned a 90% and 10% equity interest in, respectively), authorizing Simplicity One to use the Flamengo IP Rights on a League of Legends team in esports as well as in other modalities in esports, which will be maintained and assembled by Simplicity One during the term of the Licensing Agreement. The License Agreement has a term of three years, beginning on January 1, 2020 and ending on December 31, 2022, and may be renewed by mutual written agreement by the parties. In exchange for the exclusive license, the Company shall pay Clube de Regatas do Flamengo an annual fee for the first, second and third year in the amount of $32,300 (Reais$170,000.00), $35,150 (Reais$185,000.00), and $38,000 (Reais$200,000.00), respectively, as well as the payment of royalties in the amount of 8% of the gross revenues (less taxes) of the eSports teams pursuant to the terms of the Licensing Agreement. If either party unilaterally terminates the Agreement or gives rise to certain termination grounds set forth in the Agreement, the terminating party will pay the other party a non-compensatory fine in the amount of approximately $19,000 (Reais $100,000) to indemnify the other party, without prejudice to any losses or damages that exceed such amount.

Flamengo Esports was established in 2017 as the Esports division of Clube de Regatas do Flamengo, a successful Brazilian sports organization, known for its world-famous soccer team. Flamengo Esports’ League of Legends® team won the CBLoL Championship in September 2019 and competed at the 2019 League of Legends® World Championship in Europe as one of 24 teams from 13 different regions around the world.

On April 1, 2020, the Company released multiple players and staff members from Simplicity One as part of a restructuring in an effort to make the Flamengo Esports project profitable. The Company was approved for ownership of a franchise spot in League of Legends Brazil (CBLoL) in October 2020.  

In June 2020, while Simplicity One was preparing its initial application for purchasing from Riot Games a franchise in Campeonato Brasileiro de League of Legends, Simplicity One become aware that the 10%-ownership interest of Team One E-Sports Ltda (“Team One E-Sports”) in Simplicity One was in contravention of Riot Games’ policy that only one League of Legend esports team could be owned by an owner at one time because Team One had already submitted an application for purchasing a franchise for another League of Legend esports team. Accordingly, Simplicity One needed Team One E-Sports to divest itself of its 10%-equity interest in Simplicity One in order for Simplicity One to proceed with its franchise application. Therefore, on June 22, 2020, Mr. Kaplan entered into a Quota Purchase Agreement with Team One E-Sports, pursuant to which Mr. Kaplan acquired Team One Esports’ 10%-ownership equity interest for $45,000 in cash. In addition, the Company transferred a 2%-equity interest (an aggregate of 4%) to each of Laila De Braga Cavalcanti Loss and Frederico Tannure. Ms. Loss lives in Brazil and run the operations of Simplicity One, in order to comply with Riot Games’ policy requiring local ownership in Brazil in order to apply for a franchise of a league of legends sports team. Furthermore, on June 22, 2020, Mr. Kaplan agreed to forgive the debt of the Kaplan Promissory Note with a principal balance of $90,000 in exchange for the Company assigning to Mr. Kaplan a 10% equity interest in Simplicity One. In light of the restructuring of the ownership interest in Simplicity One, as of January 13, 2021, the Company, Mr. Kaplan, Ms. Cavalcanti Loss, and Mr. Tannure own a 76%, 20%, 2% and 2% equity interest in Simplicity One.

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COVID-19

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 on May 1, 2020 and have since reopened 16 corporate and 12 franchised Simplicity Gaming Centers, the majority of which are operating at restricted capacity based on local COVID-19 regulations. 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, a limited number of the franchisees of Simplicity Gaming Centers have defaulted on their obligations to pay their minimum monthly royalty payment to us. This has resulted 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. As of August 31, 2021, we have recorded an allowance for doubtful accounts of approximately $42,000. We have experienced a decrease in our account receivables, net of the allowance for doubtful accounts of approximately $21,000 during the quarter ended August 31, 2021 and an increase of $17,000 for the quarter ended August 31, 2020. Notwithstanding our efforts to support franchisees and still collect on receivables, it is unclear exactly how much of the increase in accounts receivables is attributable to the impact of COVID-19. We have waived the minimum monthly royalty payment obligations from July 2020 through present day and are instead billing the franchisees a true-up of 6% of gross sales without a minimum. We continue to assess possible similar accommodations to the franchisees in light of the impact of COVID-19. Additionally, the disruptions in commercial real estate caused by COVID-19 lockdowns have allowed the Company to strengthen its existing relationships with national landlords by signing new locations with percentage rent leases.

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 adversely impacted the Company’s business during the year ended May 31, 2021 and the three months ended August 31, 2021 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.

Corporate History

Formation

We were initially a blank check company organized under the laws of the State of Delaware on April 17, 2017 under the name I-AM Capital Acquisition Company. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Although we were not limited to a particular industry or geographic region for purposes of consummating a business combination, we focused on businesses with a connection to India. On November 20, 2018, we changed our name from I-AM Capital Acquisition Company to Smaaash Entertainment, Inc. On January 2, 2019, we changed our name from Smaaash Entertainment, Inc. to Simplicity Esports and Gaming Company.

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Smaaash Entertainment Private Limited

Business Combination

On November 20, 2018, the Company and Smaaash Entertainment Private Limited, a private limited company incorporated under the laws of India (“Smaaash Private”), consummated the transactions (the “Transactions” or the “Business Combination”) contemplated by the share subscription agreement (as amended, the “Subscription Agreement”), following the approval at the special meeting of the stockholders of the Company held on November 9, 2018 (the “Special Meeting”).

Pursuant to the Subscription Agreement, the purchase price of $150,000 was paid by the Company to Smaaash Private in exchange for 294,360 newly issued equity shares of Smaaash Private at the closing of the Transactions (the “Closing”), representing less than 1% of Smaaash Private at such time.

At the time of the Closing, AHA Holdings Private Limited (“AHA Holdings”) and Shripal Morakhia (together with AHA Holdings, the “Smaaash Founders”) agreed to transfer all of their ownership interest in Smaaash Private (the “Additional Smaaash Shares”) to the Company in exchange for newly issued shares of our Common Stock (the “Transferred Company Shares”).

In furtherance of the foregoing, at the Closing, the Company issued an aggregate of 250,000 shares of its common stock to the Smaaash Founders as an upfront portion of the Transferred Company Shares (the “Upfront Company Shares”). In connection with the issuance of the Upfront Company Shares, the Company and the Smaaash Founders entered into an escrow agreement pursuant to which the Upfront Company Shares would be held in escrow and will be either, (i) if the Additional Smaaash Shares are not transferred in full to the Company within the designated six-month period, cancelled, or (ii) if the Additional Smaaash Shares are transferred in full to the Company within the designated six-month period, released from escrow and the number of Upfront Company Shares will be deducted from the Transferred Company Shares that will be issued to the Smaaash Founders upon the delivery of the Additional Smaaash Shares. Pursuant to the terms of the escrow agreement, the Upfront Company Shares have been cancelled because the Additional Smaaash Shares were not transferred in full to the Company in the designated six-month period.

In connection with the Closing, the Company changed its name from I-AM Capital Acquisition Company to Smaaash Entertainment Inc. changed its stock symbols for its Common Stock, Public Rights and Public Warrants to “IAM,” “IAMXR,” and “IAMXW,” respectively, and entered into a master franchise agreement (“Master Franchise Agreement”) and a master license and distribution agreement (“Master Distribution Agreement”) with Smaaash Private. After the Closing, the Company’s primary assets consisted of shares in Smaaash Private and the rights granted under the Master Franchise Agreement and the Master Distribution Agreement.

Business of Smaaash Private

At the time of closing of the Smaaash transaction, Smaaash Private operated 40 games and entertainment centers (“Smaaash Centers”), including 39 Smaaash Centers in India and one international Smaaash Center in the U.S., in addition to carrying out product sales of its games and equipment that Smaaash has developed in-house, supported by its sponsorship and other revenues.

Smaaash Private’s core concept was to offer an interactive, immersive and fun experience to customers at its Smaaash Centers, blending Augmented Reality (“AR”) and Virtual Reality (“VR”) and other games, indoor entertainment, and attractive food and beverage options, customized to the tastes and preferences of a diverse set of customers across age groups, genders and backgrounds, including corporate customers, families, friends and children. Smaaash Private’s game concepts are supported by its in-house technology, value engineering and systems integration capabilities.

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Master Franchise Agreement

Under the Master Franchise Agreement, Smaaash Private granted to the Company an exclusive right to establish and operate Smaaash Centers (as defined under the Master Franchise Agreement) and to sublicense the right to establish and operate Smaaash Centers to third party franchisees, and a license to use the products and other services developed by Smaaash Private with respect to the Smaaash Centers, in the United States (“Territory”). Further, Smaaash Private has granted to the Company the limited license to use the Trademarks of Smaaash Private (as set out in the Master Franchise Agreement) for the purposes of establishing and operating the Smaaash Centers in the Territory. The Master Franchise Agreement has been executed on an arms’ length basis between Smaaash Private and the Company.

On November 29, 2018, the Company and Smaaash Private executed an addendum to the Master Franchise Agreement (the “Amendment”). Pursuant to the Amendment, Smaaash Private granted the Company the exclusive rights to set up family and entertainment centers under the name “Total Sports Center” in the United States (“Total Sports Centers”) in which 51% of the investment will be borne by the Company and 49% by Smaaash Private. Smaaash Private will be responsible for identifying the locations for setting up, managing and controlling the Total Sports Centers and will carry out all the fit out requirements for such centers. Smaaash Private will also appoint the management team for the centers. Smaaash Private will be entitled to 3% of the net revenue of each center, subject to conditions to be confirmed by the parties.

Master License and Distribution Agreement

Under the Master Distribution Agreement, Smaaash Private granted to the Company an exclusive right to purchase from Smaaash Private specialized video game equipment and products related to sports and recreational activities (“Products”) in the territory under the brand name of Smaaash Private and sell them with a 15% markup to the customers which will be the sub-franchisees of the Company who will operate the Smaaash Centers, as specified in the Master Franchise Agreement.

Shift of Business Focus to Esports Gaming

Following the January 2019 acquisition of Simplicity Esports LLC described below, we determined to shift our current primary focus to esports gaming. Accordingly, we did not generate any revenues from Smaaash in 2019. The Master Franchise Agreement, as amended, and the Master Distribution Agreement continue in full force and effect, however, and we may now or in the future pursue Smaaash Private business opportunities.

Polar and K2

On November 2, 2018, the Company entered into a stock purchase agreement with each of Polar Asset Management Partners Inc. (“Polar”) and K2 Principal Fund L.P. (“K2”), pursuant to which Polar and K2 agreed to sell up to 61,250 and 27,500 shares, respectively, of the Company’s common stock to the Company 30 days after the consummation of the transactions at a price of $89.84 contemplated by the share subscription agreement with Smaaash Private.

On December 20, 2018, the Company, Polar, K2 and the Escrow Agent, entered into an Amendment (the “Amendment”), pursuant to which, among other things, the stock purchase agreements with Polar and K2 were amended to (x) reduce the purchase price per share payable by the Company at the closing of the Stock Sales from $89.84 per share to (1) first $48.00 per share up to 20% of the original number of Shares (as defined in the respective Purchase Agreement), (2) then $40.00 per remaining share up to 20% of the original number of Shares, (3) then $32.00 per remaining share up to 20% of the original number of Shares, (4) then $24.00 per remaining Share up to 20% of the original number of Shares, and (5) then $16.00 per remaining Share up to 20% of the original number of Shares, (y) to extend the outside date of the closing of the Stock Sales until January 18, 2019, and (z) to authorize the issuance of $3,542,700 and $1,590,600 from the Escrow Account to Polar and K2, respectively, as partial payment for the Shares prior to the final closing of the Stock Sales.  

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The Amendment also included provisions regarding the reduction of the exercise price and amendment of redemption provisions of the Company’s Public Warrants and Private Placement Warrants. On August 18, 2019, the Company held a special meeting of its public warrant holders to approve the foregoing. However, these proposals were not approved by the requisite votes.

Acquisition of Simplicity Esports, LLC

In connection with the Simplicity Esports Acquisition, the Simplicity Owners received an aggregate of 37,500 shares of common stock at the closing on January 4, 2019, an additional aggregate of 87,500 shares of common stock on January 7, 2019 and the remaining 250,000) shares in March of 2019.

In connection with the Simplicity Esports Acquisition, on January 2, 2019, the Company filed a Certificate of Amendment to the Company’s Certificate of Incorporation (the “Certificate Amendment”) with the Delaware Secretary of State to change the Company’s name from “Smaaash Entertainment, Inc.” to “Simplicity Esports and Gaming Company.” In addition, the Company changed the ticker symbols of its common stock and public warrants to “WINR” and “WINRW,” respectively, and commenced trading of its common stock and public warrants under such new ticker symbols on the OTCQB on January 10, 2019.

Equity Line

On March 12, 2020, the Company entered into a Common Stock Purchase Agreement with Triton Funds LP (“Triton”), dated as of March 11, 2020, pursuant to which, upon the terms and subject to the conditions thereof, Triton was committed to purchase shares of the Company’s common stock at an aggregate price of up to $500,000 (the “Maximum Commitment Amount”) over the course of the commitment period which ends on the earlier of (i) the date on which Triton purchases the Maximum Commitment Amount and (ii) December 31, 2020 (the “Equity Line”). In connection with the execution of the Common Stock Purchase Agreement, the Company registered the resale of up to 90,625 shares of common stock issuable under the Equity Line in the amount of the Maximum Commitment Amount pursuant to a registration statement declared effective by the SEC on March 30, 2020.

On April 9, 2020, the Company delivered a Purchase Notice to Triton pursuant to the terms of the Common Stock Purchase Agreement requiring Triton to acquire 15,625 shares of common stock, which resulted in $87,700 in proceeds to the Company. Pursuant to the terms of the Common Stock Purchase Agreement, on April 9, 2020, the Company instructed the transfer agent to issue 15,625 shares of common stock to a custodial account of Triton. These shares were issued in reliance on Section 4(a)(2) of the Securities Act. Unfortunately, the transfer agent erroneously transferred the entire 90,625 shares of common stock under the Equity Line to the custodial account of Triton, resulting in an over-issuance of 75,000 shares to Triton. The Company notified Triton of this error and that the Company terminated the Common Stock Purchase Agreement with Triton. On November 18, 2020, the 75,000 shares issued in error were returned by Triton and cancelled and returned to the treasury of the Company.

Debt Obligations

10% Fixed Convertible Promissory Note

On April 29, 2020 (the “Effective Date”), the Company issued a 10% Fixed Convertible Promissory Note (the “Harbor Gates Note”), with a maturity date of October 29, 2020 (the “Maturity Date”), in the principal sum of $152,500 in favor of Harbor Gates Capital, LLC (“Harbor Gates”). Pursuant to the terms of the Harbor Gates Note, the Company agreed to pay to Harbor Gates $152,500 (the “Principal Sum”) and to pay “guaranteed” interest on the principal balance at an amount equivalent to 10% of the Principal Sum, to the extent such Principal Sum and “guaranteed” interest and any other interest, fees, liquidated damages and/or items due to Harbor Gates have not been repaid or converted into Company common stock in accordance with the terms of the Harbor Gates Note. The Harbor Gates Note carries an original issue discount (“OID”) of $2,500. Accordingly, on the Effective Date, Harbor Gates delivered $150,000 to the Company in exchange for the Harbor Gates Note.

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On July 2, 2020, the Company repaid $152,500 and $15,2500 in accrued interest and $33,550 in prepayment penalty in full satisfaction of the 10% Convertible Promissory Harbor Gates Note.

Kaplan Promissory Note

On May 12, 2020 (the “Issue Date”), the Company issued a promissory note (the “Kaplan Note”) in the principal sum of $90,000 in favor of Jed Kaplan, Chairman of the Company’s Board of Directors and greater than 5% stockholder of the Company. The Kaplan Note matures on October 12, 2020 (the “Maturity Date”). The Company used the proceeds of the Kaplan Note to fund the operations of Simplicity One.

As of May 31, 2020, advances under the terms of this note were $64,728. On various dates subsequent to May 31, 2020, Mr. Kaplan funded $25,272 pursuant to the Kaplan Promissory Note. With the contributions subsequent to May 31, 2020, the principal balances outstanding and due Mr. Kaplan amounted to $90,000. On June 22, 2020, Mr. Kaplan agreed to forgive the debt of the Kaplan Promissory Note with a principal balance of $90,000 in exchange for the Company assigning to Mr. Kaplan a 10% equity interest in Simplicity One.

Self-Amortization Promissory Note

On June 18, 2020 (the “Issue Date”), the Company entered into a securities purchase agreement (the “SPA”) with an accredited investor (the “Holder”), pursuant to which the Company issued a 12% self-amortization promissory note (the “Amortization Note”) with a maturity date of June 18, 2021 (the “Maturity Date”), in the principal sum of $550,000. Pursuant to the terms of the Amortization Note, the Company agreed to pay $550,000 (the “Principal Sum”) to the Holder and to pay interest on the Principal Sum at the rate of 12% per annum. The Amortization Note carries an original issue discount (“OID”) of $55,000. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $495,000 in exchange for the Amortization Note. In addition, pursuant to the terms of the SPA, the Company agreed to issue 6,875 shares of the Company’s common stock to the Holder as additional consideration.

In connection with the November 23, 2020 SPA discussed below, we repaid principal and interest of $198,375 on this June 18, 2020 Note.

On February 19, 2021, we repaid the outstanding principal and interest on the June 18, 2020 Note.

August 7, 2020 Self-Amortization Promissory Note

On August 7, 2020 (the “Issue Date”), the Company entered into a securities purchase agreement (the “SPA”) with FirstFire Global Opportunities Fund, LLC, an accredited investor (the “Holder”), pursuant to which the Company issued a 12% self-amortization promissory note (the “Self-Amortization Note”) with a maturity date of August 7, 2021 (the “Maturity Date”), in the principal sum of $333,333. Pursuant to the terms of the Self-Amortization Note, the Company agreed to pay $333,333 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum. The Self-Amortization Note carries an original issue discount of $33,333. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $300,000 in exchange for the Self-Amortization Note. In addition, pursuant to the terms of the SPA, the Company agreed to issue 4,167 shares of the Company’s common stock to the Holder as additional consideration.

On March 10, 2021, we repaid the outstanding principal and interest on the Self-Amortization Note.

November 23, 2020 Self-Amortization Promissory Note

On November 25, 2020, the Company entered into a securities purchase agreement (the “November 2020 SPA”), dated as of November 23, 2020 (the “Effective Date”), with an accredited investor (the “Holder”) pursuant to which the Company issued a 12% self-amortization promissory note (the “November Amortization Note”) with a maturity date of November 23, 2021 (the “Maturity Date”), in the principal sum of $750,000. Pursuant to the terms of the November Amortization Note, the Company agreed to pay to $750,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum. The Company received net proceeds of $441,375, net of original issue discount of $75,000, origination fees of $35,250, and the partial repayment of principal and interest of $198,375 on the June 18, 2020 Note. In connection with the November Amortization Note, during the first twelve months of this note, interest equal to $90,000 shall be guaranteed and earned in full as of the Effective Date, provided, however, that if the November Amortization Note is repaid in its entirety on or prior to February 23, 2021, then the interest shall be accrued on a per annum basis based on the number of days elapsed as of the repayment date from the Effective Date.

On February 19, 2021, we repaid the outstanding principal and interest on the November Amortization Note.

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Maxim Series A-2 Exchange Convertible Note

On or about December 20, 2018, the Company issued that certain Series A-2 exchange convertible note in the original principal amount of $1,000,000 (the “Series A-2 Note”) to Maxim.

On June 18, 2020, the Company and Maxim entered into that certain first amendment to the Series A-2 Note (the “First Amendment”), pursuant to which such parties agreed to the following: (i) Maxim’s resale of the Company’s common stock (the “Common Stock”) underlying the Series A-2 Note shall be limited to 10% of the daily volume of the Common Stock on each respective trading day, (ii) the maturity date of the Series A-2 Note was extended to December 31, 2020, (iii) the principal amount of the Series A-2 Note was increased by $100,000 and (iv) the conversion price was reduced from $15.44 to $9.20.

On December 31, 2020, the Company and Maxim entered into a second amendment to the Series A-2 Note to extend the maturity date of Series A-2 Note to February 15, 2021.

On April 14, 2021, the Company and Maxim entered into the third amendment to the Series A-2 Note with Maxim pursuant to which the Company and Maxim agreed to the following:

(i)	The maturity date of the Series A-2 Note was extended to October 15, 2021.
(ii)	The principal balance of the Series A-2 Note was increased by $50,000 as of April 14, 2021.

(iii)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before April 30, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.
(iv)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before May 15, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.
(v)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before July 15, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $100,000.
(vi)	If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before September 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000, representing a total cumulative increase in the principal balance of $350,000 if the Series A-2 Note is not repaid in its entirety on or before September 15, 2021.

On August 19, 2021, the Company and Maxim entered into the fourth amendment (the “Fourth Amendment”) to the Series A-2 Maxim Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock. The Company also granted Maxim an irrevocable right of first refusal superseding all others to act as Company’s sole managing underwriter and sole bookrunner or exclusive placement agent or financial advisor, or finder in connection with any public or private offering by the Company or any subsidiary of or successor to the Company (if applicable) of its equity, equity linked or debt securities (including convertible securities) while the Company’s common stock is listed on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing, each, a “National Exchange”), within the period beginning on August 19, 2021 and ending on the close of business on January 1, 2023.

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On August 19, 2021, the Company issued to Maxim a common stock purchase warrant (the “Warrant”) for the purchase of 365,000 shares of the Company’s common stock (the “Warrant Shares”) at an exercise price of $13.00, subject to adjustment as provided in the Warrant. The Warrant is exercisable during the period commencing on August 19, 2021 and ending at 5:00 p.m. eastern standard time on the date that is the earlier of (i) three years from the effective date of a registration statement registering for resale by Maxim or its assigns the Warrant Shares (provided that such registration statement remains in effect at the end of the exercise period) and (ii) the 42 month anniversary after August 19, 2021.

The Company paid off the Maxim note, in its entirety at the end of August 2021.

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% promissory note (the “Note”) with a maturity date of February 19, 2022 (the “Maturity Date”), in the principal sum of $1,650,000. In addition, the Company issued 10,000 shares of its common stock to the Holder as a commitment fee pursuant to the SPA. Pursuant to the terms of the Note, the Company agreed to pay to $1,650,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum (provided that the first twelve months of interest shall be guaranteed). The Note carries an original issue discount (“OID”) of $165,000. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $1,485,000 in exchange for the Note. The Company used the proceeds for its operational expenses, the repayment of those certain self-amortization promissory notes previously issued to the Holder on June 18, 2020 and November 23, 2020, and the repayment of certain other existing debt obligations. The Holder may convert the Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Note) at any time at a conversion price equal to $11.50 per share.

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.

The Company was required to make an interim payment to the Holder in the amount of $363,000, on or before August 19, 2021, towards the repayment of the balance of the Note. The Company and the Holder agreed to extend the terms of this payment. The extension provided that the Company pay $100,000 to the Holder by the interim payment date and agreed to pay an additional $100,000 upon the completion of a new debt deal that was anticipated to close by September 1, 2021 and the Company agreed to pay $163,000 to the Holder at the earlier of the Company stock uplist or September 30, 2021. These extension payments were paid by the Company on September 30, 2021.

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 (provided, however, that this five (5) calendar day cure period shall not apply to any event of default relating to the failure to principal and accrued interest, the conversion of the Note ), 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% (the “Default Amount”). 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.

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Recent Developments

March 2021 FirstFire Global 12% Promissory Note and Securities Purchase Agreement

On March 10, 2021, the Company, entered into a securities purchase agreement, dated as of March 10, 2021 (the “March 10 FirstFire SPA”), with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (the “FirstFire”), pursuant to which the Company issued a 12% promissory note (“March 10 FirstFire Note”) with a maturity date of March 10, 2022, in the principal sum of $560,000. The Company received net proceeds of $130,606, net of OID of $56,000, net of origination fees of $8,394, and the repayment of principal and interest of $365,000 on the August 7, 2020 Note. In addition, the Company issued 3,394 shares of its common stock to the FirstFire as a commitment fee pursuant to the SPA. Pursuant to the terms of the March 10 FirstFire Note, the Company agreed to pay to $560,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum (provided that the first twelve months of interest shall be guaranteed). The March 10 FirstFire Note carries an OID of $56,000. Accordingly, on the Closing Date (as defined in the March 10 FirstFire SPA), the Holder paid the purchase price of $504,000 in exchange for the Note. The FirstFire may convert the March 10 FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the March 10 FirstFire Note) at any time at a conversion price equal to $11.50 per share.

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. On October 1, 2021, the Company issued a common stock purchase warrant for the purchase of an additional 40,000 shares of the Company’s common stock 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.

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 (provided, however, that this five (5) calendar day cure period shall not apply to any event of default relating to the failure to principal and accrued interest, the conversion of the Note)), 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% (the “Default Amount”). 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.

Form S-8 Registration Statement

On March 18, 2021, the Company filed a registration statement on Form S-8 for the purpose of resale or reoffer thereof, of 18,125 shares of the Company’s common stock issued prior to the filing of such registration statement and held by the selling stockholder named therein in connection with such selling stockholder’s provision of services to the Company. On June 4, 2021, the Company filed a registration statement on Form S-8 for the purpose of resale or reoffer thereof, of 1,000,000 shares of the Company’s common stock reserved for issuance pursuant to the Company’s 2020 Omnibus Incentive Plan.

Appointment of Mr. Kaplan as Chairman, Mr. Franklin as Chief Executive Officer and Mr. Lau as Chief Financial Officer; New Executive Officer Agreements  

On March 25, 2021, our board of directors appointed Jed Kaplan, our then-Chief Executive Officer, Interim Chief Financial Officer and a member of the Board, as Chairman of the Board, effective March 29, 2021. Also on March 25, 2021, Mr. Kaplan submitted his resignation as Chief Executive Officer and Interim Chief Financial Officer. On the same date, our board of directors appointed Roman Franklin, our then- President and Chief Operating Officer and a member of the Board, as our Chief Executive Officer, effective March 29, 2021. Also on March 25, 2021, our board of directors appointed Knicks Lau to serve as our Chief Financial Officer, effective March 29, 2021. Donald R. Caldwell, who served as Chairman of the Board until March 29, 2021, continues to serve as a member of our board of directors and as Chairman of the Audit Committee and Chairman of the Compensation Committee.

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In connection with Mr. Franklin’s appointment, the Company entered into an employment agreement, dated as of March 29, 2021 by and between the Company and Mr. Franklin. See “Executive Compensation—Executive Officer and Director Compensation—Executive Employment Agreements” for information regarding Mr. Franklin’s employment agreement.

In connection with Mr. Lau’s appointment, the Company entered into an employment agreement, dated as of March 29, 2021 by and between the Company and Mr. Lau. See “Executive Compensation—Executive Officer and Director Compensation—Executive Employment Agreements” for information regarding Mr. Lau’s employment agreement.

Tiger Trout SPA

On March 31, 2021, the Company entered into a Stock Purchase Agreement (the “Agreement”) by and between the Company and Tiger Trout Capital Puerto Rico, LLC (“Tiger Trout”), pursuant to which the Company agreed to issue and sell to Tiger Trout an aggregate of 125,000 shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) at a purchase price of $12.00 per share, for a total purchase price of $1,500,000.

The Agreement provides that the sale will occur in two tranches, as follows:

● The Company issued 41,667 shares of Common Stock to Tiger Trout on March 31, 2021 (the “First Tranche Shares”) at a purchase price of $12.00 per share, for a total purchase price of $500,004 (the “First Tranche Purchase Price”). The closing of the purchase and sale of the First Tranche Shares is referred to herein as the “First Closing”.

● Subject to the satisfaction or waiver, by the party for whose benefit such conditions exist, of the conditions to the Second Closing (as hereinafter defined), at such time and pursuant to the terms and conditions in the Agreement, the Company agreed to issue and sell to Tiger Trout 83,333 shares of Common Stock (the “Second Tranche Shares” and together with the First Tranche Shares, the “Shares”) at a purchase price of $12.00 per share, for a total purchase price of $999,996 (the “Second Tranche Purchase Price” and together with the First Tranche Purchase Price, the “Purchase Price”). The closing of the purchase and sale of the Second Tranche Shares is referred to herein as the “Second Closing”.

In the Agreement, the Company agreed that, following the First Closing, the Company would utilize its commercially reasonable efforts to file a resale registration statement (the “Registration Statement”) pursuant to the Securities Act, with the Securities and Exchange Commission (the “Commission”) for the resale of the Shares, and will use its commercially reasonable efforts to have such registration statement declared effective by the Commission within 30 calendar days, but not more than 90 calendar days after March 31, 2021. On April 28, 2021, the Company filed a registration statement on Form S-1 (File No. 333-255584), to register up to 125,000 shares of the Company’s common stock by Tiger Trout pursuant to the Agreement, and the Form S-1 was declared effective by the SEC on May 10, 2021.

The Company also agreed to, among other things, (i) make and keep adequate current public information available, as those terms are understood and defined in Rule 144 promulgated under the Securities Act, and (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents as required for the applicable provisions of Rule 144.

The obligations of Tiger Trout to consummate the Second Closing is subject to certain conditions, including, but not limited to: (i) the Registration Statement shall have become effective, and (ii) from March 31, 2021 to the date of the Second Closing, trading in the shares of Common Stock shall not have been suspended by the Commission of the Company’s principal Trading Market (as defined in the Agreement), and, at any time prior to the date of the Second Closing, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such services, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of Tiger Trout, makes it impracticable or inadvisable to purchase the Second Tranche Shares at the Second Closing.

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The Agreement contains customary representations and warranties of the Company and the Purchaser and other customary covenants and agreements. The Agreement may be terminated by either the Company or Tiger Trout if the Second Closing has not occurred by the date that is 90 calendar days after March 31, 2021. As of August 31, 2021, the Agreement is still in effect.

FMW Media Works

Effective April 1, 2021, in connection with compensation for services to be rendered, the Company issued 12,500 shares of common stock to FMW Media Works.

Resignation of Knicks Lau; Appointment of Nancy Hennessey as Chief Financial Officer and Appointment of Laila Cavalcanti Loss as a Director; New Executive Officer Agreement and Corporate Secretary

On May 7, 2021, the Board of Directors of the Company appointed Laila Cavalcanti Loss to serve as a member of the Company’s Board of Directors. On May 10, 2021, Knicks Lau resigned as the Company’s Chief Financial Officer for personal reasons. On May 11, 2021, the Company’s Board of Directors appointed Nancy Hennessey as the Company’s Chief Financial Officer, effective May 17, 2021.  

In connection with Ms. Hennessey’s appointment as the Company’s Chief Financial Officer effective May 17, 2021, on May 11, 2021, the Company entered into an employment agreement, dated as of May 17, 2021 by and between the Company and Ms. Hennessey. See “Executive Compensation—Executive Officer and Director Compensation—Executive Employment Agreements” for information regarding Ms. Hennessey’s employment agreement.

In May 2021, the Company hired Julianne Blanchette to serve as its Corporate Secretary to assist with Board of Directors and corporate governance matters.

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% convertible promissory note (the “June 11 FirstFire Note”) with a maturity date of June 10, 2023 (the “FirstFire Maturity Date”), in the principal sum of $1,266,666.67. In addition, the Company issued 11,875 shares of its common stock to FirstFire as a commitment fee pursuant to the June 11 FirstFire SPA. Pursuant to the terms of the June 11 FirstFire Note, the Company agreed to pay to $1,266,666.67 (the “FirstFire Principal Sum”) to FirstFire 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 FirstFire Note after 180 days from June 10, 2021). The June 11 FirstFire Note carries an original issue discount (“OID”) of $126,666.67. Accordingly, FirstFire paid the purchase price of $1,140,000 in exchange for the FirstFire Note. The Company intended to use the proceeds for working capital and to pay off the promissory note issued by the Company in favor of Maxim. FirstFire may convert the June 11 FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the June 11 FirstFire Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by FirstFire upon, at the election of FirstFire, 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 June 11 FirstFire Note.

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The Company may the June 11 FirstFire Note, in full or in part, 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-year warrant (the “June 11 FirstFire Warrant”) to purchase 593,750 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73

In addition, pursuant to the terms of the June 11 FirstFire SPA, if the Company issues securities in the future with any terms that are more favorable to the terms of the June 11 FirstFire Note or June 11 FirstFire Warrant, FirstFire may elect to incorporate the more favorable terms into the June 11 FirstFire Note or June 11 FirstFire Warrant, as applicable. In addition, the Company granted to FirstFire a right of participation and first refusal  with respect to future capital raises of the Company during the 36-month period following the date of issuance of the June 11 FirstFire Note, subject to certain exceptions.  

The Company also agreed to prepare and file with the 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 filed the registration statement for these securities on October 1, 2021, which was declared effective by the Commission on October 12, 2021.

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% convertible promissory note (the “GS Note”) with a maturity date of June 10, 2023 (the “GS Maturity Date”), in the principal sum of $333,333.33. In addition, the Company issued 3,125 shares of its common stock to GS as a commitment fee pursuant to the GS SPA. Pursuant to the terms of the GS Note, the Company agreed to pay to $333,333.33 (the “GS Principal Sum”) to GS 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 GS Note after 180 days from June 10, 2021). The GS Note carries an original issue discount (“OID”) of $33,333.33. Accordingly, GS paid the purchase price of $300,000.00 in exchange for the GS Note. The Company intends to used the proceeds for working capital and to pay off the promissory note issued by the Company in favor of Maxim. GS may convert the GS Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the GS Note; provided, however, that the limitation on conversion may be waived (up to 9.99%) by GS upon, at the election of GS, 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 GS Note  .

The Company may prepay the GS Note, in full or in part, 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%.

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Pursuant to the terms of the GS SPA, the Company also issued to GS a three-year warrant to purchase 156,250 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

In addition, pursuant to the terms of the GS SPA, if the Company issues securities in the future with any terms that are more favorable to the terms of the GS Note or GS Warrant, GS Capital may elect to incorporate the more favorable terms into the GS Note or GS Warrant, as applicable. In addition, the Company granted to GS Capital a right of participation and first refusal with respect to future capital raises of the Company during the 36-month period following the date of issuance of the GS Note, subject to certain exceptions.  

The Company also agreed to prepare and file with the Commission 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 filed the registration statement for these securities on October 1, 2021, which was declared effective by the Commission on October 12, 2021.

Jefferson Street Capital Securities Purchase Agreement & Note

On August 23, 2021, the Company entered into a securities purchase agreement (the “Jefferson SPA”) with Jefferson Street Capital, LLC (“Jefferson”), pursuant to which the Company issued a 12% convertible promissory note (the “Jefferson Note”) with a maturity date of August 23, 2023 (the “Jefferson Maturity Date”), in the principal sum of $333,333.33. In addition, the Company issued 3,125 shares of its common stock to Jefferson as a commitment fee pursuant to the Jefferson SPA. Pursuant to the terms of the Jefferson Note, the Company agreed to pay to $333,333.33 (the “Jefferson Principal Sum”) to Jefferson 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 Jefferson Note after 180 days from August 23, 2021). The Jefferson Note carries an original issue discount (“OID”) of $33,333.33. Accordingly, Jefferson paid the purchase price of $300,000.00 in exchange for the Jefferson Note. The Company intended to use the proceeds for working capital and to pay off the promissory note issued by the Company in favor of Maxim. Jefferson may convert the Jefferson Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Jefferson Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by Jefferson upon, at the election of Jefferson, 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 Jefferson Note  .

The Company may prepay the Jefferson Note, in full or in part, 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-year warrant to purchase 156,250 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

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In addition, pursuant to the terms of the Jefferson SPA, if the Company issues securities in the future with any terms that are more favorable to the terms of the Jefferson Note or Jefferson Warrant, Jefferson may elect to incorporate the more favorable terms into the Jefferson Note or Jefferson Warrant, as applicable. In addition, the Company granted to Jefferson a right of participation and first refusal with respect to future capital raises of the Company during the 36-month period following the date of issuance of the Jefferson Note, subject to certain exceptions.  

The Company also agreed to prepare and file with the Commission 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. The Company filed the registration statement for these securities on October 1, 2021, which was declared effective by the Commission on October 12, 2021.

Lucas Ventures Securities Purchase Agreement & Note

On August 31, 2021, the Company entered into a securities purchase agreement (the “Lucas SPA”) with Lucas Ventures, LLC (“Lucas”), pursuant to which the Company issued a 12% convertible promissory note (the “Lucas Note”) with a maturity date of August 31, 2023 (the “Lucas Maturity Date”), in the principal sum of $200,000. In addition, the Company issued 3,749 shares of its common stock to Lucas as a commitment fee pursuant to the Lucas SPA. Pursuant to the terms of the Lucas Note, the Company agreed to pay to $200,000.00 (the “Lucas Principal Sum”) to Lucas 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 Lucas Note after 180 days from August 31, 2021). The Lucas Note carries an original issue discount (“OID”) of $20,000. Accordingly, Lucas paid the purchase price of $180,000.00 in exchange for the Lucas Note. The Company intended to use the proceeds for working capital and to pay off the promissory note issued by the Company in favor of Maxim. Lucas may convert the Lucas Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Lucas Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by Lucas upon, at the election of Lucas, 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 Lucas Note  .

The Company may prepay the Lucas Note at any time prior to maturity in accordance with the terms of the Lucas Note. The Lucas Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Lucas Note or the Lucas SPA.

Upon the occurrence of any Event of Default (as defined in the Lucas Note), which has not been cured within three calendar days, the Lucas Note shall become immediately due and payable and the Company shall pay to Lucas, 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 Lucas SPA, the Company also issued to Lucas a three-year warrant to purchase 187,480 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

In addition, pursuant to the terms of the Lucas SPA, if the Company issues securities in the future with any terms that are more favorable to the terms of the Lucas Note or Lucas Warrant, Lucas may elect to incorporate the more favorable terms into the Lucas Note or Lucas Warrant, as applicable. In addition, the Company granted to Lucas a right of participation and first refusal with respect to future capital raises of the Company during the 36-month period following the date of issuance of the Lucas Note, subject to certain exceptions.  

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The Company also agreed to prepare and file with the Commission a registration statement covering the resale of all shares issued or issuable pursuant to the Lucas SPA, including shares issued upon conversion of the Lucas Note or exercise of the Lucas Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following August 31, 2021 and to have the registration statement declared effective by the SEC within 120 days following August 31, 2021. The Company filed the registration statement for these securities on October 1, 2021, which was declared effective by the Commission on October 12, 2021.

LGH Investments Securities Purchase Agreement & Note

On August 31, 2021, the Company entered into a securities purchase agreement (the “LGH SPA”) with LGH Investments, LLC (“LGH”), pursuant to which the Company issued a 12% convertible promissory note (the “LGH Note”) with a maturity date of August 31, 2023 (the “LGH Maturity Date”), in the principal sum of $200,000. Pursuant to the terms of the LGH Note, the Company agreed to pay to $200,000.00 (the “LGH Principal Sum”) to LGH 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 LGH Note after 180 days from August 31, 2021). The LGH Note carries an original issue discount (“OID”) of $20,000. Accordingly, LGH paid the purchase price of $180,000.00 in exchange for the LGH Note. The Company intends to use the proceeds for working capital and to pay off the promissory note issued by the Company in favor of Maxim. LGH may convert the LGH Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the LGH Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by LGH upon, at the election of LGH, 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 LGH Note  .

The Company may prepay the LGH Note, in full or in part, 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 or the LGH SPA.  

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 %.

In addition, pursuant to the terms of the LGH SPA, if the Company issues securities in the future with any terms that are more favorable to the terms of the LGH Note or LGH Warrant, LGH may elect to incorporate the more favorable terms into the LGH Note or LGH Warrant, as applicable. In addition, the Company granted to LGH a right of participation and first refusal  with respect to future capital raises of the Company during the 36-month period following the date of issuance of the LGH Note, subject to certain exceptions.

The Company also agreed to prepare and file with the Commission a registration statement covering the resale of all shares issued or issuable pursuant to the LGH SPA, including shares issued upon conversion of the LGH Note. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following August 31, 2021 and to have the registration statement declared effective by the SEC within 120 days following August 31, 2021. The Company filed the registration statement for these securities on October 1, 2021, which was declared effective by the Commission on October 12, 2021.

First Amendment to March 10 FirstFire Note

On September 17, 2021, the Company entered into an amendment (“First Amendment”) with FirstFire Global Opportunities Fund, LLC (“FirstFire”) 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. As   consideration for FirstFire entering in to the First Amendment, the Company issued to FirstFire a three-year warrant to purchase 40,000 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

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Ionic Ventures Securities Purchase Agreement & Note

On September 28, 2021, the Company entered into a securities purchase agreement (the “Ionic SPA”) with Ionic Ventures, LLC (“Ionic”), pursuant to which the Company issued a 12% convertible 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. 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 $1,555,555.56 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, in full or in part, 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 the time prescribed in the Ionic Note, it 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-year warrant to purchase 729,167 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

In addition, pursuant to the terms of the Ionic SPA, if the Company issues securities in the future with any terms that are more favorable to the terms of the Ionic Note or Ionic Warrant, Ionic Ventures may elect to incorporate the more favorable terms into the Ionic Note or Ionic Warrant, as applicable. In addition, the Company granted to Ionic Ventures a right of participation and first refusal with respect to future capital raises of the Company during the 36-month period following the date of issuance of the Ionic Note, subject to certain exceptions.  

The Company also agreed to prepare and file with the Commission 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. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 30 days following September 28, 2021 and to have the registration statement declared effective by the SEC within 60 days following September 28, 2021. The Company filed the registration statement for these securities on October 1, 2021, which was declared effective by the Commission on October 12, 2021.

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Restructuring the Ownership in Simplicity One Brasil, LTDA

In June 2020, while Simplicity One was preparing its initial application for purchasing a franchise in Campeonato Brasileiro de League of Legends, Simplicity One Brasil become aware that the 10%-ownership interest of Team One E-Sports Ltd (“Team One E-Sports”) in Simplicity One was in contravention of Riot Games’ policy that only one League of Legend esports team could be owned by an owner at one time because Team One had already submitted an application for purchasing a franchise for another League of Legend esports team. Accordingly, Simplicity One needed Team One E-Sports to divest itself of its 10%-equity interest in Simplicity One in order for Simplicity One to proceed with its franchise application. Therefore, on June 22, 2020, Mr. Kaplan entered into a Quota Purchase Agreement with Team One E-Sports, pursuant to which Mr. Kaplan acquired Team One Esports’ 10%-ownership equity interest for $45,000 in cash. In addition, the Company transferred a 2%-equity interest (an aggregate of 4%) to each of Laila De Braga Cavalcanti Loss and Frederico Tannure. Ms. Loss lives in Brazil and run the operations of Simplicity One, in order to comply with Riot Games’ policy requiring local ownership in Brazil in order to apply for a franchise of a league of legends sports team. Furthermore, on June 22, 2020, Mr. Kaplan agreed to forgive the debt of the Kaplan Promissory Note with a principal balance of $90,000 in exchange for the Company assigning to Mr. Kaplan a 10% equity interest in Simplicity One. In light of the restructuring of the ownership interest in Simplicity One, as of January 13, 2021, the Company, Mr. Kaplan, Ms. Cavalcanti Loss, and Mr. Tannure own a 76%, 20%, 2% and 2% equity interest in Simplicity One.

Second Amendment to March 10 FirstFire Note

On October 1, 2021, the Company entered into an amendment (“Second Amendment”) with FirstFire to the March 10 FirstFire Note in order to remove the capital raising ceiling in such note. As consideration for FirstFire entering in to the Second Amendment, As consideration for FirstFire entering in to the Second Amendment, the Company issued to FirstFire a three-year warrant to purchase 40,000 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

Form S-1 Registration Statement

On October 1, 2021, the Company filed a registration statement on Form S-1 (File No. 333-259993), to register up to (i) 2,877,785 shares of the Company’s common stock, which consist of (a) 609,888 shares (“Conversion Shares”) of common stock that may be issued upon the conversion of the privately placed convertible debt (“Convertible Debt”) issued by the Company in the principal amount of $6,098,887 at an assumed conversion price of $10.00 per share (as determined in the Form S-1 with File No. 333-259993) and (b) 2,267,897 shares (“Warrant Shares”) of   common stock that may be issued upon the exercise of 2,267,897 warrants (“Warrants”) at an assumed exercise price of $9.35 per share (as determined in the Form S-1 with File No. 333-259993), which were issued in connection with the issuance of Convertible Debt by the Company and (ii) the resale from time to time of 69,852 shares of common stock by the selling securityholders named in the Registration Statement. The registration statement was declared effective by the Commission on October 12, 2021.

Nasdaq Listing, Reverse Stock Split and Increase in Authorized Shares of Common Stock

We have applied to list of our common stock and warrants on the Nasdaq Capital Market. There is no assurance that our listing application will be approved by the Nasdaq Capital Market. The approval of our listing on the Nasdaq Capital Market is a condition of closing. If our application to the Nasdaq Capital Market is not approved or we otherwise determine that we will not be able to secure the listing of the common stock and warrants on the Nasdaq Capital Market, we will not complete the offering.

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On November 17, 2020, our board of directors approved the reverse stock split in a ratio of 1-for-8 and on November 17, 2020, we filed an amended and restated certificate of amendment to our Third Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), implementing the reverse stock split in a ratio of 1-for-8, effective November 19, 2020; provided, however, the reverse stock split became effective for trading purposes on November 20, 2020 when it had been processed by the Financial Industry Regulatory Authority (“FINRA”). The reverse stock split is intended to allow us to meet the minimum share price requirement of the Nasdaq Capital Market. There is no assurance that our listing application will be approved by the Nasdaq Capital Market.

Employees

As of October 12, 2021, we had approximately 20 full-time employees and 30 part-time employees. None of our employees is represented by a union. We consider our relations with our employees to be good.

Legal Proceedings

On August 5, 2020, a lawsuit styled Duncan Wood v. PLAYlive Nation, Inc. and Simplicity eSports and Gaming Company (Case No. 20-1043) was filed in the U.S. District Court for the District of Delaware. The complaint alleges unlawful failure to make timely and reasonable payment of wages, breach of contract, breach of the duty of good faith and fair dealing and unjust enrichment. The plaintiff seeks monetary damages for compensation alleged to be owed, treble damages, interest on all wage compensation, reasonable attorneys’ fees and other relief as the Court deems just and proper. On October 30, 2020, Mr. Wood and Simplicity Esports and Gaming Company executed a mutual General Release and the lawsuit was dismissed with prejudice  .

From time to time, we are involved in various claims and legal actions arising in the ordinary course of business. To the knowledge of our management, there are no legal proceedings currently pending against us which we believe would have a material effect on our business, financial position or results of operations and, to the best of our knowledge, there are no such legal proceedings contemplated or threatened.

Properties

Our corporate headquarters are located at 7000 W. Palmetto Park Road, Suite 505, Boca Raton, Florida 33433, where we lease approximately 250 rentable square feet of office space from an unaffiliated third party. This lease expires on June 1, 2022. Terms of the office lease provide for a base rent payment of $800 per month. In total we lease approximately 40,000 rentable square feet of retail and office space from unaffiliated third parties in 17 locations in Florida, Oregon, Texas, California, Missouri, Montana, and Washington State for our corporate offices and gaming centers. These leases expire at various times, with the first expiration being May of 2022 and the last being July of 2030. Terms of the office and retail leases currently provide for aggregate base rent payments of approximately $39,000 per month with annual price escalations. We believe that these facilities are adequate for our current and near-term future needs.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this prospectus to “we,” “us” or the “Company” refer to Simplicity Esports and Gaming Company, formerly known as Smaaash Entertainment Inc. and prior to that as I-AM Capital Acquisition Company. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this prospectus.

Overview

We are a global esports organization, that is capitalizing on the growth in esports through three business units, Simplicity One Brasil Ltda (“Simplicity One”), Simplicity Esports, LLC (“Simplicity Esports LLC”) and PLAYlive Nation, Inc. (“PLAYlive”). We believe that we are the only Securities and Exchange Commission (“SEC”) reporting, completely integrated-esports company that owns a League of Legends franchise. Additionally, we believe that we have the largest network of corporate and franchisee owned esports gaming centers in North America.

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Our Esports Teams 

We own and manage seven professional esports teams domestically and internationally. Revenue is generated from prize winnings, corporate sponsorships, advertising, league subsidy payments and potential league revenue sharing payments from the publishers of video games.

Domestic Esports Teams – Simplicity Esports LLC

Through our wholly owned subsidiary, Simplicity Esports LLC, we own and manage multiple professional esports teams competing in games such as Heroes of the Storm  . We are committed to growing and enhancing the esports industry, fostering the development of amateurs to compete professionally and signing established professional gamers to support their paths to greater success.

International Esports Team - Simplicity One

Since January 2020, through our 76% owned subsidiary Simplicity One, we manage Flamengo eSports, one of the leading Brazilian League of Legends® teams competing in the top tier league CBLoL. CBLoL was the most talked about esports league in the world, on Twitter for the first half of 2021, with Call of Duty League and Overwatch League ranking 2nd and 3^rd, respectively. Flamengo eSports was established in 2017 as the Esports division of Clube de Regatas do Flamengo, a successful Brazilian sports organization, with over 30 million followers across social media accounts, known for its world-famous soccer team. Flamengo eSports’ League of Legends® team won the CBLoL Championship in September 2019, which qualified the team to compete at the 2019 League of Legends® World Championship in Europe as one of 24 teams from 13 different regions around the world. Flamengo Esports @flaesports was ranked as the 6th most tweeted about esports organization in the world, ahead of Team Liquid and Cloud 9 ranking 7th and 10th respectively, for the first half of 2021.

Online Tournaments

In response to demand from customers for online esports tournaments which was in all likelihood triggered by the social distancing protocols attendant to the COVID-19 pandemic, we introduced in March 2020 an initiative of online esports tournaments. Since March 2020, through our wholly owned subsidiary, Simplicity Esports LLC, we have been holding online esports tournaments in the United States. In addition, we commenced promoting these periodic online tournaments via text messages to our database of over 400,000 paying esports gaming center customers, which we acquired in our acquisition of PLAYlive. If we can convert merely 1% of these existing customers from the PLAYlive database to play in our paid online tournaments, we anticipate this business unit may generate approximately $1 million in annual revenues. At a 5% conversion rate, this business segment may generate approximately $5 million in annual revenue. Management also intends to sell sponsorship and marketing activations for these online tournaments which would create additional revenue. We also announced our initiative to offer play at home online tournaments in Brazil. These tournaments are a way for us to engage with our customer base from home during periods of required social distancing or quarantine.

Our Gaming Centers

As of August 31, 2021, we have 28 operational locations (16 corporate locations and 12 franchise locations), through our subsidiaries throughout the U.S., giving casual gamers the opportunity to play in a social setting with other members of the gaming community. In addition, aspiring and established professional gamers have an opportunity to compete in local and national esports tournaments held in our gaming centers for prizes, notoriety, and potential contracts to play for one of our professional esports teams. In this business unit, revenue is generated from franchise royalties, the sale of game time, memberships, tournament entry fees, birthday party events, corporate party events, concessions and gaming-related merchandise.

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Our business plan encompasses a brick and click physical and digital approach to further recognize revenue from all verticals, which we believe to be unique in the industry. The physical centers, together with our esports teams, lifestyle brand and marketing campaigns offer opportunities for additional revenue via strategic partnerships with both endemic and non-endemic brands. Our ultimate goal is to further engage a diverse fan base with a 360-degree approach driving traffic to both our digital platform, tournaments (online and in-person) and physical real estate to maximize the monetization opportunities with these relationships. In addition, we have proprietary intellectual capital, fan engagement strategies and brand development blueprints which complement our publicly available information.

Optimally, the esports gaming centers of Simplicity Esports LLC (“Simplicity Esports Gaming Centers”) will measure between 2,000 and 4,000 square feet, with dozens of gaming stations. The Simplicity Esports Gaming Centers will feature cutting edge technology, futuristic aesthetic décor and dynamic high-speed gaming equipment. We believe our brick-and-click strategy will present attractive opportunities for sponsors and advertisers to connect with our audience, creating an intriguing monetization opportunity for sponsors and advertisers. Currently our company owned stores operate in approximately 40,000 square feet of retail space in desirable, high traffic locations.

Creating content that engages fans, sponsors and developers, while promoting our brand is one of our primary goals. In August 2021, we announced a partnership with Television Korea 24 (“ESTV”) to provide esports and gaming content for their 24-7 live linear channel around the world. ESTV can be viewed in over 45 countries including the U.S. and Brazil. We seek to reach a broad demographic encompassing the casual, amateur and professional gaming community. Our philosophy is to enhance our footprint for both endemic and non-endemic partnerships. We believe we possess a deep perception of our markets and understand the new age of branding while maintaining authenticity to the gaming community that comprises our fanbase.

As a result of COVID-19 (discussed below), all of our corporate and franchised Simplicity Gaming Centers were closed effective April 1, 2020. We commenced reopening Simplicity Gaming Centers on May 1, 2020 and have since reopened 16 corporate and 12 franchised Simplicity Gaming Centers as of August 31, 2021, the majority of which are operating at restricted capacity based on local COVID-19 regulations. See “Risk Factors—Public health epidemics or outbreaks, such as COVID-19, could materially and adversely impact our business.”

Corporate Gaming Centers

As of August 31, 2021, through our subsidiary entities, we currently operate 16 corporate-owned retail Simplicity Esports Gaming Centers, three of which were acquired during the fiscal year ended May 31, 2021and one of which was acquired in the first fiscal quarter ended August 31, 2021. . Furthermore, we have engaged a national tenant representation real estate broker to assist in the strategic planning and negotiations for our future Simplicity Esports Gaming Center locations. We contemplate that new Simplicity Esports Gaming Centers will be funded by us as well as a combination of tenant improvement allowances from landlords and sponsorships. The Company intends to continue the expansion of its corporate owned esports gaming center footprint through the buildout of new esports gaming centers. The disruptions in commercial real estate caused by COVID-19 lockdowns have allowed the Company to strengthen its existing relationships with national landlords by signing new locations with a percentage of gross rent lease structures. The locations will range between 2,000 and 4,000 sq ft and be primarily located inside of shopping malls.

As announced in June 2020, we are in discussions with commercial property owners regarding their desire to have us open 7,000 to 12,000 square foot Arenas at their properties. There are multiple locations available to us with a percentage of gross sales rent lease structure (as opposed to fixed rent payments), and construction funds offered by the landlord to assist with the build out and equipping of our planned Arenas. These Arenas are planned as hubs in our hub and spoke model that will see smaller corporate and franchisee owned gaming centers as spokes connected to Arenas as hubs for larger events and tournaments.

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Franchised Gaming Centers

Due to interest from potential franchisees, in 2019 we launched a franchising program to accelerate the expansion of our planned nationwide footprint. We sell specific franchise territories, through our wholly owned subsidiary PLAYlive, and assist with the establishment and buildout of esports gaming centers to potential business owners that desire to use our branding, infrastructure and process to open and operate gaming centers. We currently operate 12 fully constructed franchise esports gaming centers. The 12 franchise owned gaming centers that we have acquired to date generated prior to our acquisition of them over $1 million of revenue in the fiscal year ended May 31, 2021 despite operating with limited capacity due to COVID-19 restrictions. Due to interest from potential franchisees, we have launched a franchising program to accelerate the expansion of our planned nationwide footprint. We sell specific franchise territories, through our wholly owned subsidiary PLAYlive, and assist with the establishment and buildout of esports gaming centers to potential business owners that desire to use our branding, infrastructure and process to open and operate gaming centers. Franchise revenue is generated from the sale of franchise territories, supplying furniture, equipment and merchandise to the franchisees for buildout of their centers, a gross sales royalty fee and a national marketing fee. We license the use of our branding, assist in identifying and negotiating commercial locations, assist in overseeing the buildout and development, provide access to proprietary software for point of sale, inventory management, employee training and other HR functions. Franchisees also have an opportunity to participate in our national esports tournament events, and benefit from the growing profile of our professional esports teams. Once an esports gaming center is opened, we provide operational guidance, support and use of branding elements in exchange for a monthly royalty fee calculated as 6% of gross sales. On January 1, 2020, we implemented a national marketing fee of 1% of gross sales. To date, we have sold five of these franchise territories. COVID-19 travel restrictions caused us to suspend the sale of new franchise territories from April 1, 2020 until October 1, 2020. During this time, a pipeline of interested applicants has accumulated, and we anticipate new franchise territory sales over the next 12 months as a result.

The combination of the esports gaming centers, owned or franchised by our wholly owned subsidiaries Simplicity Esports LLC or PLAYlive, provides us with what we believe is one of the largest esports gaming center footprints in North America. Over the next 12 months, existing PLAYlive esports gaming centers will be rebranded to Simplicity Esports gaming centers. All newly opened franchise esports gaming centers will be branded as Simplicity Esports gaming centers and have numerous gaming PC’s. All gaming centers in our footprint will be participating venues in our national esports tournaments.

Franchise Roll Up Strategy

We began implementing a franchise roll-up strategy in July 2020 as a result of the disruption caused by COVID-19 related stay at home orders, and the disruption it caused to the commercial real estate market. The reduction in revenues for some franchisees because of stay-at-home orders, and government mandates to remain closed created significant accrued rent payments due to landlords. We have been able to come to terms with many franchisees to acquire the assets of their gaming centers and make them corporate owned. We have simultaneously negotiated new leases with some of the largest national mall chains, including Simon Property Group and Brookfield Asset Management  , and are in the process of negotiating additional locations with other landlords. The new leases involve significant reductions in or elimination of fixed rent and the addition of percentage of revenues rent terms. During the fiscal year ended May 31, 2021, we signed 13 letters of intent and executed definitive agreements for all of those locations, most of which were operational prior to year-end. We expect each of these locations to be profitable as a result of the significant reduced rent expense via the percentage rent structure.

Our Stream Team

The Simplicity Esports LLC and Flamengo Esports stream teams encompass over 20 commentators (commonly known as “casters”), influencers and personalities who connect to a dedicated fan base. Our electric group of live personalities represent our organization to the fullest with their own unique style. We are proud to support and present a diverse group of gamers as we engage fans across a multiple of esports genres. Our Twitch affiliation has enabled our stream team influences to reach a broad fan base. Additionally, we have created several niches within the streaming community which has enabled us to engage fans within certain titles on a 24/7 basis. Our notoriety in the industry is evidenced by our audience that views millions of minutes of Simplicity Esports’ and Flamengo Esports’ content monthly, via various social media outlets including YouTube, Twitter and Twitch. Through Simplicity Esports LLC, we have 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.

Our Financial Position

For the fiscal years ended May 31, 2021 and 2020, we generated revenues of $1,551,923 and $861,410, respectively, and reported net losses of $6,096,855 and $2,620,238, respectively, and negative cash flow from operating activities of $1,391,938 and $1,523,262, respectively. For the three months ended August 31, 2021, we reported a net loss of $4,210,907, and had negative cash flow from operating activities of $943,694. As of August 31, 2021, we had an aggregate accumulated deficit of $16,502,806. We anticipate that we will continue to report losses and negative cash flow. There is substantial doubt regarding our ability to continue as a going concern as a result of our historical recurring losses and negative cash flows from operations as well as our dependence on private equity and financings. See “Risk Factors—We have a history of operating losses, our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal year ended May 31, 2021 and 2020.”

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Results of Operations

The following table summarizes our operating results for the three months ended August 31, 2021 and 2020.

	Three Months Ended			Three Months Ended
	August 31, 2021			August 31, 2020
Franchise revenues	$	62,358		$	87,283
Company-owned stores sales		673,501			76,938
Esports revenue		168,981			36,380
Total revenue		904,840			200,601
Less: Cost of goods sold		(607,122	)		(67,645	)
Gross margin		297,718			132,956
Operating expenses		(2,196,174	)		(618,228	)
Other income (expense)		(2,367,288	)		(185,828	)
Net loss attributable to non-controlling interest		54,837			15,886
Net Loss	$	(4,210,907	)	$	(655,214	)

Summary of Statement of Operations for the Three Months Ended August 31, 2021 and 2020:

Revenue

The Company’s revenue for the three months ended August 31, 2021 was $904,840, a $704,239 increase over the three months ended August 31, 2020 revenue of $200,601

Cost of Goods Sold

Cost of goods sold for the three months ended August 31, 2021 was $607,122, an increase of $539,477 over the three months ended August 31, 2020 cost of goods sold of $67,645.

Operating Expenses

Operating expenses for the three months ended August 31, 2021 was $2,196,174 as compared to $618,228 for the three months ended August 31, 2020, an increase of $1,577,946. The change is primarily attributable to a $1,000,558 increase in compensation and benefits, a $375,462 increase in professional fees coupled with a $201,926 increase in general and administrative expenses. The increase in compensation and benefits is related to an increase in stock based compensation coupled with higher wages and wage related taxes on the increased number of employees at the company owned stores. The increase in professional fees is primarily attributable to an increase in legal services, coupled with higher accounting and audit fees. The increase in general and administrative costs is primarily related to the increased rent, utilities, and operating costs of the company owned stores.

Other Income

We incurred $2,367,288 of non-operating loss comprised of $1,759,969 of loss on the extinguishment of debt and $52,358 in other income offset by $659,696 in interest expense for the three months ended August 31, 2021, as compared to non-operating expense of $185,828, comprised of $154,128 of interest expense, $19,572 of foreign exchange losses and $12,135 of loss on the extinguishment of debt for the three months ended August 31, 2020.

Net Loss

Net loss for the three months ended August 31, 2021 was $4,265,744, as compared to net loss of $671,100 for the three months ended August 31, 2020.

The following table summarizes our operating results for the fiscal years ended May 31, 2021 and 2020.

	Fiscal Year			Fiscal Year
	Ended			Ended
	May 31, 2021			May 31, 2020
Franchise royalties and license fees	$	151,634		$	478,023
Franchise deposit revenue		154,291			44,984
Company-owned stores sales		1,053,226			174,042
Esports revenue		192,772			164,361
Total revenue		1,551,923			861,410
Less: Cost of goods sold		(1,014,310	)		(591,541	)
Gross margin		537,613			269,869
Operating expenses		(5,335,112	)		(3,001,990	)
Other income (expense)		(1,397,329	)		66,342
Net loss attributable to non-controlling interest		97,973			45,541
Net Loss	$	6,096,855		$	(2,620,238	)

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Summary of Statement of Operations for the Fiscal Year Ended May 31, 2021 and 2020:

Revenue

We generated $1,551,923 of revenue for the fiscal year ended May 31, 2021 as compared to $861,410 for the fiscal year ended May 31, 2020. The increase in revenue is principally due to the increase in the number of company owned stores we operate offset by a reduction in franchise royalties as franchises were converted to company owned stores.

Franchise royalties, franchise deposit and termination revenue and company-owned stores sales, totaling $1,359,000 and $697,000, in the fiscal year ended May 31, 2021 and 2020. In addition, Esports revenue was $193,000 during the fiscal year ended May 31, 2021, up from $164,000 in the fiscal year ended May 31, 2020. This increase was due to the increase in the number of company owned stores and inclusion of the full year of operations of Simplicity One Brazil which was acquired in January 2020.

Cost of Goods Sold

Cost of goods sold during the fiscal years ended May 31, 2021 and 2020 totaled $1,014,000 and $592,000, respectively. Cost of goods sold is related to player and team expenses related to esports revenues and cost of gaming system and store merchandise sold at company owned store including the depreciation on the gaming equipment needed to generate these revenues. The increase is cost of goods sold is directly related to the increase in company owned store revenues.

Other Operating Expenses

Other operating expenses for the fiscal year ended May 31, 2021 totaled $5,335,000, a $2,333,000 increase from the $3,002,000 of other operating expense in the fiscal year ended May 31, 2020. Included in this increase were compensation and related benefits increase of $1,227,000 primarily due to $862,000 increase in stock based compensation coupled with a $253,000 increase in salaries, wages and the related insurance and taxes predominantly driven by the increase in employees related to the new company owned stores; professional fees increase of $272,000 of which $175,000 was for new design services and the $97,000 was for increased legal, accounting and consulting services; an increase in general and administrative expenses of $475,000 primarily due to an increase in amortization of $85,000, an increase in rent of $198,000, an increase in contracted services of $141,000 and an increase in utilities of $51,000. In addition, there was an increase of $359,000 in impairment expense on terminated franchises.

Other income (expense)

Other income/(expense) was an expense of $1,397,000 and income of $66,000 during the fiscal years ended May 31, 2021 and 2020, respectively. The increase in other expense of $1,463,000 is due to an increase of $1,368,000 of interest expense on the notes payable mentioned herein, $20,000 increase in foreign exchange losses, a $94,000 reduction in debt forgiveness income and a $69,000 reduction in other income offset by a $19,000 increase in other income.

Net loss attributable to non-controlling interest

As part of the conversion of franchises into company-owned stores, two of the original franchisees retained a 21% interest in the stores, one retained a 49% interest and 24% of our interest in Simplicity One, 20% of which is owned by our Chairman, as noted in the related party footnote. As such, a portion of the net loss incurred during the year is allocated to those parties. For the fiscal year ended May 31, 2021 the net loss attributable to non-controlling interests was $98,000 which is an increase of $52,000 from the year ended May 31, 2020.

Liquidity and Capital Resources

As of May 31, 2020, we had no cash and marketable securities held in the Trust Account.

As of May 31, 2021 and 2020, we had cash of $414,000 and $160,000, which is available for use by us to cover the costs associated with general corporate purposes. In addition, as of May 31, 2021 and 2020, we had accounts payable and accrued expenses of $1,605,000 and $1,549,000, respectively.

For the fiscal years ended May 31, 2021 and 2020, cash used in operating activities amounted to $1,392,000   and $1,523,000, respectively. The decline in net cash used of $131,000 is due to an increase in shares for services of $2,822,000, and increase in non-cash interest expense of $1,118,000, an impairment loss of $359,000, an increase in depreciation and amortization charges of $257,000   and a decline in debt forgiveness income of $94,000 offset by an increased net loss of $3,529,000. In addition, changes in our operating liabilities and assets used $174,000 of cash, a decline of $981,000 from May 31, 2020. The decline in cash provided is due to reduced accounts payable and accrued expenses of $778,000, a reduction in deferred revenues of $281,000, an increase in inventory of $47,000  , an increase in prepaid expenses and security deposits of $34,000 and an increase in due from franchisee of $25,000, offset by reduced accounts receivable of $96,000 and increased deferred brokerage fees of $88,000. Cash used in investing activities amounted to $152,000, a reduction of $15,000 from the prior year. The reduction is attributable to reduced purchase of property and equipment of $161,000, offset by higher use of cash for acquisitions of $176,000. Cash provided from financing activities amounted to $1,815,000, an increase of $1,534,000 over the prior year. The increase is mainly attributable to a net cash increase of $1,087,000 for the net effect of the issuance in notes payable, coupled with an increase in funds received from private placement units of $379,000, an increase non-controlling interest in subsidiaries of $179,000, offset by an increase in deferred financing costs of $111,000.

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As of August 31, 2021, we had cash of 673,693, which is available for use by us to cover all of the Company’s costs including those associated with due diligence procedures and other general corporate purposes. In addition, as of August 31, 2021, we had accrued expenses of $1,147,434.

For the three months ended August 31, 2021, cash used in operating activities amounted to $943,694 primarily resulting from a net loss of $4,265,744 an increase of $1,759,969 in loss on extinguishment of debt, an increase of $620,178 in non-cash interest expense, $168,209 increase in shares issued for services, inventory purchases and interest coupled with a $65,176 increase in depreciation and amortization expense, an increase in lease liability net of leased assets of $20,447 offset by a decline of $38,412 in the provision for uncollectible accounts and an $116,000 increase in deferred guaranteed interest payments. Changes in our operating liabilities and assets provided cash of $289,423.

We will need to raise additional funds in order to meet the expenditures required for operating our business.

Off-balance sheet arrangements

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Going Concern

The Company’s unaudited 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 as of August 31, 2021, a net loss and net cash used deficit in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the of the date that the financial statements are issued.

The Company’s cash position may not be sufficient to support the Company’s daily operations. Management plans to raise additional funds by way of a private or public offering. 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 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.

COVID-19

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.

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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 on May 1, 2020 and have since reopened 16 corporate and 12 franchised Simplicity Gaming Centers, the majority of which are operating at restricted capacity based on local COVID-19 regulations. 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, a limited number of the franchisees of Simplicity Gaming Centers have defaulted on their obligations to pay their minimum monthly royalty payment to us. This has resulted 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. As of August 31, 2021, we have recorded an allowance for doubtful accounts of approximately $42,000. We have experienced a decrease in our account receivables, net of the allowance for doubtful accounts of approximately $21,000 during the quarter ended August 31, 2021 and an increase of $17,000 for the quarter ended August 31, 2020. Notwithstanding our efforts to support franchisees and still collect on receivables, it is unclear exactly how much of the increase in accounts receivables is attributable to the impact of COVID-19. We have waived the minimum monthly royalty payment obligations from July 2020 through present day and are instead billing the franchisees a true-up of 6% of gross sales without a minimum. We continue to assess possible similar accommodations to the franchisees in light of the impact of COVID-19. Additionally, the disruptions in commercial real estate caused by COVID-19 lockdowns have allowed the Company to strengthen its existing relationships with national landlords by signing new locations with percentage rent leases.

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 adversely impacted the Company’s business during the year ended May 31, 2021 and the three months ended August 31, 2021 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.

Contractual obligations

We do not have any long-term capital lease obligations, operating lease obligations or long-term liabilities, except as follows:

Attorney Settlement Agreement

In March of 2019, the Company entered into a settlement agreement with its prior attorney. The settlement agreement called for $200,000 to be paid upon signing the settlement agreement and then another approximate $525,000 to be paid over-time. As of August 31, 2021, the Company owes this attorney approximately $125,000.

Maxim Series A-2 Exchange Convertible Note

For a detailed description of the Series A-2 Exchange Convertible Note issued by the Company to Maxim, please see “Description of Business—Debt Obligations – Maxim Series A-2 Exchange Convertible Note,” on page 57 of this prospectus.

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Operating Lease

We have long-term operating lease obligations and deferred revenues related to franchise fees to be recognized over the term of franchise agreements with our franchises, generally ten years. We will begin to recognize deferred franchise fee revenue at the time a franchise commences operations. We will also recognize deferred franchise fee revenue upon completing acquisitions of franchisee owned gaming centers and converting them to corporate owned centers.

In February 2019, the Company entered into a 5-year operating lease in Boca Raton, Florida in connection with the opening of its first gaming center. Rent is approximately $2,300 per month for the first year and contains customary escalation clauses. In June of 2019, the Company entered into a 5-year operating lease for its corporate office, rent is approximately $700 per month. In August of 2019, the Company opened its second gaming center and in connection with this gaming center entered into a 5-year operating lease in Deland, Florida. Rent is approximately $2,500 per month for the first year and contains customary escalation clauses. On June 26, 2020, the Company entered into a 10-year operating lease in El Paso, Texas for a corporate gaming center in Fort Bliss. It is a percentage rent lease (without a base rent) which provides for the (i) first and second year of the lease, the rent would be 10% of gross sales of such gaming center per year, (iii) third fourth and fifth year of the lease, the rent would be 12% of gross sales of such gaming center per year, and (iv) sixth, seventh, eighth, ninth and tenth year of the lease, the rent would be 14% of the gross sales of such gaming center per year.

The gaming center acquisitions that occurred in the current period were also complimented by the signing of new lease agreements with the landlords. The leases consist of rent payments to be made as a percentage of each gaming center’s gross sales with a minimum floor payment ranging between $1,000 and $3,000 monthly, representing 50-80% reductions in rent expense from prior leases that were in force while the gaming centers were owned by franchisees.

Future base lease payments under the non-cancelable operating lease related to Gaming Centers at August 31, 2021 are as follows:

Years Ending May 31,	Amount
2022	411,278
2023	391,832
2024	373,870
2025	330,017
2026	110,000
Total minimum non-cancelable operating lease payments	1,616,997

Debt Obligations

For a detailed description of debt obligations of the Company, please see “Description of Business—Debt Obligations,” “Description of Business —Recent Developments— March 2021 FirstFire Global 12% Promissory Note and Securities Purchase Agreement,” “Description of Business — Recent Developments — June 2021 FirstFire Global 12% Promissory Note and Securities Purchase Agreement,” “Description of Business — Recent Developments — GS Capital Securities Purchase Agreement & Note,” “Description of Business — Recent Developments — Jefferson Street Capital Securities Purchase Agreement & Note,” “Description of Business — Recent Developments — Lucas Ventures Stock Purchase Agreement & Note,” “Description of Business — Recent Developments — LGH Investments Stock Purchase Agreement & Note,” and “Description of Business — Recent Developments — Ionic Ventures Securities Purchase Agreement & Note” on pages 55, 59, 61, 62, 63, 64, 65, and 66 of this prospectus, respectively.

Adoption of 2020 Omnibus Incentive Plan

The board and shareholders of the Company approved of the Simplicity Esports and Gaming Company 2020 Omnibus Incentive Plan (the “2020 Plan”) on April 22, 2020 and June 23, 2020, respectively. The 2020 Plan provides for various stock-based incentive awards, including incentive and nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units, and other equity-based or cash-based awards. On June 4, 2021, the Company filed a registration statement on Form S-8 for the purpose of resale or reoffer thereof, of 1,000,000 shares of the Company’s common stock reserved for issuance pursuant to the Company’s 2020 Plan. As of October 12, 2021, the Company has issued 297,567 shares of common stock under the plan.

Critical Accounting Policies

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially 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 its 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 two sources, the first is from the sale of the rights to our players to third parties and second from participation and prize money awarded at gaming tournaments.

The following describes principal activities, separated by major product or service, from which the Company generates its revenues:

Company-Owned Stores Sales

The Company-owned stores principally generate revenue from retail esports gaming centers, including the sale of game time to casual players on our high speed, high performance gaming stations, the sale of gaming related merchandise and accessories including controllers, collectible card games, such as Pokemon Magic the Gathering, and Yugi-Oh, registration fees from local esports tournaments and leagues, and the sale of party packages for party events. Revenues from Company-owned stores are recognized when the products are delivered, or the service is provided.

Franchise Royalties and Fees

Franchise royalties are based on six percent of franchise store sales after a minimum level of sales occur, 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 net of costs incurred, 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. Initial franchise fees are generally recognized once a location is opened to the public which is when management deems substantially all services required under the franchise agreements have been performed.

The Company offers various incentive programs for franchisees including royalty incentives, new restaurant 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.

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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 is a form of competition using video games. Most commonly, esports takes the form of organized, multiplayer video game competitions, particularly between professional players, individually or as teams. Revenues from esports revenue are recognized when the competition is completed, and prize money is awarded.

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 May 31, 2021, management has recorded an allowance for doubtful accounts of $38,000.

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. Our assessment date was May 31, 2021, and the Company used a third-party valuation expert to review our goodwill and this independent valuation, indicated no 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. The Company had intangible assets subject to amortization related to its acquisition of Simplicity Esports, LLC. These costs were included in intangible assets on our balance sheet and amortized on a straight-line basis when placed into service over the estimated useful lives of the costs, which is 3 to 5 years.

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. For the year ended May 31, 2021, the company used a third-party valuation expert to review our intangible assets and based upon this independent valuation, the company did not need to take an impairment charge.

Stock-Based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation and ASC 505-50, Equity-Based Payments to Non-Employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.

In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees. This guidance is effective for the Company as of January 1, 2019. The Company adopted ASU 2018-07 on January 1, 2019. The adoption of ASU 2018 did not have any material impact on the Company’s consolidated financial statements.

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. The updated guidance is effective for interim and annual periods beginning after December 15, 2018.

On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; and (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not to recognize right-of-use (“ROU”) assets and lease liabilities for short-term leases that have a term of 12 months or less.

Operating lease ROU assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the condensed consolidated statements of operations.

Operating Lease Right-of-Use Assets and Operating Lease Liabilities

The Company adopted ASC Topic 842, Leases (Topic 842) and has elected the ‘package of practical expedients’, which permits it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. In addition, the Company elected not to apply Topic 842 to arrangements with lease terms of 12 months or less. The Company has entered into various lease agreements mainly to support the operations of its gaming centers.

The significant assumption used to determine the present value of the lease liability was a discount rate ranging from 10% to 12% which was based upon the Company’s estimated incremental borrowing rate at the start of the lease term.

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MANAGEMENT

The following table sets forth information regarding our directors and executive officers:

Name	Age	Position
Jed Kaplan	57	Chairman and Class II Director of the Company
Roman Franklin	38	Chief Executive Officer and Class I Director of the Company
Nancy Hennessey	56	Chief Financial Officer
Donald R. Caldwell	75	Class I Director of the Company
Max Hooper	75	Class II Director of the Company
Frank Leavy	68	Class I Director of the Company
Edward Leonard Jaroski	74	Class I Director of the Company
William H. Herrmann, Jr.	75	Class II Director of the Company
Laila Cavalcanti Loss	40	Class II Director of the Company

Jed Kaplan. Mr. Kaplan has been our Chairman since March 29, 2021 and a member of our board of directors since December 31, 2018. He also served as our sole Chief Executive Officer from February 8, 2019 until March 29, 2021 and as our interim Chief Financial Officer from February 8, 2019 to March 29, 2021. From December 31, 2018 to February 8, 2019, Mr. Kaplan served as our co-Chief Executive Officer. He founded and serves as the Chief Executive Officer of Shearson Financial Services, a FINRA-registered broker dealer, since May 1995. As a natural leader possessing a passion for sports management, Mr. Kaplan has been involved in a wide variety of professional sports and sports management ventures. Most recently Mr. Kaplan successfully sold the NBA G League Team, Iowa Energy, to the Minnesota Timberwolves. Currently Mr. Kaplan is also a minority owner of the Memphis Grizzlies, Orlando City Soccer Club and Swansea City of the English Championship League. Mr. Kaplan’s insight, vision and knowledge are all represented as an appointed founding member of the NBA G League leadership committee. Mr. Kaplan graduated from City University of New York in 1989 with a Bachelor of Business Administration degree.

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The Company believes Mr. Kaplan’s strong expertise in the financial services and sports management industries qualifies him to serve on its board of directors.

Roman Franklin. Mr. Franklin has been a member of our board of directors since August 16, 2017 and our Chief Executive Officer since March 29, 2021. From December 31, 2018 until March 31, 2021, Mr. Franklin served as our President. Mr. Franklin was Chief Investment Officer of SMC Global USA from March 2016 until December 31, 2016, and prior, President of Franklin Financial Planning from 2005 to 2016. Mr. Franklin is a 16-year veteran of the financial services industry. By the age of 22 he held FINRA Series 7, Series 66, and Life, Health, and Variable Insurance Licenses. In 2005, he founded a fee-only registered investment advisory firm. In 2008, he was one of the youngest recipients of the National Association of Financial Advisors (“NAPFA”) Registered Financial Advisor (RFA) designation. In 2015, he was elected as a Board Member of the NAPFA, South Region Board of Directors, overseeing more than a dozen states from Texas, to Florida, to North Carolina. Mr. Franklin has experience in domestic and international investment, and has been involved in multiple business transactions tied to India. Mr. Franklin holds a Bachelor of Science degree in Management from Barry University and an M.B.A. in Finance from the Graduate School of Business at Stetson University. His civic organization roles include School Advisory Council for Volusia County Schools, City of DeLand Economic Development Committee, and the Boys’ and Girls’ Clubs of Central Florida.

We believe Mr. Franklin’s strong expertise in finance and international and domestic business transactions qualifies him to serve on our board of directors.

Nancy Hennessey. Ms. Hennessey has served as our Chief Financial Officer since May 17, 2021. Ms. Hennessey worked as the Senior Vice President of Financial Planning and Analysis and as a consultant to the Chief Executive Officer of Travel and Leisure, formerly Wyndham Destinations, an NYSE listed $5 billion market cap company from April 2011 to August 2019 as an employee and as a consultant until August 2020  . From 1990 to 2011, Ms. Hennessey served multiple companies as Vice President of Finance and Chief Financial Officer. Ms. Hennessey began her career by working for Ernst & Young as a Senior Auditor from 1986 until 1990. Ms. Hennessey is a Certified Public Accountant and holds a BBA and MBA in Public Accounting from the Lubin School of Business at Pace University.

Donald R. Caldwell. Mr. Caldwell, who has been an independent director since August 16, 2017, and served as our Chairman of the board of directors from August 16, 2017 to March 29, 2021, is an experienced investor, co-founded Cross Atlantic Capital Partners, Inc., a venture capital management company, where he has served as its Chairman and Chief Executive Officer since 1999. At Cross Atlantic Capital Partners, Inc., Mr. Caldwell has raised four investment funds totaling over $500 million of committed capital and is responsible for the firm’s operations, building the investment team, and growing the Cross Atlantic franchise through fundraising, network development, and deal flow generation. Prior to founding Cross Atlantic Capital Partners, Inc. in March 1999, Mr. Caldwell was President and Chief Operating Officer of Safeguard Scientifics, Inc. (NYSE: SFE) (“Safeguard”) from 1996 to 1999, where he also previously served as Executive Vice President from 1993 to 1996. In addition to his service on our board, Mr. Caldwell currently serves on the board of directors of three companies: InsPro Technologies Corporation (OTC: ITCC) since 2008, where he serves as chairman of the board and member of the audit committee (a public company); Lightning Gaming, Inc. (a private company) since June 2015, where he serves as a director and chairman of the audit committee; and Quaker Chemical Corporation (NYSE: KWR) (a public company) since 1997, where he serves as lead director, as chairman of the executive committee and member of the compensation and audit committees; Mr. Caldwell was previously a member of the board of directors of Diamond Cluster International, Inc. from 1994 to 2010 and has served as a director for several private companies and non-profit organizations, including software and money management firms as well as the Pennsylvania Academy of the Fine Arts and the Committee for Economic Development. Mr. Caldwell is a Certified Public Accountant (Retired) and holds a Bachelor of Science degree from Babson College and a Master of Business Administration from the Graduate School of Business at Harvard University.

We believe Mr. Caldwell’s deep financial, entrepreneurial and business expertise and extensive experience as a member of the boards and board committees of other public companies qualifies him to serve on our board of directors.

Max Hooper. Dr. Hooper, who has been an independent member of our board of directors since August 16, 2017, serves as Managing Director of Merging Traffic, a web-based crowdsourcing portal, since September 2015 and Head of Investment Banking and Senior Vice President of Triloma Securities, a subsidiary of Triloma Financial Group LLC, since January 2016. Dr. Hooper is also the founder and owner of Partners Advisory Group and Partners Capital Group, two financial advisory firms since January 2014. Since February 2018, Dr. Hooper’s primary focus has been as Managing Director/CEO of Managing Traffic and co-owner of Triloma Financial Group. Prior to that, Dr. Hooper was co-founder of Equity Broadcasting Corporation, a media company that owned and operated more than one hundred television stations across the United States. Dr. Hooper is an accomplished entrepreneur and has started multiple businesses in technology/internet, lodging, and services industries. Dr. Hooper has served on the investment committee of several venture capital and angel funds, and has completed “work out” transactions as a Certified Debt Arbitrator representing banks and private transactions. Dr. Hooper also has prior experience with SPACs such as transaction structuring, administration, research, and execution. Dr. Hooper has earned five doctorate degrees from a variety of institutions.

We believe Dr. Hooper’s expertise in investment, management and mergers and acquisitions over various industries qualify him to serve on our board of directors.

Frank Leavy. Mr. Leavy has been an independent member of our board of directors since August 16, 2017. Since 2007, Mr. Leavy has been the Senior Vice President and Director of Finance and Administration for Blake’s All Natural Foods, a manufacturer of “better for you” frozen entrees. Prior to that, he held various financial officer positions at member companies of Group Rossignol, a world leading company in the winter sports industry. Specifically, he was Controller of Rossignol Ski Company from 1982 to 2006 and Vice President of Finance of Skis Dynastar, Inc. and Skis Dynastar Canada from 2000 to 2006. He also served as Chief Operating Officer at Roger Cleveland Golf Company, a subsidiary of Group Rossignol from 1999 to 2000 and was elected a director of the company from 2003 to 2005. Mr. Leavy holds a Bachelor of Arts degree from the College of the Holy Cross and a Master of Science degree in accounting from the Graduate School of Professional Accounting at Northeastern University.

We believe Mr. Leavy’s extensive experience in corporate finance qualify him to serve on our board of directors.

Edward Leonard Jaroski. Mr. Jaroski has been an independent member of our board of directors since October 2017. Mr. Jaroski was the founder of Capstone Asset Management Company and had served as its President and Chief Executive Officer from 1987 to March 2016. Mr. Jaroski was Chairman, Chief Executive Officer and President of various Capstone/Steward Funds in the fund complex from 1987 through 2016. Mr. Jaroski was at Tenneco Financial Services from 1981 to 1987, where he was the Executive Vice President. He started his career at Philadelphia Life Insurance Company as Manager of Investments in 1969, where he served until 1981 and also served as its Vice President of Finance. He also served as a Director of Philadelphia Life Asset Management Company. Mr. Jaroski holds the insurance industry professional designations of Chartered Life Underwriter, Charter Financial Consultant and Fellow Life Management Institute. He holds a B.B.A. degree in Accounting from Temple University.

We believe Mr. Jaroski’s experience in investments and asset management qualify him to serve on our board of directors.

William H. Herrmann, Jr. Mr. Herrmann has been an independent member of our board of directors since October 2017. Mr. Herrmann has over 45 years of experience in financial services, and insurance and investment planning industries. Presently, Mr. Herrmann is the Owner of Herrmann & Associates, a financial services firm affiliated with Hudson Heritage Capital Management Inc., a Registered Investment Advisor since February 15, 2006. Mr. Herrmann has also served as an independent Director of Steward Funds, from 2011 until 2017. Mr. Herrmann served as the Chairman of the Nominating and Corporate Governance Committee and was Chairman of the Contracts Committee. He previously served as Independent Lead Director of Steward Funds. Mr. Herrmann is also an Independent Director of Church Capital Fund, where he served as Chairman of the Nominating and Corporate Governance Committees.

Mr. Herrmann is a member of the Advisory Committee to the Liquidation Trustee for Church Capital Fund Liquidation Trust under TMI Trust Company. Mr. Herrmann is also a Trustee of LuLu Shriners Investment Advisory Committee and the Chairman of Beta Rho Property Company. Mr. Herrmann holds a B.A. from the University of Pennsylvania, and an MBA from Temple University, and holds the Chartered Life Underwriter (CLU) designation from American College. Mr. Herrmann holds Series 7, 63, and 65 securities licenses as well as insurance licenses in multiple states.

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We believe Mr. Herrmann’s experience in financial services and the investment planning industry qualify him to serve on our board of directors.

Laila Cavalcanti Loss. Ms. Loss has served as a member of our board of directors since May 7, 2021. Since 2017, Ms. Loss, has practiced law in private practice at Cavalcanti Loss Sociedade Individual de Advocacia. From 2010 to 2016, Ms. Loss served as the Head of Legal in Latin America and Angola for Expro Group, a leading global oil services company. Ms. Loss holds a Master of Laws from the University of Texas at Austin. She is permitted to practice law in Brazil and is admitted to the New York State Bar Association.

The Company believes that Ms. Loss’s expertise in the legal industry qualify her to serve on its board of directors.

Our officers and board of directors are well qualified as leaders. In their prior positions they have gained experience in core management skills, such as strategic and financial planning, public company financial reporting, compliance, risk management, and leadership development. Our officers and directors also have experience serving on boards of directors and board committees of other public companies and private companies, and have an understanding of corporate governance practices and trends, which provides an understanding of different business processes, challenges, and strategies.

Number and Terms of Office of Officers and Directors

Our board of directors is comprised of nine directors, divided into two classes, Class I and Class II, with only one class of directors being elected in each year and each class serving a two-year term. There are four Class I directors and six Class II directors. However, as of October 1, 2021, there is one board vacancy. The board is conducting a search for a replacement director to fill the vacancy. Once a suitable replacement is found, they will serve as a Class II director.

Our officers are elected by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary, Assistant Secretaries, Treasurer and such other offices as may be determined by the board of directors.

Board Committees and Director Independence

Our common stock is presently quoted on the OTCQB under the symbol “WINR.” Our warrants issued in connection with our initial public offering in August 2017 are currently listed on OTCQB under the symbol “WINRW.” Under the rules of the OTCQB, we are not required to maintain a majority of independent directors on our Board of Directors and we are not required to establish committees of the Board of Directors consisting of independent directors. However, we have applied to list our common stock and our warrants (forming part of the units offered hereby) on The Nasdaq Capital Market (“Nasdaq Capital Market”). In order to list our common stock and our warrants on the Nasdaq Capital Market, we are required to comply with the Nasdaq Capital Market standards relating to corporate governance, requiring, among other things, that:

● A majority of our Board of Directors to consist of “independent directors” as defined by the applicable rules and regulations of the Nasdaq Capital Market;

● The compensation of our executive officers to be determined, or recommended to the Board of Directors for determination, by independent directors constituting a majority of the independent directors of the Board in a vote in which only independent directors participate or by a Compensation Committee comprised solely of independent directors;

● That director nominees to be selected, or recommended to the Board of Directors for selection, by independent directors constituting a majority of the independent directors of the Board in a vote in which only independent directors participate or by a nomination committee comprised solely of independent directors; and

● Establishment of an audit committee with at least three independent directors as well as composed entirely of independent directors, where at least one of the independent directors qualifies as an audit committee financial expert under SEC rules and as a financially sophisticated audit committee member under the Nasdaq Capital Market rules.

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Under applicable Nasdaq Capital Market rules, a director will only qualify as an “independent director” if, in the opinion of the listed company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. Our Board of Directors has determined in its business judgment that each of Messrs. Caldwell, Leavy, Jaroski and Herrmann and Dr. Hooper is independent within the meaning of the Nasdaq Capital Market rules for U.S. Companies, the Sarbanes-Oxley Act and related SEC rules. Therefore, a majority of the members of our Board of Directors is independent.

In addition, our Board of Directors has two standing committees: an Audit Committee and a Compensation Committee.

Committees of the Board of Directors

Our board of directors has two standing committees: an audit committee and a compensation committee. Both our audit committee and our compensation committee are composed solely of independent directors.

Audit Committee

Messrs. Caldwell and Leavy and Dr. Hooper serve as members of our audit committee. Mr. Caldwell serves as chairman of the audit committee. Under Nasdaq Capital Market listing standards and applicable SEC rules, we are required to have three members of the audit committee, all of whom must be independent. Messrs. Caldwell, and Leavy and Dr. Hooper are independent.

Each member of the audit committee is financially literate and our board of directors has determined that Mr. Caldwell qualifies as an “audit committee financial expert” as defined in applicable SEC rules.

Responsibilities of the audit committee include:

● the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;

● pre-approving all audit and non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;

● reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;

● setting clear hiring policies for employees or former employees of the independent auditors

● setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

● obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within, the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;

● reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and

● reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

Compensation Committee

The members of our compensation committee are Messrs. Caldwell and Jaroski and Dr. Hooper. Mr. Caldwell serves as chairman of the compensation committee. We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:

● reviewing and approving the compensation of all of our other executive officers;

● reviewing our executive compensation policies and plans;

● implementing and administering our incentive compensation equity-based remuneration plans;

● assisting management in complying with our proxy statement and annual report disclosure requirements;

● approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;

● producing a report on executive compensation to be included in our annual proxy statement; and

● reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq Capital Market and the SEC.

Director Nominations

We do not have a standing nominating committee. In accordance with Rule 5605(e)(1)(A) of the Nasdaq Listing Rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who shall participate in the consideration and recommendation of director nominees are Messrs. Caldwell, Jaroski, Leavy, and Herrmann, and Dr. Hooper. In accordance with Rule 5605(e)(1)(A) of the Nasdaq Listing Rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.

The board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election. Our stockholders that wish to nominate a director for election to the board of directors should follow the procedures set forth in our bylaws.

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We have not formerly established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.

Code of Ethics

We have adopted a Code of Ethics applicable to our directors, officers and employees. We previously filed a copy of our form of Code of Ethics as an exhibit to our registration statement on Form S-1 (File 333-219251). You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K. See “Where You Can Find Additional Information.”

Limitation on Liability and Indemnification of Officers and Directors

Our third amended and restated certificate of incorporation, as amended, provides that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our restated certificate provides that our directors will not be personally liable for monetary damages to us for breaches of their fiduciary duty as directors, except to the extent such exemption from liability or limitation thereof is not permitted by the Delaware General Corporation Law (“DGCL”).

We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our third amended and restated certificate. Our bylaws also permit us to maintain insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We have purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.

Our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account, and have agreed to waive any right, title, interest or claim of any kind they may have in the future as a result of, or arising out of, any services provided to us and will not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification we provide to our officers and directors will only be able to be satisfied by us if we have sufficient funds outside of the trust account.

These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.

We believe that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.

The Board’s Role in Risk Oversight

Although our management is primarily responsible for managing our risk exposure on a daily basis, our board of directors oversees the risk management processes. Our board, as a whole, determines the appropriate level of risk for our Company, assesses the specific risks that we face, and reviews management’s strategies for adequately mitigating and managing the identified risks. Although our board administers this risk management oversight function, our audit committee supports our board in discharging its oversight duties and addresses risks inherent in its area.

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Director Compensation

During the fiscal year ended May 31, 2021, each non-employee director, other than our Chairman of the Board, received a grant of 2,500 shares of the Company’s common stock as compensation for services as a member of the Board. Our Chairman of the Board received an annual grant of 5,000 shares of the Company’s common stock in exchange for his services in that capacity. Effective March 29, 2021, Jed Kaplan resigned as Chief Executive Officer and Interim Chief Financial Officer and was appointed as Chairman of the Board. In addition to his equity grant, Mr. Kaplan receives $4,000 per month in exchange for his services as Chairman of the Board.

During the fiscal year ended May 31, 2021, executive officers who are also directors do not receive any additional compensation for their services as directors. Compensation for members of the Board is reviewed annually by the Compensation Committee. The Compensation Committee may not delegate its authority regarding director compensation, and, except as described above, no executive officer plays a role in determining the amount of director compensation. The Compensation Committee considers the amount of time directors dedicate to Company matters and the need to attract and retain qualified directors when determining Board compensation.

Fiscal Year Ended May 31, 2021 Director Compensation Table

Name	Fees earned or paid in cash ($)		Stock Awards ($)			Option Awards ($)		Non-equity incentive plan compensation ($)		Nonqualified deferred compensation earnings ($)		All Other Compensation ($)		Total ($)
Donald R. Caldwell	$	—	$	30,938		$	—	$	—	$	—	$	—	$	30,938
Edward Leonard Jaroski	$	—	$	17,330		$	—	$	—	$	—	$	—	$	17,330
Frank Leavy	$	—	$	17,330		$	—	$	—	$	—	$	—	$	17,330
William H. Herrmann, Jr.	$	—	$	17,330		$	—	$	—	$	—	$	—	$	17,330
Max Hooper	$	—	$	17,330		$	—	$	—	$	—	$	—	$	17,330
Laila Cavalcanti Loss	$	—	$	(1	)	$	—	$	—	$	—	$	—	$	-
Jed Kaplan (2)	$	8,000	$	—		$	—	$	—	$	—	$	—	$	8,000

(1)	Ms. Loss received common stock valued at $55,366 for legal services provided to the Company. In addition, Ms. Loss earned $27,500 for legal services provided to the Company. A portion of the $27,500 has not yet been paid to Ms. Loss.
(2)	Mr. Kaplan ceased to be an executive officer on March 29, 2021. On March 25, 2021, the Company’s board of directors appointed Mr. Kaplan as Chairman of the Board, effective March 29, 2021. Mr. Kaplan resigned as Chief Executive Officer and Interim Chief Financial Officer effective March 29, 2021.

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EXECUTIVE COMPENSATION

The following table summarizes all compensation recorded by us in the past two fiscal years ended May 31, 2021 for:

● our principal executive officer or other individual serving in a similar capacity, and

● our two most highly compensated executive officers, other than our principal executive officer, who were serving as corporate officers at May 31, 2021.

For definitional purposes, these individuals are sometimes referred to as the “named executive officers.”

2021 Summary Compensation Table  

Name and Principal Position	Fiscal Year Ended		Salary ($)			Bonus ($)			Stock Awards ($)			Option Awards ($)		All Other Compensation ($)		Total ($)
Roman Franklin,		5/31/2021	$	197,737		$	125,000		$	1,032,243	(3)	$	—	$	—	$	1,354,980
Chief Executive Officer and Former President (1)		5/31/2020	$	100,000		$	75,000	(2)	$	245,215	(4)	$	—	$	—	$	420,215
Jed Kaplan,		5/31/2021	$	85,308	(5)	$	125,000		$	1,201,465	(6)	$	—	$	—	$	1,411,773
Former Chief Executive Officer and former interim Chief Financial Officer (7)		5/31/2020	$	—		$	75,000	(8)	$	311,925	(4)	$	—	$	—	$	386,925

(1)	Mr. Franklin was appointed Chief Executive Officer on March 29, 2021, and ceased to be President on March 29, 2021.
(2)	This amount was accrued as of May 31, 2020. During the fiscal year ended May 31, 2021, Mr. Franklin received $40,000 of the accrued bonus from the fiscal year ended May 31, 2020. As of May 31, 2021, the Company still owes Mr. Franklin $35,000 of this amount.
(3)	Represents the aggregate grant date fair value for all restricted stock granted to Mr. Franklin vested in the current fiscal year, computed in accordance with Topic 718. Assumptions used to determine the aggregate grant date fair value of the restricted stock include per share grant date fair values ranging from $6.56 to $19.75, based on the closing stock price of the Company’s common stock as reported on OTC Markets on various dates.
(4)	Represents the aggregate grant date fair value for all restricted stock granted to the named executive officer vested in the current fiscal year, computed in accordance with Topic 718. Assumptions used to determine the aggregate grant date fair value of the restricted stock include a per share grant date fair values ranging from $6.96 to $11.20, based on the closing stock prices of the Company’s common stock as reported on OTC Markets on various dates.
(5)	Of this amount, $8,000 was paid for Mr. Kaplan’s services as Chairman of the Board.
(6)	Represents the aggregate grant date fair value for all restricted stock granted to Mr. Kaplan vested in the current fiscal year, computed in accordance with Topic 718. Assumptions used to determine the aggregate grant date fair value of the restricted stock include per share grant date fair values ranging from $6.56 to $19.75, based on the closing stock price of the Company’s common stock as reported on OTC Markets on various dates.
(7)	Mr. Kaplan ceased to be an executive officer on March 29, 2021. On March 25, 2021, the Company’s board of directors appointed Mr. Kaplan as Chairman of the Board, effective March 29, 2021. Mr. Kaplan resigned as Chief Executive Officer and Interim Chief Financial Officer effective March 29, 2021. Beginning March 29, 2021, Mr. Kaplan is paid $4,000 per month for his services as Chairman of the Board. In addition, Mr. Kaplan received a grant of 5,000 shares of the Company’s common stock for his services as Chairman of the Board.
(8)	This amount was accrued as of May 31, 2020. During the fiscal year ended May 31, 2021, Mr. Kaplan received $40,000 of the accrued bonus from the fiscal year ended May 31, 2020. As of May 31, 2021, the Company still owes Mr. Kaplan $35,000 of this amount.

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Outstanding Equity Awards at 2021 Fiscal Year-End

The following table sets forth information on outstanding options and stock awards held by the named executive officers as of May 31, 2021.

Option Awards

Stock Awards

Name

Number of Securities Underlying Unexercised Options (#) Exercisable

Number of Securities Underlying Unexercised Options (#) Unexercisable

Option Exercise Price ($)

Option Expiration Date

Number of Shares or Units Of Stock that Have Not Vested (#) (1)

Market Value Of Shares Or Units of Stock That Have Not Vested ($) (1)

Roman Franklin

—

—

$

—

—

—

$

—

Jed Kaplan

—

—

$

—

—

—

$

—

2021 Option Exercises and Stock Vested Table

The following table sets forth the vesting of restricted stock during the fiscal year ended May 31, 2021 for the named executive officers:

	Stock Awards
Name	Number of Shares Acquired on Vesting		Value Realized on Vesting
Roman Franklin		91,067	$	1,032,243
Jed Kaplan		106,875	$	1,201,465

Executive Officer and Director Compensation

The Company intends to develop an executive compensation program that is consistent with its existing compensation policies and philosophies, which are designed to align compensation with our business objectives and the creation of stockholder value, while enabling us to attract, motivate and retain individuals who contribute to the long-term success of the Company.

Decisions on the executive compensation program will be made by the compensation committee. The following discussion is based on the present expectations as to the executive compensation program to be adopted by the compensation committee. The executive compensation program actually adopted will depend on the judgment of the members of the compensation committee and may differ from that set forth in the following discussion.

We anticipate that decisions regarding executive compensation will reflect our belief that the executive compensation program must be competitive in order to attract and retain our executive officers. We anticipate that the compensation committee will seek to implement our compensation policies and philosophies by linking a significant portion of our executive officers’ cash compensation to performance objectives and by providing a portion of their compensation as long-term incentive compensation in the form of equity awards.

We anticipate that compensation for our executive officers will have three primary components: base salary, an annual cash incentive bonus and long-term incentive compensation in the form of share-based awards, if any.

Base Salary

Our compensation committee will determine base salaries and manage the base salary review process, subject to existing employment agreements.

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Annual Bonuses

We intend to use annual cash incentive bonuses for the executive officers to tie a portion of their compensation to financial and operational objectives achievable within the applicable fiscal year. We expect that, near the beginning of each year, the compensation committee will select the performance targets, target amounts, target award opportunities and other term and conditions of annual cash bonuses for the executive officers, subject to the terms of any employment agreement. Following the end of each year, the compensation committee will determine the extent to which the performance targets were achieved and the amount of the award that is payable to the executive officers.

On July 29, 2020, the board of directors approved a cash bonus to each of Messrs. Kaplan and Franklin in the amount of $75,000 in return for services provided during the 2020 fiscal year. Such bonuses will be deferred and paid when the Company has sufficient funds available to pay such bonuses, as to be reasonably determined by the board of directors and the respective executives. During the fiscal year ended May 31, 2021, the Company paid $40,000 of such bonus amount to each of Messrs. Kaplan and Franklin. As of May 31, 2021, the Company owed $35,000 to each of Messrs. Kaplan and Franklin for the bonus granted for the fiscal year ended May 31, 2020.

In December 2020, the board of directors approved a cash bonus to each of Messrs. Kaplan and Franklin in the amount of $125,000. Such bonuses have been deferred and will be paid when the Company has sufficient funds available to pay such bonuses, to be reasonably determined by the board of directors and the respective executives.

Stock-Based Awards

We intend to use stock-based awards to reward long-term performance of the executive officers. We believe that providing a meaningful portion of the total compensation package in the form of stock-based awards will align the incentives of its executive officers with the interests of its stockholders and serve to motivate and retain the individual executive officers. Stock-based awards will be awarded under the Incentive Plan, which has been adopted by our Board of Directors and is being submitted to our shareholders for approval at the special meeting in lieu of an annual meeting.

Restricted Stock Awards

On July 29, 2020, the Board issued 41,875 shares of common stock to Jed Kaplan, our then-Chief Executive Officer and Interim Chief Financial Officer and a member of our board of directors. Of these shares, (i) 31,250 shares of common stock related to services provided by Mr. Kaplan to the Company during the 2020 fiscal year, (ii) 8,750 shares of common stock related to grants that should have been, but were not, made pursuant to the Kaplan 2018 Agreement (as hereinafter defined), and (iii) 1,875 shares of common stock related to grants made pursuant to the Kaplan 2020 Agreement (as hereinafter defined). Mr. Kaplan currently serves as our Chairman of the Board. The Kaplan 2018 Agreement provided for the grant to Mr. Kaplan of 1,250 shares of common stock per month. For the months of January 2020 through July 2020, however, such shares had not been granted. Accordingly, the July 29, 2020 grant included an aggregate of 8,750 shares of common stock that should have been granted for the months of January 2020 through July 2020. The Kaplan 2020 Agreement provides for the grant to Mr. Kaplan of 1,875 shares of common stock per month. Such shares were fully vested and earned as of the issuance thereof.

On July 29, 2020, the Board also issued 34,813 shares of common stock to Roman Franklin, our then-President and a member of our board of directors. Of these shares, (i) 31,250 shares of common stock related to services provided by Mr. Franklin to the Company during the 2020 fiscal year, (ii) 2,625 shares of common stock related to grants that should have been, but were not, made pursuant to the Franklin 2018 Agreement (as hereinafter defined), and (iii) 938 shares of common stock related to grants made pursuant to the Franklin 2020 Agreement (as hereinafter defined). Mr. Franklin currently serves as our Chief Executive Officer and a member of the board of directors. The Franklin 2018 Agreement provided for the grant to Mr. Franklin of 375 shares of common stock per month. For the months of January 2020 through July 2020, however, such shares had not been granted. Accordingly, the July 29, 2020 grant included an aggregate of 2,625 shares of common stock that should have been granted for the months of January 2020 through July 2020. The Franklin 2020 Agreement provides for the grant to Mr. Franklin of 782 shares of common stock per month. Such shares were fully vested and earned as of the issuance thereof.

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Executive Employment Agreements

On December 31, 2018, the Company entered into an employment agreement (the “Kaplan 2018 Agreement”) with Jed Kaplan, pursuant to which the parties agreed that he will serve as the Co-Chief Executive Officer of the Company until March 31, 2019, at which point he automatically became the sole Chief Executive Officer of the Company. Under the terms of the Kaplan 2018 Agreement, Mr. Kaplan did not receive a salary or other monetary compensation and in lieu thereof he will receive an equity grant of 1,250 shares of Common Stock per month, which shares will be fully vested upon grant.

On July 29, 2020, the Company entered into a new employment agreement (the “Kaplan 2020 Agreement”) with Mr. Kaplan. Such employment agreement replaced the Kaplan 2018 Agreement. As a result, the Kaplan 2018 Agreement was terminated and is of no further force or effect. Pursuant to the terms of the Kaplan 2020 Agreement, the Company agreed to pay Mr. Kaplan a monthly base salary of $5,000; provided, however, that the parties agreed that such base salary will be deferred and will accumulate until the Company has sufficient cash available to make such payments, to be reasonably determined by the Board of Directors and Mr. Kaplan, at which time all accrued and unpaid base salary will be paid. In addition, Mr. Kaplan will receive an equity grant of 1,875 shares of common stock per month, which shares will be fully vested upon grant. Mr. Kaplan will also be eligible to receive a quarterly bonus in the form of cash or an equity grant of shares and will be entitled to participate in the Company’s employee benefit plans.

The term of the Kaplan 2020 Agreement is for an initial one-year term, which shall automatically renew for successive one-year terms unless either party provides 60 days’ advance written notice of its intention not to renew the Kaplan 2020 Agreement at the conclusion of the then applicable term. The term of the Kaplan 2020 Agreement may be terminated by the Company with or without cause or by Mr. Kaplan with or without good reason, as such terms are defined therein.

On March 25, 2021, the board of directors appointed Mr. Kaplan as Chairman of the Board, effective March 29, 2021, and he ceased to be the Company’s Chief Executive Officer and Interim Chief Financial Officer. Accordingly, the Company terminated the Kaplan 2020 Agreement. As of October 12, 2021, $35,000 is still owing to Mr. Kaplan under the Kaplan 2020 Agreement. In addition, as of October 12, 2021, Mr. Kaplan earns $4,000 per month for his services as Chairman of the Board.

On December 31, 2018, the Company also entered into an employment agreement (the “Franklin 2018 Agreement”) with Roman Franklin, pursuant to which the parties agreed that he will serve as the President of the Company. Pursuant to the terms of the Franklin 2018 Agreement, the Company agreed to that Mr. Franklin will receive (i) a monthly base salary of $8,333.33 and (ii) an equity grant of 375 shares of Common Stock per month, which shares will be fully vested upon grant.

On July 29, 2020, the Company entered into a new employment agreement (the “Franklin 2020 Agreement”) with Mr. Franklin. Such employment agreement replaced the Franklin 2018 Agreement. As a result, the Franklin 2018 Agreement was terminated and is of no further force or effect. Pursuant to the terms of the Franklin 2020 Agreement, the Company agreed to pay Mr. Franklin a monthly base salary of $12,500; provided, however, that the parties agreed that such base salary will be deferred and will accumulate until the Company has sufficient cash available to make such payments, to be reasonably determined by the Board of Directors and Mr. Franklin, at which time all accrued and unpaid base salary will be paid  . In addition, Mr. Franklin will receive an equity grant of 782 shares of common stock per month, which shares will be fully vested upon grant. Mr. Franklin will also be eligible to receive a quarterly bonus in the form of cash or an equity grant of shares and will be entitled to participate in the Company’s employee benefit plans.

Each of the Kaplan 2020 Agreement   and the Franklin 2020 Agreement contains customary non-competition and non-solicitation covenants for a period of one year after the termination of the executive’s employment.

On March 25, 2021, the board of directors appointed Mr. Franklin as the Company’s Chief Executive Officer, effective March 29, 2021. Mr. Kaplan ceased to be the Company’s President on such date. Mr. Franklin continues to be a member of our board of directors. In connection with Mr. Franklin’s appointment, the Company entered into an employment agreement, dated as of March 29, 2021, by and between the Company and Mr. Franklin (the “2021 Franklin Employment Agreement”) which replaced the Franklin 2020 Agreement. As of October 12, 2021, $35,000 is still owing to Mr. Franklin under the Franklin 2020 Agreement.

Pursuant to the terms of the 2021 Franklin Employment Agreement, in exchange for Mr. Franklin’s services, the Company agreed to pay Mr. Franklin an annual base salary of $250,000. Mr. Franklin is also eligible to receive a quarterly bonus of up to $15,000 in the form of a cash bonus and/or equity grant of shares of the Company’s common stock. Mr. Franklin’s eligibility for any bonus and the amount thereof will be determined solely at the discretion of the Board of Directors.

Mr. Franklin’s employment and the 2021 Franklin Employment Agreement may be terminated by the Company with or without Cause (as hereinafter defined), or by Mr. Franklin with or without Good Reason (as hereinafter defined). In addition, in the event of Mr. Franklin’s death or total disability as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (“Disability”), during the term of the 2021 Franklin Employment Agreement, the term of the 2021 Franklin Employment Agreement and Mr. Franklin’s employment will terminate on the date of death or Disability.

For purposes of the 2021 Franklin Employment Agreement, “Cause” means, subject to the provisions of the 2021 Franklin Employment Agreement:

(i)	Mr. Franklin’s willful failure to perform his duties (other than any such failure resulting from incapacity due to physical or mental illness);
(ii)	Mr. Franklin’s willful failure to comply with any valid and legal directive of the Board of Directors; or
(iii)	Mr. Franklin’s willful engagement in gross misconduct, which is, in each case, materially injurious to the Company or its affiliates; or
(iv)	Actions by Mr. Franklin constituting embezzlement, misappropriation, or fraud, whether or not related to Mr. Franklin’s employment with the Company; or
(v)	Mr. Franklin’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude; or
(vi)	Mr. Franklin’s material breach of any material obligation under the 2021 Franklin Employment Agreement, which Mr. Franklin fails to correct within 10 days after Mr. Franklin receives written notice from the Board of Directors of such breach.

For purposes of the 2021 Franklin Employment Agreement, “Good Reason” means the occurrence of any of the following, in each case during the term of the 2021 Franklin Employment Agreement:

(i)	A material reduction in Mr. Franklin’s base salary;
(ii)	A material reduction in Mr. Franklin’s target bonus opportunity;
(iii)	A relocation of Mr. Franklin’s principal place of employment from that set forth in the Franklin Employment Agreement by more than 35 miles;
(iv)	A material breach by the Company of any material provision of the Franklin Employment Agreement;
(v)	At any time following a Change of Control (as defined in the Franklin Employment Agreement), a material change in Mr. Franklin’s title or responsibilities, or a material diminution by the Company of compensation and benefits (taken as a whole) provided to Mr. Franklin immediately prior to a Change of Control.

Mr. Franklin may not terminate the 2021 Franklin Employment Agreement for Good Reason pursuant to clause (i), (ii), (iii) or (iv) above unless (x) Mr. Franklin, within 30 days following the occurrence of the such condition giving rise to Good Reason, notifies the Company in writing of his intent to terminate with Good Reason; (y) the Company fails to cure such condition within 30 days after being so notified; and (z) Mr. Franklin actually terminates no later than 30 days after the end of the cure period.

Solely in the case of an event of Cause relating to Mr. Franklin’s willful failure to perform his duties (other than any such failure resulting from incapacity due to physical or mental illness), Mr. Franklin’s willful failure to comply with any valid and legal directive of the Board of Directors; or Mr. Franklin’s material breach of any material obligation under the Franklin Employment Agreement, which Mr. Franklin fails to correct within 10 days after Mr. Franklin receives written notice from the Board of Directors of such breach (each, a “Cause Capable of Cure”), the Company may not and will not terminate the Franklin Employment Agreement for Cause unless the Company has provided written notice to Mr. Franklin of the existence of the circumstances providing grounds for termination for a Cause Capable of Cure, and Mr. Franklin has had at least 14 calendar days to cure such circumstances to the reasonable satisfaction of the Company and has thereafter not cured such circumstance within such 14 calendar day period.

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Pursuant to the terms of the 2021 Franklin Employment Agreement, upon (i) termination by the Company for Cause, (ii) termination by Mr. Franklin without Good Reason, or (iii) a non-renewal by the Company, the Company will pay to Mr. Franklin the following amounts (the “Franklin Accrued Amounts”):

(i)	Any accrued but unpaid base salary;
(ii)	Any bonus compensation awarded for the quarterly period preceding that in which termination occurs, but unpaid on the date of termination (the “Prior Quarterly Period Bonus”);
(iii)	Reimbursement for unreimbursed business expenses;
(iv)	Such employee benefits, if any, to which Mr. Franklin may be entitled under the Company’s employee benefit plans as of the date of termination; provided that, in no event shall Mr. Franklin be entitled to any payments in the nature of severance or termination payments except as specifically provided in the 2021 Franklin Employment Agreement; and
(v)	all amounts otherwise required to be paid or provided by law.

Pursuant to the terms of the 2021 Franklin Employment Agreement, upon termination of the 2021 Franklin Employment Agreement solely as a result of Mr. Franklin’s death or Disability, Mr. Franklin or his estate will receive the 2021 Franklin Accrued Amounts and the pro-rated bonus as provided in the 2021 Franklin Employment Agreement.

Upon Mr. Franklin’s termination by the Company without or other than for Cause, or (ii) resignation by Mr. Franklin with Good Reason, then:

(i)	the Company will pay to Mr. Franklin the Franklin Accrued Amounts and a pro-rated bonus as provided in the Franklin Employment Agreement;
(ii)	the Company will pay to Mr. Franklin $125,000 as a severance payment;
(iii)	the Company will pay to Mr. Franklin any salary that Mr. Franklin would have earned through the end of the then-applicable initial term or renewal term, as applicable; and
(iv)	any unvested incentive awards then held by Mr. Franklin will immediately be vested in full.

Also on March 25, 2021, the Board appointed Knicks Lau to serve as the Company’s Chief Financial Officer, effective March 29, 2021. In connection with Mr. Lau’s appointment, the Company entered into an employment agreement, dated as of March 29, 2021 by and between the Company and Mr. Lau (the “Lau Employment Agreement”). Pursuant to the terms of the Lau Employment Agreement, in exchange for Mr. Lau’s services, the Company agreed to pay Mr. Lau an annual base salary of $140,000. In addition, Mr. Lau was entitled to receive compensation in the form of an equity grant of $5,000 in the Company’s common stock for each quarter during the term of the Lau Employment Agreement. On May 10, 2021, Knicks Lau resigned as the Company’s Chief Financial Officer for personal reasons. Upon Mr. Lau’s resignation, the Lau Employment Agreement was terminated under mutual agreement of the parties with no payouts made other than the salary paid for the time served.

In connection with Nancy Hennessey’s appointment as the Company’s Chief Financial officer on May 11, 2021 and effective May 17, 2021, the Company entered into an employment agreement, dated as of May 17, 2021, by and between the Company and Ms. Hennessey (the “Hennessey Employment Agreement”). Pursuant to the terms of the Hennessey Employment Agreement, in exchange for Ms. Hennessey’s services, the Company agreed to pay Ms. Hennessey an annual base salary of $140,000. In addition, Ms. Hennessey is entitled to receive compensation in the form of an equity grant of $12,500 in the Company’s common stock for each quarter during the term of the Hennessey Employment Agreement, which runs for a period ending one year after May 17, 2021 and automatically renews for successive one year terms unless either party gives 60 days’ advance written notice of its intention not to renew the Hennessey Employment Agreement. Pursuant to the terms of the Hennessey Employment Agreement, Ms. Hennessey will also receive 5,000 shares of common stock upon completion of an uplisting to a national exchange, such as The Nasdaq Stock Market or the NYSE American. Ms. Hennessey’s eligibility for any bonus and the amount thereof will be determined solely at the discretion of the Board of Directors.

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Ms. Hennessey’s employment and the Hennessey Employment Agreement may be terminated by the Company with or without Cause (as hereinafter defined), or by Ms. Hennessey with or without Good Reason (as hereinafter defined). In addition, in the event of Ms. Hennessey’s death or total disability as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (“Disability”), during the term of the Hennessey Employment Agreement, the term of the Hennessey Employment Agreement and Ms. Hennessey’s employment will terminate on the date of death or Disability.

For purposes of the Hennessey Employment Agreement, “Cause” means, subject to the provisions of the Hennessey Employment Agreement:

(i)	Ms. Hennessey’s willful failure to perform her duties (other than any such failure resulting from incapacity due to physical or mental illness);
(ii)	Ms. Hennessey’s willful failure to comply with any valid and legal directive of the Board of Directors; or
(iii)	Ms. Hennessey’s willful engagement in dishonesty, illegal conduct, or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates; or
(iv)	Actions by Ms. Hennessey constituting embezzlement, misappropriation, or fraud, whether or not related to Ms. Hennessey’s employment with the Company; or
(v)	Ms. Hennessey’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude; or
(vi)	Ms. Hennessey’s material breach of any material obligation under the Hennessey Employment Agreement, which Ms. Hennessey fails to correct within 10 days after Ms. Hennessey receives written notice from the Board of Directors of such breach.

For purposes of the Hennessey Employment Agreement, “Good Reason” means the occurrence of any of the following, in each case during the term of the Hennessey Employment Agreement:

(i)	A material reduction in Ms. Hennessey’s base salary;
(ii)	A material reduction in Ms. Hennessey’s target bonus opportunity;
(iii)	A relocation of Ms. Hennessey’s principal place of employment from that set forth in the Hennessey Employment Agreement by more than 35 miles;
(iv)	A material breach by the Company of any material provision of the Hennessey Employment Agreement;
(v)	At any time following a Change of Control (as defined in the Hennessey Employment Agreement), a material change in Ms. Hennessey’s title or responsibilities, or a material diminution by the Company of compensation and benefits (taken as a whole) provided to Ms. Hennessey immediately prior to a Change of Control.

Ms. Hennessey may not terminate the Hennessey Employment Agreement for Good Reason pursuant to clause (i), (ii), (iii) or (iv) above unless (x) Ms. Hennessey, within 30 days following the occurrence of the such condition giving rise to Good Reason, notifies the Company in writing of her intent to terminate with Good Reason; (y) the Company fails to cure such condition within 30 days after being so notified; and (z) Ms. Hennessey actually terminates no later than 30 days after the end of the cure period.

Solely in the case of an event of Cause relating to Ms. Hennessey’s willful failure to perform her duties (other than any such failure resulting from incapacity due to physical or mental illness), Ms. Hennessey’s willful failure to comply with any valid and legal directive of the Board of Directors; or Ms. Hennessey’s material breach of any material obligation under the Hennessey Employment Agreement, which Ms. Hennessey fails to correct within 10 days after Ms. Hennessey receives written notice from the Board of Directors of such breach (each, a “Cause Capable of Cure”), the Company may not and will not terminate the Hennessey Employment Agreement for Cause unless the Company has provided written notice to Ms. Hennessey of the existence of the circumstances providing grounds for termination for a Cause Capable of Cure, and Ms. Hennessey has had at least 14 calendar days to cure such circumstances to the reasonable satisfaction of the Company and has thereafter not cured such circumstance within such 14 calendar day period.

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Pursuant to the terms of the Hennessey Employment Agreement, upon (i) termination by the Company for Cause, (ii) termination by Ms. Hennessey without Good Reason, or (iii) a non-renewal by the Company, the Company will pay to Ms. Hennessey the following amounts (the “Hennessey Accrued Amounts”):

(i)	Any accrued but unpaid base salary, any accrued but unpaid equity grants and accrued but unused vacation;
(ii)	Any bonus compensation awarded for the quarterly period preceding that in which termination occurs, but unpaid on the date of termination (the “Prior Quarterly Period Bonus”);
(iii)	Reimbursement for unreimbursed business expenses;
(iv)	Such employee benefits, if any, to which Ms. Hennessey may be entitled under the Company’s employee benefit plans as of the date of termination; provided that, in no event shall Ms. Hennessey be entitled to any payments in the nature of severance or termination payments except as specifically provided in the Hennessey Employment Agreement; and
(v)	all amounts otherwise required to be paid or provided by law.

Pursuant to the terms of the Hennessey Employment Agreement, upon termination of the Hennessey Employment Agreement solely as a result of Ms. Hennessey’s death or Disability, Ms. Hennessey or her estate will receive the Hennessey Accrued Amounts and the pro-rated bonus as provided in the Hennessey Employment Agreement.

Upon Ms. Hennessey’s termination by the Company without or other than for Cause, or (ii) resignation by Ms. Hennessey with Good Reason, then:

(i)	the Company will pay to Ms. Hennessey the Hennessey Accrued Amounts and a pro-rated bonus as provided in the Hennessey Employment Agreement;
(ii)	the Company will pay to Ms. Hennessey $35,000 as a severance payment;
(iii)	the Company will pay to Ms. Hennessey any salary that Ms. Hennessey would have earned through the end of the then-applicable initial term or renewal term, as applicable;
(iv)	any unvested incentive awards then held by Ms. Hennessey will immediately be vested in full; and
(v)	any additional equity grants to which Ms. Hennessey would have been entitled pursuant to the terms of the Hennessey Employment Agreement will be issued and paid in accordance with the terms of the Hennessey Employment Agreement.

2020 Omnibus Incentive Plan

The board and shareholders of the Company approved of the Simplicity Esports and Gaming Company 2020 Omnibus Incentive Plan (the “2020 Plan”) on April 22, 2020 and June 23, 2020, respectively. We believe that the 2020 Plan serves as an essential element of our compensation program and is critical to our ability to attract and retain the highly qualified employees essential for the execution of our business strategy. We believe the 2020 Plan will (i) attract and retain key personnel, and (ii) provide a means whereby directors, officers, employees, consultants, and advisors of the Company and its subsidiaries can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measure by reference to the value of the Company’s common stock, thereby strengthening their commitment to the welfare of the Company and its subsidiaries and aligning their interests with those of the Company’s stockholders. The 2020 Plan provides for various stock-based incentive awards, including incentive and nonqualified stock options, stock appreciation rights (“SARs”), restricted stock and restricted stock units (“RSUs”), and other equity-based or cash-based awards. On June 4, 2021, the Company filed a registration statement on Form S-8 for the purpose of resale or reoffer thereof, of 1,000,000 shares of the Company’s common stock reserved for issuance pursuant to the 2020 Plan.

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2020 Plan Highlights

Highlights of the 2020 Plan are as follows:

● The Compensation Committee, which is comprised solely of independent directors, administers the 2020 Plan.

● The total number of shares of common stock authorized for issuance under the 2020 Plan is 1,000,000   shares, or approximately 8.6% of the common stock outstanding at October 12, 2021.

● No non-employee director may be granted awards under the 2020 Plan during any calendar year if such awards, taken together with any cash fees paid to such non-employee director would exceed a total value of $250,000 (calculated in accordance with the terms of the 2020 Plan).

● The exercise price of options and SARs may not be less than the fair market value of the common stock on the date of grant.

● In addition to other vesting requirements, the Compensation Committee may condition the vesting of awards on the achievement of specific performance targets.

Material Features of the 2020 Plan

Term

The 2020 Plan was effective June 23, 2020. The 2020 Plan will terminate on June 23, 2030, unless the Board terminates it earlier.

Purpose

The purpose of the 2020 Plan is to provide a means through with the Company and its subsidiaries may attract and retain key personnel, and to provide a means whereby directors, officer, employees, consultants, and advisors of the Company and its subsidiaries can acquire and maintain an equity interest in the Company, or be paid incentive compensation, thereby strengthening their commitment to the welfare of the Company and its subsidiaries and aligning their interests with those of the Company’s stockholders.

Administration

Pursuant to the terms of the 2020 Plan, a committee of the Board or any properly delegated subcommittee, or, if no such committee or subcommittee thereof exists, the Board, shall administer the 2020 Plan. The Compensation Committee, which is comprised entirely of independent directors, administers the 2020 Plan. The Compensation Committee will have the sole and plenary authority to (i) designate participants; (ii) determine the type or types of awards; (iii) determine the number of shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, awards; (iv) determine the terms and conditions of any award; (v) determine whether, to what extent, and under what circumstances awards may be settled in, or exercised for, cash, shares of Company common stock, other securities, other awards, or other property, or canceled, forfeited, or suspended and the method or methods by which awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, shares of Company common stock, other securities, other awards, or other property and other amounts payable with respect to an award shall be deferred either automatically or at the election of the participant or of the Compensation Committee; (vii) interpret, administer, reconcile any inconsistency in, correct any defect in, and/or supply any omission in the 2020 Plan and any instrument or agreement relating to, or award granted under, the 2020 Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Compensation Committee shall deem appropriate for the proper administration of the 2020 Plan; (ix) adopt sub-plans; and (x) make any other determination and take any other action that the Compensation Committee deems necessary or desirable for the administration of the 2020 Plan.

The Compensation Committee may delegate its authority to administer the 2020 Plan as permitted by law, except for award grants to non-employee directors.

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The Compensation Committee will have the discretion to select particular performance targets in connection with awards under the 2020 Plan. Under the 2020 Plan, performance targets are specific levels of performance of the Company (and/or subsidiaries, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing), which may be determined in accordance with GAAP or on a non-GAAP basis on the specified measures, including, but not limited to:

●	debt ratings;	●	share price;
●	debt to capital ratio;	●	total stockholder return;
●	generation of cash;	●	acquisition or disposition of assets;
●	issuance of new debt;	●	acquisition or disposition of companies, entities or businesses;
●	establishment of new credit facilities;	●	creation of new performance and compensation criteria for key personnel;
●	retirement of debt;	●	recruiting and retaining key personnel;
●	return measures (including, but not limited to, return on assets, return on capital, return on equity);	●	customer satisfaction;
●	attraction of new capital;	●	employee morale;
●	cash flow;	●	hiring of strategic personnel;
●	earnings per share;	●	development and implementation of Company policies, strategies and initiatives;
●	net income;	●	creation of new joint ventures;
●	pre-tax income;	●	increasing the Company’s public visibility and corporate reputation;
●	pre-tax pre-bonus income;	●	development of corporate brand name;
●	operating income;	●	overhead cost reductions; or
●	gross revenue;	●	any combination of or variations on the foregoing.
●	net revenue;
●	net margin;
●	pre-tax margin;

Eligibility

Employees, directors and independent contractors (except those performing services in connection with the offer or sale of the Company’s securities in a capital raising transaction, or promoting or maintaining a market for the Company’s securities) of the Company or its subsidiaries will be eligible to receive awards under the 2020 Plan.

Maximum Shares Available

Awards granted under the 2020 Plan are subject to the following limitations: (i) no more than 1,000,000 shares of common stock (the “Absolute Share Limit”) will be available for awards under the 2020 Plan; (ii) no more than the number of shares of common stock equal to the Absolute Share Limit may be issued in the aggregate pursuant to the exercise of incentive stock options granted under the 2020 Plan; and (iii) the maximum number of shares of common stock subject to awards granted during a single calendar year to any non-employee director, taken together with any cash fees paid to such non-employee director during such calendar year, shall not exceed a total value of $250,000 (calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes).

When (i) an option or SAR is granted under the 2020 Plan, the maximum number of shares subject to the option or SAR will be counted against the Absolute Share Limit as one share for every share subject to such option or SAR, regardless of the actual number of shares (if any) used to settle such option or SAR upon exercise; and (ii) an award other than an option or SAR is granted under the 2020 Plan, the maximum number of shares subject to the award will be counted against the Absolute Share Limit as two shares for every share subject to such award, regardless of the actual number of shares (if any) used to settle such award. The issuance of shares or the payment of cash upon the exercise of an award or in consideration of the cancellation or termination of an award shall reduce the total number of shares available under the 2020 Plan, as applicable. If shares are not issued or are withheld from payment of an award to satisfy tax obligations with respect to the award, such shares will not be added back to the Absolute Share Limit, but rather will count against the Absolute Share Limit.

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To the extent that an award granted under the 2020 Plan or a prior plan award expires or is canceled, forfeited or terminated, in whole or in part without issuance to the holder thereof of shares of common stock to which the award or prior plan award related or cash or other property in lieu thereof, the unissued shares of common stock will again be available for grant under the 2020 Plan; provided that, in any such case, the number of shares again available for grant under the 2020 Plan shall be the number of shares previously counted against the Absolute Share Limit (or, in the case of prior plan award, the number of shares that would have been counted against the Absolute Share Limit if such prior plan award had been granted under this 2020 Plan) with respect to such unissued shares of common stock to which such award or prior plan award related, as determined in accordance with the terms of the 2020 Plan.

Awards may, in the sole discretion of the Compensation Committee, be granted under the 2020 Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by the Company or with which the Company combines (“Substitute Awards”). Substitute Awards will not be counted against the Absolute Share Limit; provided, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) will be counted against the aggregate number of shares of common stock available for awards of incentive stock options under the 2020 Plan. Subject to applicable stock exchange requirements, available shares of common stock under a stockholder-approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect the acquisition or combination transaction) may be used for awards under the 2020 Plan and will not reduce the number of shares of common stock available for issuance under the 2020 Plan.

Adjustments

In the event of a merger, consolidation, reorganization, recapitalization, reorganization, stock split or dividend, or similar event affecting the common stock, the number (including limits on shares of common stock granted) and kind of shares granted under the 2020 Plan, the Compensation Committee will make such proportionate substitution or adjustment, if any, as it deems equitable, to any or all of the Absolute Share Limit, the number of shares of common stock or other securities of the Company that may be issued in respect of awards or with respect to which awards may be granted and the terms of any outstanding award.

Restricted Stock

The Compensation Committee will be authorized to award restricted stock under the 2020 Plan. Awards of restricted stock will be subject to the terms and conditions established by the Compensation Committee. Restricted stock is common stock that is subject to such restrictions as may be determined by the Compensation Committee for a specified period.

RSU Awards

The Compensation Committee will be authorized to award RSUs in lieu of or in addition to any restricted stock awards. RSUs will be subject to the terms and conditions established by the Compensation Committee. Each RSU will have an initial value that is at least equal to the fair market value of a share of Company common stock on the date of grant. RSUs may be paid at such time as the Compensation Committee may determine in its discretion, and payments may be made in a lump sum or in installments, in cash, shares of common stock, or a combination thereof, as determined by the Compensation Committee in its discretion.

Options

The Compensation Committee will be authorized to grant options to purchase shares of common stock that are either “qualified,” meaning they are intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) for incentive stock options, or “nonqualified,” meaning they are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the 2020 Plan will be subject to the terms and conditions established by the Compensation Committee. Under the terms of the 2020 Plan, the exercise price of the options will not be less than the fair market value of our common stock at the time of grant. Options granted under the 2020 Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by the Compensation Committee and specified in the applicable award agreement. The maximum term of an option granted under the 2020 Plan will be 10 years from the date of grant (or five years in the case of a qualified option granted to a 10% stockholder). Payment in respect of the exercise of an option may be made in cash or by check, by surrender of unrestricted shares (at their fair market value on the date of exercise), or through a “net exercise,” or the Compensation Committee may, in its discretion and to the extent permitted by law, allow such payment to be made through a broker-assisted cashless exercise mechanism or by such other method as the Compensation Committee may determine to be appropriate.

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Stock Appreciation Rights

The Compensation Committee will be authorized to award SARs under the 2020 Plan. SARs will be subject to the terms and conditions established by the Compensation Committee and reflected in the award agreement. A SAR is a contractual right that allows a participant to receive, in the form of either cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. An option granted under the 2020 Plan may include SARs, and SARs may also be awarded to a participant independent of the grant of an option. SARs granted in connection with an option shall be subject to terms similar to the option corresponding to such SARs.

Other Stock-Based Awards

The Compensation Committee will be authorized to award other stock-based awards having terms and conditions as determined by the Compensation Committee. These awards may be granted either alone or in tandem with other awards.

Qualified Performance-Based Awards

Restricted stock and RSUs granted to officers and employees of the Company may depend on the degree of achievement of one or more performance goals relative to a pre-established targeted level or levels using one or more identified performance targets. The applicable performance period may not be less than three months nor more than 10 years.

Dividends and Voting Rights

Participants awarded stock options and SARs will not receive dividends or dividend equivalents or have any voting rights with respect to shares of common stock underlying these awards prior to the issuance of any such shares. Participants that hold unearned awards subject to performance vesting conditions (other than or in additional to the passage of time) will not receive dividends or dividend equivalents or have any voting rights with respect to shares of common stock underlying these awards prior to the issuance of any such shares; provided, however, that dividends and dividend equivalents may be accumulated in respect of unearned awards and paid within 30 days after such awards are earned and become payable or distributable.

Transferability

Awards granted under the 2020 Plan generally will be transferable only by will or the applicable laws of descent and distribution. In certain limited circumstances, the Compensation Committee may authorize stock options, other than incentive stock options, to be transferred to family members or trusts controlled by family members of the participant. Restricted stock may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of until the applicable restrictions lapse.

Change in Control

In the event of a Change in Control (as defined in the 2020 Plan), options become immediately exercisable in full. In addition, in such event the Compensation Committee may accelerate the termination date of the option to a date no earlier than 30 days after notice of such acceleration is given to the participant. Upon the giving of any such acceleration notice, the option shall become immediately exercisable in full.

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A participant’s right to SARs under an SAR agreement immediately vest as to 100% of the total number of shares covered by the grant (i) upon termination of the grantee’s employment on account of the grantee’s death or permanent disability; or (ii) upon the occurrence of a Change in Control.

With respect to restricted stock and RSUs, in the event that the grantee’s status as an employee is terminated following a Change in Control, then all unvested shares of restricted stock and RSUs will immediately vest.

Clawback

All awards under the 2020 Plan are subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with (i) any clawback, forfeiture or other similar policy adopted by the Board or the Compensation Committee and as in effect from time to time; and (ii) applicable law.

Amendment and Termination

The Board may terminate or amend the 2020 Plan or any portion thereof at any time; provided, however, that the Board may not, without stockholder approval, amend the 2020 Plan if:

● Such approval is necessary to comply with any regulatory requirement applicable to the 2020 Plan;

● It would materially increase the number of securities which may be issued under the 2020 Plan (except for increases expressly provided for in the 2020 Plan; or

● It would materially modify the requirements for participation in the 2020 Plan.

In addition, any such amendment that would materially and adversely affect an award holder’s rights with respect to a previously granted and outstanding award will not to that extent be effective without the consent of the affected holder of such award.

The Compensation Committee may terminate or amend any award agreement, to the extent consistent with the terms of the 2020 Plan and any applicable award agreement and so long as such termination or amendment would not materially and adversely affect an award holder’s rights with respect to a previously granted and outstanding award (unless the affected holder consents thereto); provided, however that the Compensation Committee may not, without stockholder approval, amend or terminate an award or award agreement to:

● Reduce the exercise price of any option or the strike price of any SAR,

● To cancel any outstanding option or SAR and replace it with a new option or SAR (with a lower exercise price or strike price, as the case may be) or other award or cash payment that is greater than the intrinsic value (if any) of the canceled option or SAR; and

● Take any other action which is considered a “repricing” for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted.

U.S. Federal Income Tax Consequences

The following is a general summary of the material U.S. federal income tax consequences to 2020 Plan participants and the Company of the grant, vesting and exercise of awards under the 2020 Plan and the disposition of shares acquired pursuant to the exercise of such awards and is based upon an interpretation of the current federal income tax laws and regulations and may be inapplicable if such laws and regulations are changed. This summary is not intended to be a complete statement of applicable law or constitute tax advice, nor does it address foreign, state, local and payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant. To the extent that any awards under the 2020 Plan are subject to Section 409A of the Code (“Section 409A”), the following discussion assumes that such awards will be designed to conform to the requirements of Section 409A and the regulations promulgated thereunder (or an exception thereto). The 2020 Plan is not subject to the protective provisions of the Employee Retirement Income Security Act of 1974, as amended, and is not qualified under Section 401(a) of the Code.

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Incentive Stock Options. Options issued under the 2020 Plan and designated as incentive stock options are intended to qualify as such under Section 422 of the Code. Under the provisions of Section 422 of the Code and the related regulations, holders of incentive stock options will generally incur no federal income tax liability at the time of grant or upon exercise of those options, and the Company will not be entitled to a deduction at the time of the grant or exercise of the option. However, the difference between the value of the common stock received on the exercise date and the exercise price paid will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability to the holder for the taxable year in which the exercise occurs. The taxation of gain or loss upon the sale of the common stock acquired upon exercise of an incentive stock option depends, in part, on whether the holding period of the shares of our common stock acquired through the exercise of an incentive stock option is at least (i) two years from the date of grant of the option and (ii) one year from the date the option was exercised. If these holding period requirements are satisfied, any gain or loss realized on a subsequent disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction will be allowed to us for federal income tax purposes in connection with the grant or exercise of the incentive stock option. If these holding periods requirements are not met, then, upon such “disqualifying disposition” of the shares, the participant will generally realize compensation, taxable as ordinary income, at the time of such disposition in an amount equal to the difference between the fair market value of the share on the date of exercise over the exercise price, limited to the gain on the sale, and that amount will generally be deductible by us for federal income tax purposes, subject to the possible limitations on deductibility under Section 162(m)of the Code for compensation paid to certain executives designated thereunder. Finally, if an otherwise qualified incentive stock option becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the grant date value), the portion of the incentive stock option in respect of those excess shares will be treated as a non-qualified stock option for federal income tax purposes.

Non-qualified Stock Options. No income will generally be realized by a participant upon grant of a non-qualified stock option. Upon the exercise of a non-qualified stock option, the participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the fair market value of the underlying exercised shares over the option exercise price paid at the time of exercise. We will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Section 162(m) of the Code for compensation paid to certain executives designated thereunder. Upon a subsequent disposition of the shares acquired under a non-qualified stock option, the participant will realize short-term or long-term capital gain (or loss) depending on the holding period. The capital gain (or loss) will be short-term if the shares are disposed of within one year after the non-qualified stock option is exercised, and long-term if shares were held more than 12 months as of the sale date.

Restricted Stock. A participant will normally not be required to recognize income for federal income tax purposes upon the grant of an award of restricted stock, nor is the Company entitled to any deduction, to the extent that the shares awarded have not vested (i.e., are no longer subject to a substantial risk of forfeiture). On the date an award of restricted stock is no longer subject to a substantial risk of forfeiture, the participant will compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the vested shares on that date and the amount the participant paid for such shares, if any, unless the participant made an election under Section 83(b) of the Code to be taxed at the time of grant. The participant may, however, make an election under Section 83(b) of the Code, within 30 days following the grant of the restricted stock award, to be taxed at the time of the grant of the award based on the difference between the fair market value of the shares on the date of grant and the amount the participant paid for such shares, if any. If the shares subject to such election are subsequently forfeited, the participant will not be entitled to any deduction, refund or loss for tax purposes with respect to the forfeited shares. We will be able to deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Section 162(m) of the Code for compensation paid to certain executives designated thereunder. Upon the sale of the vested shares, the participant will realize short-term or long-term capital gain or loss depending on the holding period. The holding period generally begins when the restriction period expires. If the recipient timely made a Section 83(b) election, the holding period commences on the date of the grant.

Deferred Stock Units and Restricted Stock Units. A participant will not be subject to federal income tax upon the grant of a deferred stock unit award or a restricted stock unit award, and the Company is not entitled to a deduction at the time of grant. Rather, upon the delivery of shares or cash pursuant to a deferred stock unit award or a restricted stock unit award, the participant will generally have compensation taxable at ordinary income rates in an amount equal to the fair market value of the number of shares (or the amount of cash) actually received with respect to the settlement of the award of such units. We will generally be able to deduct the amount of the ordinary income realized by the participant for U.S. federal income tax purposes, but the deduction may be limited under Section 162(m) of the Code for compensation paid to certain executives designated thereunder. If the participant receives shares upon settlement then, upon disposition of such shares, appreciation or depreciation after the settlement date is treated as either short-term or long-term capital gain or loss, depending on how long the shares have been held.

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SARs. SARs are treated very similarly to non-qualified options for tax purposes. No income will normally be realized by a participant upon grant of a SAR. Upon the exercise of a SAR, the participant will recognize compensation taxable as ordinary income in an amount equal to either: (i) the cash received upon exercise; or (ii) if shares are received upon the exercise of the SAR, the fair market value of the shares received in respect of the SAR. We will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Section 162(m) of the Code for compensation paid to certain executives designated thereunder.

Performance Awards. A participant generally will not recognize income upon the grant of a performance award. Upon payment of the performance award, the participant will recognize ordinary income in an amount equal to the cash received or, if the performance award is payable in shares, the fair market value of the shares received. When the participant recognizes ordinary income upon payment of a performance award, the Company generally will be entitled to a tax deduction in the same amount.

Other Stock-Based Awards. A participant will generally have compensation taxable as ordinary income for federal income tax purposes in an amount equal to the difference between the fair market value of the shares on the date the award is settled (whether in shares or cash, or both) over the amount the participant paid for such shares, if any. We will generally be able to deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Section 162(m) for compensation paid to certain executives designated thereunder.

Consequences of Change of Control. If a change of control of the Company causes awards under the 2020 Plan to accelerate vesting or is deemed to result in the attainment of performance goals, certain participants could, in some cases, be considered to have received “excess parachute payments,” which could subject certain participants to a 20% excise tax on the excess parachute payments and result in a disallowance of the Company’s deductions under Section 280G of the Code.

Section 409A. Section 409A applies to compensation that individuals earn in one year but that is not paid until a future year. This is referred to as non-qualified deferred compensation. Section 409A, however, does not apply to qualified plans (such as a Section 401(k) plan) and certain welfare benefits. If deferred compensation covered by Section 409A meets the requirements of Section 409A, then Section 409A has no effect on the individual’s taxes. The compensation is taxed in the same manner as it would be taxed if it were not covered by Section 409A. If a deferred compensation arrangement does not meet the requirements of Section 409A, the compensation is subject to accelerated taxation in the year in which such compensation is no longer subject to a substantial risk of forfeiture and certain additional taxes, interest and penalties, including a 20% additional income tax. Awards of stock options, SARs, restricted stock units and performance awards under the 2020 Plan may, in some cases, result in the deferral of compensation that is subject to the requirements of Section 409A. Awards under the 2020 Plan are intended to comply with Section 409A, the regulations issued thereunder or an exception thereto. Notwithstanding, Section 409A may impose upon a participant certain taxes or interest charges for which the participant is responsible. Section 409A does not impose any penalties on the Company and does limit the Company’s deduction with respect to compensation paid to a participant.

Section 162(m). The Company generally may deduct any compensation or ordinary income recognized by the recipient of an award under the 2020 Plan when recognized, subject to the limits of Section 162(m) of the Code (“Section 162(m)”). Prior to 2018, Section 162(m) imposed a $1 million limit on the amount a public company may deduct for compensation paid to a Company’s Chief Executive Officer or any of the Company’s three other most highly compensated executive officers (other than the Chief Financial Officer) who were employed as of the end of the year. This limitation did not apply to compensation that met Code requirements for “qualified performance-based compensation.” The performance-based compensation exemption, the last day of the year determination date, and the exemption of the Chief Financial Officer from Code Section 162(m)’s deduction limit have all been repealed under the Tax Cuts and Jobs Act of 2017 (“Tax Reform”), effective for taxable years beginning after December 31, 2017, such that awards paid under the 2020 Plan to our covered executive officers may not be deductible for such taxable years due to the application of the $1 million deduction limitation. However, under Tax Reform transition relief, compensation provided under a written binding contract in effect on November 2, 2017 that is not materially modified after that date continues to be subject to the performance-based compensation exception. As in prior years, while deductibility of executive compensation for federal income tax purposes is among the factors the Compensation Committee considers when structuring our executive compensation, it is not the sole or primary factor considered. Our Board and the Compensation Committee retain the flexibility to authorize compensation that may not be deductible if they believe it is in our best interests.

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Tax Withholding. The Company and its affiliates have the right to deduct or withhold, or require a participant to remit to the Company and its affiliates, an amount sufficient to satisfy federal, state and local taxes (including employment taxes) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising with respect to awards under the 2020 Plan.

Equity Compensation Plan Information

The table below sets forth information as of May 31, 2021.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
		(a)	(b)		(c)
Equity compensation plans approved by security holders		—	N/A		—
Equity compensation plans not approved by security holders		—	N/A		838,933	(1)
Total		—	N/A		838,933

(1) This represents (i) 62,500 shares of common stock issuable pursuant to the 2018 Equity Incentive Plan (the “2018 Plan”) (the Company has not made, and does not intend to make, any future grants under the 2018 Plan), and (ii) 776,433 shares   of common stock issuable pursuant to the Simplicity Esports and Gaming Company 2020 Omnibus Incentive Plan (the “2020 Plan”).

The Company’s stockholders approved the 2018 Plan on October 4, 2018. Under the 2018 Plan, 62,500 shares of common stock are authorized for issuance to employees, officers, directors, consultants. The 2018 Plan authorizes the grant of nonqualified stock options and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, other stock bonus awards, and performance compensation awards. There were 62,500 shares available for award as of May 31, 2021 under the 2018 Plan. The Company has not made, and does not intend to make, any grants under the 2018 Plan.

The Board of Directors and stockholders of the Company approved the 2020 Plan on April 22, 2020 and June 23, 2020, respectively. Under the 2020 Plan, 1,000,000 shares of common stock are authorized for issuance to employees, directors and independent contractors (except those performing services in connection with the offer or sale of the Company’s securities in a capital raising transaction, or promoting or maintaining a market for the Company’s securities) of the Company or its subsidiaries. The 2020 Plan authorizes equity-based and cash-based incentives for participants. There were 776,433 shares available for award as of May 31, 2021 under the 2020 Plan.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number of shares of and percent of the Company’s common stock beneficially owned as of October 12, 2021, by all directors, our named executive officers, our directors and executive officers as a group, and persons or groups known by us to own beneficially 5% or more of our common stock, immediately prior to this Offering, and immediately after the closing of this offering, as adjusted to reflect the assumed sale of units (which includes shares of our common stock and immediately exercisable warrants to purchase shares of our common stock) in this Offering and the exercise of the Representative’s over-allotment option in full to purchase additional shares of common stock and warrants to purchase shares of common stock, but assumes the warrants forming part of the units and over-allotment option are not exercised.

Unless otherwise noted, the business address of each of the beneficial owners listed below is c/o Simplicity Esports and Gaming Company, 7000 W. Palmetto Park Rd., Suite 505, Boca Raton, FL 33433.

Name of Beneficial Owner	Amount and Nature of  Beneficial Ownership		Pre- Closing Percentage of Class (1)			Post- Closing Amount and Nature of Beneficial Ownership		Post- Closing Percentage of Class (1)
Directors and Executive Officers
Jed Kaplan (2)		281,953		17.60	%		281,953		9.80	%
Roman Franklin (3)		148,133		9.30	%		148,133		5.15	%
Donald R. Caldwell (4)		24,625		1.50	%		24,625		*	%
Max Hooper (5)		11,188		*	%		11,188		*	%
Frank Leavy (6)		10,954		*	%		10,954		*	%
Edward Leonard Jaroski (7)		23,938		1.50	%		23,938		*	%
William H. Herrmann, Jr. (8)		14,790		*	%		14,790		*	%
Nancy Hennessey		15,000		*	%		15,000		*	%
Laila Cavalcanti Loss		11,563		*	%		11,563		*	%
All directors and officers as a group (9 persons) (9)		542,144		33.60	%		542,144		18.75	%
Principal Shareholders (more than 5%):
AQR Capital Management, LLC (10)		101,605		6.00	%		101,605		3.42	%
Maxim Group, LLC (11)		385,000		4.99	%		385,000		4.99	%
Labrys Fund, LP (12)		139,609		4.99	%		139,609		4.65	%
FirstFire Global Opportunities Fund, LLC (13)		871,685		4.99	%		871,685		4.99	%
GS Capital Partners, LLC (14)		192,708		4.99	%		192,708		4.99	%
Jefferson Street Capital, LLC (15)		192,708		4.99	%		192,708		4.99	%
Lucas Ventures, LLC (16)		211,229		4.99	%		211,229		4.99	%
LGH Investments, LLC (17)		20,000		1.20	%		20,000		*	%
Ionic Ventures, LLC (18)		899,306		4.99	%		899,306		4.99	%

* less than 1%.

(1)	The pre-closing percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our capital stock outstanding on October 12, 2021. The post-closing percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our capital stock outstanding on October 12, 2021, plus the assumed sale of 1,111,111 units (which includes shares of our common stock and immediately exercisable warrants to purchase shares of our common stock) in this Offering and the exercise of the Representative’s over-allotment option in full to purchase 166,666 shares of common stock and warrants to purchase 166,666 shares of common stock, but assumes the warrants forming part of the units and over-allotment option are not exercised. On October 12, 2021, there were 1,594,803 shares of our common stock outstanding. To calculate a stockholder’s percentage of beneficial ownership, we include in the numerator and denominator the common stock outstanding and all shares of our common stock issuable to that person in the event of the exercise of outstanding warrants and other derivative securities owned by that person which are exercisable within 60 days of October 12, 2021. Common stock warrants and derivative securities held by other stockholders are disregarded in this calculation. Therefore, the denominator used in calculating beneficial ownership among our stockholders may differ. Unless we have indicated otherwise, each person named in the table has sole voting power and sole investment power for the shares listed opposite such person’s name.
(2)	Includes 2,440 shares of Common Stock owned indirectly through Mr. Kaplan’s wife, Jamie Kaplan, and 6,250 shares of Common Stock issuable upon exercise of 6,250 warrants with an exercise price of $92.00 which expire on May 22, 2024 that have vested or will vest within 60 days of October 12, 2021.
(3)	Includes 6,375 shares of Common Stock owned indirectly through Mr. Franklin’s wife, Alyssia Franklin.

(4)	Includes 2,500 shares of our Common Stock issuable upon exercise of 2,500 warrants with an exercise price of $92.00 which expire on May 22, 2024 that have vested or will vest within 60 days of October 12, 2021.
(5)	Includes 1,813 shares of Common Stock owned directly by Merging Traffic, Inc., 1,250 shares of our Common Stock issuable upon exercise of 1,250 warrants owned directly by Merging Traffic, Inc. with an exercise price of $92.00 which expire on May 22, 2024 that have vested or will vest within 60 days of October 12, 2021, and 3,125 shares of our Common Stock owned directly by Dr. Hooper. Dr. Hooper is Managing Director of Merging Traffic, Inc.
(6)	Includes 938 shares of our Common Stock issuable upon exercise of 938 warrants with an exercise price of $92.00 which expire on May 22, 2024 that have vested or will vest within 60 days of October 12, 2021.
(7)	Includes 7,500 shares of our Common Stock issuable upon exercise of 7,500 warrants with an exercise price of $92.00 which expire on May 22, 2024 that have vested or will vest within 60 days of October 12, 2021.
(8)	Includes 1,250 shares of our Common Stock issuable upon exercise of 1,250 warrants with an exercise price of $92.00 which expire on May 22, 2024 that have vested or will vest within 60 days of October 12, 2021.
(9)	Includes Jed Kaplan, Roman Franklin, Nancy Hennessey, Donald R. Caldwell, Max Hooper, Frank Leavy, Edward Leonard Jaroski, Laila Cavalcanti Loss, and William H. Herrmann, Jr.
(10)	Represents warrants to purchase shares of the Company’s common stock. AQR Capital Management, LLC (“AQR”) is a wholly owned subsidiary of AQR Capital Management Holdings, LLC (“AQR Holdings”). CNH Partners, LLC (“CNH”) is deemed to be controlled by AQR. AQR serves as the investment manager to the AQR Diversified Arbitrage Fund, an open-end registered investment company. AQR, AQR Holdings and CNH share voting and dispositive power over such shares. The principal office of AQR, AQR Holdings and CNH is Two Greenwich Plaza, Greenwich, CT 06830.
(11)	Includes (a) 20,000 shares of Common Stock, representing shares issued in connection with the release of Convertible Notes and (b) 365,000 shares of our Common Stock issuable upon exercise of the Warrants held by Maxim Group, LLC, which Warrants are subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such warrants will not have the right to exercise any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% or 9.99%, as applicable, of the number of shares of Common Stock outstanding immediately after giving effect to such exercise, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding. Maxim Group, LLC is the record and beneficial owner of the securities set forth in the table. The address of Maxim Group, LLC is 405 Lexington Avenue, 2nd FL, New York, NY 10174.
(12)	Includes (a) 10,000 shares of Common Stock, representing commitment shares issued in connection with the issuance of the Convertible Note to Labrys Fund, LP (“Labrys”) and (b) 129,609 shares of our Common Stock issuable upon conversion of the Convertible Note held by Labrys, which Convertible Note is subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such Convertible Note will not have the right to convert any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99%, as applicable), of the number of shares of Common Stock outstanding immediately after giving effect to such conversion, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding. Labrys is the record and beneficial owner of the securities set forth in the table. Thomas Silverman, as Managing Member of Labrys, has voting control and investment discretion over the securities reported herein that are held by Labrys. The address of Labrys is 48 Parker Road, Wellesley, MA 02482.

99

(13)	Includes (a) 15,269 shares of Common Stock, representing commitment shares issued in connection with the issuance of the Convertible Note to FirstFire Global Opportunities Fund, LLC (“FirstFire”), (b) 182,666 shares of our Common Stock issuable upon conversion of the Convertible Note held by FirstFire, which Convertible Note is subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such Convertible Note will not have the right to convert any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99%, as applicable), of the number of shares of Common Stock outstanding immediately after giving effect to such conversion, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding, and (c) 673,750 shares of our Common Stock issuable upon exercise of the Warrants held by FirstFire, which Warrants are subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such warrants will not have the right to exercise any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% or 9.99%, as applicable, of the number of shares of Common Stock outstanding immediately after giving effect to such exercise, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding. FirstFire is the record and beneficial owner of the securities set forth in the table. Eli Fireman, the Manager of FirstFire Capital Management, LLC, which is the manager of FirstFire, has voting control and investment discretion over the securities reported herein that are held by FirstFire. The address of FirstFire is 1040 First Avenue, Suite 190, New York, NY 10022.
(14)	Includes (a) 3,125 shares of Common Stock, representing commitment shares issued in connection with the issuance of the Convertible Note to GS Capital Partners, LLC (“GS Capital”), (b) 33,333 shares of our Common Stock issuable upon conversion of the Convertible Note held by GS Capital, which Convertible Note is subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such Convertible Note will not have the right to convert any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99%, as applicable), of the number of shares of Common Stock outstanding immediately after giving effect to such conversion, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding, and (c) 156,250 shares of our Common Stock issuable upon exercise of the Warrants held by GS Capital, which Warrants are subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such warrants will not have the right to exercise any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% or 9.99%, as applicable, of the number of shares of Common Stock outstanding immediately after giving effect to such exercise, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding. GS Capital is the record and beneficial owner of the securities set forth in the table. Gabe Sayegh, the President of GS Capital, has voting control and investment discretion over the securities reported herein that are held by GS Capital. The address of GS Capital is 30 Washington Street, Suite 5L, Brooklyn, New York 11201.
(15)	Includes (a) 3,125 shares of Common Stock, representing commitment fee shares issued in connection with the issuance of the Convertible Note to Jefferson Street Capital, LLC (“Jefferson”), (b) 33,333 shares of our Common Stock issuable upon conversion of the Convertible Note held by Jefferson, which Convertible Note is subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such Convertible Note will not have the right to convert any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99%, as applicable), of the number of shares of Common Stock outstanding immediately after giving effect to such conversion, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding, and (c) 156,250 shares of our Common Stock issuable upon exercise of the Warrants held by Jefferson, which Warrants are subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such warrants will not have the right to exercise any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% or 9.99%, as applicable, of the number of shares of Common Stock outstanding immediately after giving effect to such exercise, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding. Jefferson is the record and beneficial owner of the securities set forth in the table. Brian Goldberg, as Managing Member of Jefferson, has voting control and investment discretion over the securities reported herein that are held by Jefferson. The address of Jefferson is 720 Monroe Street, Suite 401B, Hoboken, New Jersey 07030.

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(16)	Includes (a) 3,749 shares of Common Stock, representing commitment fee shares issued in connection with the issuance of the Convertible Note to Lucas Ventures, LLC (“Lucas Ventures”), (b) 20,000 shares of our Common Stock issuable upon conversion of the Convertible Note held by Lucas Ventures, which Convertible Note is subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such Convertible Note will not have the right to convert any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99%, as applicable), of the number of shares of Common Stock outstanding immediately after giving effect to such conversion, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding, and (c) 187,480 shares of our Common Stock issuable upon exercise of the Warrants held by Lucas Ventures, which Warrants are subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such warrants will not have the right to exercise any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% or 9.99%, as applicable, of the number of shares of Common Stock outstanding immediately after giving effect to such exercise, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding. Lucas Ventures is the record and beneficial owner of the securities set forth in the table. Lucas Hoppel, as Managing Member of Lucas Ventures, has voting control and investment discretion over the securities reported herein that are held by Lucas Ventures.
(17)	Includes 20,000 shares of our Common Stock issuable upon conversion of the Convertible Note held by LGH Investments, LLC (“LGH Investments”), which Convertible Note is subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such Convertible Note will not have the right to convert any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99%, as applicable), of the number of shares of Common Stock outstanding immediately after giving effect to such conversion, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding. LGH Investments is the record and beneficial owner of the securities set forth in the table. Lucas Hoppel, as Managing Member of LGH Investments, has voting control and investment discretion over the securities reported herein that are held by LGH Investments, LLC.
(18)	Includes (a) 14,584 shares of Common Stock, representing commitment fee shares issued in connection with the issuance of the Convertible Note to Ionic Ventures, LLC (“Ionic”), (b) 155,555 shares of our Common Stock issuable upon conversion of the Convertible Note held by Ionic, which Convertible Note is subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such Convertible Note will not have the right to convert any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99%, as applicable), of the number of shares of Common Stock outstanding immediately after giving effect to such conversion, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding, and (c) 729,167 shares of our Common Stock issuable upon exercise of the Warrants held by Ionic, which Warrants are subject to, as applicable, certain beneficial ownership limitations, which provide that a holder of such warrants will not have the right to exercise any portion thereof if such holder, together with its affiliates, would beneficially own in excess of 4.99% or 9.99%, as applicable, of the number of shares of Common Stock outstanding immediately after giving effect to such exercise, provided that upon at least 61 days’ prior notice to us, such holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding. Ionic is the record and beneficial owner of the securities set forth in the table. Brendan O’Neil and Keith Coulston are the managers of Ionic and may also be deemed to have investment discretion and voting power over the shares that it holds. Mr. O’Neil and Mr. Coulston each disclaim beneficial ownership of the reported securities except to the extent of their pecuniary interest therein. The address of Ionic Ventures, LLC is 3053 Fillmore St, Suite 256, San Francisco, CA 94123.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Our audit committee must review and approve any related person transaction we propose to enter into. Our audit committee charter details the policies and procedures relating to transactions that may present actual, potential or perceived conflicts of interest and may raise questions as to whether such transactions are consistent with the best interest of our company and our stockholders. A summary of such policies and procedures is set forth below.

Any potential related party transaction that is brought to the audit committee’s attention will be analyzed by the audit committee, in consultation with outside counsel or members of management, as appropriate, to determine whether the transaction or relationship does, in fact, constitute a related party transaction. At its meetings, the audit committee will be provided with the details of each new, existing or proposed related party transaction, including the terms of the transaction, the business purpose of the transaction and the benefits to us and to the relevant related party.

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In determining whether to approve a related party transaction, the audit committee must consider, among other factors, the following factors to the extent relevant:

● whether the terms of the transaction are fair to us and on the same basis as would apply if the transaction did not involve a related party;

● whether there are business reasons for us to enter into the transaction;

● whether the transaction would impair the independence of an outside director; and

● whether the transaction would present an improper conflict of interest for any director or executive officer.

Any member of the audit committee who has an interest in the transaction under discussion must abstain from any voting regarding the transaction, but may, if so requested by the chairman of the audit committee, participate in some or all of the audit committee’s discussions of the transaction. Upon completion of its review of the transaction, the audit committee may determine to permit or to prohibit the transaction.

Equity Sales

On May 7, 2020, we authorized the sale of 2,867 shares of our restricted Common Stock at $8.72 per share to William H. Herrmann, Jr. a member of our board of directors for $25,000.

Restricted Stock Awards to Certain Officers and Directors

On July 29, 2020, the Board issued 41,875 shares of common stock to Jed Kaplan, our then-Chief Executive Officer and Interim Chief Financial Officer and a member of our board of directors. Of these shares, (i) 31,250 shares of common stock related to services provided by Mr. Kaplan to the Company during the 2020 fiscal year, (ii) 8,750 shares of common stock related to grants that should have been, but were not, made pursuant to the Kaplan 2018 Agreement (as hereinafter defined), and (iii) 1,875 shares of common stock related to grants made pursuant to the Kaplan 2020 Agreement (as hereinafter defined). The Kaplan 2018 Agreement provided for the grant to Mr. Kaplan of 1,250 shares of common stock per month. For the months of January 2020 through July 2020, however, such shares had not been granted. Accordingly, the July 29, 2020 grant included an aggregate of 8,750 shares of common stock that should have been granted for the months of January 2020 through July 2020. The Kaplan 2020 Agreement provides for the grant to Mr. Kaplan of 3,000 shares of common stock per month. Such shares were fully vested and earned as of the issuance thereof. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.

On July 29, 2020, the Board also issued 34,813 shares of common stock to Roman Franklin, our then-President and a member of our board of directors. Of these shares, (i) 31,250 shares of common stock related to services provided by Mr. Franklin to the Company during the 2020 fiscal year, (ii) 2,625 shares of common stock related to grants that should have been, but were not, made pursuant to the Franklin 2018 Agreement (as hereinafter defined), and (iii) 938 shares of common stock related to grants made pursuant to the Franklin 2020 Agreement (as hereinafter defined). The Franklin 2018 Agreement provided for the grant to Mr. Franklin of 375 shares of common stock per month. For the months of January 2020 through July 2020, however, such shares had not been granted. Accordingly, the July 29, 2020 grant included an aggregate of 2,625 shares of common stock that should have been granted for the months of January 2020 through July 2020. The Franklin 2020 Agreement provides for the grant to Mr. Franklin of 782 shares of common stock per month. Such shares were fully vested and earned as of the issuance thereof. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.

On July 29, 2020, we authorized the grant of an aggregate of 24,000 shares of common stock to an employee and the members of the Board of Directors of the Company. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.

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On September 16, 2020, the Company issued an aggregate of 2,813 restricted common shares of the Company to executive officers and employees of the Company for services rendered. More specifically, the Company issued 1,875 of these shares to Jed Kaplan and issued 938 of these shares to Roman Franklin. These shares were valued at $25,420, or $9.04 per share, based on the quoted trading price on the date of grant. In connection with the issuance of these shares, during the nine months ended February 28, 2021, the Company recorded stock-based professional fees of $25,420. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.

During the three months ended November 30, 2020, the Company issued an aggregate of 9,844 restricted common shares of the Company to executive officers of the Company for services rendered. Of these shares, the Company issued 5,625 shares to Jed Kaplan and issued 2,344 shares to Roman Franklin. These shares were valued at $119,632, or per share prices ranging from $9.04 per share to $11.44 per common share, based on the quoted trading price on the date of grant. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.

On December 18, 2020, the Company issued an aggregate of 100,000 shares (50,000 each) to two executive officers as a bonus. More specifically, the Company issued 50,000 of these shares to Jed Kaplan and issued 50,000 of these shares to Roman Franklin. These shares were valued at $1,410,000, or $14.10 per share, based on the quoted trading price on the date of grant. In connection with the issuance of these shares, the Company recorded stock-based compensation of $1,410,000. Additionally, these officers shall receive a cash bonus of $125,000 each to be paid when funds are available. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.

On February 16, 2021, the Company issued an aggregate of 2,657 restricted common shares of the Company to executive officers and employees of the Company for services rendered. More specifically, the Company issued 1,875 of these shares to Jed Kaplan and issued 782 of these shares to Roman Franklin. These shares were valued at $39,191, or $14.75 per share, based on the quoted trading price on the date of grant.

On March 8, 2021, the Company issued an aggregate of 2,657 restricted common shares of the Company to executive officers and employees of the Company for services rendered. More specifically, the Company issued 1,875 of these shares to Jed Kaplan and issued 782 of these shares to Roman Franklin. These shares were valued at $35,604, or $13.40 per share, based on the quoted trading price on the date of grant.

On April 6, 2021, the Company issued an aggregate of 2,657 restricted common shares of the Company to executive officers and employees of the Company for services rendered. More specifically, the Company issued 1,875 of these shares to Jed Kaplan and issued 782 of these shares to Roman Franklin. These shares were valued at $34,488, or $12.98 per share, based on the quoted trading price on the date of grant.

On September 1, 2021, the Company issued an aggregate of 82,500 restricted common shares of the Company to executive officers and directors of the Company for services rendered during the fiscal year ended May 31, 2021.

Kaplan Promissory Note

On May 12, 2020 (the “Issue Date”), the Company issued a promissory note (the “Kaplan Note”) in the principal sum of $90,000 in favor of Jed Kaplan, the Company’s then-Chief Executive Officer, interim Chief Financial Officer, member of the Company’s Board of Directors and greater than 5% stockholder of the Company. The Kaplan Note matures on the first business day following the 150-day anniversary of the Issue Date.

As of May 31, 2020, advances under the terms of this note were $64,728. On various dates subsequent to May 31, 2020, Mr. Kaplan funded $25,272 pursuant to the Kaplan Promissory Note. With the contributions subsequent to May 31, 2020, the principal balances outstanding and due Mr. Kaplan amounted to $90,000. On June 22, 2020, Mr. Kaplan agreed to forgive the debt of the Kaplan Promissory Note with a principal balance of $90,000 in exchange for the Company assigning to Mr. Kaplan a 10% equity interest in Simplicity One Brasil, Ltda, a subsidiary of the Company. See “Description of Business—Recent Developments—Debt Obligations—Kaplan Promissory Note” for a more complete description of the terms of the note.

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Restructuring the Ownership in Simplicity One Brasil, LTDA

In June 2020, while Simplicity One Brasil Ltda (“Simplicity One Brasil”) was preparing its initial application for purchasing a franchise in Campeonato Brasileiro de League of Legends, Simplicity One Brasil become aware that the 10%-ownership interest of Team One E-Sports Ltda (“Team One E-Sports”) in Simplicity One Brasil was in contravention of Riot Games’ policy that only one League of Legend esports team could be owned by an owner at one time because Team One had already submitted an application for purchasing a franchise for another League of Legend esports team. Accordingly, Simplicity One Brasil needed Team One E-Sports to divest itself of its 10%-equity interest in Simplicity One Brasil in order for Simplicity One Brasil to proceed with its franchise application. Therefore, on June 22, 2020, Mr. Kaplan entered into a Quota Purchase Agreement with Team One E-Sports, pursuant to which Mr. Kaplan acquired Team One Esports’ 10%-ownership equity interest for $45,000 in cash. In addition, the Company transferred a 2%-equity interest (an aggregate of 4%) to each of Laila De Braga Cavalcanti Loss, who runs the operations of Simplicity One Brasil, and Frederico Tannure, who live in Brazil , in order to comply with Riot Games’ policy requiring local ownership in Brazil in order to apply for a franchise of a league of legends sports team. Furthermore, on June 22, 2020, Mr. Kaplan agreed to forgive the debt of the Kaplan Promissory Note with a principal balance of $90,000 in exchange for the Company assigning to Mr. Kaplan a 10% equity interest in Simplicity One Brasil. In light of the restructuring of the ownership interest in Simplicity One Brasil, as of July 7, 2021, the Company, Mr. Kaplan, Ms. Cavalcanti Loss, and Mr. Tannure own a 76%, 20%, 2% and 2% equity interest in Simplicity One Brasil.

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. 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 August 31, 2021, the Company has accrued $25,000 and 375 shares of stock for the payments of this contract.

Cash Balance

The Company maintains its cash balance at a financial services company that is owned by an officer of the Company.

Director Independence

For a description of director independence of our board members, see “Management— Board Committees and Director Independence” on page 80 of this prospectus.

UNDERWRITING 

Maxim Group LLC (“Maxim”) is acting as the representative of the underwriters of the offering (the “Representative”). We have entered into an underwriting agreement dated __________, 2021 with the Representative. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to each underwriter named below and each underwriter named below has severally and not jointly agreed to purchase from us, at the public offering price per Unit less the underwriting discounts set forth on the cover page of this prospectus, the number of Units listed next to its name in the following table:

Name of Underwriter	Number of Units
Maxim Group LLC
Joseph Gunnar & Co. LLC

The underwriting agreement provides that the obligation of the underwriters to purchase all of the Units being offered to the public is subject to specific conditions, including the absence of any material adverse change in our business or in the financial markets and the receipt of certain legal opinions, certificates and letters from us, our counsel and the independent auditors. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased, or the offering may be terminated. Subject to the terms of the underwriting agreement, the underwriters will purchase all of the Units being offered to the public, other than those covered by the over-allotment option described below, if any of these Units are purchased.

The underwriters are offering the Units, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Over-Allotment Option

We have granted to the Representative an option, exercisable one or more times in whole or in part, not later than 45 days after the date of this prospectus, to purchase from us up to an (i) additional 166,666 shares of common stock at a price of $9.00 per share (based on an assumed public offering price per Unit of $9.00, the last reported sale price of our common stock on October 1, 2021) and/or (ii) additional warrants to purchase 166,666 shares of common stock at a price of $0.01 per warrant (15% of the shares of common stock and warrants included in the Units sold in this offering), in each case, less the underwriting discounts and commissions set forth on the cover of this prospectus in any combination thereof to cover over-allotments, if any. To the extent that the Representative exercises this option, each of the underwriters will become obligated, subject to conditions, to purchase approximately the same percentage of these additional shares of common stock and/or warrants as the number of Units to be purchased by it in the above table bears to the total number of Units offered by this prospectus. We will be obligated, pursuant to the option, to sell these additional shares of common stock and/or warrants to the underwriters to the extent the option is exercised. If any additional shares of common stock and/or warrants are purchased, the underwriters will offer the additional shares of common stock and/or warrants on the same terms as those on which the other Units are being offered hereunder. If this option is exercised in full, the total offering price to the public will be $11,500,000 and the total net proceeds, before expenses and after the credit to the underwriting commissions described below, to us will be $10,695,000.

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Representative’s Warrants

We have agreed to issue to the Representative (or its permitted assignees) warrants to purchase up to a total of 155,555 shares of common stock (7% of the shares of common stock sold in this offering and 7% of the shares of common stock underlying the Warrants sold in this offering) (excluding the exercise of the over-allotment option by the underwriters; such number of underlying shares shall be 178,888 if the overallotment is exercised in full). The warrants will be exercisable at any time, and from time to time, in whole or in part, during the three year period commencing 180 days from the effective date of the registration statement of which this prospectus is a part, which period is in compliance with FINRA Rule 5110(f)(2)(G)(i). The warrants are exercisable at a per share price equal to $10.35 per share, or 115% of the public offering price per Unit in the offering. The warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The Representative (or permitted assignees under Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date of the registration statement of which this prospectus is a part. In addition, the warrants provide for certain piggyback registration rights upon request, in certain cases. The piggyback registration rights provided will terminate 3 years from the effective date of the registration statement of which this prospectus is a part in compliance with FINRA Rule 5110(f)(2)(G)(v). We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation.

Discounts and Commissions; Expenses

The underwriters propose initially to offer the units to the public at the public offering price set forth on the cover page of this prospectus and to dealers at those prices less a concession not in excess of $____ per unit. If all of the units offered by us are not sold at the public offering price, the underwriters may change the offering price and other selling terms by means of a supplement to this prospectus.

The following table shows the public offering price, underwriting discounts and commissions and proceeds before expenses to us. The information assumes either no exercise or full exercise of the over-allotment option we granted to the Representative.

	Per Unit	Total Without Over-Allotment Option	Total With Full Over-Allotment Option
Public offering price	$	$	$
Underwriting discount	$	$	$
Non-accountable expense allowance	$	$	$
Proceeds, before expenses, to us	$	$	$

We have agreed to pay a non-accountable expense allowance to the Representative equal to 1% of the gross proceeds received at the closing of the offering (excluding any proceeds received upon any subsequent exercise of the over-allotment option).

We have also agreed to reimburse the Representative for reasonable out-of-pocket expenses not to exceed $90,000 in the aggregate. We estimate that total expenses payable by us in connection with this offering, other than the underwriting discount, will be approximately $474,107.

We have paid an expense deposit of $15,000 to the Representative, which will be applied against the accountable expenses that will be paid by us to the Representative in connection with this offering. The $15,000 expense deposit will be returned to us to the extent not actually incurred. The underwriting agreement also provides that in the event the offering is terminated, the $15,000 expense deposit paid to the Representative will be returned to us to the extent that offering expenses are not actually incurred by the Representative in accordance with Financial Industry Regulation Authority (“FINRA”) Rule 5110(f)(2)(C).

Discretionary Accounts

The underwriters do not intend to confirm sales of the Units offered hereby to any accounts over which they have discretionary authority.

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Indemnification

We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.

Lock-Up Agreements

We and our officers and directors, and the holders of 5% or more of the outstanding shares of our common stock, as of the effective date of the Registration Statement, have agreed for a period of 180 days after the closing of this offering, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of, directly or indirectly any shares of our common stock or any securities convertible into or exchangeable for our common stock either owned as of the date of the underwriting agreement or thereafter acquired without the prior written consent of the Representative.

Pricing of this Offering

Prior to this offering, there has not been an active market for our common stock and there has been no public market for our warrants. The offering price of the Units was determined between the underwriters and us at the time of pricing, considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our business. The market price of our common stock was one of several factors that was considered in determining the actual offering price.

We offer no assurances that the public offering price of our Units will correspond to the price at which our common stock and/or warrants will trade in the public market subsequent to this offering or that an active trading market for our common stock and warrants will develop and continue after this offering.

Right of First Refusal and Certain Post-Offering Investments

Subject to the closing of this offering and certain conditions set forth in the underwriting agreement, for a period of eighteen (18) months after the closing of the offering, each of the Representative and Joseph Gunnar & Co. LLC (“Joseph Gunnar”) shall have a right of first refusal to act as lead managing underwriter and book-runner and/or placement agent for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings undertaken during such period by us, or any of our successors or subsidiaries, on terms customary to each of the Representative and Joseph Gunnar. In the event that both Maxim and Joseph Gunnar exercise their respective right of first refusal as to the same public equity offering, the economic participation between Maxim and Joseph Gunnar for this right of first refusal on such future public equity offering shall be 50% to Maxim and 50% to Joseph Gunnar. Each of the Representative and Joseph Gunnar in conjunction with us, shall have the sole right to determine whether or not any other broker-dealer shall have the right to participate in any such offering and the economic terms of any such participation. In addition, the Company has also agreed to pay Maxim Group and Joseph Gunnar an aggregate cash fee of 7% in the event investors previously directly introduced to the Company by such parties provide capital to the Company in any transaction during the period commencing 91 days following the closing of the offering and continuing for a period of 18 months thereafter.

Trading; NASDAQ Capital Market Listing

We have applied to list our common stock and warrants (forming part of the units offered hereby) on The Nasdaq Capital Market (“Nasdaq Capital Market”) under the symbols “WINR” and “WINRW,” respectively. There is no assurance that our listing application will be approved by the Nasdaq Capital Market. The approval of our listing on the Nasdaq Capital Market is a condition of closing this offering.

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Price Stabilization, Short Positions and Penalty Bids

this offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act:

● Stabilizing transactions permit bids to purchase securities so long as the stabilizing bids do not exceed a specified maximum.

● Over-allotment involves sales by the underwriters of securities in excess of the number of securities the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of securities over-allotted by the underwriters is not greater than the number of securities that they may purchase in the over-allotment option. In a naked short position, the number of securities involved is greater than the number of securities in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing securities in the open market.

● Syndicate covering transactions involve purchases of the securities in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of securities to close out the short position, the underwriters will consider, among other things, the price of securities available for purchase in the open market as compared to the price at which they may purchase securities through the over-allotment option. A naked short position occurs if the underwriters sell more securities than could be covered by the over-allotment option. This position can only be closed out by buying securities in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the securities in the open market after pricing that could adversely affect investors who purchase in this offering.

● Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when securities originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our securities or preventing or retarding a decline in the market price of the securities. As a result, the price of our shares of common stock and warrants may be higher than the price that might otherwise exist in the open market. These transactions may be discontinued at any time.

Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our shares of common stock and warrants. In addition, neither we nor the underwriters make any representation that the underwriters will engage in these transactions or that any transaction, if commenced, will not be discontinued without notice.

Electronic Distribution

This prospectus in electronic format may be made available on websites or through other online services maintained by the underwriters, or by their affiliates. Other than this prospectus in electronic format, the information on the underwriters’ websites and any information contained in any other websites maintained by the underwriters is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriters in their capacity as underwriters, and should not be relied upon by investors.

Relationship with Maxim Group LLC, the Representative of the Several Underwriters

Maxim Group LLC served as underwriter in connection with our initial public offering in August 2017. In addition to cash compensation earned in connection with such offering, we issued 6,250 shares of Common Stock to Maxim in connection with its services as underwriter for the IPO. Such shares of Common Stock were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. On September 13, 2017, we issued Maxim an additional 250 shares of our Common Stock upon partial exercise of the over-allotment. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.

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On November 20, 2018, the Company entered into a settlement and release agreement (“Settlement Agreement”) with Maxim Group LLC. Pursuant to the Settlement Agreement, the Company made a cash payment of $20,000 to Maxim and issued a demand secured promissory note in favor of Maxim in the amount of $1.8 million (the “Note”) to settle the payment obligations of the Company under the underwriting agreement dated August 16, 2017, by and between the Company and Maxim. The Company also agreed to remove the restrictive legends on an aggregate of 10,400 shares of its common stock held by Maxim and its affiliate. The Note was surrendered and exchanged pursuant to the securities exchange agreement described below.

On December 20, 2018, the Company entered into a securities exchange agreement (“Exchange Agreement”) with Maxim. Pursuant to the terms of the Exchange Agreement, Maxim agreed to surrender and exchange the Note in the amount of $1.8 million which was issued to Maxim pursuant to the Settlement Agreement (discussed immediately above). In exchange, the Company issued to the Maxim a Series A-1 Exchange Convertible Note in the principal amount of $500,000 (the “Series A-1 Note”) and a Series A-2 Exchange Convertible Note in the principal amount of $1,000,000 (the “Series A-2 Note,” and collectively with Series A-1 Note, the “Exchange Notes”).

As of December 31, 2018, upon the closing of the Simplicity Esports Acquisition, the Series A-1 Note automatically converted into 24,206 shares of the Company’s common stock.

On June 18, 2020, the Company and Maxim entered into that certain first amendment to the Series A-2 Note, pursuant to which such parties agreed to the following: (i) Maxim’s resale of the Company’s common stock underlying the Series A-2 Note shall be limited to 10% of the daily volume of the Common Stock on each respective trading day, (ii) the maturity date of the Series A-2 Note was extended to December 31, 2020, (iii) the principal amount of the Series A-2 Note was increased by $100,000 and (iv) the conversion price was reduced from $15.44 to $9.20.

On December 31, 2020, the Company and Maxim entered into a second amendment to the Series A-2 Note to extend the maturity date of the Series A-2 Note to February 15, 2021  .

On April 14, 2021, the Company and Maxim entered into the third amendment to the Series A-2 Note to extend the maturity date of the Series A-2 Note to October 15, 2021. In exchange, the principal balance of the Series A-2 Note was increased by $50,000 on April 14, 2021.

On August 19, 2021, the Company and Maxim entered into the fourth amendment (the “Fourth Amendment”) to the Series A-2 Maxim Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock. The Company also granted Maxim an irrevocable right of first refusal superseding all others to act as Company’s sole managing underwriter and sole bookrunner or exclusive placement agent or financial advisor, or finder in connection with any public or private offering by the Company or any subsidiary of or successor to the Company (if applicable) of its equity, equity linked or debt securities (including convertible securities) while the Company’s common stock is listed on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing, each, a “National Exchange”), within the period beginning on August 19, 2021 and ending on the close of business on January 1, 2023.

On August 19, 2021, the Company issued to Maxim a common stock purchase warrant (the “Warrant”) for the purchase of 365,000 shares of the Company’s common stock (the “Warrant Shares”) at an exercise price of $13.00, subject to adjustment as provided in the Warrant. The Warrant is exercisable during the period commencing on August 19, 2021 and ending at 5:00 p.m. eastern standard time on the date that is the earlier of (i) three years from the effective date of a registration statement registering for resale by Maxim or its assigns the Warrant Shares (provided that such registration statement remains in effect at the end of the exercise period) and (ii) the 42 month anniversary after August 19, 2021.

The Company paid off the Maxim note, in its entirety at the end of August 2021.

Other

From time to time, the underwriters and/or their affiliates have provided, and may in the future provide, various investment banking and other financial services for us for which services it has received and, may in the future receive, customary fees. Except for the services provided in connection with this offering, the underwriters have not provided any investment banking or other financial services during the 180-day period preceding the date of this prospectus.

Offers Outside of the United States

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

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DESCRIPTION OF SECURITIES

The following description of our capital stock is based upon our third amended and restated certificate of incorporation, as amended, our bylaws and applicable provisions of law, in each case as currently in effect. This discussion does not purport to be complete and is qualified in its entirety by reference to our third amended and restated certificate of incorporation, as amended, and our bylaws, copies of which are filed with the SEC as exhibits to the registration statement of which this prospectus is a part.

Authorized Capital Stock

On August 17, 2020, we filed a Certificate of Amendment to increase the authorized shares of common stock from 20,000,000 to 36,000,000. Accordingly, our authorized capital stock consists of (i) 36,000,000 shares of common stock, par value $0.0001 per share (“Common Stock”), and (ii) 1,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred Stock”). At October 12, 2021, we had 1,594,803 shares of Common Stock issued and outstanding and no Preferred Stock issued and outstanding.

As of October 12, 2021, there were 134 holders of record of our Common Stock.

Common Stock

Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Unless specified in our third amended and restated certificate of incorporation, as amended, or bylaws, or as required by applicable provisions of the DGCL or applicable stock exchange rules, the affirmative vote of a majority of our shares of Common Stock that are voted is required to approve any such matter voted on by our stockholders. Our board of directors is divided into two classes, each of which will generally serve for a term of two years with only one class of directors being elected in each year. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors. Our stockholders are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor.

Preferred Stock

Our third amended and restated certificate of incorporation, as amended, provides that shares of preferred stock may be issued from time to time in one or more series. Our board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board of directors will be able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of our board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. We have no preferred stock outstanding at the date hereof. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future. No shares of preferred stock are being issued or registered in this offering.

Warrants

Public Stockholders’ Warrants

In August 2017, we issued 650,000 warrants (“Public Warrants”) forming a part of units which we originally issued in our initial public offering. Each Public Warrant entitles the registered holder to purchase one share of our Common Stock at a price of $92.00 per share, subject to adjustment. The Public Warrants may be exercised at any time commencing on December 20, 2018 until November 19, 2023. On September 30, 2019, the 650,000 shares of Common Stock issuable upon the exercise of the Public Warrants became registered under the Securities Act.

Notwithstanding the above, if our Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement or register or qualify the shares under blue sky laws, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under the blue sky laws of the state of residence in those states in which the warrants were initially offered by us in this offering.

Once the warrants become exercisable, we may call the warrants for redemption:

● in whole and not in part;

● at a price of $0.01 per warrant;

● upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and

● if, and only if, the reported last sale price of the common stock equals or exceeds $168.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date we send to the notice of redemption to the warrant holders.

If and when the warrants become redeemable by us, we may exercise our redemption right even if the issuance of shares of Common Stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws and we are unable to effect such registration or qualification, subject to our obligation in such case to use our best efforts to register or qualify the shares of Common Stock under the blue sky laws of the state of residence in those states in which the warrants were initially offered by us in this offering.

We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the common stock may fall below the $168.00 redemption trigger price as well as the $92.00 warrant exercise price after the redemption notice is issued.

If we call the warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise his, her or its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Common Stock issuable upon the exercise of our warrants. If our management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If our management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Common Stock to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the exercise of the warrants after our initial business combination. If we call our warrants for redemption and our management does not take advantage of this option, the initial purchasers and their permitted transferees would still be entitled to exercise their Private Placement Warrants contained in the Private Placement Units for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more detail below.

A holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount as a holder may specify) of the shares of Common Stock outstanding immediately after giving effect to such exercise.

If the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Common Stock. A rights offering to holders of common stock entitling holders to purchase shares of Common Stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for common stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of common stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for common stock, in determining the price payable for common stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of common stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.

In addition, if we, at any time while the warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of common stock on account of such shares of Common Stock (or other shares of our capital stock into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, (c) to satisfy the redemption rights of the holders of common stock in connection with a proposed initial business combination, (d) as a result of the repurchase of shares of Common Stock by the company if the proposed initial business combination is presented to the stockholders of the company for approval, or (e) in connection with the redemption of our Public Shares upon our failure to complete our initial business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of common stock in respect of such event. If the number of outstanding shares of our Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of Common Stock.

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Whenever the number of shares of Common Stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Common Stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Common Stock so purchasable immediately thereafter.

In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than those described above or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of our Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. However, if such holders were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each warrant will become exercisable will be deemed to be the weighted average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election, and if a tender, exchange or redemption offer has been made to and accepted by such holders (other than a tender, exchange or redemption offer made by the company in connection with redemption rights held by stockholders of the company as provided for in the company’s amended and restated certificate of incorporation or as a result of the repurchase of shares of Common Stock by the company if a proposed initial business combination is presented to the stockholders of the company for approval) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the outstanding shares of Common Stock, the holder of a warrant will be entitled to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a stockholder if such warrant holder had exercised the warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the common stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in the warrant agreement. Additionally, if less than 70% of the consideration receivable by the holders of common stock in such a transaction is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the warrant agreement based on the per share consideration minus Black-Scholes Warrant Value (as defined in the warrant agreement) of the warrant in order to determine and realize the option value component of the warrant. This formula is to compensate the warrant holder for the loss of the option value portion of the warrant value due to the requirement that the warrant holder exercise the warrant within 30 days of the event. The Black-Scholes model is an accepted pricing model for estimating fair market value where no quoted market price for an instrument is available.

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The warrants have been issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. You should review a copy of the warrant agreement, which will be filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms and conditions applicable to the warrants. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants.

The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders. Warrants may be exercised only for a whole number of shares of Common Stock. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to the warrant holder.

As of October 12, 2021, 650,000 Public Warrants remain outstanding.

Private Placement Warrants

In August 2017, we issued 32,688 warrants (“Private Placement Warrants”) forming a part of units which we originally issued in a private placement that closed simultaneously with the consummation of our initial public offering. Each Private Placement Warrant entitles the registered holder to purchase one share of our Common Stock at a price of $92.00 per share, subject to adjustment. The Private Placement Warrants may be exercised at any time commencing on December 20, 2018 until November 19, 2023. On September 30, 2019, the 32,688 shares of Common Stock issuable upon the exercise of the Private Placement Warrants became registered under the Securities Act.

The Private Placement Warrants (including the common stock issuable upon exercise of the Private Placement Warrants), will not be redeemable by us so long as they are held by the initial purchasers or their permitted transferees. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in the IPO. If the Private Placement Warrants are held by holders other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as the Public Warrants.

If holders of the Private Placement Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that we have agreed that these warrants will be exercisable on a cashless basis so long as they are held by the initial purchasers and their permitted transferees is because it is not known at this time whether they will be affiliated with us following a business combination. If they remain affiliated with us, their ability to sell our securities in the open market will be significantly limited. We expect to have policies in place that prohibit insiders from selling our securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell our securities, an insider cannot trade in our securities if he or she is in possession of material non-public information. Accordingly, unlike Public Stockholders who could exercise their warrants and sell the shares of Common Stock received upon such exercise freely in the open market in order to recoup the cost of such exercise, the insiders could be significantly restricted from selling such securities. As a result, we believe that allowing the holders to exercise such warrants on a cashless basis is appropriate.

As of October 12, 2021, 32,688 Private Placement Warrants remain outstanding.

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2019 Warrants

During the period from March 1, 2019 through July 1, 2019, the Company issued 123,438 warrants (“2019 Warrants”) which formed a part of units privately placed in a units offering. The warrants expire 5-years from the date of issuance and are exercisable at a purchase price of $32.00 per share. On September 30, 2019, the shares of Common Stock issuable upon the exercise of the 2019 Warrants became registered under the Securities Act.

As of October 12, 2021, 123,438 2019 Warrants remain outstanding.

2021 Warrants

During the period from June 11, 2021 through October 12, 2021, in connection with the issuance of convertible promissory notes to various investors and the fourth amendment with Maxim, the Company issued an aggregate of 2,267,897 warrants (“2021 Warrants”) to such investors. The 2021 Warrants expire 3-years from the date of issuance and are exercisable at a purchase price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

As of October 12, 2021, 2,267,897 Warrants remain outstanding.

Dividends

We have not paid any cash dividends on our Common Stock to date and do not intend to pay cash dividends. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any cash dividends will be within the discretion of our board of directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future, except if we increase the size of the offering pursuant to Rule 462(b) under the Securities Act, in which case we will effect a stock dividend immediately prior to the consummation of the offering in such amount as to maintain the ownership of our initial stockholders prior to this offering at 20% of our issued and outstanding shares of our Common Stock upon the consummation of this offering (not including the Private Placement Shares and the shares of Common Stock issuable to Maxim upon the consummation of this offering). Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.

Description of Securities in this Offering

Units

Each unit consists of one share of common stock, par value $0.0001 per share, and one warrant to purchase one share of our common stock, each as described further below. No units will actually be issued in this offering and the common stock and warrants will be immediately separable and will be issued separately.

Warrants

In connection with the purchase of each unit, each investor will receive one share of common stock and one warrant. Accordingly, upon completion of this offering based on the assumed offering price, we expect to have an additional 1,277,777 warrants outstanding (if the warrants reserved for the over-allotment are sold). Each warrant is exercisable for one share of common stock at an exercise price of 110% of the price of each unit sold in the offering and is exercisable for a period of five years from the initial exercise date.

The number of warrants outstanding, and the exercise price of those securities, will be adjusted proportionately in the event of a reverse or forward stock split of our common stock, a recapitalization or reclassification of our common stock, payment of dividends or distributions in common stock to our common stock holders, or similar transactions. In the event that the Company effects a rights offering to its common stock holders or a pro rata distribution of its assets among its common stock holders, then the holder of the warrants will have the right to participate in such distribution and rights offering to the extent of their pro rata share of the Company’s outstanding common stock assuming they owned the number of shares of common stock issuable upon the exercise of their warrants. In the event of a “Fundamental Transaction” by the Company, such as a merger or consolidation of it with another company, the sale or other disposition of all or substantially all of the Company’s assets in one or a series of related transactions, a purchase offer, tender offer or exchange offer, or any reclassification, reorganization or recapitalization of the Company’s common stock, then the warrant holder will have the right to receive, for each share of common stock issuable upon the exercise of the warrant, at the option of the holder, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration payable as a result of the Fundamental Transaction, that would have been issued or conveyed to the warrant holder had the holder exercised the warrant immediately preceding the closing of the Fundamental Transaction. In lieu of receiving such common stock and additional consideration in the Fundamental Transaction, the warrant holder may elect to have the Company or the successor entity purchase the warrant holder’s warrant for its fair market value.

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The Company will promptly notify the warrant holders in writing of any adjustment to the exercise price or to the number of the outstanding warrants, declaration of a dividend or other distribution, a special non-recurring cash dividend on or a redemption of the common stock, the authorization of a rights offering, the approval of the stock holders required for any proposed reclassification of the common stock, a consolidation or merger by the Company, sale of all or substantially all of the assets of the Company, any compulsory share exchange, or the authorization of any voluntary or involuntary dissolution, liquidation, or winding up of the Company.

The warrants will be issued in registered form, in each case pursuant to a Warrant Agent Agreement between the transfer agent and registrar, as warrant agent, and us. You should review a copy of the Warrant Agent Agreement, which has been filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms and conditions applicable to the warrants.

Certain Anti-Takeover Provisions of Delaware Law and our Third Amended and Restated Certificate of Incorporation, as Amended, and Bylaws

We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. This statute prevents certain Delaware corporations, under certain circumstances, from engaging in a “business combination” with:

● a stockholder who owns 15% or more of our outstanding voting stock (otherwise known as an “interested stockholder”);

● an affiliate of an interested stockholder; or

● an associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder.

A “business combination” includes a merger or sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:

● our board of directors approves the transaction that made the stockholder an “interested stockholder,” prior to the date of the transaction;

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● after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of Common Stock; or

● on or subsequent to the date of the transaction, the business combination is approved by our board of directors and authorized at a meeting of our stockholders, and not by written consent, by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.

Our third amended and restated certificate of incorporation, as amended, provides that our board of directors will be classified into two classes of directors. As a result, in most circumstances, a person can gain control of our board only by successfully engaging in a proxy contest at two or more annual meetings.

Our authorized but unissued common stock and preferred stock are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Exclusive Forum for Certain Lawsuits

Our third amended and restated certificate of incorporation, as amended, will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing such suit will be deemed to have consented to service of process on such stockholder’s counsel. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.

Special Meeting of Stockholders

Our bylaws provide that special meetings of our stockholders may be called only by a majority vote of our board of directors, by our Chief Executive Officer or by our Chairman.

Advance Notice Requirements for Stockholder Proposals and Director Nominations

Our bylaws provide that stockholders seeking to bring business before our annual meeting of stockholders, or to nominate candidates for election as directors at our annual meeting of stockholders must provide timely notice of their intent in writing. To be timely, a stockholder’s notice will need to be received by the secretary to our principal executive offices not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day prior to the scheduled date of the annual meeting of stockholders. If our annual meeting is called for a date that is not within 30 days before or after such anniversary date, a stockholder’s notice will need to be received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which we first publicly announce the date of the annual meeting. Our bylaws also specify certain requirements as to the form and content of a stockholder’s notice for an annual meeting. Specifically, a stockholder’s notice must include: (i) a brief description of the business desired to be brought before the annual meeting, the text of the proposal or business and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such stockholder and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (iii) the class or series and number of shares of our capital stock owned beneficially and of record by such stockholder and by the beneficial owner, if any, on whose behalf the proposal is made, (iv) a description of all arrangements or understandings between such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and any other person or persons (including their names) in connection with the proposal of such business by such stockholder, (v) any material interest of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made in such business and (vi) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before such meeting. These notice requirements will be deemed satisfied by a stockholder as to any proposal (other than nominations) if the stockholder has notified us of such stockholder’s intention to present such proposal at an annual meeting in compliance with Rule 14a-8 of the Exchange Act, and such stockholder has complied with the requirements of such rule for inclusion of such proposal in the proxy statement we prepare to solicit proxies for such annual meeting. Pursuant to Rule 14a-8 of the Exchange Act, proposals seeking inclusion in our annual proxy statement must comply with the notice periods contained therein. The foregoing provisions may limit our stockholders’ ability to bring matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders.

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Our Transfer Agent and Warrant Agent

The transfer agent for our Common Stock and warrant agent for our Warrants is Continental Stock Transfer & Trust Company. We have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents and each of its stockholders, directors, officers and employees against all liabilities, including judgments, costs and reasonable counsel fees that may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence, willful misconduct or bad faith of the indemnified person or entity.

LEGAL MATTERS

The validity of the securities offered by this prospectus will be passed upon for us by Anthony L.G., PLLC, 625 N. Flagler Drive, Suite 600, West Palm Beach, Florida 33401. Littman Krooks LLP, New York, New York is acting as counsel to the underwriters.

EXPERTS

Our balance sheets as of May 31, 2021 and 2020 and the related statement of operations, changes in stockholders’ equity and cash flows for the year ended May 31, 2021 and 2020 included in this registration statement and prospectus have been audited by Prager Metis, independent registered public accounting firm, as indicated in their report (which report expresses an unqualified opinion and includes an explanatory paragraph related to Simplicity Esports and Gaming Company’s ability to continue as a going concern) with respect thereto, and have been so included in reliance upon the report of such firm given on their authority as experts in accounting and auditing.

DISCLOSURE OF COMMISSION’S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our directors and officers are indemnified as provided by Delaware law, our third amended and restated certificate of incorporation, as amended, and our bylaws. We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC the registration statement on Form S-1 under the Securities Act for the securities offered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information in the registration statement and the exhibits filed with it, portions of which have been omitted as permitted by SEC rules and regulations. For further information concerning us and the securities offered by this prospectus, we refer to the registration statement and to the exhibits filed with it. Statements contained in this prospectus as to the content of any contract or other document referred to are not necessarily complete. In each instance, we refer you to the copy of the contracts and/or other documents filed as exhibits to the registration statement.

The registration statement on Form S-1, of which this prospectus forms a part, including exhibits, is available at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file with, or furnish to, the SEC at its public reference facilities:

Public Reference Room Office

100 F Street, N.E.

Room 1580

Washington, D.C. 20549

You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Callers in the United States can also call (202) 551-8090 for further information on the operations of the public reference facilities.

115

SIMPLICITY ESPORTS AND GAMING COMPANY

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets, as of May 31, 2021 and 2020 (Audited)	F-3
Consolidated Statement of Operations, Fiscal Years Ended May 31, 2021 and 2020 (Audited)	F-4
Consolidated Statement of Shareholders’ Equity, Fiscal Years Ended May 31, 2021 and 2020 (Audited)	F-5
Consolidated Statement of Cash Flows, Fiscal Years Ended May 31, 2021 and 2020 (Audited)	F-6
Notes to Consolidated Financial Statements	F-7
Condensed Consolidated Balance Sheets , as of August 31, 2021 (Unaudited) and May 31, 2021	F-35
Condensed Consolidated Statement of Operations for the Three Months Ended August 31, 2021 and August 31, 2020 (Unaudited)	F-36
Condensed Consolidated Statement of Stockholder’s Equity for the Three Months Ended August 31, 2021 and 2020 (Unaudited)	F-37
Condensed Consolidated Statement of Cash Flows for the Three Months Ended August 31, 2021 and August 31, 2020 (Unaudited)	F-38
Notes to Interim Unaudited Financial Statements	F-39

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Simplicity Esports and Gaming Company and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Simplicity Esports and Gaming Co. (the “Company”) as of May 31, 2021 and 2020, and the related statements of operations, stockholders’ (deficit), and cash flows for each of the years in the two-year period ended May 31, 2021, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended May 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has an accumulated deficit and a net loss as of May 31, 2021. The Company’s cash may not be sufficient to support the Company’s daily operations in the next twelve months, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Prager Metis CPAs, LLP

We have served as the Company’s auditor since 2017.

El Segundo, CA

August 30, 2021

F-2

SIMPLICITY ESPORTS AND GAMING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	May 31,			May 31,
	2021			2020
ASSETS
Current Assets
Cash and cash equivalents	$	414,257		$	160,208
Accounts receivable, net		160,101			127,653
Inventory		206,974			15,787
Other current assets		52,643			5,588
Total Current Assets		833,975			309,236
Non Current Assets
Goodwill		5,180,141			5,155,141
Intangible assets, net		1,635,227			2,141,374
Deferred brokerage fees		79,943			149,223
Property and equipment, net		574,308			232,733
Right of use asset, operating leases, net		1,533,010			490,984
Security deposits		40,307			14,885
Due from franchisees		23,007			-
Deferred financing costs		307,494			98,198
Total Non Current Assets		9,373,437			8,282,538
TOTAL ASSETS	$	10,207,412		$	8,591,774
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	438,466		$	126,716
Accrued expenses		1,166,433			1,381,342
Convertible note payable		2,211,097			1,127,320
Loan payable		82,235			40,500
Note payable - related party		-			64,728
Operating lease obligation, current		307,013			151,867
Current portion of deferred revenues		30,034			3,795
Stock payable		-			75,000
Total Current Liabilities		4,235,278			2,971,268
Operating lease obligation, net of current portion		1,199,748			339,116
Deferred revenues, net of current portion		182,342			365,718
Total Liabilities		5,617,368			3,676,102
Commitments and Contingencies - Note 9		-			-
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; 1,427,124 and 998,622 shares issued and outstanding as of May 31, 2021 and 2020, respectively		142			100
Additional paid-in capital		16,708,762			11,132,103
Accumulated deficit		(12,291,899	)		(6,195,044	)
Total Simplicity Esports and Gaming Company Stockholders’ Equity		4,417,005			4,937,159
Non-Controlling Interest		173,039			(21,487	)
Total Stockholders’ Equity		4,590,044			4,915,672
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	10,207,412		$	8,591,774

The accompanying notes are an integral part of these condensed consolidated financial statements

F-3

SIMPLICITY ESPORTS AND GAMING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Year Ended
	May 31, 2021			May 31, 2020
Revenues:
Franchise royalties and license fees		305,925			523,007
Company-owned stores sales		1,053,226			174,042
Esports revenue		192,772			164,361
Total Revenues		1,551,923			861,410
Cost of Goods Sold		1,014,310			591,541
Gross Profit		537,613			269,869
Operating Expenses:
Compensation and related benefits		2,804,177			1,577,245
Professional fees		771,859			499,568
General and administrative expenses		1,399,947			925,177
Impairment loss		359,129			-
Total Operating Expenses		5,335,112			3,001,990
Loss from Operations		(4,797,499	)		(2,732,121	)
Other Income (Expense):
Debt forgiveness Income		-			93,761
Interest expense		(1,399,598	)		(32,472	)
Interest income		29			3,034
Gain on bargain acquisition		21,812			2,019
Foreign exchange gain/(loss)		(19,572	)		-
Total Other Income (Expense)		(1,397,329	)		66,342
Loss Before Provision for Income Taxes		(6,194,828	)		(2,665,779	)
Provision for Income Taxes		-			-
Net Loss		(6,194,828	)		(2,665,779	)
Net loss attributable to noncontrolling interest		97,973			45,541
Net loss attributable to common shareholders	$	(6,096,855	)	$	(2,620,238	)
Basic and Diluted Net Loss per share	$	(4.91	)	$	(2.71	)
Basic and diluted Weighted Average Number of Common Shares Outstanding		1,242,981			965,371

The accompanying notes are an integral part of these condensed consolidated financial statements

F-4

SIMPLICITY ESPORTS AND GAMING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED MAY 31, 2021 AND 2020

					Additional		Non-						Total
	Common Stock				Paid-In		Controlling			Accumulated			Stockholders’
	Shares		Amount		Capital		Interest			Deficit			Equity
Balance - May 31, 2019		875,497	$	88	$	9,442,027	$	-		$	(3,574,806	)	$	5,867,309
Shares issued for PLAYlive Nation acquisition		93,750		9		1,439,991		-			-			1,440,000
Shares issued for vesting of employment agreement awards		13,125		1		153,000					-			153,001
Shares issued for cash		15,625		2		87,698		-			-			87,700
Shares issued as compensation		625		-		5,900		-			-			5,900
Shares issued in connection with note payable						3,487								3,487
Non-controlling interest of original investment in subsidiaries		-		-		-		24,054			-			24,054
Net loss attributable to noncontrolling interest		-		-		-		(45,541	)		-			(45,541	)
Net Loss											(2,620,238	)		(2,620,238	)
Balance - May 31, 2020		998,622	$	100	$	11,132,103	$	(21,487	)	$	(6,195,044	)	$	4,915,672
Shares issued to directors, officers and employees as compensation		219,535		22		2,359,379		-			-			2,359,401
Shares issued in connection with franchise acquisition		64,714		7		703,860		-			-			703,867
Shares issued in connection with issuance and amendment of notes payable		42,040		4		1,313,554		-			-			1,313,558
Shares issued for contracted services		53,817		5		624,870		-			-			624,875
Shares issued for cash		48,396		4		574,996		-			-			575,000
Non-controlling interest of investment in subsidiaries		-		-		-		292,500			-			292,500
Net loss attributable to noncontrolling interest		-		-		-		(97,974	)		-			(97,974	)
Net Loss		-		-		-		-			(6,096,855	)		(6,096,855	)
Balance - May 31, 2021		1,427,124	$	142	$	16,708,762	$	173,039		$	(12,291,899	)	$	4,590,044

The accompanying notes are an integral part of these condensed consolidated financial statements

F-5

SIMPLICITY ESPORTS AND GAMING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Year Ended
	May 31, 2021			May 31, 2020
Cash flows from operating activities:
Net loss	$	(6,194,829	)	$	(2,665,779	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense		1,117,667			-
Depreciation expense		229,513			57,473
Amortization expense		295,709			211,067
Impairment loss		359,129			-
Deferred lease expense		(26,248	)		(776	)
Debt forgiveness income		-			(93,761	)
Issuance of shares for services		2,984,271			161,776
Changes in operating assets and liabilities:
Accounts receivable		(32,448	)		(127,653	)
Inventory		(63,474	)		(15,787	)
Prepaid expenses		(16,500	)		(5,588	)
Security deposits		(25,422	)		(2,568	)
Deferred brokerage fees		69,280			(18,592	)
Deferred revenues		(157,137	)		123,882
Accounts payable		337,022			123,142
Accrued expenses		(245,464	)		729,902
Due from franchisee		(23,007	)		-
Net cash used in operating activities		(1,391,938	)		(1,523,262	)
Cash flows from investing activities:
Cash (used in)/acquired from acquisition		(150,000)			26,180
Purchase of property and equipment		(1,949	)		(163,472	)
Net cash provided by (used in) investing activities		(151,949	)		(137,292	)
Cash flows from financing activities:
Repayment of note payable		(2,137,753	)		-
Proceeds from note payable		3,417,430			192,048
Proceeds from sale of Private Units		500,000			87,700
Deferred financing costs		(209,296	)		(98,198	)
Non-controlling interest of original investment in subsidiaries		202,500			24,054
Private placement funds received		41,735			75,000
Net cash provided by financing activities		1,814,616			280,604
Net change in cash		254,049			(1,379,950	)
Cash - beginning of period		160,208			1,540,158
Cash - end of period	$	414,257		$	160,208
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-
Supplemental Non-Cash Investing and Financing Information
Common stock issued for consideration in an acquisition of assets	$	871,852		$	1,440,000
Conversion of debt to common shares	$	100,000		$	-
Increase in prepaid expenses and accrued expenses	$	30,555		$	-
Warrants issued for debt discount	$	(1,521,754	)	$	-
Acquisition of PLAYlive:
Goodwill	$	-		$	2,226,166
Property and equipment	$	-		$	9,503
Deferred brokerage fees	$	-		$	805,975
Accounts payable	$	-		$	(3,574	)
Deferred revenue	$	-		$	(1,624,250	)

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements

F-6

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS

Simplicity Esports and Gaming Company F/K/A Smaaash Entertainment Inc. (the “Company,” “we,” or “our”), was an 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 2, 2019, the Company changed its name from Smaaash Entertainment Inc. to Simplicity Esports and Gaming Company.

Through our wholly subsidiary, Simplicity Esports, LLC, acquired on January 2, 2019 (see Note 6). 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 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 (see Note 6), the Company has a network of franchised Gaming Centers. As May 31, 2020, approximately 43 locations were open and operating, in various states including Arizona, California, Idaho, Florida, Maryland, Michigan, Mississippi, Montana, Oregon, South Carolina, Texas, Utah 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 sponsor was I-AM Capital Partners LLC (the “Sponsor”). The Company selected May 31 as its fiscal year end.

Initial Business Combination

The Company’s management had broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering.

F-7

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

On August 21, 2018, the Company deposited into the Trust Account an aggregate of $303,610 (including interest earned on the funds in the Trust Account available for withdrawal), representing $0.058 per public share. As a result of such payment, the Company extended the period of time it had to consummate a Business Combination by three months to November 21, 2018.

On November 20, 2018, the parties consummated the initial Business Combination.

Upon consummation of the Business Combination, the Company issued 208,000 restricted shares to Chardan Capital Markets in consideration for advisory services provided. These restricted shares are valued at $10.21 per share totaling $2,125,000 and are on the statement of operations included in general and administrative expenses.

At the special meeting of stockholders held on November 9, 2018, holders of 4,448,260 shares of the Company’s common stock sold in its Initial Public Offering (“Public Shares”) exercised their right to redeem those shares for cash at a price of $10.2187363 per share, for an aggregate of approximately $45,455,596. Immediately after giving effect to the initial Business Combination (including as a result of the redemptions described above) the issuance of 2,000,000 shares of common stock to the Smaaash founders, the issuance of 520,000 shares of common stock upon conversion of the rights at the Closing and the issuance of 208,000 shares of common stock to Chardan Capital Markets as consideration for services), there were 5,119,390 shares of common stock and warrants to purchase approximately 5,461,500 shares of common stock issued and outstanding. Upon the Closing, the Company’s rights ceased to exist, and its common stock and warrants began trading on The Nasdaq Stock Market (“Nasdaq”).

On the Closing Date, the Company entered into a master franchise agreement (“Master Franchise Agreement”) and a master license and distribution agreement (“Master Distribution Agreement”) with Smaaash. As of May 31, 2020, the Master Franchise Agreement and Master Distribution Agreement continue to be in effect.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company views its operations as one reporting entity and accordingly does not report on segments.

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 consolidated financial statements include the operations of the Company and its wholly owned subsidiaries, Simplicity Esports, LLC, PLAYlive Nation, Inc., and PLAYlive Nation Holdings, LLC, its 76% owned subsidiary Simplicity One Brasil Ltd, and its 79% owned subsidiaries Simplicity Happy Valley, LLC and Simplicity Redmond, LLC and its 51% owned subsidiary Simplicity El Paso.

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 cash equivalents.

F-8

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the consolidated balance sheet.

Use of Estimates

The preparation of 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 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 its 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.

The following describes principal activities, separated by major product or service, from which the Company generates its revenues.

Company-owned Stores 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.

F-9

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Franchise Royalties and Fees

Franchise royalties which 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 years. Franchise license renewal fees, which generally occur every 10 years, are billed before the renewal date. Fees received for future license renewal periods are amortized over the life of the renewal period.

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 food 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 is a form of competition using video games. Most commonly, esports takes the form of organized, single player and multiplayer video game competitions, particularly between professional players, individually or as teams. Revenues from Esports revenue are recognized when the competition is completed, and prize money is awarded. Revenues earned from league sponsorships from the Company’s share of league revenues including domestic esports teams competing in games such as Overwatch, Apex Legends, PUBG and more are included here. Revenue from international esports teams including Flamengo esports are included here. League revenues are earned through sponsorship fees on a per tournament, or per season basis. As of March 22, 2020, the Company commenced online esports tournaments promoted directly to its existing customer base. Revenue from these tournaments, comprised of registration fees on a per player basis, is included here.

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 May 31, 2021 and 2020. These costs are recognized in the same period as the initial franchise fee revenue is recognized.

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. Management has assessed accounts receivable as of May 31, 2021 and 2020, and an allowance for doubtful accounts of approximately $38,000 and $52,400, respectively has been recorded

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 years) of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if it benefits future periods.

F-10

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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 were included in intangible assets on our balance sheet and amortized on a straight-line basis when placed into service over the estimated useful lives of the costs, which is 3 to 5 years.

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. For the year ended May 31, 2021, we performed a third-party evaluation of the intangible assets which indicated no impairment was required.

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. Our assessment date was May 31, 2020, and we performed a third-party evaluation of the goodwill value at May 31, 2021 which quantitative 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 May 31, 2021, approximately 12 locations were open and operating, in various states including Arizona, California, Florida, Idaho, Maryland, Michigan, Mississippi, Montana, Oregon, South Carolina, Texas, Utah and Washington.

Stock-based compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation and ASC 505-50, Equity-Based Payments to Non-Employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.

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, which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions.

F-11

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Leases

In February of 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 adopted this update as of January l, 2019 using the modified retrospective transition method and prior periods have not been restated. Upon implementation, the Company recognized initial operating lease right-of-use assets of $110,003 and operating lease liabilities of $107,678. Due to the simplistic nature of the Company’s leases, no retained earnings adjustment was required. See Note 9 for further details.

Deferred Financing Costs

The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — “Expenses of Offering”. Offering costs of $307,494 and $98,198 consisting principally of legal and professional fees have been recorded as an asset as of May 31, 2021, and 2020, respectively. These amounts will be charged to additional paid in capital upon the completion of the Company’s ongoing Public Offering.

Basic Income (Loss) per share

The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted earnings or loss per common share is calculated by dividing net income or loss available to common stockholders by the diluted weighted-average number of common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities for this calculation consist primarily of warrants, outstanding options, and shares into which the convertible notes 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,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement 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.

Recent 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 are a 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.

F-12

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), followed by other related ASUs that provided targeted improvements and additional practical expedient options (collectively “ASC 842”). ASC 842 requires lessees to recognize right-of-use (“ROU”) assets and lease payment liabilities on the balance sheet for leases representing the Company’s right to use the underlying assets over the lease term. Each lease that is recognized on the balance sheet is classified as either finance or operating, with such classification affecting the pattern and classification of expense recognition in the Statements of Operations and presentation within the Statements of Cash Flows.

The Company adopted ASC 842 on January 1, 2019 using the modified retrospective method. The Company elected as part of its adoption to also use the optional transition methodology whereby previously reported periods continue to be reported in accordance with historical accounting guidance for leases that were in effect for those prior periods. Policy elections and practical expedients that the Company has implemented as part of adopting ASC 842 include (a) excluding from the balance sheet leases with terms that are less than or equal to one year, (b) for all existing asset classes that contain both lease and non-lease components, combining these components together and accounting for them as a single lease component, (c) the package of practical expedients, which among other things, allows the Company to avoid reassessing contracts that commenced prior to adoption that were properly evaluated under legacy GAAP, and (d) excluding land easements, which were not accounted for under the previous leasing guidance, that existed or expired before adoption of ASC 842. The scope of ASC 842 does not apply to leases used in the exploration for minerals or use thereof, including oil, natural gas and natural gas liquids.

The Company’s adoption of ASC 842 resulted in an increase in other assets, accounts payable and accrued liabilities, and other liabilities line items on the accompanying Consolidated Balance Sheets as a result of the additional ROU assets and related lease liabilities. Upon adoption on January 1, 2019, the Company recognized approximately $0.5 million in ROU assets and liabilities for its operating leases. There was no cumulative effect to accumulated deficit upon the adoption of this guidance.

Going Concern, Liquidity and Management’s Plan

The Company’s 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 consolidated financial statements, the Company has an accumulated deficit as of May 31, 2021 and 2020 of $12,291,899 and $6,195,044 respectively. The Company also has a net loss for the year ended May 31, 2021 and 2020 of $6,096,855 and $2,620,238, respectively. Net cash used in operating activities for the year ended May 31, 2021 and 2020 was $1,408,609 and $1,523,262, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the of the date that the financial statements are issued.

The Company’s cash position may not be sufficient to support the Company’s daily operations. Management plans to raise additional funds by way of a private or ongoing public offering. 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 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.

F-13

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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 had been closed effective April 1, 2020. 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. As of May 31, 2021 all but one company owned store and a few franchise stores have begun to re-open in conformity with local and state COVID-19 regulations.

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 impacted the Company’s business for the fiscal year and potentially beyond. 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.

NOTE 3 — INITIAL PUBLIC OFFERING AND PRIVATE PLACEMENT

Initial Public Offering

On August 22, 2017, the Company sold 625,000 Public Units at a purchase price of $80.00 per Public Unit, on a pre reverse-split basis, in the Initial Public Offering, generating gross proceeds of $50.0 million. The Company incurred offering costs of approximately $3.7 million, inclusive of approximately $3.2 million of underwriting fees. The Company paid $1 million of underwriting fees upon the closing of the Initial Public Offering, issued 50,000 shares of common stock, on a pre reverse-split basis, for underwriting fees, and deferred $1.82 million of underwriting fees until the consummation of the initial Business Combination.

Each Unit consisted of one share of the Company’s common stock, one right to receive one-tenth of one share of the Company’s common stock upon consummation of the Company’s initial Business Combination (“Right”), and one redeemable warrant (“Warrant”). Each Warrant entitles the holder to purchase one share of common stock at an exercise price of $92.00 on a pre reverse-split basis, per share, subject to adjustment. No fractional shares will be issued upon exercise of the Warrants. The Warrants became exercisable 30 days after the completion of the initial Business Combination and will expire five years after the completion of the initial Business Combination or earlier upon redemption or liquidation.

The Company may redeem the Warrants, in whole and not in part, at a price of $0.01 per Warrant upon 30 days’ notice (“30-day redemption period”), only in the event that the last sale price of the common stock equals or exceeds $21.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which notice of redemption is given, provided there is an effective registration statement with respect to the shares of common stock underlying such Warrants and a current prospectus relating to those shares of common stock is available throughout the 30-day redemption period. If the Company calls the Warrants for redemption as described above, the Company’s management will have the option to require all holders that wish to exercise Warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” management will consider, among other factors, the Company’s cash position, the number of Warrants that are outstanding and the dilutive effect on the Company’s stockholders of issuing the maximum number of shares of common stock issuable upon the exercise of the Warrants.

F-14

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Each holder of a Right received one-tenth (1/10) of one share of common stock upon consummation of the Business Combination. No fractional shares were issued upon exchange of the Rights. No additional consideration was paid by a holder of Rights in order to receive its additional shares upon consummation of the Business Combination as the consideration related thereto has been included in the Unit purchase price paid for by investors in the Initial Public Offering.

The Company granted the underwriters a 45-day option to purchase up to 93,750 additional Public Units to cover any over-allotment, at the initial public offering price less any underwriting discounts and commissions. On September 13, 2017, the underwriters purchased 25,000 additional Public Units for gross proceeds of $2,000,000, less commissions of $110,000, of which $70,000 are deferred.

The Company issued Maxim Group LLC (“Maxim”), as compensation for the Initial Public Offering, an aggregate of 6,500 shares, including 250 shares issued in connection with the partial exercise of the over-allotment option. The Company accounted for the fair value of these shares as an expense of the Initial Public Offering resulting in a charge directly to stockholders’ equity.

Settlement Agreement

On November 20, 2018, the Company entered into a settlement and release agreement (“Settlement Agreement”) with Maxim. Pursuant to the Settlement Agreement, the Company made a cash payment of $20,000 to Maxim and issued the Note in favor of Maxim in order to settle the payment obligations of the Company under the underwriting agreement dated August 16, 2017, by and between the Company and Maxim. The Company also agreed to remove the restrictive legends on an aggregate of 6,500 shares of its common stock held by Maxim and its affiliate. See “Note Payable” under Note 8 below.

Unit Purchase Option

At the time of the closing of the Initial Public Offering, the Company sold to Maxim, for an aggregate of $100, an option (the “UPO”) to purchase 31,250 Units (which increased to 32,500 units upon the partial exercise of the underwriters’ over-allotment option). The Company has accounted for the fair value of the UPO, inclusive of the receipt of the $100 cash payment, as an expense of the Initial Public Offering resulting in a charge directly to shareholders’ equity. The Company estimates that the fair value of this UPO is approximately $743,600 (or $2.86 per Unit) using the Black-Scholes option-pricing model. The fair value of the UPO is estimated as of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 1.73% and (3) expected life of five years. The UPO may be exercised for cash or on a “cashless” basis, at the holder’s option (except in the case of a forced cashless exercise upon the Company’s redemption of the Warrants, as described above), such that the holder may use the appreciated value of the UPO (the difference between the exercise prices of the UPO and the underlying Warrants and Rights, and the market price of the Units and underlying shares of common stock) to exercise the UPO without the payment of any cash. The Company will have no obligation to net cash settle the exercise of the UPO or the Warrants or Rights underlying the UPO. The holder of the UPO will not be entitled to exercise the UPO or the Warrants or Rights underlying the UPO unless a registration statement covering the securities underlying the UPO is effective or an exemption from registration is available. If the holder is unable to exercise the UPO or underlying Warrants or Rights, the UPO, Warrants or Rights, as applicable, will expire worthless.

The Company granted the holders of the UPO, demand and “piggy back” registration rights for periods of five and seven years, respectively, from the effective date of the registration statement relating to the Initial Public Offering, including securities directly and indirectly issuable upon exercise of the UPO.

Private Placement

Concurrently with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 31,812 Private Units at $80.00 per Private Unit, generated gross proceeds of $2,545,000 in a Private Placement all on a pre reverse-split basis. The proceeds from the Private Units were added to the proceeds from the Initial Public Offering held in the Trust Account. The Private Units (including their component securities) were not transferable, assignable or salable until 30 days after the completion of the initial Business Combination and the warrants included in the Private Units (the “Private Placement Warrants”) will be non-redeemable so long as they are held by the Sponsor or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Warrants included in the Public Units sold in the Initial Public Offering. Otherwise, the Private Placement Warrants and the Rights underlying the Private Units have terms and provisions that are identical to those of the Warrants and Rights, respectively, sold as part of the Public Units in the Initial Public Offering and have no net cash settlement provisions.

F-15

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

On September 13, 2017, the Sponsor purchased 875 additional Private Units for gross proceeds of $70,000 upon the partial exercise of the over-allotment option.

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation:

	May 31,			May 31,
	2021			2020
Leasehold improvements		110,849			52,189
Property and equipment		755,741			243,314
Total cost		866,590			295,503
Less accumulated depreciation		(292,282	)		(62,771	)
Net, property plant and equipment	$	574,308		$	232,733

Depreciation expense for the years ended May 31, 2021, and 2020 was $229,511 and $57,473, respectively.

NOTE 5 - INTANGIBLE ASSETS

The following tables set forth the intangible assets, including accumulated amortization at May 31, 2021 and 2020:

	May 31, 2021
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value
Non-Competes	4.50 years	$	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 years		3,000		2,417		583
		$	2,438,118	$	802,891	$	1,635,227

	May 31, 2020
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value
Non-Competes	4.50 years	$	1,023,118	$	289,884	$	733,234
Trademarks	Indefinite		866,000		-		866,000
Customer Contracts	10 years		546,000		5,443		540,557
Internet domain	2.50 years		3,000		1,417		1,583
		$	2,438,118	$	296,744	$	2,141,374

The following table sets forth the future amortization of the Company’s intangible assets at May 31, 2021:

	2022		2023		2024		2025		2026		Thereafter		Total
Non-Competes	$	204,624	$	204,624	$	119,363	$	-	$	-	$	-	$	528,611
Customer contracts		89,647		20,897		14,647		14,647		14,647		89,840		244,325
Internet domain		583		-		-		-		-		-		583
Total	$	260,224	$	259,807	$	259,224	$	173,962	$	54,600	$	267,557	$	1,275,374

Amortization expense for the years ended May 31, 2021, and 2020 was $295,709 and $211,067, respectively.

Goodwill

The Company’s goodwill carrying amounts relate to the acquisitions of Simplicity Esports LLC and PLAYlive Nation Inc. The composition of the goodwill balance, is as follows:

	Fiscal Year Ended May 31, 2021		Fiscal Year Ended May 31, 2020
Simplicity Esports LLC	$	4,456,250	$	4,456,250
PLAYlive Nation Inc.		698,891		698,891
Ft. Bliss		25,000		25,000
Total Goodwill	$	5,180,141	$	5,180,141

F-16

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

NOTE 6 - ACQUISITIONS

The Simplicity Esports, LLC Acquisition

On January 4, 2019, the Company consummated the transactions contemplated by the share exchange agreement, dated December 21, 2018 (as amended by Amendment No. 1 to Share Exchange Agreement, dated December 28, 2018 and by Amendment No. 2 to Share Exchange Agreement, dated December 30, 2018, the “Share Exchange Agreement”) by and among the Company, Smaaash Entertainment, Inc. (“Smaaash”), each of the equity holders of Simplicity (“Simplicity Owners”) and Jed Kaplan, in the capacity as the representative of the Simplicity Owners (the “Representative”). Pursuant to the Share Exchange Agreement the Simplicity Owners transferred all the issued and outstanding equity interests of Simplicity to the Company in exchange for newly issued shares of common stock of the Company (the “Acquisition”).

The Simplicity Owners received an aggregate of 37,500 shares of common stock at the closing of the Acquisition and an additional aggregate of 87,500 shares of common stock on January 7, 2019 and the remaining 250,000 shares in March of 2019.

The acquisition of Simplicity, in an all-stock deal, creates a pure play esports team and entertainment platform opportunity, which we believe will increase shareholder value and boost our growth strategy as we endeavor the build out of our brick and mortar esports centers.

The acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. All fair value measurements of acquired assets and liabilities assumed are non-recurring in nature and classified as level 3 on the fair value hierarchy.

The aggregate purchase price consisted of the following:

Restricted stock consideration		6,090,000
Total	$	6,090,000

As noted in the table above, the Company issued 375,000 restricted shares of common stock as consideration which was valued at market at the date of the closing, fair value of approximately $6,090,000.

The following table summarizes the estimated fair value of The Simplicity Esports, LLC assets acquired, and liabilities assumed at the date of acquisition:

Cash		76,000
Internet Domain		3,000
Trade names and trademarks		588,000
Non-Competes		1,023,118
Accounts payable and accrued liabilities		(56,000	)
Goodwill		4,455,882
Total	$	6,090,000

F-17

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

PLAYlive Nation Acquisition

On July 29, 2019, the Company entered into a definitive agreement to acquire PLAYlive for total consideration of 93,750 shares of common stock. The PLAYlive acquisition closed on July 30, 2019.

The acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. All fair value measurements of acquired assets and liabilities assumed are non-recurring in nature and classified as level 3 on the fair value hierarchy.

The aggregate purchase price consisted of the following:

Restricted stock consideration		1,440,000
Total	$	1,440,000

As noted in the table above, the Company issued 93,750 restricted shares of common stock as consideration which was valued at market at the date of the closing, fair value of approximately $1,440,000.

The following table summarizes the estimated fair value of the PLAYlive assets acquired and liabilities assumed at the date of acquisition:

Cash		26,000
Property, plant and equipment		10,000
Net deferred revenue		(115,000	)
Customer relationships
Accounts payable and accrued liabilities		(4,000	)
Goodwill		699,000
Trademarks		278,000
Customer contracts		546,000
Total	$	1,440,000

Revenue and net loss included in the year ended May 31, 2021 and 2020, consolidated financial statements attributable to PLAYlive is approximately $306,000 and $301,000_ and $523,000 and $124,000, respectively.

Company owned store acquisitions

During the year, the Company acquired thirteen gaming centers from prior franchisees in various locations throughout the United States. On a consolidated basis, the Company paid for these acquisitions by issuing 64,714 shares of stock to former franchise owners in return for the property, plant and equipment, the inventory on hand at the time of the acquisition and the leasehold improvements of the leased spaces. As part of the acquisition effort, the Company was able to renegotiate the lease terms with the landlords in order to provide more favorable operating terms to the Company.

F-18

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

NOTE 7 — RELATED PARTY TRANSACTIONS

Private Units

In addition, the Sponsor purchased an aggregate of 31,812 Private Units, on a pre reverse-split asis, at $80.00 per Private Unit on a pre reverse-split basis for proceeds of $2,545,000 in the aggregate in the Private Placement. This purchase took place on a private placement basis simultaneously with the completion of the Initial Public Offering. This issuance was be made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

The Sponsor committed to purchase from the Company up to an additional 3,281 Private Units if the underwriters’ over-allotment option was exercised in full.

On September 13, 2017, 7,000 additional Private Units, on a pre reverse-split basis were purchased by the Sponsor at $80.00 per Private Unit on a pre reverse-split basis upon the partial exercise of the over-allotment option.

Kaplan Promissory Note

On May 12, 2020 (the “Issue Date”), the Company issued a promissory note (the “Kaplan Note”) in the principal sum of $90,000 in favor of Jed Kaplan, the Company’s Chief Executive Officer, interim Chief Financial Officer, member of the Company’s Board of Directors and greater than 5% stockholder of the Company. The Kaplan Note matures on the first business day following the 150-day anniversary of the Issue Date (the “Maturity Date”). The Company will use the proceeds of the Kaplan Note to fund the operations of Simplicity One Brasil Ltda, the Company’s majority owned subsidiary (“Simplicity Brasil”). As of May 31, 2020, advances under the terms of this note were $64,728 (Note 8). Inconsideration for a 10% equity stake in Brasil Ltda., the Kaplan Note was retired during the year ended May 31, 2021.

Equity Sales

On May 7, 2020, we authorized the sale of 2,867 shares of our restricted Common Stock at $8.72 per share to William H. Herrmann, Jr. a member of our board of directors for $25,000 (Note 10).

The Company maintains its cash balance at a financial services company that is owned by an officer of the Company.

NOTE 8 – DEBT

The table below presents outstanding debt instruments as of May 31:

	2021			2020
Convertible Promissory Notes		3,157,970			152,500
Less: Related Discount		(946,873	)		(25,180	)
Related Party Note		-			64,728
Convertible Note Payable					1,000,000
Total	$	2,211,097		$	1,192,048

F-19

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

10% Fixed Convertible Promissory Note

On April 29, 2020 (the “Effective Date”), the Company issued a 10% Fixed Convertible Promissory Note (the “Harbor Gates Note”), with a maturity date of October 29, 2020 (the “Maturity Date”), in the principal sum of $152,000 in favor of Harbor Gates Capital, LLC (“Harbor Gates”). Pursuant to the terms of the Harbor Gates Note, the Company agreed to pay to Harbor Gates $152,500 (the “Principal Sum”) and to pay “guaranteed” interest on the principal balance at an amount equivalent to 10% of the Principal Sum, to the extent such Principal Sum and “guaranteed” interest and any other interest, fees, liquidated damages and/or items due to Harbor Gates have not been repaid or converted into Company common stock in accordance with the terms of the Harbor Gates Note. The Harbor Gates Note carries an original issue discount (“OID”) of $2,500. Accordingly, on the Effective Date, Harbor Gates delivered $150,000 to the Company in exchange for the Harbor Gates Note.

In addition to the “guaranteed” interest, and upon the occurrence of an Event of Default (as hereinafter defined), additional interest will accrue from the date of the Event of Default at the rate equal to the lower of 20% per annum or the highest rate permitted by law.

The Company may prepay the Harbor Gates Note according to the following schedule:

Days Since Effective Date	Payment Amount
Under 30	115% of Principal Amount (as hereinafter defined) so paid
31-60	120% of Principal Amount so paid
61-90	125% of Principal Amount so paid
91-180	135% of Principal Amount so paid

135% of the remaining unpaid and unconverted Principal Amount, plus all accrued and unpaid interest will be due and payable on the Maturity Date. “Principal Amount” refers to the sum of (i) the original principal amount of the Harbor Gates Note (including the OID, prorated if the Harbor Gates Note has not been funded in full); (ii) all guaranteed and other accrued but unpaid interest under the Harbor Gates Note; (iii) any fees due under the Harbor Gates Notes; (iv) liquidated damages; and (v) any default payments owing under the Harbor Gates Note, in each case previously paid or added to the Principal Amount.

Pursuant to the terms of the Harbor Gates Note, the Company agreed to issue Harbor Gates shares of Company common stock in two tranches as follows:

(i)

1,250 shares of common stock within three trading days of the Effective Date; and

(ii)

In the event the average of the three volume weighted average prices for the Company’s common stock during the three consecutive trading days immediately preceding the date which is the 180th day following the Effective Date is less than $1.00 per share, then Harbor Gates will be entitled, and the Company will issue to Harbor Gates additional shares of common stock as set forth in the Harbor Gates Note.

F-20

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

If an Event of Default (as defined in the Promissory Note) occurs, the outstanding Principal Amount of the Harbor Gates Note owing in respect thereof through the date of acceleration, shall become, at Harbor Gates’ election, immediately due and payable in cash at the “Mandatory Default Amount”. The Mandatory Default Amount means 35% of the outstanding Principal Amount of the Harbor Gates Note will be automatically added to the Principal Sum of the Harbor Gates Note and tack back to the Effective Date for purposes of Rule 144 promulgated under the 1934 Act. Commencing five days after the occurrence of any Event of Default that results in the eventual acceleration of the Harbor Gates Note, the Harbor Gates Note will accrue additional interest, in addition to the Harbor Gates Note’s “guaranteed” interest, at a rate equal to the lesser of 20% per annum or the maximum rate permitted under applicable law.

If the Harbor Gates Note is not retired on or before the Maturity Date, then at any time and from time to time after the Maturity Date, and subject to the terms hereof and restrictions and limitations contained in the Harbor Gates Note, Harbor Gates has the right, at Harbor Gates’ sole option, to convert in whole or in part the outstanding and unpaid Principal Amount under the Harbor Gates Note into shares of the Company’s common stock at the Variable Conversion Price. The “Variable Conversion Price” will be equal to the lower of: (a) $1.00, or (b) 70% of the lowest volume weighted average price of the Company’s common stock during the 15 consecutive trading days prior to the date on Harbor Gates elects to convert all or part of the Harbor Gates Note. The Company intends to prepay the Harbor Gates Note in accordance with its terms so that no amount under the Harbor Gates Note is converted into shares of the Company’s common stock.

This note along with guaranteed interest of $15,000 was repaid on July 2, 2020.

Kaplan Promissory Note

On May 12, 2020 (the “Issue Date”), the Company issued a promissory note (the “Kaplan Note”) in the principal sum of $90,000 in favor of Jed Kaplan, the Company’s Chief Executive Officer, interim Chief Financial Officer, member of the Company’s Board of Directors and greater than 5% stockholder of the Company. The Kaplan Note matures on the first business day following the 150-day anniversary of the Issue Date (the “Maturity Date”). The Company will use the proceeds of the Kaplan Note to fund the operations of Simplicity One Brasil Ltda, the Company’s majority owned subsidiary (“Simplicity Brasil”).

Pursuant to the terms of the Kaplan Note, the Company agreed to pay to Mr. Kaplan the lesser of (i) the principal sum of $90,000 (the “Maximum Commitment”), or (ii) the aggregate principal amount of all direct advances of the proceeds of the Kaplan Note (each, an “Advance”), together with any interest thereon, and any and all other amounts which may be due and payable thereunder from time to time.

Subject to the terms of the Kaplan Note, Mr. Kaplan agreed to make one direct Advance to and for the benefit of the Company on the Issue Date in the amount of $45,000, and one additional Advance to and for the benefit of the Company at such time as the Company may request during the two month period following the Issue Date. The total of the aggregate principal balance of all Advances (collectively referred to herein as the “Principal Amount”) outstanding at any time shall not exceed the Maximum Commitment. Advances made by Mr. Kaplan to the Company under the Kaplan Note which have been repaid may not be borrowed again.

Prior to the Maturity Date or an Event of Default (as hereinafter defined), the Principal Amount outstanding under the Kaplan Note will bear interest at a rate of 3% (the “Interest Rate”). From and after the Maturity Date or upon and during the continuance of an Event of Default, interest will accrue on the unpaid Principal Amount during any such period at an annual rate (the “Default Rate”) equal to 10% plus the Interest Rate; provided, however, that in no event will the Default Rate exceed the maximum rate permitted by law.

The Company may prepay the Kaplan Note, in whole or in part, without a prepayment penalty, at any time provided that an Event of Default has not then occurred.

During the year ended May 31, 2021, the Kaplan Note was retired in exchange for a 10% equity stake in Simplicity Brasil.

F-21

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Self-Amortization Promissory Note

On June 18, 2020 (the “Issue Date”), the Company entered into a securities purchase agreement (the “SPA”) with an accredited investor (the “Holder”), pursuant to which the Company issued a 12% self-amortization promissory note (the “Amortization Note”) with a maturity date of June 18, 2021 (the “Maturity Date”), in the principal sum of $550,000. Pursuant to the terms of the Amortization Note, the Company agreed to pay to $550,000 (the “Principal Sum”) to the Holder and to pay interest on the Principal Sum at the rate of 12% per annum. The Amortization Note carries an original issue discount (“OID”) of $55,000. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $495,000 in exchange for the Amortization Note. In addition, pursuant to the terms of the SPA, the Company agreed to issue 6,875 shares of the Company’s common stock to the Holder as additional consideration.

The Company may prepay the Amortization Note at any time prior to the date that an Event of Default (as defined in the Amortization Note) (each an “Event of Default”) occurs at an amount equal to 100% of the Principal Sum then outstanding plus accrued and unpaid interest with no prepayment premium. The Amortization Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Amortization Note or SPA.

The Company is required to make amortization payments to the Holder according to the following schedule:

Payment Date		Payment Amount
10/16/2020	$	66,125.00
11/16/2020	$	66,125.00
12/16/2020	$	66,125.00
01/18/2021	$	66,125.00
02/18/2021	$	66,125.00
03/18/2021	$	66,125.00
04/16/2021	$	66,125.00
05/18/2021	$	66,125.00
06/18/2021	$	65,921.26
Total:	$	594,921.26

In connection with the November 23, 2020 SPA discussed below, we repaid principal and interest of $198,375 on this June 18, 2020 Note.

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 calendar days as provided in the Amortization Note, the Amortization 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% (the “Default Amount”). 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. The Company shall have the right to pay the Default Amount in cash at any time, provided, however that the Holder may convert the Amortization Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% contained in the Amortization Note) at any time after the date that is five calendar days after the Amortization Note becomes immediately due and payable as a result of an Event of Default until the Company has repaid the Amortization Note in cash. If the aforementioned event occurs, the conversion price will be equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion. The Company intends to repay the Amortization Note in accordance with its terms so that no amount under the Amortization Note is converted into shares of the Company’s common stock.

While any portion of this Note is outstanding, if the Company receives cash proceeds of more than $2,000,000.00 (the “Minimum Threshold”) in the aggregate from public offerings or private placements to investors, the Company shall, within two business days of Company’s receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Company to immediately apply up to 50% of all proceeds received by the Company after the Minimum Threshold is reached to repay the outstanding amounts owed under this Note. As of November, 2020, we repaid the entire amount of principal and interest.

August 7, 2020 Self-Amortization Promissory Note

On August 7, 2020 (the “Issue Date”), the Company entered into a securities purchase agreement (the “SPA”) with FirstFire Global Opportunities Fund, LLC, an accredited investor (the “Holder”), pursuant to which the Company issued a 12% self-amortization promissory note (the “Self-Amortization Note”) with a maturity date of August 7, 2021 (the “Maturity Date”), in the principal sum of $333,333. Pursuant to the terms of the Self-Amortization Note, the Company agreed to pay $333,333 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum. The Amortization Note carries an original issue discount of $33,333. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $300,000 in exchange for the Self-Amortization Note. In addition, pursuant to the terms of the SPA, the Company agreed to issue 4,167 shares of the Company’s common stock to the Holder as additional consideration.

F-22

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

The Company may prepay the Self-Amortization Note at any time prior to the date that an Event of Default (as defined in the Amortization Note) (each an “Event of Default”) occurs at an amount equal to 100% of the Principal Sum then outstanding plus accrued and unpaid interest with no prepayment premium. The Self-Amortization Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Self-Amortization Note or SPA.

The Company is required to make amortization payments to the Holder according to the following schedule:

Payment Date		Payment Amount
12/07/2020	$	40,075.75
01/07/2021	$	40,075.75
02/08/2021	$	40,075.75
03/08/2021	$	40,075.75
04/07/2021	$	40,075.75
05/07/2021	$	40,075.75
06/07/2021	$	40,075.75
07/07/2021	$	40,075.75
08/07/2021	$	39,952.34
Total:	$	360,558.34

On March 10, 2021, we repaid the outstanding principal and interest on the Self-Amortization Note.

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 calendar days as provided in the Amortization Note, the Amortization 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% (the “Default Amount”). 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. The Company shall have the right to pay the Default Amount in cash at any time, provided, however that the Holder may convert the Amortization Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% contained in the Amortization Note) at any time after the date that is five calendar days after the Amortization Note becomes immediately due and payable as a result of an Event of Default until the Company has repaid the Amortization Note in cash. If the aforementioned event occurs, the conversion price will be equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion. The Company intends to repay the Amortization Note in accordance with its terms so that no amount under the Amortization Note is converted into shares of the Company’s common stock.

While any portion of this Note is outstanding, if the Company receives cash proceeds of more than $2,000,000.00 (the “Minimum Threshold”) in the aggregate from public offerings or private placements to investors, the Company shall, within two business days of Company’s receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Company to immediately apply up to 50% of all proceeds received by the Company after the Minimum Threshold is reached to repay the outstanding amounts owed under this Note.

November 23, 2020 Self-Amortization Promissory Note

On November 25, 2020, the Company entered into a securities purchase agreement (the “November 2020 SPA”), dated as of November 23, 2020 (the “Effective Date”), with an accredited investor (the “Holder”) pursuant to which the Company issued a 12% self-amortization promissory note (the “November Amortization Note”) with a maturity date of November 23, 2021 (the “Maturity Date”), in the principal sum of $750,000. Pursuant to the terms of the November Amortization Note, the Company agreed to pay to $750,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum. The Company received net proceeds of $441,375, net of original issue discount of $75,000, origination fees of $35,250, and the partial repayment of principal and interest of $198,375 on the June 18, 2020 Note. In connection with the November Amortization Note, during the first twelve months of this note, interest equal to $90,000 shall be guaranteed and earned in full as of the Effective Date, provided, however, that if the November Amortization Note is repaid in its entirety on or prior to February 23, 2021, then the interest shall be accrued on a per annum basis based on the number of days elapsed as of the repayment date from the Effective Date.

F-23

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

In connection with the November 23, 2020 SPA, the Company is required to issue warrants equal to 375,000 divided by the Exercise Price (as defined below) (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. For purposes of this Warrant, the term “Exercise Price” shall mean 110% of the public offering price of the Company’s common stock under the public offering contemplated by the registration statement on Form S-1 filed by the Company on October 23, 2020 (the “Uplist Offering”), provided, however, that if the Uplist Offering has not been consummated on or before May 23, 2021, then the Exercise Price shall mean the closing bid price of the Company’s common stock on December 23, 2020, subject to adjustment as provided in the warrant (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the earlier of (i) the date of the Company’s consummation of the Uplist Offering or (ii) May 23, 2021, and ending on the five-year anniversary thereof. In connection with the issuance of these warrants, on the initial measurement date, the relative fair value of the warrants of $157,438 was recorded as a debt discount and an increase in paid-in capital.

The Company may prepay the Amortization Note at any time prior to the date that an Event of Default (as defined in the Amortization 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 Amortization Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the November Amortization Note or the November 2020 SPA.

The Company is required to make amortization payments to the Holder according to the following schedule:

Payment Date		Payment Amount
2/23/2021	$	84,000.00
3/23/2021	$	84,000.00
4/23/2021	$	84,000.00
5/21/2021	$	84,000.00
6/23/2021	$	84,000.00
7/23/2021	$	84,000.00
8/23/2021	$	84,000.00
9/23/2021	$	84,000.00
10/22/2021	$	84,000.00
11/23/2021	$	84,000.00
Total:	$	840,000.00

On February 19, 2021, we repaid the outstanding principal and interest on the November Amortization Note.

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 (provided, however, that this cure period shall not apply to certain events of default as set forth in the November Amortization Note), the November Amortization 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% (the “Default Amount”). Upon the occurrence of an Event of Default (as hereinafter defined), 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. The Company shall have the right to pay the Default Amount in cash at any time, provided, however that the Holder may convert the November Amortization Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% contained in the Amortization Note) at any time after the date that is five (5) calendar days after the November Amortization Note becomes immediately due and payable as a result of an Event of Default until the Company has repaid the Amortization Note in cash. If the aforementioned event occurs, the conversion price will be equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion.

The Holder shall have the right, at any time following an Uncured Default Date (as defined in this Note), to convert all or any portion of the then outstanding and unpaid principal amount and interest (including any default interest) into shares of the Company’s common stock at the Conversion Price. Following the Uncured Default Date, the Conversion Price shall equal the lesser of (i) 105% multiplied by the closing bid price of the Company’s common stock or (ii) the closing bid price of the Company’s common stock immediately preceding the date of the respective conversion (the “Conversion Price”).

F-24

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Amendments to the Series A-2 Exchange Convertible Note

On or about December 20, 2018, the Company issued that certain Series A-2 exchange convertible note in the original principal amount of $1,000,000 (the “Series A-2 Note”) to Maxim.

On June 18, 2020, the Company and Maxim entered into that certain first amendment to the Series A-2 Note (the “First Amendment”), pursuant to which such parties agreed to the following: (i) Maxim’s resale of the Company’s common stock (the “Common Stock”) underlying the Series A-2 Note shall be limited to 10% of the daily volume of the Common Stock on each respective trading day, (ii) the maturity date of the Series A-2 Note was extended to December 31, 2020, (iii) the principal amount of the Series A-2 Note was increased by $100,000 and (iv) the conversion price was reduced from $15.44 ($1.93 pre-reverse split) to $9.20 ($1.15 pre-reverse split).

On December 31, 2020, the Company and Maxim entered into a second amendment to the Series A-2 Note to extend the maturity date of Series A-2 Note to February 15, 2021. 

On April 14, 2021, the Company and Maxim entered into the third amendment to the Series A-2 Note with Maxim pursuant to which the Company and Maxim agreed to the following:

(i)	The maturity date of the Series A-2 Note is extended to October 15, 2021.
(ii)	The principal balance of the Series A-2 Note is increased by $50,000 as of April 14, 2021.
(iii)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before April 30, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.
(iv)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before May 15, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.

F-25

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

(v)	If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before July 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000.
(vi)	If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before September 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000, representing a total cumulative increase in the principal balance of $350,000 if the Series A-2 Note is not repaid in its entirety on or before September 15, 2021.
(vii)	The Company will, within five business days after the Company’s receipt of the Second Tranche Purchase Price of $999,996, pay $500,000 to Maxim, which will reduce the principal owed under the Series A-2 Note by $500,000.

While any portion of the Series A-2 Note is outstanding, if the Company receives cash proceeds from public offerings or private placements of the Company’s common stock to investors (except with respect to proceeds from officers and directors of the Company), the Company will, within five business days of the Company’s receipt of such proceeds, inform Maxim or such receipt, following which Maxim will have the right in its sole discretion to require the Company to immediately apply up to 25% of such proceeds received by the Company to repay the outstanding amounts owed under the Series A-2 Note. The parties understand that (a) each dollar applied toward repayment pursuant to this clause (viii) will reduce the balance owed under the Series A-2 Note by one dollar, and (b) this clause (viii) will not apply to the Tiger Trout transaction.

On August 19, 2021, the Company and Maxim entered into the fourth amendment (the “Fourth Amendment”) to the Series A-2 Maxim Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock. The Company also granted Maxim an irrevocable right of first refusal superseding all others to act as Company’s sole managing underwriter and sole bookrunner or exclusive placement agent or financial advisor, or finder in connection with any public or private offering by the Company or any subsidiary of or successor to the Company (if applicable) of its equity, equity linked or debt securities (including convertible securities) while the Company’s common stock is listed on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing, each, a “National Exchange”), within the period beginning on August 19, 2021 and ending on the close of business on January 1, 2023.

On August 19, 2021, the Company issued to Maxim a common stock purchase warrant (the “Warrant”) for the purchase of 365,000 shares of the Company’s common stock (the “Warrant Shares”) at an exercise price of $13.00, subject to adjustment as provided in the Warrant. The Warrant is exercisable during the period commencing on August 19, 2021 and ending at 5:00 p.m. eastern standard time on the date that is the earlier of (i) three years from the effective date of a registration statement registering for resale by Maxim or its assigns the Warrant Shares (provided that such registration statement remains in effect at the end of the exercise period) and (ii) the 42 month anniversary after August 19, 2021.

The Company has paid the Maxim note, in its entirety by August 24, 2021

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% promissory note (the “Note”) with a maturity date of February 19, 2022 (the “Maturity Date”), in the principal sum of $1,650,000. In addition, the Company issued 10,000 shares of its common stock to the Holder as a commitment fee pursuant to the SPA. Pursuant to the terms of the Note, the Company agreed to pay to $1,650,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum (provided that the first twelve months of interest shall be guaranteed). The Note carries an original issue discount (“OID”) of $165,000. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $1,485,000 in exchange for the Note. The Company intends to use the proceeds for its operational expenses, the repayment of those certain self-amortization promissory notes previously issued to the Holder on June 18, 2020 and November 23, 2020, and the repayment of certain other existing debt obligations. The Holder may convert the Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Note) at any time at a conversion price equal to $11.50 per share.

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.

The Company is required to make an interim payment to the Holder in the amount of $363,000, on or before August 19, 2021, towards the repayment of the balance of the Note. Currently the Company and the Holder have agreed to extend the terms of this payment. The extension provides that the Company paid $100,000 to the Holder by the interim payment date and has agreed to pay an additional $100,000 upon the completion of a new debt deal that is anticipated to close by September 1, 2021 and the Company has agreed to pay $163,000 to the Holder at the earlier of the Company stock uplist or September 30, 2021.

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 (provided, however, that this five (5) calendar day cure period shall not apply to any event of default under Sections 3.1, 3.2, and 3.19 of the Note), 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% (the “Default Amount”). 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.

F-26

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Note Payable

On November 20, 2018, the Company paid its underwriter $20,000 and issued its underwriter a secured demand promissory note (the “Note”) in the amount of $1,800,000. The Note accrued interest at 8% per annum from the date of the Note through and including May 20, 2019, 12% per annum from and including May 21, 2019, through and including August 20, 2019, and 15% per annum from and including August 21, 2019, through and including November 20, 2019. If a late payment had occurred and continued, the interest rate would have increased to 12% per annum from the date of the Note through and including August 20, 2019 and 18% per annum from after August 21, 2019. If a late payment had remained outstanding for over 48 hours, Maxim could have required the Company to redeem all or any part of the Note at a redemption price equal to 125% of the Alternate Payment Amount.

The principal and interest of the Note was payable upon demand by Maxim or from time to time, in accordance the following schedule:

(i)	one third of the principal, accrued and unpaid interest and any late charges on May 20, 2019;
(ii)	one third of the principal, accrued and unpaid interest and any late charges on August 20, 2019; and
(iii)	one third of the principal, accrued and unpaid interest and any late charges on November 20, 2019.

The Note was secured by a first priority security interest in all personal property and assets of the Company excluding the assets held in escrow with respect to (i) that certain stock purchase agreement with Polar, pursuant to which Polar agreed to sell up to 490,000 shares of the Company’s common stock to the Company thirty days after the consummation of the Business Combination and (ii) that certain stock purchase agreement with K2, pursuant to which K2 agreed to sell up to 220,000 shares of the Company’s common stock to the Company thirty days after the consummation of the Business Combination.

The amount payable under the Note could also have been paid in shares of common stock of the Company or securities convertible or exercisable into shares of common stock of the Company (the “Alternate Equity Payment”) if and only if the Company and Maxim mutually agree on both the purchase price and, if applicable, the conversion and/or exercise price of each security of the Company issued in such Alternative Equity Payment. Otherwise, the payment should be made in cash only.

So long as any amount under the Note remained outstanding, all cash proceeds received by the Company from any sales of its securities was to be used to repay this Note.

F-27

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

NOTE 9 — COMMITMENTS AND CONTINGENCIES

Unit Purchase Option

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 (or an aggregate exercise price of $2,990,000) upon the closing of the Initial Public Offering. The 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.

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 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 all the existing leases subject to the new lease standard were previously classified as operating leases by the Company, they were similarly classified as operating leases under the new standard. The Company has determined that the identified operating leases did not contain non-lease components and require no further allocation of the total lease cost. Additionally, the agreements in place did not contain information to determine the rate implicit in the leases, so we used our incremental borrowing rate as the discount rate. Our weighted average discount rate is 10.4% and the weighted average remaining lease terms are 41 months.

As of May 31, 2021, operating lease right-of-use assets and liabilities arising from operating leases was $1,527,286 and $1,527,967, respectively. As of May 31, 2020, operating lease right-of-use assets and liabilities arising from operating leases was $490,984 and $490,983, respectively. During the year ended May 31, 2021 and 2020, the Company recorded operating lease expense of approximately $353,000 and $147,000, respectively.

The following is a schedule showing the future minimum lease payments under operating leases by years and the present value of the minimum payments as of May 31, 2021.

2022	$	471,063
2023	$	450,377
2024	$	452,511
2025	$	405,795
2026	$	153,601
Total Operating Lease Obligations	$	1,945,347
Less: Amount representing interest	$	(418,061	)
Present Value of minimum lease payments	$	1,527,286

Employment Agreements, Board Compensation and Bonuses

On July 29, 2020, the Company entered into a new employment agreement (the “Kaplan 2020 Agreement”) with Mr. Kaplan. Such employment agreement replaced the Kaplan 2018 Agreement. As a result, the Kaplan 2018 Agreement was terminated and is of no further force or effect. Pursuant to the terms of the Kaplan 2020 Agreement, the Company agreed to pay Mr. Kaplan a monthly base salary of $5,000; provided, however, that the parties agreed that such base salary will be deferred and will accumulate until the Company has sufficient cash available to make such payments, to be reasonably determined by the Board of Directors and Mr. Kaplan, at which time all accrued and unpaid base salary will be paid. In addition, Mr. Kaplan will receive an equity grant of 15,000 shares of common stock per month, which shares will be fully vested upon grant. Mr. Kaplan will also be eligible to receive a quarterly bonus in the form of cash or equity shares and will be entitled to participate in the Company’s employee benefit plans. In addition, if, during the term of the Kaplan 2020 Agreement, the Company’s shares are approved for listing on a U.S. national securities exchange, the Company will pay Mr. Kaplan a $50,000 cash bonus, to be paid upon such listing begin effective.

The term of the Kaplan 2020 Agreement is for an initial one-year term, which shall automatically renew for successive one-year terms unless either party provides 60 days’ advance written notice of its intention not to renew the Kaplan 2020 Agreement at the conclusion of the then applicable term. The term of the Kaplan 2020 Agreement may be terminated by the Company with or without cause or by Mr. Kaplan with or without good reason, as such terms are defined therein.

F-28

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

On July 29, 2020, the Board of Directors approved for Mr. Kaplan a $75,000 cash bonus and authorized the issuance of 250,000 shares of the Company’s common stock both related to his performance during the fiscal year ended May 31, 2020. As of May 31, 2020, the Company has accrued $75,000 related to Mr. Kaplans cash bonus and $216,625 related to the Common Shares to be issued to Mr. Kaplan.

On July 29, 2020, the Company entered into a new employment agreement (the “Franklin 2020 Agreement”) with Mr. Franklin. Such employment agreement replaced the Franklin 2018 Agreement. As a result, the Franklin 2018 Agreement was terminated and is of no further force or effect. Pursuant to the terms of the Franklin 2020 Agreement, the Company agreed to pay Mr. Franklin a monthly base salary of $12,500; provided, however, that the parties agreed that such base salary will be deferred and will accumulate until the Company has sufficient cash available to make such payments, to be reasonably determined by the Board of Directors and Mr. Franklin, at which time all accrued and unpaid base salary will be paid. In addition, Mr. Franklin will receive an equity grant of 6,250 shares of common stock per month, which shares will be fully vested upon grant. Mr. Franklin will also be eligible to receive a quarterly bonus in the form of cash or equity shares and will be entitled to participate in the Company’s employee benefit plans. In addition, if, during the term of the Franklin 2020 Agreement, the Company’s shares are approved for listing on a U.S. national securities exchange, the Company will pay Mr. Franklin a $50,000 cash bonus, to be paid upon such listing begin effective.

On July 29, 2020, the Board of Directors approved for Mr. Franklin a $75,000 cash bonus and authorized the issuance of 250,000 fully vested shares of the Company’s common stock both related to his performance during the fiscal year ended May 31, 2020. As of May 31, 2020, the Company has accrued $75,000 related to Mr. Franklins cash bonus and $216,625 related to the Common Shares to be issued to Mr. Franklin.

On July 29, 2020, the Board of Directors approved the issuance of 192,000 shares of common stock to an employee and the Directors of the Company for services provided during the fiscal year ended May 31, 2020. As of May 31, 2020, the Company has accrued $166,675 related to the authorized issuance of these shares.

During the year ended May 31, 2021, the Board of Directors approved the issuance of 17,125 shares of common stock for the Company’s Directors. These shares were issued during the year. The Board of Directors has not issued any year end stock awards for the year ended May 31, 2021 and there is no guarantee that they will issue any of this stock.

Litigation

On August 5, 2020, a lawsuit styled Duncan Wood v. PLAYlive Nation, Inc. and Simplicity eSports and Gaming Company (Case No. 20-1043) was filed in the U.S. District Court for the District of Delaware. The complaint alleges unlawful failure to make timely and reasonable payment of wages, breach of contract, breach of the duty of good faith and fair dealing and unjust enrichment. The plaintiff seeks monetary damages for compensation alleged to be owed, treble damages, interest on all wage compensation, reasonable attorneys’ fees and other relief as the Court deems just and proper. Defendants’ responsive pleading is not yet due and has not been filed. The litigation is in its initial stages and the Company is unable to reasonably predict its potential outcome. The Company, however, believes that the lawsuit is without merit and intends to vigorously defend the claims. On SOME DATE the lawsuit was withdrawn without prejudice.

NOTE 10 — STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. At May 31, 2021 and 2020, there were no shares of preferred stock issued or outstanding.

Common Stock

The Company is authorized to issue 36,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the shares of the Company’s common stock are entitled to one vote for each share. At May 31, 2021, and May 31, 2020, there were 1,427,124 and 988,622 shares of common stock issued and outstanding respectively.

2020 Transactions

During the year ended May 31, 2020, the Company issued 123,000 shares of its common stock on a post reverse split basis. Shares were issued in conjunction with the acquisition of Playlive Nation of 94,000, for compensation for employees, officers and directors in the amount of 14,000 shares, and 15,000 shares were issued for cash. 

2021 Transactions

During the year ended May 31, 2021, the Company issued 429,000 shares of its common stock. Shares were issued for compensation for employees, officers and directors in the amount of 240,000 shares, 84,000 shares in connection with notes payable, 65,000 shares for the acquisition of company owned stores from prior franchisees, 37,000 shares as satisfaction to vendors for services rendered and 3,000 shares were issued for cash.

Common Shares Issued subsequent May 31, 2021

From June 1, 2021 through August 27, 2021 the Company has issued 42,000 shares of its common stock. Of this, 21,000 shares were issued in satisfaction to vendors for services rendered, 15,000 shares were issued in connection with notes payable and 6,000 shares were issued for the acquisition of a company owned store from a prior franchisee.

F-29

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Private Placement

Beginning in February of 2019 and closing in May of 2019, the Company sold units in connection with a private offering by the Company to raise working capital of up to $2,000,000 (the “Offering Amount”) through the sale to accredited investors only of up to up to 1,000,000 “Units” of the Company’s securities, at a purchase price of $2.00 per Unit, with each Unit consisting of (i) one share of common stock, par value $0.0001 per share of the Company (the “Common Stock”) and (ii) a warrant to purchase one share of Common Stock, exercisable at a price of $4.00 per share, exercisable at any time within five years of issuance (each, a “Warrant”) as provided for in the Company’s Term Sheet for Unit Offering dated February 6, 2019 (the “Term Sheet”).

The Company sold 962,500 units for gross proceeds of $1,925,000.

Stock Based Compensation

For the year ended May 31, 2020 the Company authorized the issuance of 95,000 shares of common stock to employees, officers and directors of the Company. The shares were issued in conjunction with their employment agreements or services such individuals provided to the Company and vested ratably through May 31, 2020.

For the year ended May 31, 2021, the Company authorized the issuance of 240,000 shares of common stock to employees, officers and directors of the Company. The shares were issued in conjunction with their employment agreements or services such individuals provided to the Company and vested ratably through May 31, 2021.

For the years ended May 31, 2021 and 2020, in connection with these issuances the Company recorded share-based compensation expense of $1,690,000 and $828,000 respectively. At May 31, 2021 and 2020, the Company has no unrecognized share-based compensation.

Warrants

During the year ended May 31, 2021, we issued 3,116 shares of common stock to an accredited investor upon the exercise of previously issued warrants. The warrants were exercised on a cashless or “net” basis. Accordingly, we did not receive any proceeds from such exercises. The cashless exercise of such warrants resulted in the cancellation of previously issued warrants. During the year ended May 31, 2020, there was no warrant activity.

A summary of the status of the Company’s outstanding stock warrants for the years ended May 31, 2021 and 2020 is as follows:

	Number of Shares		Average Exercise Price
Outstanding – May 31, 2019		803,001	$	83.01
Outstanding – May 31, 2020		803,001		83.01
Granted – May 31, 2020		17,063		20.66
Outstanding – May 31, 2021		820,064	$	81.71

NOTE 11 - INCOME TAXES

For the year ended May 31, 2021 and 2020, the income tax provisions for current taxes were $0.

Deferred income taxes reflect the net tax effects of permanent and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences that result in deferred tax assets and liabilities are the results of carry forward tax losses, amortization and impairment expense.

The components of the net deferred tax assets for the year ended May 31, 2021 and 2020 are as follows:

	Year ended May 31, 2021			Year ended May 31, 2020
Net Operating Loss	$	1,926,000		$	770,000
Impairment of cost method investment		129,000			-
Accrued Expenses		98,000
Allowance for Doubtful Accounts		10,000
Gross deferred tax asset		2,163,000			770,000
Less: Valuation allowance		(1,972,000	)		(825,000	)
Net deferred tax asset	$	191,000		$	55,000
Deferred tax liabilities:
Amortization of intangible assets		(98,000	)		(55,000	)
Depreciation		(93,000	)
Net deferred assets/liabilities		-			-

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a valuation allowance, in an amount equal to gross deferred tax assets less deferred tax liabilities. For the years ended May 31, 2021 and 2020, the change in the valuation allowance was $1,257,000 and $444,000, respectively.

F-30

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

The table below summarizes the reconciliation of our income tax provision computed at the federal statutory rate of 21% for the years ended May 31, 2021 and 2020 and the actual tax provisions for the year ended May 31, 2021 and 2020.

	2021			2020
Expected provision (benefit) at statutory rate		(21.0	)%		(21.0	)%
State taxes, net of federal tax benefit		(4.4	)%		(4.4	)%
Permanent differences-stock based compensation		9.0			15.0
Increase in valuation allowance		16.4	%		10.4	%
Total provision (benefit) for income taxes		0.0	%		0.0	%

At May 31, 2021 and May 31, 2020, the Company had Federal net operating loss carry forwards of approximately $7,600,000 and $3,800,000, respectively. The net operating loss of approximately $7,600,000 can be carried forward indefinitely subject to annual usage limitations. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOLs may be subject to an annual limitation in the event of a change in control as defined under the regulations.

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions and is subject to examination by the various taxing authorities.

F-31

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

NOTE 12 — SUBSEQUENT EVENTS

Acquisitions

Simplicity Salinas, LLC:

On July 22, 2021, the Company’s wholly-owned subsidiary, Simplicity Salinas, LLC (“Simplicity Salinas”) entered into an Asset Purchase Agreement (“Simplicity Salinas APA”) with an existing franchisee (“”), to acquire the franchisee’s assets in exchange for 6,000 shares of the Company’s common stock with fair value of $65,100, or $10.85 per share, based on the fair value of assets acquired.

Debt Instruments Issued

June 11 FirstFire Global 12% Promissory Note and Securities Purchase Agreement

On June 11, 2021, the Company entered into a securities purchase agreement (the “FirstFire SPA”) dated as of June 10, 2021, with FirstFire Global Opportunities Fund, LLC (“FirstFire”), pursuant to which the Company issued a 12% promissory note (the “FirstFire Note”) with a maturity date of June 10, 2023 (the “FirstFire Maturity Date”), in the principal sum of $1,266,666. In addition, the Company issued 11,875 shares of its common stock to FirstFire as a commitment fee pursuant to the FirstFire SPA. Pursuant to the terms of the FirstFire Note, the Company agreed to pay to $1,266,666 (the “FirstFire Principal Sum”) to FirstFire 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 FirstFire Note after 180 days from June 10, 2021). The FirstFire Note carries an original issue discount (“OID”) of $126,666. Accordingly, FirstFire paid the purchase price of $1,140,000 in exchange for the FirstFire Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. FirstFire may convert the FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the FirstFire Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by FirstFire upon, at the election of FirstFire, 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 FirstFire Note.

The Company may prepay the FirstFire Note at any time prior to maturity in accordance with the terms of the FirstFire Note. The 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 FirstFire Note or the FirstFire SPA.

Upon the occurrence of any Event of Default (as defined in the FirstFire Note), which has not been cured within three calendar days, the 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 FirstFire SPA, the Company also issued to FirstFire a three-year warrant (the “FirstFire Warrant”) to purchase 593,750 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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 FirstFire SPA, including shares issued upon conversion of the FirstFire Note or exercise of the 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.

F-32

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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% promissory note (the “GS Note”) with a maturity date of June 10, 2023 (the “GS Maturity Date”), in the principal sum of $333,333. In addition, the Company issued 3,125 shares of its common stock to GS as a commitment fee pursuant to the GS SPA. Pursuant to the terms of the GS Note, the Company agreed to pay to $300,000.00 (the “GS Principal Sum”) to GS 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 GS Note after 180 days from June 10, 2021). The GS Note carries an original issue discount (“OID”) of $33,333. Accordingly, GS paid the purchase price of $300,000.00 in exchange for the GS Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. GS may convert the GS Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the GS Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by GS upon, at the election of GS, 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 GS Note.

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%.

Pursuant to the terms of the GS SPA, the Company also issued to GS a three-year warrant to purchase 156,250 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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.

Pursuant to the terms of the Series A-2 Maxim Note Amendments, on July 15, 2021 the Company was required to either pay the Maxim Series A-2 Note in its entirety or the Company would increase the Maxim Note to include an additional $100,000 in principal to Maxim. On July 15, 2021 the Company increased the Maxim Note by $100,000. 

Fourth Amendment to Series A-2 Maxim Note

On August 19, 2021, the Company and Maxim entered into the fourth amendment (the “Fourth Amendment”) to the Series A-2 Maxim Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock. The Company also granted Maxim an irrevocable right of first refusal superseding all others to act as Company’s sole managing underwriter and sole bookrunner or exclusive placement agent or financial advisor, or finder in connection with any public or private offering by the Company or any subsidiary of or successor to the Company (if applicable) of its equity, equity linked or debt securities (including convertible securities) while the Company’s common stock is listed on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing, each, a “National Exchange”), within the period beginning on August 19, 2021 and ending on the close of business on January 1, 2023.

On August 19, 2021, the Company issued to Maxim a common stock purchase warrant (the “Warrant”) for the purchase of 365,000 shares of the Company’s common stock (the “Warrant Shares”) at an exercise price of $13.00, subject to adjustment as provided in the Warrant. The Warrant is exercisable during the period commencing on August 19, 2021 and ending at 5:00 p.m. eastern standard time on the date that is the earlier of (i) three years from the effective date of a registration statement registering for resale by Maxim or its assigns the Warrant Shares (provided that such registration statement remains in effect at the end of the exercise period) and (ii) the 42 month anniversary after August 19, 2021.

The Company is expected to pay the Maxim note, in its entirety by the end of August, 2021.

Jefferson Street Capital Stock Purchase Agreement & 12% Convertible Promissory Jefferson Note

On August 23, 2021, the Company entered into that certain securities purchase agreement (the “Jefferson SPA”), dated as of August 23, 2021, by and between the Company and Jefferson Street Capital LLC (“Jefferson”). Pursuant to the terms of the Jefferson SPA, (i) the Company agreed to issue and sell to Jefferson the Jefferson Note (as hereinafter defined); (ii) the Company agreed to issue to Jefferson the Warrant (as hereinafter defined); and (iii) the Company agreed to issue to Jefferson 3,125 commitment shares; and (iv) Jefferson agreed to pay to the Company $300,000.00 (the “Purchase Price”).

F-33

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Pursuant to the terms of the Jefferson SPA, on August 23, 2021, the Company issued a 12% convertible promissory Jefferson Note (the “Jefferson Note”) with a maturity date of August 23, 2023 (the “Maturity Date”), in the principal amount of $333,333.33. Pursuant to the terms of the Jefferson Note, the Company agreed to pay to Jefferson $333,333.33 (the “Principal Amount”), with a purchase price of $300,000 plus an original issue discount in the amount of $333,333.33 (the “OID”), and to pay interest on the Principal Amount at the rate of 12% per annum, with the understanding that the first six months of interest is guaranteed and the remaining 18 months of interest is deemed earned in full if any amount is outstanding under the Jefferson Note after 180 days from August 23, 2021.

Any Principal Amount or interest on the Jefferson Note that is not paid when due will bear interest at the rate of the lesser of (i) 20%, or (b) the maximum rate allowed by law.

Jefferson may, at any time while the shares issuable upon conversion of the Jefferson Note are subject to an effective registration statement, or if no registration statement covering such shares is effective, at any time after 180 days from August 23, 2021, so long as there are amounts outstanding under the Jefferson Note, convert all or any portion of the then outstanding and unpaid Principal Amount and interest into shares of the Company’s common stock at a conversion price of $11.50 per share; provided, however, that upon failure to make any payment under the Jefferson Note, the conversion price will be $10.00 per share, as the same may be adjusted as provided in the Jefferson Note. The Jefferson Note has a 4.99% equity blocker; provided, however, that the 4.99% equity blocker may be waived (up to 9.99%) by Jefferson, at Jefferson’s election, on not less than 61 days’ prior notice to the Company.

On August 23, 2021, Jefferson paid the purchase price of $300,000 in exchange for the Jefferson Note. The Company intends to use the proceeds for its operational expenses and to pay off certain debt.

The Company may prepay the Jefferson Note at any time in accordance with the terms of the Jefferson Note. While any portion of the outstanding Principal Amount and interest are due and owing, if the Company receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, the issuance of equity or debt, the conversion of outstanding warrants of the Company, the issuance of securities pursuant to an equity line of credit of the Company or the sale of assets, the Company must inform Jefferson of such receipt, following which Jefferson may, in its sole discretion, require the Company to immediately apply up to 50% of the proceeds therefrom to repay all or any portion of the outstanding Principal Amount and interest then due under the Jefferson Note; provided, however, that the first $3,000,000 of equity financing received by the Company will be excepted from this requirement.

The Jefferson SPA and the Jefferson Note contain 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 Jefferson SPA.

Jefferson Street Capital Registration Rights Agreement

On August 23, 2021, the Company also entered into a registration rights agreement (the “Jefferson Registration Rights Agreement”) with Jefferson pursuant to which the Company is obligated to file a registration statement to register the resale of the shares issuable pursuant to the Jefferson SPA. Pursuant to the Jefferson Registration Rights Agreement, the Company must (i) file the registration statement within 90 calendar days from August 23, 2021, and (ii) use reasonable best efforts to cause the registration statement to be declared effective under the Securities within 120 calendar days after August 23, 2021. The Company also agreed that it would not file any other registration statement, including those on Form S-8 or Form S-4, for other securities, for a period of 12 months from August 23, 2021, unless it has the prior written approval from Jefferson.

The Jefferson Registration Rights Agreement contains customary indemnification provisions.

Jefferson Street Capital Common Stock Purchase Warrant

Also on August 23, 2021, pursuant to the terms of the Jefferson SPA, the Company issued to Jefferson a common stock purchase warrant (the “Jefferson Warrant”) for the purchase of 156,250 shares of the Company’s common stock. The per share exercise price under the Jefferson Warrant is, subject to adjustment as described therein, as follows: (i) 110% of the per share offering price of the offering made in connection with any “up-listing” of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any “up-listing” of the common stock and following such time if the “up-listing” contemplated in the Jefferson Warrant is not completed by November 1, 2021, the exercise price shall be $10.73. The Jefferson Warrant is exercisable during the period commencing on August 23, 2021 and ending at the close of business on August 23, 2024.

F-34

SIMPLICITY ESPORTS AND GAMING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	August 31,			May 31,
	2021			2021
ASSETS
Current Assets
Cash and cash equivalents	$	673,693		$	414,257
Accounts receivable, net		139,166			160,101
Inventory		297,013			206,974
Other current assets		41,250			52,643
Total Current Assets		1,151,122			833,975
Non Current  Assets
Goodwill		5,180,141			5,180,141
Intangible assets, net		1,558,039			1,635,227
Deferred brokerage fees		77,539			79,943
Property and equipment, net		566,970			574,308
Right of use asset, operating leases, net		1,562,617			1,533,010
Security deposits		40,307			40,307
Due from franchisees		3,037			23,007
Deferred financing costs		320,399			307,494
Total Non Current  Assets		9,309,049			9,373,437
TOTAL ASSETS	$	10,460,171		$	10,207,412
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	209,594		$	438,466
Accrued expenses		1,147,434			1,166,433
Current portion of convertible note payable, net of discount		1,323,051			2,211,097
Loan payable		82,235			82,235
Operating lease obligation, current		311,116			307,013
Current portion of deferred revenues		30,034			30,034
Total Current Liabilities		3,103,464			4,235,278
Operating lease obligation, net of current portion		1,245,699			1,199,748
Deferred revenues, less current portion		176,127			182,342
Non current portion of convertible notes payable,net of discount		235,030			-
Total Non Current Liabilities		1,656,856			1,382,090
Total Liabilities		4,760,320			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; 1,492,595 and 1,427,124 shares issued and outstanding as of August 31, 2021 and May 31, 2021 respectively		149			142
Common stock issuable		850,775			-
Additional paid-in capital		21,233,531			16,708,762
Accumulated deficit		(16,502,806	)		(12,291,899	)
Total Simplicity Esports and Gaming Company Stockholders’ Equity		5,581,649			4,417,005
Non-Controlling Interest		118,202			173,039
Total Stockholders’ Equity		5,699,851			4,590,044
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	10,460,171		$	10,207,412

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

F-35

SIMPLICITY ESPORTS AND GAMING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended
	August 31, 2021			August 31, 2020
Revenues:
Franchise revenues	$	62,358		$	87,283
Company-owned stores sales		673,501			76,938
Esports revenue		168,981			36,380
Total Revenues		904,840			200,601
Cost of Goods Sold		607,122			67,645
Gross Profit		297,718			132,956
Operating Expenses:
Compensation and related benefits		1,303,126			302,568
Professional fees		449,353			73,891
General and administrative expenses		443,695			241,769
Total Operating Expenses		2,196,174			618,228
Loss from Operations		(1,898,456	)		(485,272	)
Other Income (Expense):
Loss on extinguishment of debt		(1,759,969	)		(12,135	)
Interest expense		(659,696	)		(154,128	)
Interest income		19			7
Other income		52,358			-
Foreign exchange gain/(loss)		-			(19,572	)
Total Other Income (Expense)		(2,367,288	)		(185,828	)
Loss Before Provision for Income Taxes		(4,265,744	)		(671,100	)
Provision for Income Taxes		-			-
Net Loss		(4,265,744	)		(671,100	)
Net loss attributable to noncontrolling interest		54,837			15,886
Net loss attributable to common shareholders	$	(4,210,907	)	$	(655,214	)
Basic and Diluted Net Loss per share	$	(2.89	)	$	(0.61	)
Basic and diluted Weighted Average Number of Common Shares Outstanding		1,459,485			1,074,408

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

F-36

SIMPLICITY ESPORTS AND GAMING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

					Additional		Non-						Total
	Common Stock				Paid-In		Controlling			Accumulated			Stockholders’
	Shares		Amount		Capital		Interest			Deficit			Equity
Balance - May 31, 2020		998,622	$	100	$	11,132,103	$	(21,487	)	$	(6,195,044	)	$	4,915,672
Shares issued for cash		2,976		-		25,000		-			-			25,000
Shares issued in connection with issuance and amendments of notes payable		23,030		2		202,215					-			202,217
Shares issued for contracted services		6,597		-		68,778		-			-			68,778
Shares issued to directors, officers and employees as compensation		116,174		12		819,297		-			-			819,309
Shares issued in connection with franchise acquisition		18,750		2		164,998		-			-			165,000
Non-controlling interest of original investment in subsidiaries		-		-		-		240,000			-			240,000
Net loss attributable to noncontrolling interest		-		-		-		(15,886	)		-			(15,886	)
Net Loss											(655,214	)		(655,214	)
Balance - August 31, 2020		1,166,149	$	116	$	12,412,391	$	202,627		$	(6,850,258	)	$	5,764,876
Balance - May 31, 2021		1,427,124	$	142	$	16,708,762	$	173,039		$	(12,291,899	)	$	4,590,044
Shares issued in connection with issuance and amendments of notes payable		38,125		4		4,136,895		-			-			4,136,899
Shares issued for contracted services		21,346		2		224,875		-			-			224,877
Sale of warrants						100,000		-			-			100,000
Shares issued in connection with franchise acquisition		6,000		1		62,999		-			-			63,000
Common stock issuable		-		-		-		-			-			850,775
Net loss attributable to noncontrolling interest		-		-		-		(54,837	)		-			(54,837	)
Net Loss											(4,210,907	)		(4,210,907	)
Balance - August 31, 2021		1,492,595	$	149	$	21,233,531	$	118,202		$	(16,502,806	)	$	5,699,851

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

F-37

SIMPLICITY ESPORTS AND GAMING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended
	August 31, 2021			August 31, 2020
Cash flows from operating activities:
Net loss	$	(4,265,744	)	$	(671,100	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense		620,178			-
Deferred guaranteed interest		(116,000	)		-
Depreciation expense		81,737			27,135
Amortization expense		77,188			66,614
Provision for uncollectible accounts		14,137			52,549
Loss on extinguishment of debt		1,759,969			-
Stock-based compensation		850,775			-
Lease liability net of leased asset		20,447			-
Deferred financing costs		(12,905	)		(30,416	)
Gain on acquisition		(2,357	)		-
Issuance of shares for services		224,877			150,095
Issuance of shares for interest payment		81,508			-
Issuance of shares for inventory purchases		11,919			-
Changes in operating assets and liabilities:
Accounts receivable		20,935			5,478
Inventory		(90,039	)		11,127
Prepaid expenses		11,393			(17,087	)
Deferred brokerage fees		2,404			4,525
Deferred revenues		(6,215	)		(7,414	)
Accounts payable		(228,872	)		(10,538	)
Accrued expenses		(18,999	)		185,620
Due from franchisee		19,970			-
Net cash used in operating activities		(943,694	)		(233,412	)
Cash flows from investing activities:
Purchase of property and equipment		(20,961	)		-
Net cash provided by (used in) investing activities		(20,961	)		-
Cash flows from financing activities:
Proceeds from sale of warrants		100,000			-
Repayment of note payable		(590,909	)		(201,300	)
Proceeds from note payable		1,715,000			748,150
Proceeds from sale of Private Units		-			25,000
Net cash provided by financing activities		1,224,091			571,850
Net change in cash		259,436			338,438
Cash - beginning of period		414,257			160,208
Cash - end of period	$	673,693		$	498,646
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	109,091		$	48,800
Cash paid for income taxes	$	-		$	-
Supplemental Non-Cash Investing and Financing Information
Common stock issued for consideration in an acquisition of fixed assets	$	63,000		$	165,000
Common stock issued in connection with notes payable	$	238,918		$	-
Beneficial conversion feature with warrants issued for debt discount	$	1,505,387		$	-

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

F-38

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS

Simplicity Esports and Gaming Company F/K/A Smaaash Entertainment Inc. (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 2, 2019, 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 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 August 31, 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.

F-39

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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, as filed with the SEC on August 30, 2021. The interim results for the three months ended August 31, 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 months ended August 31, 2020 has been corrected for a reclassification of depreciation expense of $27,134 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 increased from $40,511 to $67,645 with a corresponding decrease of General and administrative expenses, resulting in a decrease to Gross Profit from $160,090 to $132,956. The correction had no impact on Total operating loss 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.

F-40

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

Basis of Consolidation

The condensed consolidated financial statements include the operations of the Company and its wholly owned subsidiaries, Simplicity Esports, LLC, PLAYlive Nation, Inc., and PLAYlive Nation Holdings, LLC, its 76% owned subsidiary Simplicity One Brasil Ltd, its 79% owned subsidiaries Simplicity Happy Valley, LLC and Simplicity Redmond, LLC, and its 51% owned subsidiary Simplicity El Paso, LLC.

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 cash equivalents.

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. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

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 period.

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.

F-41

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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 years. Franchise license renewal fees, which generally occur every 10 years, are billed before the renewal date. Fees received for future license renewal periods are amortized over the life of the renewal period.

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.

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SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

Deferred costs include commissions paid to brokers related to the sale of specific new franchises which have not met revenue recognition criteria as of August 31, 2021. These costs are recognized in the same period as the initial franchise fee revenue is recognized

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. Management has assessed accounts receivable and an allowance for doubtful accounts of approximately $42,479 has been recorded.

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 years), of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if they benefit future periods.

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 to 10 years.

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 August 31, 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 and ASC 505-50, Equity-Based Payments to Non-Employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.

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, which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions.

F-43

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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 and operating lease liability of $107,678. Due to the simplistic nature of the Company’s leases, no retained earnings adjustment was required. See Note 6 for further details.

Basic Income (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,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the consolidated financial statements and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

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.

F-44

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(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 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 $16,502,806, a working capital deficit of $1,952,342 as of August 31, 2021, and a net loss attributable to common shareholders of $4,210,907 for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the of the date that the unaudited financial statements are issued.

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 and/or public 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.

F-45

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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 16 company owned stores and 12 franchise 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 impacted the Company’s business for the fiscal year ended May 31, 2021 as well as the fiscal quarter ended August 31, 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.

NOTE 3 — PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation:

	August 31, 2021			May 31, 2021
Leasehold improvements	$	110,849		$	110,849
Property and equipment		830,141			755,741
Total cost		940,990			866,590
Less accumulated depreciation		(374,020	)		(292,282	)
Net property plant and equipment	$	566,970		$	574,308

Depreciation expense for the three months ended August 31, 2021 and 2020 was $81,737 and $27,135, respectively.

F-46

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 4 — INTANGIBLE ASSETS

The following table sets forth the intangible assets, including accumulated amortization as of August 31, 2021:

	August 31, 2021
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value
Non-Competes	4 years	$	1,023,118	$	548,642	$	474,476
Trademarks	Indefinite		866,000		-		866,000
Customer database	2 years		35,000		20,417		14,583
Restrictive covenant	2 years		115,000		67,083		47,917
Customer contracts	10 years		546,000		391,270		154,730
Internet domain	2 years		3,000		2,667		333
		$	2,588,118	$	944,537	$	1,558,039

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 years	$	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 years		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 August 31, 2021 for the fiscal years ending May 31:

	2022		2023		2024		2025		2026		Thereafter		Total
Non-Competes	$	153,468	$	204,624	$	116,384	$	-	$	-	$	-	$	474,476
Customer contracts		12,158		16,211		16,211		16,211		16,211		77,728		154,730
Restrictive covenant		43,125		4,792				-		-		-		47,917
Customer database		13,125		1,458				-		-		-		14,583
Internet domain		333		-		-		-		-		-		333
Total	$	222,209	$	227,085	$	132,595	$	16,211	$	16,211	$	77,728	$	692,039

Amortization expense for the three months ended August 31, 2021 and 2020 was $77,188 and $66,614, respectively.

F-47

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 5 — ACQUISITIONS

Simplicity Salinas, LLC

On July 26, 2021 the Company through its wholly owned subsidiary, Simplicity Salinas, LLC acquired all of the inventory and property, plant and equipment assets of an existing franchise in exchange for 6,000 shares of common stock at $10.85 per share.

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 August 31, 2021, the Company has accrued $25,000 and 375 shares of stock for the payments of this contract.

F-48

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

The Company maintains a portion of its cash balance at a financial services company that is owned by an officer of the Company.

NOTE 7 — COMMITMENTS AND CONTINGENCIES

Unit Purchase Option

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 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 August 31, 2021, operating lease right-of-use assets and liabilities arising from operating leases was $1,562,617 and $1,556,815, respectively. During the quarter ended August 31, 2021 and 2020, the Company recorded operating lease expense of $140,516 and $20,623.

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 August 31, 2021.

2022	$	370,370
2023	$	468,377
2024	$	470,511
2025	$	423,795
2026 and thereafter	$	171,602
Total Operating Lease Obligations	$	1,904,655
Less: Amount representing interest	$	(347,840	)
Present Value of minimum lease payments	$	1,556,815

F-49

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

Employment Agreements, Board Compensation and Bonuses

On July 29, 2020, the Company entered into a new employment agreement (the “Kaplan 2020 Agreement”) with Mr. Kaplan and the Board of Directors approved for Mr. Kaplan a $75,000 cash bonus and authorized the issuance of 250,000 shares of the Company’s common stock both related to his performance during the fiscal year ended May 31, 2020. As of August 31, 2021 the Company still owed Mr. Kaplan $35,000 of the 2020 bonus award.

Effective March 29, 2021, the Company promoted Mr. Kaplan to be the Chairmen of the Board of Directors, and he ceased to be the Company’s Chief Executive Officer and Interim Chief Financial Officer. Upon this change, Mr. Kaplan’s new monthly salary became $4,000 per month and the Kaplan 2020 Agreement was terminated.

On July 29, 2020, the Company entered into a new employment agreement (the “Franklin 2020 Agreement”) with Mr. Franklin and the Board of Directors approved for Mr. Franklin a $75,000 cash bonus and authorized the issuance of 250,000 fully vested shares of the Company’s common stock both related to his performance during the fiscal year ended May 31, 2020. As of August 31, 2021, the Company still owed Mr. Franklin $35,000 of the 2020 bonus award.

On March 25, 2021, the Board of Directors appointed Mr. Franklin as the Company’s Chief Executive Officer, effective March 29, 2021. Mr. Franklin continues to be a member of our board of directors. In connection with Mr. Franklin’s appointment, on March 25, 2021, the Company entered into an employment agreement, dated as of March 29, 2021 by and between the Company and Mr. Franklin (the “2021 Franklin Employment Agreement”). Pursuant to the terms of the 2021 Franklin Employment Agreement, in exchange for Mr. Franklin’s services, the Company agreed to pay Mr. Franklin an annual base salary of $250,000. Mr. Franklin is also eligible to receive a quarterly bonus of up to $15,000 in the form of a cash bonus and/or equity grant of shares of the Company’s common stock. Mr. Franklin’s eligibility for any bonus and the amount thereof will be determined solely at the discretion of the Board of Directors.

On May 11, 2021, the Board appointed Nancy Hennessey to serve as the Company’s Chief Financial Officer, effective May 17, 2021. In connection with Ms. Hennessey’s appointment as the Company’s Chief Financial officer, the Company entered into an employment agreement, dated as of May 17, 2021 by and between the Company and Ms. Hennessey (the “Hennessey Employment Agreement”). Pursuant to the terms of the Hennessey Employment Agreement, in exchange for Ms. Hennessey’s services, the Company agreed to pay Ms. Hennessey an annual base salary of $140,000. In addition, Ms. Hennessey is entitled to receive compensation in the form of an equity grant of $5,000 in the Company’s common stock for each quarter during the term of the Hennessey Employment Agreement, which runs for a period ending one year after May 17, 2021 and automatically renews for successive one year terms unless either party gives 60 days’ advance written notice of its intention not to renew the Hennessey Employment Agreement. Ms. Hennessey is also eligible to receive a quarterly bonus of up to $12,500 in the form of a cash bonus and/or equity grant of shares of the Company’s common stock. Pursuant to the terms of the Hennessey Employment Agreement, Ms. Hennessey will also receive (i) 5,000 shares of common stock upon filing of the 2021 Annual Report on Form 10-K, if completed before July 31, 2021, and (ii) 5,000 shares of common stock upon completion of an uplisting to a national exchange, such as The Nasdaq Stock Market or the NYSE American. Ms. Hennessey’s eligibility for any bonus and the amount thereof will be determined solely at the discretion of the Board of Directors

On August 31, 2021, the Company has accrued $5,000 for the quarterly equity grant for Ms. Hennessey.

On August 20, 2021, the Board of Directors approved 82,500 shares of stock to its directors and officers with for prior services an issuance date of September 1, 2021. On August 31, 2021, the Company has accrued $833,250 as common stock issuable.

F-50

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 8 - DEBT

The table below presents outstanding debt instruments as of August 31, and May 31, 2021

	AUGUST 31, 2021			MAY 31, 2021
Convertible Promissory Notes	$	3,952,424		$	3,157,970
Related Debt Discount		(2,394,343	)		(947,873	)
Total	$	1,558,081		$	2,211,097
Current portion of Convertible Promissory Notes, net	$	1,323,051		$	2,211,097
Non current portion of Convertible Promissory Notes, net		235,030			-

Amendments to the Series A-2 Exchange Convertible Note

On or about December 20, 2018, the Company issued that certain Series A-2 exchange convertible note in the original principal amount of $1,000,000 (the “Series A-2 Note”) to Maxim. The Series A-2 Note has terms substantially similar to those of the Series A-1 Note except that the Series A-2 Note has a maturity date of June 20, 2020, and an initial conversion price of $1.93, which will be automatically adjusted to the lower of (i) the conversion price then in effect, and (ii) the greater of the arithmetic average of the VWAP of the Company’s common stock in the five trading days prior to the notice of conversion and $0.50.

On June 4, 2020, $100,000 in principal was converted into 85,905 shares of common stock in accordance with the terms of the Maxim Note.

On June 18, 2020, the Company and Maxim entered into that certain first amendment to the Series A-2 Note (the “First Amendment”), pursuant to which such parties agreed to the following: (i) Maxim’s resale of the Company’s common stock (the “Common Stock”) underlying the Series A-2 Note shall be limited to 10% of the daily volume of the Common Stock on each respective trading day, (ii) the maturity date of the Series A-2 Note was extended to December 31, 2020, (iii) the principal amount of the Series A-2 Note was increased by $100,000 and (iv) the conversion price was reduced from $15.44 to $9.20.

On December 31, 2020, the Company and Maxim entered into a second amendment to the Series A-2 Note to extend the maturity date of Series A-2 Note to February 15, 2021.

F-51

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

On April 14, 2021, the Company and Maxim entered into the third amendment to the Series A-2 Note with Maxim pursuant to which the Company and Maxim agreed to the following:

(i)	The maturity date of the Series A-2 Note is extended to October 15, 2021.
(ii)	The principal balance of the Series A-2 Note is increased by $50,000 as of April 14, 2021.
(iii)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before April 30, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.
(iv)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before May 15, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.
(v)	If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before July 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000.
(vi)	If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before September 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000, representing a total cumulative increase in the principal balance of $350,000 if the Series A-2 Note is not repaid in its entirety on or before September 15, 2021.
(vii)	The Company will, within five business days after the Company’s receipt of the Second Tranche Purchase Price of $999,996, pay $500,000 to Maxim, which will reduce the principal owed under the Series A-2 Note by $500,000.

While any portion of the Series A-2 Note is outstanding, if the Company receives cash proceeds from public offerings or private placements of the Company’s common stock to investors (except with respect to proceeds from officers and directors of the Company), the Company will, within five business days of the Company’s receipt of such proceeds, inform Maxim or such receipt, following which Maxim will have the right in its sole discretion to require the Company to immediately apply up to 25% of such proceeds received by the Company to repay the outstanding amounts owed under the Series A-2 Note. The parties understand that (a) each dollar applied toward repayment pursuant to this clause (viii) will reduce the balance owed under the Series A-2 Note by one dollar, and (b) this clause (viii) will not apply to the Tiger Trout transaction.

On August 19, 2021, the Company and Maxim entered into the fourth amendment (the “Fourth Amendment”) to the Series A-2 Maxim Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock. The Company also granted Maxim an irrevocable right of first refusal superseding all others to act as Company’s sole managing underwriter and sole bookrunner or exclusive placement agent or financial advisor, or finder in connection with any public or private offering by the Company or any subsidiary of or successor to the Company (if applicable) of its equity, equity linked or debt securities (including convertible securities) while the Company’s common stock is listed on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing, each, a “National Exchange”), within the period beginning on August 19, 2021 and ending on the close of business on January 1, 2023.

As a result of the Fourth Amendment, the Company issued to Maxim a common stock purchase warrant (the “Warrant”) for the purchase of 365,000 shares of the Company’s common stock (the “Warrant Shares”) at an exercise price of $13.00. On August 25, 2021, the Company paid Maxim $500,000 and recognized an expense on the extinguishment of debt in the amount of $1,759,969. On August 30, 2021 the Company issued Maxim 20,000 shares of its common stock in fulfillment of the Fourth Amendment.

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% promissory note (the “Note”) with a maturity date of February 19, 2022 (the “Maturity Date”), in the principal sum of $1,650,000. In addition, the Company issued 10,000 shares of its common stock to the Holder as a commitment fee pursuant to the SPA. Pursuant to the terms of the Note, the Company agreed to pay to $1,650,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum (provided that the first twelve months of interest shall be guaranteed). The Note carries an original issue discount (“OID”) of $165,000. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $1,485,000 in exchange for the Note. The Company intends to use the proceeds for its operational expenses, the repayment of those certain self-amortization promissory notes previously issued to the Holder on June 18, 2020 and November 23, 2020, and the repayment of certain other existing debt obligations. The Holder may convert the Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Note) at any time at a conversion price equal to $11.50 per share.

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.

The Company is required to make an interim payment to the Holder in the amount of $363,000, on or before August 19, 2021, towards the repayment of the balance of the Note. The Company and the Holder have agreed to extend the terms of this payment. The extension provides that the Company paid $100,000 to the Holder by the interim payment date and has agreed to pay an additional $100,000 upon the completion of a new debt deal that is anticipated to close by September 1, 2021 and the Company has agreed to pay $163,000 to the Holder at the earlier of the Company stock uplist or September 30, 2021. These extension payments were paid by the Company on September 30,2021.

During the quarter ended August 31, 2021 the Company paid interim payments to the Holder in the amount of $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 and the Company recorded $287,330 in interest expense for the amortization of debt discount. On August 31, 2021 the balance of the Note, net of the related debt discount is $903,588.

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 (provided, however, that this five (5) calendar day cure period shall not apply to any event of default under Sections 3.1, 3.2, and 3.19 of the Note), 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% (the “Default Amount”). 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.

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% promissory note (“March 10 FirstFire Note”) with a maturity date of March 10, 2022, in the principal sum of $560,000. The Company received net proceeds of $130,606, net of OID of $56,000, net of origination fees of $8,394, and the repayment of principal and interest of $365,000 on the August 7, 2020 Note. In addition, the Company issued 3,394 shares of its common stock to the FirstFire as a commitment fee pursuant to the SPA. Pursuant to the terms of the March 10 FirstFire Note, the Company agreed to pay to $560,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum (provided that the first twelve months of interest shall be guaranteed). The March 10 FirstFire Note carries an OID of $56,000. Accordingly, on the Closing Date (as defined in the March 10 FirstFire SPA), the Holder paid the purchase price of $504,000 in exchange for the Note. The FirstFire may convert the March 10 FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the March 10 FirstFire Note) at any time at a conversion price equal to $11.50 per share.

F-52

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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.

On October 1, 2021, the Company issued a common stock purchase warrant for the purchase of an additional 40,000 shares of the Company’s common stock 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.

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 (provided, however, that this five (5) calendar day cure period shall not apply to any event of default under Sections 3.1, 3.2, and 3.19 of the March 10 FirstFire Note), 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% (the “Default Amount”). 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 quarter ended August 31, 2021, the Company recognized $65,533 of amortization of debt discount related to the FirstFire Note. On August 31, 2021, the balance of FirstFire Note, net of the related debt discount, is $419,468 all of which is included in the current portion of convertible notes payable, net of debt discount.

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% promissory note (the “June 11 FirstFire Note”) with a maturity date of June 10, 2023 (the “FirstFire Maturity Date”), in the principal sum of $1,266,666. In addition, the Company issued 11,875 shares of its common stock to FirstFire as a commitment fee pursuant to the June 11 FirstFire SPA. Pursuant to the terms of the June 11 FirstFire Note, the Company agreed to pay to $1,266,666 (the “FirstFire Principal Sum”) to FirstFire 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 FirstFire Note after 180 days from June 10, 2021). The June 11 FirstFire Note carries an original issue discount (“OID”) of $126,666. Accordingly, FirstFire paid the purchase price of $1,140,000 in exchange for the FirstFire Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. FirstFire may convert the June 11 FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the June 11 FirstFire Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by FirstFire upon, at the election of FirstFire, 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 June 11 FirstFire Note.

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-year warrant (the “June 11 FirstFire Warrant”) to purchase 593,750 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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. During the quarter, the Company recorded interest expense of $140,548. On August 31, 2021, the balance of the June 11 FirstFire Note, net of the related debt discount is $140,548 all of which is included in the long term portion of convertible notes payable, net of related debt discount.

F-53

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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% promissory note (the “GS Note”) with a maturity date of June 10, 2023 (the “GS Maturity Date”), in the principal sum of $333,333. In addition, the Company issued 3,125 shares of its common stock to GS as a commitment fee pursuant to the GS SPA. Pursuant to the terms of the GS Note, the Company agreed to pay to $300,000.00 (the “GS Principal Sum”) to GS 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 GS Note after 180 days from June 10, 2021). The GS Note carries an original issue discount (“OID”) of $33,333. Accordingly, GS paid the purchase price of $300,000.00 in exchange for the GS Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. GS may convert the GS Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the GS Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by GS upon, at the election of GS, 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 GS Note.

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%.

Pursuant to the terms of the GS SPA, the Company also issued to GS a three-year warrant to purchase 156,250 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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 quarter, the Company recorded interest expense of $34,703. On August 31, 2021, the balance of the GS Note, net of the related debt discount is $34,703 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% promissory note (the “Jefferson Note”) with a maturity date of August 23, 2023 (the “Jefferson Maturity Date”), in the principal sum of $333,333. In addition, the Company issued 3,125 shares of its common stock to Jefferson as a commitment fee pursuant to the Jefferson SPA. Pursuant to the terms of the Jefferson Note, the Company agreed to pay to $300,000.00 (the “Jefferson Principal Sum”) to Jefferson 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 Jefferson Note after 180 days from August 23, 2021). The Jefferson Note carries an original issue discount (“OID”) of $33,333. Accordingly, Jefferson paid the purchase price of $300,000.00 in exchange for the Jefferson Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. Jefferson may convert the Jefferson Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Jefferson Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by Jefferson upon, at the election of Jefferson, 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 Jefferson Note.

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-year warrant to purchase 156,250 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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.

The Company recorded the Jefferson Note in the amount of $333,333 and a related debt discount of $274,239, interest payable of $20,000 and additional paid in capital of $205,905. During the quarter, the Company recorded interest expense of $685. On August 31, 2021, the balance of the Jefferson Note, net of the related debt discount is $59,779 all of which is included in the long term portion of convertible notes payable, net of related debt discount.

F-54

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 9 -STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of August 31, 2021 there were no shares of preferred stock issued or outstanding.

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 August 31, 2021 and May 31, 2021, there were 1,492,595 and 1,427,124 shares of common stock issued and outstanding respectively.

Stock - Based Compensation

During the quarter ended August 31, 2021, the company approved stock-based compensation to its officers or directors and share based compensation for the three months ended August 31, 2021 and August 31, 2020 was approximately $838,250 and $150,095, respectively.

Warrants

The Company issued warrants related to the convertible notes payable that were issued during the quarter ended August 31, 2021. Additinally, the Company sold 100,000 warrants for the purchase of 100,000 shares of common stock at an exercise price of $20.00 per share to a private investor for $100,000.

A summary of the status of the Company’s outstanding stock warrants as of August 31, 2021 is as follows:

	Number of Shares		Average Exercise Price
Outstanding – May 31, 2020		803,001	$	83.01
Granted during the year ended May 31, 2021		17,063	$	20.66
Outstanding – May 31, 2021		820,064	$	10.38
Warrants granted during the quarter ended August 31, 2021		1,257,312	$	11.26
Sale of warrants during the quarter		100,000	$	20.00
Warrants exercisable – August 31, 2021		2,177,376	$	38.08

F-55

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

 NOTE 10 — SUBSEQUENT EVENTS

On September 1, 2021, the Company issued an aggregate of 82,500 restricted common shares of the Company to executive officers and directors of the Company for services rendered during the fiscal year ended May 31, 2021 which was approved by the Board of Directors on August 20, 2021 and which expense was accrued for the quarter ended August 31, 2021.

On August 31, 2021 pursuant to the terms of that certain Securities Purchase Agreement between the Company and Lucas Ventures, LLC, the Company issued a convertible promissory note in the principal amount of $200,000 with an effective date of September 2, 2021. In addition, the Company issued 3,749 shares of its common stock to the investor 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.

On August 31, 2021 pursuant to the terms of that certain Securities Purchase Agreement between the Company and LGH Investments, LLC, the Company issued a convertible promissory note in the principal amount of $200,000 effective September 2, 2021.

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 Global Opportunities Fund, LLC (“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.

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. 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-year warrant to purchase 729,167 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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.

On September 28, 2021 the Company received notice that the original Paycheck Protection Plan (“PPP”) loan was forgiven in the amount of $40,500. The company will record this along with the related accrued interest as debt forgiveness income in the quarter ending November 30, 2021.

On September 30, 2021, the Company paid $500,000 to the Holder of the February 19, 2021 12% Promissory Note and Securities Purchase Agreement in compliance with the renegotiated terms of an interim payment that was due on August 19, 2021.

On October 1, 2021, the Company issued a common stock purchase warrant for the purchase of an additional 40,000 shares of the Company’s common stock 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.

On October 7, 2021, the Company’s wholly owned subsidiary Simplicity Tracy, LLC entered into an Asset Purchase agreement company with a former franchisee to acquire the assets of the former franchisee in exchange for 4,500 shares of its common stock.

The above issuances/sales were made pursuant to an exemption from registration as set forth in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.

F-56

1,111,111 Units

SIMPLICITY ESPORTS AND GAMING COMPANY

PROSPECTUS

Lead Book-Running Manager	Co-Book-Running Manager
Maxim Group LLC	Joseph Gunnar & Co. LLC

__________, 2021

Through and including                         , 2021 (the 25^th day after the date of this offering), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth all expenses to be paid by the registrant, other than estimated underwriting discounts and commissions, in connection with our public offering. All amounts shown are estimates except for the SEC registration fee, the Nasdaq Capital Market listing fee and the FINRA filing fee:

Type	Amount
SEC Registration Fee	$	3,375
FINRA Filing Fee		5,000
Nasdaq Capital Market Listing Fee		50,000
Legal Fees and Expenses		225,000
Accounting Fees and Expenses		15,000
Transfer agent and registrar’s fees and expenses		10,000
Printing and engraving expenses		6,000
Non-Accountable Expense Allowance		100,000
Miscellaneous expense		59,732
Total Expenses	$	474,107

Item 14. Indemnification of Directors and Officers.

Our third amended and restated certificate of incorporation will provide that all of our directors, officers, employees and agents shall be entitled to be indemnified by us to the fullest extent permitted by Section 145 of the Delaware General Corporation Law (the “DGCL”). Section 145 of the DGCL concerning indemnification of officers, directors, employees and agents is set forth below.

Section 145. Indemnification of officers, directors, employees and agents; insurance.

(a)

A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.

(b)

A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

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(c)	To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.
(d)	Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.
(e)	Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former officers and directors or other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.
(f)	The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to such provision after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.
(g)	A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.
(h)	For purposes of this section, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

 II-2

(i)	For purposes of this section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this section.
(j)	The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
(k)	The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any by law, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation’s obligation to advance expenses (including attorneys’ fees).

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

In accordance with Section 102(b)(7) of the DGCL, our third amended and restated certificate of incorporation, as amended, will provide that no director shall be personally liable to us or any of our stockholders for monetary damages resulting from breaches of their fiduciary duty as directors, except to the extent such limitation on or exemption from liability is not permitted under the DGCL. The effect of this provision of our third amended and restated certificate of incorporation, as amended, is to eliminate our rights and those of our stockholders (through stockholders’ derivative suits on our behalf) to recover monetary damages against a director for breach of the fiduciary duty of care as a director, including breaches resulting from negligent or grossly negligent behavior, except, as restricted by Section 102(b)(7) of the DGCL. However, this provision does not limit or eliminate our rights or the rights of any stockholder to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director’s duty of care.

If the DGCL is amended to authorize corporate action further eliminating or limiting the liability of directors, then, in accordance with our third amended and restated certificate of incorporation, as amended, the liability of our directors to us or our stockholders will be eliminated or limited to the fullest extent authorized by the DGCL, as so amended. Any repeal or amendment of provisions of our third amended and restated certificate of incorporation, as amended, limiting or eliminating the liability of directors, whether by our stockholders or by changes in law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to further limit or eliminate the liability of directors on a retroactive basis.

Our third amended and restated certificate of incorporation, as amended, will also provide that we will, to the fullest extent authorized or permitted by applicable law, indemnify our current and former officers and directors, as well as those persons who, while directors or officers of our corporation, are or were serving as directors, officers, employees or agents of another entity, trust or other enterprise, including service with respect to an employee benefit plan, in connection with any threatened, pending or completed proceeding, whether civil, criminal, administrative or investigative, against all expense, liability and loss (including, without limitation, attorney’s fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by any such person in connection with any such proceeding.

 II-3

Notwithstanding the foregoing, a person eligible for indemnification pursuant to our third amended and restated certificate of incorporation, as amended, will be indemnified by us in connection with a proceeding initiated by such person only if such proceeding was authorized by our board of directors, except for proceedings to enforce rights to indemnification.

The right to indemnification which will be conferred by our third amended and restated certificate of incorporation, as amended, is a contract right that includes the right to be paid by us the expenses incurred in defending or otherwise participating in any proceeding referenced above in advance of its final disposition, provided, however, that if the DGCL requires, an advancement of expenses incurred by our officer or director (solely in the capacity as an officer or director of our corporation) will be made only upon delivery to us of an undertaking, by or on behalf of such officer or director, to repay all amounts so advanced if it is ultimately determined that such person is not entitled to be indemnified for such expenses under our third amended and restated certificate of incorporation, as amended, or otherwise.

The rights to indemnification and advancement of expenses will not be deemed exclusive of any other rights which any person covered by our third amended and restated certificate of incorporation, as amended, may have or hereafter acquire under law, our third amended and restated certificate of incorporation, as amended, our bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.

Any repeal or amendment of provisions of our third amended and restated certificate of incorporation, as amended, affecting indemnification rights, whether by our stockholders or by changes in law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to provide broader indemnification rights on a retroactive basis, and will not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision. Our third amended and restated certificate of incorporation, as amended, will also permit us, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other that those specifically covered by our third amended and restated certificate of incorporation, as amended.

Our bylaws, include the provisions relating to advancement of expenses and indemnification rights consistent with those which will be set forth in our third amended and restated certificate of incorporation, as amended. In addition, our bylaws provide for a right of indemnity to bring a suit in the event a claim for indemnification or advancement of expenses is not paid in full by us within a specified period of time. Our bylaws also permit us to purchase and maintain insurance, at our expense, to protect us and/or any director, officer, employee or agent of our corporation or another entity, trust or other enterprise against any expense, liability or loss, whether or not we would have the power to indemnify such person against such expense, liability or loss under the DGCL.

Any repeal or amendment of provisions of our bylaws affecting indemnification rights, whether by our board of directors, stockholders or by changes in applicable law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to provide broader indemnification rights on a retroactive basis, and will not in any way diminish or adversely affect any right or protection existing thereunder with respect to any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.

The registrant also intends to enter into indemnification agreements with its future directors and executive officers. The registrant has purchased directors’ and officers’ liability insurance. The registrant believes that this insurance is necessary to attract and retain qualified directors and officers.

 II-4

Item 15. Recent Sales of Unregistered Securities.

The following is a summary of transactions by us since our inception on April 17, 2017 involving sales of our securities that were not registered under the Securities Act.

On May 31, 2017, we issued 179,688 Founder Shares to I-AM Capital Partners LLC (“Sponsor”) in exchange for a capital contribution of $25,000. Upon the partial exercise of the underwriters’ over-allotment option on September 13, 2017, 17,188 Founder Shares were forfeited by the Sponsor, for a balance of 162,500 Founder Shares held by our Sponsor. Our sponsor is an accredited investor for purposes of Rule 501 of Regulation D. No underwriting discounts or commissions were paid with respect to such sales.

On August 22, 2017, we sold 5,000,000 units at a purchase price of $10.00 per unit in our initial public offering (“IPO”) of public units (“Public Units”), generating gross proceeds of $50.0 million. Each Public Unit consisted of one share of our Common Stock (“Public Shares”), one right to receive one-tenth of one share our Common Stock upon consummation of an initial business combination (“Public Right”), and one redeemable warrant (“Public Warrants”). Each warrant entitled the holder to purchase one share of common stock at an exercise price of $92.00 per share, subject to adjustment.

On August 22, 2017, simultaneously with the consummation of the IPO and the sale of the Public Units, we consummated the private placement of 254,500 units (“Private Placement Units”) at a price of $10.00 per unit, generating total gross proceeds of $2,545,000. Each unit consisted of (i) one share of Common Stock, (ii) one right to receive one-tenth (1/10) of one share of Common Stock upon the consummation of an initial business combination (“Private Placement Rights”), and (iii) one 5-year warrant to purchase one share of Common Stock at an exercise price of $92.00 per share. The Private Placement Units, which were purchased by the Sponsor, are identical to the Public Units, except the Private Placement Warrants underlying the Private Placement Units are non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its affiliates or designees. If the Private Placement Units are held by someone other than the initial holder, or its permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by such holders on the same basis as the Public Warrants.

On August 22, 2017, we issued 6,250 shares of Common Stock to Maxim Group LLC (“Maxim”) in connection with its services as underwriter for the IPO.

Contained in the underwriting agreement for the IPO was an over-allotment option allowing the underwriters to purchase from the Company up to an additional 750,000 Public Units (the “Over-Allotment Units”) and, in addition, the Company received a commitment from the Sponsor to purchase up to an additional 26,250 Private Placement Units. On September 13, 2017, the underwriters partially exercised their option and purchased 200,000 Over-Allotment Units, which were sold at an offering price of $10.00 per unit, generating gross proceeds of $2,000,000.

On September 13, 2017, simultaneously with the underwriter’s partial exercise of the over-allotment option, we consummated the sale of an additional 875 Private Placement Units, generating gross proceeds of $70,000.

On September 13, 2017, we issued Maxim an additional 250 shares of our Common Stock upon partial exercise of the over-allotment. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.

At the Special Meeting on November 20, 2018, holders of 556,033 Public Shares exercised their right to redeem those shares for cash at a price of $81.75 per share, for an aggregate of approximately $45,455,596.

On November 20, 2018, we issued 250,000 shares of our Common Stock to AHA Holdings Private Limited as an upfront portion of the newly issued shares of our Common Stock to be exchanged for all of the ownership interest in Smaaash Private within 6 months after the closing of the Business Combination.

On November 20, 2018, we issued 26,000 shares of Common Stock to Chardan Capital Markets, LLC (“Chardan”) in consideration of services rendered. The shares issued to Chardan are subject to the same lock-up and will have the same registration rights as the shares of the Company held by the Sponsor.

On November 20, 2018, we issued 65,000 shares of Common Stock upon conversion of the Public Rights.

On November 20, 2018, upon the consummation of the transaction (“Business Combination”) with Smaaash Entertainment Private Limited (“Smaaash Private”), we issued 3,269 shares of Common Stock underlying the Private Placement Rights to the holders of the Private Placement Rights.

In connection with the closing of the Acquisition of Simplicity Esports LLC, we issued 37,500, 87,500, and 250,000 shares of Common Stock, respectively, to the Simplicity Owners on January 4, 2019, January 7, 2019, and March 27, 2019 in exchange for all of the issued and outstanding equity interest of Simplicity Esports LLC held by Simplicity Owners.

 II-5

On January 4, 2019, upon the closing of the Acquisition of Simplicity Esports LLC, the Series A-1 Note in the amount of $500,000 and held by Maxim automatically converted into 24,206 shares of Common Stock.

During the period from March 1, 2019 through July 1, 2019, we sold an aggregate of 987,500 units at a purchase price of $2.00 per unit to 12 accredited investors in exchange for receipt of $1,975,000. Each unit consisted of (i) one share of Common Stock, and (ii) a 5-year warrant to purchase one share of Common Stock at a purchase price of $32.00.

On March 27, 2019, pursuant to a Restricted Stock Award, we issued Jed Kaplan, our then-Chief Executive Officer and interim Chief Financial Officer and a member of our board of directors, 15,000 shares of our restricted Common Stock. Such shares vested over the succeeding nine month period. As of July 7, 2021, all of such shares have vested. Mr. Kaplan currently serves as our Chairman of the Board.

On March 27, 2019, pursuant to a Restricted Stock Award, we issued Roman Franklin, our then-President and a member of our board of directors, 4,500 shares of our restricted Common Stock. Such shares vested over the succeeding nine month period. As of July 7, 2021, all of such shares have vested. Mr. Franklin currently serves as our Chief Executive Officer and a member of our board of directors.

On March 27, 2019, pursuant to a Restricted Stock Award, we issued Steve Grossman, President of Simplicity Esports, LLC, a wholly owned subsidiary of our Company at such time, 3,000 shares of our restricted Common Stock. Such shares vested over the succeeding nine month period. As of July 7, 2021 all of such shares have vested.

Each of the Restricted Stock Awards was entered into in connection with entry into employment agreements with each of Messrs. Kaplan, Franklin and Grossman on December 31, 2018.

On May 31, 2019, we issued 12,500 shares of Common Stock to Polar in exchange for Polar Asset Management Partners Inc.’s (“Polar”) forgiveness of $143,476 owed by us to Polar under that that certain Debt Conversion Agreement entered into in May 2019 between Polar and us.

On July 30, 2019, in connection with the acquisition of a 100% interest in PLAYlive Nation, Inc. (“PLAYlive”) by way of merger, the Company issued 93,750 shares of the Company’s common stock in exchange for 100% of the issued and outstanding common stock from the owners of PLAYlive.

On September 16, 2019, pursuant to a Restricted Award, we issued to Jed Kaplan, our then-Chief Executive Officer and Interim Chief Financial Officer and a member of our board of directors, of 8,750 shares of our restricted Common Stock. Mr. Kaplan currently serves as our Chairman.

On September 16, 2019, pursuant to a Restricted Award, we issued to Roman Franklin, our then-President and a member of our board of directors, of 2,625 shares of our restricted Common Stock. Mr. Franklin currently serves as our Chief Executive Officer and a member of our board of directors.

On September 16, 2019, pursuant to a Restricted Award, we issued to Steven Grossman, our Corporate Secretary, of 1,750 shares of our restricted Common Stock. These shares were issued in reliance on Section 4(a)(2) of the Securities Act. Mr. Grossman has informed the Company that he will resign as Corporate Secretary effective April 15, 2021.

On March 11, 2020, in connection with the execution of the Common Stock Purchase Agreement with Triton Funds, LP, the Company issued 625 shares of the Company’s common stock to Triton Funds, LP (“Triton”) as a donation.

On April 9, 2020, the Company delivered a Purchase Notice to Triton pursuant to the terms of the Common Stock Purchase Agreement requiring Triton to acquire 15,625 shares of common stock, which resulted in $87,700 in proceeds to the Company. Pursuant to the terms of the Common Stock Purchase Agreement, on April 9, 2020, the Company instructed the transfer agent to issue 15,625 shares of common stock to a custodial account of Triton. Unfortunately, the transfer agent erroneously transferred the entire 90,625 shares of common stock under the Equity Line to the custodial account of Triton, resulting in an over-issuance of 75,000 shares to Triton. The Company notified Triton of this error and that the Company terminated the Common Stock Purchase Agreement with Triton. On November 18, 2020, the 75,000 shares issued in error were returned by Triton and cancelled and returned to the treasury of the Company.

On May 4, 2020, pursuant to the terms of that certain 10% Fixed Convertible Promissory Note dated April 29, 2020 in the principal amount of $152,500 issued by the Company in favor of Harbor Gates Capital, LLC, the Company issued 1,250 shares of the Company’s common stock to Harbor Gates Capital, LLC as additional consideration for the purchase of such note.

 II-6

On May 7, 2020, we issued 2,977 shares of our restricted Common Stock, at a price of 8.40 per share, to William H. Herrmann, Jr. a member of our board of directors, for an aggregate purchase price of $25,000.

On June 4, 2020, we issued 10,739 shares of common stock in connection with the conversion of $100,000 in principal of a convertible note issued in favor of Maxim.

On June 4, 2020, we issued 3,125 shares of common stock in satisfaction of an outstanding balance owed to a vendor.

On June 18, 2020, pursuant to the terms of that certain Securities Purchase Agreement between the Company and an accredited investor, pursuant to which the Company issued a 12% self-amortization promissory note in the principal amount of $550,000, the Company issued 6,875 shares of the Company’s common stock to such accredited investor as additional consideration for the purchase of such note.

On June 30, 2020, the Company issued 12,334 shares of common stock at $7.76 per share to various employees of the Company as compensation. In connection with the issuance of these shares, the Company recorded stock-based compensation of $95,700.

On July 1, 2020, the Company acquired the assets of one its franchisee owned esports gaming centers located on the Fort Bliss U.S. Military base in El Paso, TX. In connection with the acquisition the Company issued 18,750 restricted shares.

On July 29, 2020, the Board issued 41,875 shares of common stock to Jed Kaplan, our then-Chief Executive Officer and Interim Chief Financial Officer and a member of our board of directors. Mr. Kaplan now serves as our Chairman of the Board. Of these shares, (i) 31,250 shares of common stock related to services provided by Mr. Kaplan to the Company during the 2020 fiscal year, (ii) 8,750 shares of common stock related to grants that should have been, but were not, made pursuant to the Kaplan 2018 Agreement (as hereinafter defined), and (iii) 1,875 shares of common stock related to grants made pursuant to the Kaplan 2020 Agreement (as hereinafter defined). The Kaplan 2018 Agreement provided for the grant to Mr. Kaplan of 1,250 shares of common stock per month. For the months of January 2020 through July 2020, however, such shares had not been granted. Accordingly, the July 29, 2020 grant included an aggregate of 8,750 shares of common stock that should have been granted for the months of January 2020 through July 2020. The Kaplan 2020 Agreement provides for the grant to Mr. Kaplan of 1,875 shares of common stock per month. Such shares were fully vested and earned as of the issuance thereof.

On July 29, 2020, the Board also issued 34,813 shares of common stock to Roman Franklin, our then-President and a member of our board of directors. Mr. Franklin now serves as our Chief Executive Officer and a member of our board of directors. Of these shares, (i) 31,250 shares of common stock related to services provided by Mr. Franklin to the Company during the 2020 fiscal year, (ii) 2,625 shares of common stock related to grants that should have been, but were not, made pursuant to the Franklin 2018 Agreement (as hereinafter defined), and (iii) 938 shares of common stock related to grants made pursuant to the Franklin 2020 Agreement (as hereinafter defined). The Franklin 2018 Agreement provided for the grant to Mr. Franklin of 375 shares of common stock per month. For the months of January 2020 through July 2020, however, such shares had not been granted. Accordingly, the July 29, 2020 grant included an aggregate of 2,625 shares of common stock that should have been granted for the months of January 2020 through July 2020. The Franklin 2020 Agreement provides for the grant to Mr. Franklin of 782 shares of common stock per month. Such shares were fully vested and earned as of the issuance thereof.

On July 29, 2020, we issued an aggregate of 24,000 shares of common stock to an employee and the members of the Board of Directors of the Company.

 II-7

On July 31, 2020, we entered into a marketing agreement whereby we issued 3,472 shares of common stock at $6.56 per share.

On August 7, 2020, pursuant to the terms of that certain Securities Purchase Agreement between the Company and an accredited investor pursuant to which we issued a 12% self-amortization promissory note in the principal amount of $333,333, the Company issued 4,167 shares of common stock.

During the three months ended August 31, 2020, the Company issued 84,062 shares of common stock to executive officers of the Company for services rendered. Additionally, the Company issued 19,779 shares of common stock to employees for services rendered. The shares were valued at per share prices ranging from $6.56 to $14.72, based on the quoted trading price on the date of grant. In connection with the issuance of these shares, during the nine months ended November 30, 2020, the Company recorded stock-based compensation of $54,395 and reduced prior accrued compensation by $669,215.

On September 16, 2020, we issued 13,209 shares of common stock to employees and consultants.

On September 16, 2020, the Company issued an aggregate of 2,813 restricted common shares of the Company to executive officers and employees of the Company for services rendered. More specifically, the Company issued 1,875 of these shares to Jed Kaplan and issued 938 of these shares to Roman Franklin. These shares were valued at $25,420, or $9.04 per share, based on the quoted trading price on the date of grant.

On September 22, 2020, in connection with an Asset Purchase agreement with Ignatious O’Riley, an existing franchisee to acquire such franchisee’s assets in exchange for 2,989 shares of the Company’s common stock with fair value of $29,416 or $9.84 per share.

On September 23, 2020, the Company’s wholly owned subsidiary, Simplicity Union Gap entered into an Asset Purchase agreement with Five Point Legacy Corp., an existing franchisee, to acquire such franchisee’s assets in exchange for 4,506 shares of the Company’s common stock with fair value of $43,974 or $9.76 per share.

On October 1, 2020, the Company entered into an Asset Purchase agreement with Parryproject LLC., Owen Parry and Jennie Parry, an existing franchisee, to acquire such franchisee’s assets in exchange for 3,688 shares of the Company’s common stock with fair value of $38,650 or $10.48 per share.

On October 1, 2020, the Company’s wholly owned subsidiary, Simplicity Humble entered into an Asset Purchase agreement with Team Centore Entertainment Corp., and Charles Centore, an existing franchisee, to acquire such franchisee’s assets in exchange for 8,402 shares of the Company’s common stock with fair value of $88,052 or $10.48 per share.

On October 12, 2020, the Company’s wholly owned subsidiary, Simplicity Frisco entered into an Asset Purchase agreement with JAR Mathis Holdings, Jared Mathis and Amy Mathis, an existing franchisee), to acquire such franchisee’s assets in exchange for 6,202 shares of the Company’s common stock with fair value of $74,423 or $12.00 per share.

 II-8

On October 30, 2020, the Company’s wholly owned subsidiary, Simplicity Santa Rosa entered into an Asset Purchase agreement with B&R Franchise Investments, LLC, Brian Chu and Richard Loo, an existing franchisee, to acquire such franchisee’s assets in exchange for 4,202 shares of the Company’s common stock with fair value of $46,068 or $11.44 per share.

On October 30, 2020, the Company’s wholly owned subsidiary, Simplicity Brea entered into an Asset Purchase agreement (“APA”) with Nextgen Gaming, LLC, Ajay Chunilal Shah and Shweta Shah, an existing franchisee, to acquire such franchisee’s assets in exchange for 3,255 shares of the Company’s common stock with fair value of $37,237 or $11.44 per share.

On October 30, 2020, the Company’s wholly owned subsidiary, Simplicity Billings entered into an Asset Purchase agreement with Button Mashers, Inc, Jon Bessmer and Brandy Bessmer, an existing franchisee, to acquire such franchisee’s assets in exchange for 4,697 shares of the Company’s common stock with fair value of $52,725 or $11.44 per share.

During the three months ended November 30, 2020, the Company issued an aggregate of 9,844 restricted common shares of the Company to executive officers of the Company for services rendered. Of these shares, the Company issued 5,625 shares to Jed Kaplan and issued 2,344 shares to Roman Franklin. These shares were valued at $119,632, or per share prices ranging from $9.04 per share to $11.44 per common share, based on the quoted trading price on the date of grant.

On December 1, 2020, the Company’s wholly-owned subsidiary, Simplicity St. Louis, LLC, entered into an Asset Purchase Agreement with Metta Gaming, LLC, Brian Paul Van Wyk, an existing franchisee, to acquire such franchisee’s assets in exchange for 3,523 shares of the Company’s common stock with fair value of $52,845, or $15.00 per share.

On December 2, 2020, the Company issued 5,000 shares of its common stock in satisfaction of $50,000 in legal fees. These shares were valued at $80,000, or $16.00 per share, based on the quoted trading price on the date of grant. In connection with the issuance of these shares, the Company reduced accounts payable by $50,000 and recorded legal fees of $30,000.

On March 10, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and FirstFire Global Opportunities Fund, LLC, the Company issued a 12% convertible promissory note in the principal amount of $560,000. In addition, the Company issued 3,394 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement.

 II-9

On March 11, 2021, the Company’s wholly-owned subsidiary, Simplicity Fullerton, LLC, entered into an Asset Purchase Agreement with Say K 2 Play, LLC a California limited liability company, Paresh Mital an individual and Smeeta Mital, an existing franchisee, to acquire such franchisee’s assets in exchange for 1,600 shares of the Company’s common stock with fair value of $20,800 or $13.00 per share.

During the three months ended February 28, 2021, the Company issued an aggregate of 108,641 restricted common shares of the Company to executive officers of the Company for services rendered. These shares were valued at $1,545,467, or per share prices ranging from $13.25 per share to $19.75 per common share, based on the quoted trading price on the date of grant.

On March 26, 2021, the Company’s wholly-owned subsidiary, Simplicity Vancouver, LLC, entered into an Asset Purchase Agreement with Bhavin Shah, an individual and Parshwa, Inc., a Washington corporation, an existing franchisee, to acquire such franchisee’s assets in exchange for 2,900 shares of the Company’s common stock with fair value of $42,900 or $16.50 per share.

On March 31, 2021, pursuant to the terms of that certain Stock Purchase Agreement, the Company issued and sold 41,667 shares of Common Stock to Tiger Trout Capital Puerto Rico, LLC at a purchase price of $12.00 per share.

On April 6, 2021, the Company issued an aggregate of 2,657 restricted common shares of the Company to executive officers and employees of the Company for services rendered. More specifically, the Company issued 1,875 of these shares to Jed Kaplan and issued 782 of these shares to Roman Franklin. These shares were valued at $34,488, or $12.98 per share, based on the quoted trading price on the date of grant.

On June 11, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and FirstFire Global Opportunities Fund, LLC, the Company issued a 12% convertible promissory note in the principal amount of $1,266,666. In addition, the Company issued 11,875 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 593,750 shares of the Company’s common stock.

On June 16, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and GS Capital Partners, LLC, the Company issued a convertible promissory note in the principal amount of $333,333. In addition, the Company issued 3,125 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 156,250 shares of the Company’s common stock.

On July 22, 2021, the Company’s wholly-owned subsidiary, Simplicity Salinas, entered into an Asset Purchase Agreement with an existing franchisee, to acquire the franchisee’s assets in exchange for 6,000 shares of the Company’s common stock with fair value of $65,100, or $10.85 per share, based on the fair value of assets acquired.

On August 19, 2021, the Company and Maxim entered into the fourth amendment to the Series A-2 Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Note, as amended, shall be extinguished, and the Series A-2 Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock.

On August 23, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and Jefferson Street Capital, LLC, the Company issued a convertible promissory note in the principal amount of $333,333. In addition, the Company issued 3,125 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 156,250 shares of the Company’s common stock.

 II-10

On August 31, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and Lucas Ventures, LLC, the Company issued a convertible promissory note in the principal amount of $200,000. In addition, the Company issued 3,749 shares of its common stock to the investor 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.

On August 31, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and LGH Investments, LLC, the Company issued a convertible promissory note in the principal amount of $200,000.

On September 1, 2021, the Company issued an aggregate of 82,500 restricted common shares of the Company to executive officers and directors of the Company for services rendered during the fiscal year ended May 31, 2021.

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 Global Opportunities Fund, LLC (“FirstFire”) as consideration for FirstFire entering into a first amendment to the March 10 FirstFire Note in order to forgive the interim payment and reduced the principal amount outstanding of the March 10 FirstFire Note by $123,200.

On September 28, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and Ionic Ventures, LLC, the Company issued a convertible promissory note in the principal amount of $1,555,555.56. In addition, the Company issued 14,584 shares of its common stock to the investor as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 729,167 shares of the Company’s common stock.

On October 1, 2021, the Company issued a common stock purchase warrant for the purchase of an additional 40,000 shares of the Company’s common stock 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.

On October 7, 2021, the Company’s wholly owned subsidiary Simplicity Tracy, LLC, entered into an Asset Purchase Agreement with an existing 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.

The above issuances/sales were made pursuant to an exemption from registration as set forth in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.

Item 16. Exhibits and Financial Statement Schedules

(a)	Exhibits. The list of exhibits preceding the signature page of this registration statement is incorporated herein by reference.
(b)	Financial Statements. See page F-1 for an index to the financial statements and schedules included in the registration statement.

Item 17. Undertakings

Insofar as indemnification for liabilities arising under the Securities Act “may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(a)	Rule 415 Offering. The undersigned registrant hereby undertakes:
(1)	To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)	To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii)	To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii)	To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2)	That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)	To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(i)	The undersigned Registrant hereby undertakes that it will:

a.

for determining any liability under the Securities Act of 1933, treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1), or (4) or 497(h) under the Securities Act of 1933 as part of this registration statement as of the time the Commission declared it effective.

b.

for determining any liability under the Securities Act of 1933, treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities.

 II-11

EXHIBIT INDEX

Exhibit No.	Exhibit
1.1	Form of Underwriting Agreement*
2.1	Share Subscription Agreement, dated May 3, 2018, by and among the Company, Smaaash Private, and the Smaaash Founders, (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement filed with the SEC on September 19, 2018).
2.2	Amendment Cum Addendum to the Share Subscription Agreement Dated May 03, 2018 (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement filed with the SEC on September 19, 2018).
2.3	Second Amendment Cum Addendum to the Share Subscription Agreement Dated May 03, 2018 (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement filed with the SEC on September 19, 2018).
2.4	Third Amendment Cum Addendum to the Share Subscription Agreement Dated May 03, 2018 (incorporated by reference to Annex A to the Company’s Proxy Statement Supplement, which was filed with the SEC on November 5, 2018).
2.5	Fourth Amendment Cum Addendum to the Share Subscription Agreement Dated May 03, 2018, dated as of November 15, 2018 (1)
3.1	Third Amended and Restated Certificate of Incorporation (1)
3.2	Certificate of Amendment to the Company’s Third Amended and Restated Certificate of Incorporation, filed with the Delaware Secretary of State on January 2, 2019 (9)
3.3	Certificate of Amendment to the Company’s Third Amended and Restated Certificate of Incorporation, filed with the Delaware Secretary of State on August 17, 2020 (20)
3.4	Certificate of Amendment to the Company’s Third Amended and Restated Certificate of Incorporation, filed with the Delaware Secretary of State on September 18, 2020 (21)
3.5	Certificate of Amendment to the Company’s Third Amended and Restated Certificate of Incorporation, filed with the Delaware Secretary of State on September 29, 2020 (22)
3.6	Certificate of Amendment to the Company’s Third Amended and Restated Certificate of Incorporation, filed with the Delaware Secretary of State on October 12, 2020 (23)
3.7	Certificate of Amendment to the Company’s Third Amended and Restated Certificate of Incorporation, filed with the Delaware Secretary of State on November 2, 2020 (24)
3.8	Certificate of Amendment to the Company’s Third Amended and Restated Certificate of Incorporation, filed with the Delaware Secretary of State on November 17, 2020 (25)
3.9	Bylaws (2)
4.1	Specimen Common Stock Certificate (4)
4.2	Specimen Warrant Certificate (4)
4.3	Warrant Agreement, dated August 16, 2017, by and between Continental Stock Transfer & Trust Company and the Company (3)
4.4	Form of Warrant (Annex C to the Form of Warrant Agent Agreement attached as Exhibit 4.5) (39)
4.5	Form of Warrant Agent Agreement by and between the Company and Continental Stock Transfer & Trust Company (39)
4.6	Form of Representative’s Warrant (39)
5.1	Opinion of Anthony L.G., PLLC*
10.1	Master Franchise Agreement, dated November 20, 2018, by and between the Company and Smaaash Private(1)
10.2	Master License and Distribution Agreement, dated November 20, 2018, by and between the Company and Smaaash Private(1)
10.3	Settlement and Release Agreement, dated November 20, 2018, by and between the Company and Maxim Group LLC(1)
10.4	Demand Secured Promissory Note, dated November 20, 2018, issued to Maxim Group LLC(1)
10.5	Escrow Agreement, dated November 20, 2018, by and among the Company, Ellenoff Grossman and Schole LLP and Shripal Morakhia(1)
10.6	Smaaash Entertainment Inc. 2018 Equity Incentive Plan (incorporated by reference to Annex F to the Company’s Proxy Statement filed with the SEC on September 19, 2018) †
10.7	Side Letter, dated November 16, 2018, by and between the Company and Chardan Capital Markets, LLC (1)
10.8	Letter of Undertaking, dated November 16, 2018, by Smaaash Private and Smaaash Founders(1)
10.9	Addendum to Master Franchise Agreement, dated November 29, 2018, by and between the Company and Smaaash Private(1)
10.10	Promissory Note, dated May 31, 2017, issued to I-AM Capital Partners LLC, our sponsor (2)
10.11	Letter Agreement, dated August 16, 2017, by and between the Company, the Sponsor and the officers and directors of the Company (3)
10.12	Registration Rights Agreement, dated August 16, 2017, by and among the Company and our sponsor (3)
10.13	Securities Subscription Agreement, dated May 31, 2017, among the Registrant and our sponsor (2)
10.14	Amended and Restated Unit Purchase Agreement, dated August 11, 2017, between the Registrant and our sponsor (5)
10.15	Form of Indemnity Agreement (4)
10.16	Administrative Services Agreement, dated August 16, 2017, by and between the Company and our sponsor (3)
10.17	Shareholders’ Agreement, dated May 3, 2018, by and among the Company, FW Metis Limited, Mitesh R. Gowani, the Smaaash Founders, and Smaaash Private (incorporated by reference to Annex D to the Company’s Definitive Proxy Statement filed with the SEC on September 19, 2018).
10.18	Stock Purchase Agreement, dated as of November 2, 2018, by and between the Company and Polar Asset Management Partners Inc. (6)
10.19	Stock Purchase Agreement, dated as of November 5, 2018, by and between the Company and K2 Principal Fund L.P. (6)
10.20	Amendment, dated December 20, 2018, by and among the Company, Polar Asset Management Partners Inc., and The K2 Principal Fund L.P. (7)

 II-12

10.21	Share Exchange Agreement, dated December 21, 2018, by and among Smaaash Entertainment Inc., Simplicity Esports, LLC, Jed Kaplan and each of the equity holders of Simplicity Esports, LLC (8)
10.22	Amendment No. 1 to Share Exchange Agreement, dated December 28, 2018, by and among Smaaash Entertainment Inc., Simplicity Esports, LLC, Jed Kaplan and each of the equity holders of Simplicity Esports, LLC (8)
10.23	Securities Exchange Agreement, dated December 20, 2018, by and between Smaaash Entertainment Inc. and Maxim Group LLC (8)
10.24	Series A-1 Exchange Convertible Note (8)
10.25	Series A-2 Exchange Convertible Note (8)
10.26	Registration Rights Agreement, dated December 20, 2018, by and between Smaaash Entertainment Inc. and Maxim Group LLC (8)
10.27	Lock-Up Agreement, dated December 20, 2018, by and between Smaaash Entertainment Inc. and Maxim Group LLC (8)
10.28	Amendment No. 2 to Share Exchange Agreement, dated December 30, 2018, by and among the Company, Simplicity Esports, LLC, and Jed Kaplan (9)
10.29	Voting Agreement, Dated December 31, 2018, between the Company and the stockholders of the Company party thereto (9)
10.30	Employment Agreement, dated December 31, 2018, between the Company and Jed Kaplan (9) †
10.32	Employment Agreement, dated December 31, 2018, between the Company and Roman Franklin (9) †
10.33	Employment Agreement, dated December 31, 2018, between the Company and Steven Grossman (9) †
10.34	Restricted Stock Award Agreement dated March 27, 2019 between the registrant and Jed Kaplan (10) †
10.35	Restricted Stock Award Agreement dated March 27, 2019 between the registrant and Roman Franklin (10) †
10.36	Restricted Stock Award Agreement dated March 27, 2019 between the registrant and Steve Grossman (10) †
10.37	Agreement and Plan of Merger, dated July 25, 2019, among the registrant, PLAYlive Nation, Inc., and owners of PLAYlive Nation, Inc. (11)
10.38	Exclusive Trademark and Symbol Use License Agreement, and Other Covenants, dated November 4, 2019, among Simplicity One Brasil LTDA and Clube de Regatas do Flamengo (12)
10.39	Common Stock Purchase Agreement, dated as of March 11, 2020, between the Company and Triton Funds LP (13)
10.40	Registration Rights Agreement, dated as of March 11, 2020, between the Company and Triton Funds LP (13)
10.41	10% Fixed Convertible Promissory Note dated April 29, 2020 issued by the Company in favor of Harbor Gates Capital, LLC (14)
10.42	Promissory Note dated May 12, 2020 issued by the Company in favor of Jed Kaplan (15)
10.43	Form of Self-Amortization Promissory Note dated June 18, 2020 issued by the Company to an accredited investor (16)
10.44	Form of Securities Purchase Agreement dated June 18, 2020, by and between the Company and an accredited investor (16)
10.45	First Amendment to the Series A-2 Exchange Convertible Note issued on December 20, 2018 (16)
10.46	2020 Omnibus Incentive Plan (17) †
10.47	Employment Agreement dated July 29, 2020 by and between the Company and Jed Kaplan (18) †
10.48	Employment Agreement dated July 29, 2020 by and between the Company and Roman Franklin (18) †
10.49	Form of Self-Amortization Promissory Note dated August 7, 2020 issued by the Company to an accredited investor (19)
10.50	Self-Amortization Promissory Note dated November 23, 2020, issued by the Company to an accredited investor (26)
10.51	Securities Purchase Agreement dated November 23, 2020, by and between the Company and an accredited investor (26)
10.52	Common Stock Purchase Warrant dated November 23, 2020, issued by the Company to an accredited investor (26)
10.53	Promissory Note dated February 19, 2021, issued by the Company to the Holder (27)
10.54	Securities Purchase Agreement dated February 19, 2021, by and between the Company and the Holder (27)
10.55	Promissory Note dated March 10, 2021, issued by the Company to FirstFire Global Opportunities Fund, LLC (28)

 II-13

10.56	Securities Purchase Agreement dated March 10, 2021, by and between the Company and FirstFire Global Opportunities Fund, LLC (28)
10.57	Employment Agreement, entered into on March 25, 2021 and effective March 29, 2021, by and between the Company and Roman Franklin (29) †
10.58	Employment Agreement, entered into on March 23, 2021 and effective March 29, 2021, by and between the Company and Knicks Lau (29) †
10.59	Stock Purchase Agreement, dated as of March 31, 2021, by and between the Company and Tiger Trout Capital Puerto Rico, LLC (30)
10.60	Third Amendment to the Series A-2 Exchange Convertible Note entered into on April 14, 2021, by and between the registrant and Maxim Group LLC (31)
10.61	Employment Agreement by and between the Company and Nancy Hennessey, entered into on May 11, 2021 and effective as of May 17, 2021 (32) †
10.62	Securities Purchase Agreement, entered into on June 11, 2021 and dated as of June 10, 2021, by and between the Company and FirstFire Global Opportunities Fund, LLC (33)
10.63	Convertible Promissory Note, issued on June 11, 2021 and dated as of June 10, 2021, by the Company in favor of FirstFire Global Opportunities Fund LLC (33)
10.64	Common Stock Purchase Warrant, dated as of June 11, 2021, to FirstFire Global Opportunities Fund LLC (40)
10.65	Securities Purchase Agreement, entered into on June 16, 2021 and dated as of June 10, 2021, by and between the Company and GS Capital Partners, LLC (33)
10.66	Convertible Promissory Note, issued on June 16, 2021 and dated as of June 10, 2021, by the Company in favor of GS Capital Partners, LLC (33)
10.67	Common Stock Purchase Warrant, dated as of June 16, 2021, to GS Capital Partners, LLC. (40)
10.68	Fourth Amendment to the Series A-2 Exchange Convertible Note entered into on August 19, 2021, by and between the registrant and Maxim Group LLC (34)
10.69	Common Stock Purchase Warrant, dated as of August 4, 2021, to Maxim Group, LLC (34)
10.70	Securities Purchase Agreement, dated August 23, 2021, by and between the Company and Jefferson Street Capital LLC (35)
10.71	Convertible Promissory Note, dated August 23, 2021, by the Company in favor of Jefferson Street Capital LLC (35)
10.72	Common Stock Purchase Warrant, dated as of August 23, 2021, to Jefferson Street Capital, LLC (35)
10.73	Securities Purchase Agreement, dated August 31, 2021, by and between the Company and Lucas Ventures, LLC (36)
10.74	Convertible Promissory Note, dated August 31, 2021, by the Company in favor of Lucas Ventures, LLC (36)
10.75	Common Stock Purchase Warrant, dated as of August 31, 2021, to Lucas Ventures, LLC (36)
10.76	Convertible Promissory Note, dated August 31, 2021, by the Company in favor of LGH Investments, LLC (36)
10.77	Securities Purchase Agreement, dated September 28, 2021, by and between the Company and Ionic Ventures, LLC (37)
10.78	Convertible Promissory Note, dated September 28, 2021, by the Company in favor of Ionic Ventures, LLC (37)
10.79	Common Stock Purchase Warrant, dated as of September 28, 2021, to Ionic Ventures, LLC (37)
10.80	Amendment No. 1 to Convertible Promissory Note, dated September 17, 2021, between the Company and FirstFire Global Opportunities Fund LLC *
10.81	Common Stock Purchase Warrant, dated as of September 17, 2021, to FirstFire Global Opportunities Fund LLC (40)
10.82	Amendment No. 2 to Convertible Promissory Note, dated October 1, 2021, between the Company and FirstFire Global Opportunities Fund LLC (40)
10.83	Common Stock Purchase Warrant, dated as of October 1, 2021, to FirstFire Global Opportunities Fund LLC (40)
10.84	Amendment No. 1 to Common Stock Purchase Warrant, dated as of September 9, 2021, between the Company and FirstFire Global Opportunities Fund LLC (40)
10.85	Amendment No. 1 to Common Stock Purchase Warrant, dated as of September 9, 2021, between the Company and GS Capital Partners, LLC (40)
10.86	Amendment No. 1 to Common Stock Purchase Warrant, dated as of September 9, 2021, between the Company and Jefferson Street Capital, LLC (40)
10.87	Amendment No. 1 to Common Stock Purchase Warrant, dated as of September 9, 2021, between the Company and Lucas Ventures, LLC (40)
14.1	Code of Ethics (4)
21.1	List of Subsidiaries*
23.1	Consent of Prager Metis CPAs, LLC*
23.2	Consent of Anthony L.G., PLLC (included on Exhibit 5.1)*
24.1	Power of Attorney (included on the signature page of the Registration Statement on Form S-1 filed on April 10, 2020) (38)

* Filed herewith

† Management contract, compensation plan or arrangement

 II-14

(1)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on November 30, 2018
(2)	Incorporated by reference to exhibits to the Company’s Registration Statement on Form S-1 filed on July 12, 2017
(3)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on August 22, 2017.
(4)	Incorporated by reference to exhibits to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed on July 31, 2017
(5)	Incorporated by reference to exhibits to Amendment No. 2 to the Company’s Registration Statement on Form S-1 filed on August 14, 2017
(6)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on November 7, 2018
(7)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on December 26, 2018
(8)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on December 28, 2018
(9)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on January 7, 2019.
(10)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on April 2, 2019.
(11)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on August 1, 2019.
(12)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on January 22, 2020.
(13)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on March 17, 2020.
(14)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on May 5, 2020.
(15)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on May 18, 2020.
(16)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on June 24, 2020.
(17)	Incorporated by reference to Appendix I Company’s Proxy Statement filed on June 9, 2020.
(18)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed with the SEC on August 13, 2020
(19)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on August 13, 2018.
(20)	Incorporated by reference to exhibits to the Company’s Annual Report on Form 10-K filed on August 31, 2020.
(21)	Incorporated by reference to exhibits to the Company’s Post-Effective Amendment No. 1 to Registration Statement on Form S-1 filed on October 5, 2020.
(22)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on October 5, 2020.
(23)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on October 13, 2020.
(24)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on November 4, 2020.
(25)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on November 18, 2020.
(26)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on December 2, 2020.
(27)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on February 24, 2021.
(28)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on March 16, 2021.
(29)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on March 29, 2021.
(30)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on April 6, 2021.
(31)	Incorporated by reference to exhibits to the Company’s Quarterly Report on Form 10-Q filed on April 14, 2021.
(32)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on May 12, 2021.
(33)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on June 17, 2021.
(34)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on August 24, 2021.
(35)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on August 27, 2021.
(36)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on September 7, 2021.
(37)	Incorporated by reference to exhibits to the Company’s Current Report on Form 8-K filed on October 1, 2021.
(38)	Incorporated by reference to exhibits to the Company’s Registration Statement on Form S-1 filed on April 10, 2020.
(39)	Incorporated by reference to exhibits to the Company’s Amendment No. 3 to Registration Statement on Form S-1 filed on October 23, 2020.
(40)	Incorporated by reference to exhibits to the Company’s Registration Statement on Form S-1 filed on October 1, 2021.

 II-15

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Pre-Effective Amendment No. 7 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boca Raton, Florida, on October 12, 2021.

SIMPLICITY ESPORTS AND GAMING COMPANY
By:	/s/ Roman Franklin
	Roman Franklin
	Chief Executive Officer (principal executive officer)

Pursuant to the requirements of the Securities Act, this Pre-Effective Amendment No. 7 to Registration Statement has been signed by the following persons in the capacities held on October 12, 2021.

Name	Position	Date
/s/ Roman Franklin	Chief Executive Officer and Director	October 12, 2021
Roman Franklin	(Principal Executive Officer)
/s/ Nancy Hennessey	Chief Financial Officer	October 12, 2021
Nancy Hennessey	(Principal Financial and Accounting Officer)
/s/ Jed Kaplan	Chairman	October 12, 2021
Jed Kaplan
*	Director	October 12, 2021
Donald R. Caldwell
*	Director	October 12, 2021
Max Hooper
*	Director	October 12, 2021
Frank Leavy
*	Director	October 12, 2021
Edward Leonard Jaroski
*	Director	October 12, 2021
William H. Herrmann
/s/ Laila Cavalcanti Loss	Director	October 12, 2021
Laila Cavalcanti Loss

By:	/s/ Jed Kaplan
	Jed Kaplan
	Attorney-in-fact*

 II-16

EX-1.1

EXHIBIT 1.1

________UNITS

EACH UNIT CONSISTING OF

ONE SHARE of Common Stock

and

ONE Warrant TO PURCHASE ONE SHARE OF COMMON STOCK

SIMPLICITY ESPORTS AND GAMING COMPANY

UNDERWRITING AGREEMENT

_____________, 2021

Maxim Group LLC

Investment Banking

405 Lexington Avenue, 2nd Fl.

New York, New York 10174

As Representative of the Several Underwriters, if any, named in Schedule I hereto

Ladies and Gentlemen:

The undersigned, Simplicity Esports and Gaming Company, a company incorporated under the laws of Delaware (collectively with its subsidiaries, including, without limitation, all entities disclosed or described in the Registration Statement as being subsidiaries of Simplicity Esports and Gaming Company, the “Company”), hereby confirms its agreement (this “Agreement”) with the several underwriters (such underwriters, including the Representative (as defined below), the “Underwriters” and each an “Underwriter”) named in Schedule I hereto for which Maxim Group LLC (“Maxim”) is acting as representative to the several Underwriters (in such capacity, the “Representative” and if there are no Underwriters other than the Representative, references to multiple Underwriters shall be disregarded and the term Representative as used herein shall have the same meaning as Underwriter) on the terms and conditions set forth herein.

It is understood that the several Underwriters are to make a public offering of the Public Securities (as defined below) as soon as the Representative deems it advisable to do so. The Public Securities are to be initially offered to the public at the public offering price set forth in the Prospectus. The Representative may from time to time thereafter change the public offering price and other selling terms.

It is further understood that Maxim will act as the Representative for the Underwriters in the offering and sale of the Closing Securities (as defined below) and, if any, the Option Securities (as defined below) in accordance with this Agreement.

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ARTICLE I.

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:

“Action” shall have the meaning ascribed to such term in Section 3.1(k).

“Affiliate” means with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person as such terms are used in and construed under Rule 405 under the Securities Act.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided that banks shall not be deemed to be authorized or obligated to be closed due to a “shelter in place,” “non-essential employee” or similar closure of physical branch locations at the direction of any governmental authority if such banks’ electronic funds transfer systems (including for wire transfers) are open for use by customers on such day.

“Business Licenses” shall have the meaning ascribed to such term in Section 3.1(qq).

“Closing” means the closing of the purchase and sale of the Closing Securities pursuant to Section 2.1.

“Closing Date” means the hour and the date on the Trading Day on which all conditions precedent to (i) the Underwriters’ obligations to pay the Closing Purchase Price and (ii) the Company’s obligations to deliver the Closing Securities, in each case, have been satisfied or waived, but in no event later than 10:00 a.m. (New York City time) on the second (2^nd) Trading Day following the date hereof or at such other time as shall be agreed upon by the Representative and the Company pursuant to Rule 15c6-1(a) under the Exchange Act.

“Closing Purchase Price” shall have the meaning ascribed to such term in Section 2.1(b), which aggregate purchase price shall be net of underwriting discounts and commissions.

“Closing Securities” shall have the meaning ascribed to such term in Section 2.1(a)(iii).

“Closing Shares” shall have the meaning ascribed to such term in Section 2.1(a)(ii).

“Closing Units” shall have the meaning ascribed to such term in Section 2.1(a)(i).

“Closing Warrants” shall have the meaning ascribed to such term in Section 2.1(a)(iii).

“Commission” means the United States Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

2

“Company Auditor” means Prager Metis CPAs, LLC, with offices located at 222 Mount Airy Road, Basking Ridge, New Jersey 07920.

“Company Counsel” means Anthony L.G., PLLC, with offices located at 625 N. Flagler Drive, Suite 600, West Palm Beach, Florida 33401

“Company IT Systems” shall have the meaning ascribed to such term in Section 3.1(rr).

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.

“EDGAR” shall have the meaning ascribed to such term in Section 3.1(f).

“Environmental Laws” shall have the meaning ascribed to such term in Section 3.1(n).

“Effective Date” means the date and time as of which the Registration Statement became effective in accordance with the rules and regulations under the Securities Act.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Execution Date” shall mean the date on which the parties execute and enter into this Agreement.

“Exempt Issuance” means the issuance of (a) shares of Common Stock, restricted stock, restricted stock units or options to employees, officers, consultants, other service providers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, for services rendered to the Company, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with automatic price resets, stock splits, adjustments or combinations as set forth in such securities) or to extend the term of such securities and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.22(a) herein, and provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

3

“FINRA” means the Financial Industry Regulatory Authority.

“GAAP” shall have the meaning ascribed to such term in Section 3.1(i).

“General Disclosure Package” shall have the meaning ascribed to such term in Section 3.1(f).

“Hazardous Materials” shall have the meaning ascribed to such term in Section 3.1(n).

“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $25,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $25,000 due under leases required to be capitalized in accordance with GAAP.

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(q).

“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Littman Krooks LLP” means Littman Krooks LLP, counsel to the Underwriters, with offices located at 655 Third Avenue, 20th Floor, New York, New York 10017.

“Lock-Up Agreements” means the lock-up agreements that are delivered on the date hereof by each of the Company’s officers and directors, and each holder of Common Stock and Common Stock Equivalents holding, on a fully-diluted basis, more than 5% of the Company’s issued and outstanding Common Stock, in the form of Exhibit A attached hereto.

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

“Material Permit” shall have the meaning ascribed to such term in Section 3.1(ff).

“Offering” shall have the meaning ascribed to such term in Section 2.1(c).

“Option Closing Date” shall have the meaning ascribed to such term in Section 2.2(c).

“Option Closing Purchase Price” shall have the meaning ascribed to such term in Section 2.2(b), which aggregate purchase price shall be net of the underwriting discounts and commissions.

“Option Securities” shall have the meaning ascribed to such term in Section 2.2(a).

“Option Shares” shall have the meaning ascribed to such term in Section 2.2(a).

“Option Warrants” shall have the meaning ascribed to such term in Section 2.2(a).

“Over-Allotment Option” shall have the meaning ascribed to such term in Section 2.2(a).

4

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Preliminary Prospectus” shall have the meaning ascribed to such term in Section 3.1(f).

“Privacy and Data Security Laws” shall have the meaning ascribed to such term in Section 3.1(o).

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Prospectus” shall have the meaning ascribed to such term in Section 3.1(f).

“Public Securities” means, collectively, the Closing Securities and, if any, the Option Securities.

“Registration Statement” shall have the meaning ascribed to such term in Section 3.1(f).

“Representative’s Securities” shall have the meaning ascribed to such term in Section 2.5.

“Representative’s Warrants” shall have the meaning ascribed to such term in Section 2.5.

“Representative’s Warrant Shares” shall have the meaning ascribed to such term in Section 2.5.

“Representative’s Warrant Agreement” shall have the meaning ascribed to such term in Section 2.5.

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(i).

“Securities” means the Closing Securities, the Option Securities, the Warrant Shares and the Representative’s Securities.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

5

“Share Purchase Price” shall have the meaning ascribed to such term in Section 2.1(b).

“Shares” means, collectively, the shares of Common Stock delivered to the Underwriters in accordance with Section 2.1(a)(ii) and Section 2.2(a).

“Subsidiary” means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

“Trading Day” means a day on which the principal Trading Market is open for trading.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the OTCQB Venture Market, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).

“Transaction Documents” means this Agreement and all exhibits and schedules hereto, the Warrants, the Warrant Agent Agreement, the Representative’s Warrant Agreement, the Lock-Up Agreements, and any other documents or agreements executed in connection with the transactions contemplated hereunder.

“Transfer Agent” means Continental Stock Transfer & Trust Company, with a mailing address of 1 State Street, 30th Floor, New York, NY 10004 and a facsimile number of (___) ___-____, and any successor transfer agent of the Company.

“Underwriters’ Information” shall have the meaning ascribed to such term in Section 6.1.

“Units” shall have the meaning ascribed to such term in Section 2.1(a)(i).

“Warrant Agent” means the Transfer Agent.

“Warrant Agent Agreement” means the warrant agent agreement by and between the Company and Continental Stock Transfer & Trust Co., as warrant agent, dated on or before the Closing Date, for the purpose of administering the Warrants, in the form of Exhibit G attached hereto.

“Warrant Purchase Price” shall have the meaning ascribed to such term in Section 2.1(b).

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

“Warrants” means, collectively, the Common Stock purchase warrants delivered to the Underwriters in accordance with Section 2.1(a)(ii) and Section 2.2, which Warrants shall be exercisable immediately and have a term of exercise equal to five (5) years, in the form of Exhibit E attached hereto.

6

ARTICLE II.

PURCHASE AND SALE

2.1 Closing.

(a) Upon the terms and subject to the conditions set forth herein, the Company agrees to sell in the aggregate (i) _______ units (the “Units”), with each Unit consisting of one share of Common Stock, and one Warrant to purchase one share of Common Stock, subject to the terms and conditions stated herein, and each Underwriter agrees to purchase, severally and not jointly, at the Closing, the following securities of the Company:

(i) the number of Units (the “Closing Units”) set forth opposite the name of such Underwriter on Schedule I hereof; and

(ii) the number of shares of Common Stock (the “Closing Shares”) set forth opposite the name of such Underwriter on Schedule I hereof included in the Closing Units; and

(iii) the number of Warrants (“Closing Warrants”) to purchase shares of Common Stock set forth opposite the name of such Underwriter on Schedule I hereof included in the Closing Units, which shall have an exercise price of $____ (subject to adjustment as provided therein) (collectively with the Closing Units and the Closing Shares, the “Closing Securities”).

The Units have no stand-alone rights or obligations and will not be certificated or issued as stand-alone securities. The shares of Common Stock and the Warrants comprising the Units are immediately separable and will be issued separately at the Closing.

(b) The Underwriters, severally and not jointly, agree to purchase from the Company the number of Closing Units set forth opposite their respective names on Schedule I attached hereto and made a part hereof at a purchase price of $____ per Closing Unit (93% of the public offering price per Closing Unit) (the “Closing Purchase Price”), and the purchase price of each Closing Unit shall be allocated as follows: (i) $___ per Closing Share (the “Share Purchase Price”) and (ii) $0.01 per Closing Warrant (the “Warrant Purchase Price”). The Closing Units are to be offered initially to the public at the price of $____ per Unit ($___ per share of Common Stock and $____ per Warrant), which offering price is also set forth on the cover page of the Prospectus (as defined in Section 3.1(f) hereof).

(c) On the Closing Date, each Underwriter shall deliver or cause to be delivered to the Company, via wire transfer, immediately available funds equal to such Underwriter’s Closing Purchase Price and the Company shall deliver to, or as directed by, such Underwriter its respective Closing Securities and the Company shall deliver the other items required pursuant to Section 2.3 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.3 and 2.4, the Closing shall occur at the offices of Littman Krooks LLP or such other location (including remotely by facsimile or other electronic transmission) as the Company and Representative shall mutually agree. The Public Securities are to be offered initially to the public at the offering price set forth on the cover page of the Prospectus (the “Offering”).

2.2 Over-Allotment Option.

(a) For the purposes of covering any over-allotments in connection with the distribution and sale of the Closing Securities, the Representative is hereby granted an option (the “Over-Allotment Option”) to purchase up to ______ shares of Common Stock, representing fifteen percent (15%) of the Closing Shares sold as part of the Closing Units sold in the Offering (the “Option Shares”), and/or Warrants to purchase up to ______ shares of Common Stock, representing fifteen percent (15%) of the Closing Warrants sold as part of the Closing Units sold in the Offering (the “Option Warrants” and, collectively with the Option Shares, the “Option Securities”), which may be purchased in any combination of Option Shares and/or Option Warrants at the Share Purchase Price and/or Warrant Purchase Price, respectively. The Closing Warrants and the Option Warrants, if any, shall be issued pursuant to, and shall have the rights and privileges set forth in the Warrant Agent Agreement.

7

(b) In connection with an exercise of the Over-Allotment Option, (a) the purchase price to be paid for any Option Shares is equal to the product of the Share Purchase Price multiplied by the number of Option Shares to be purchased and (b) the purchase price to be paid for any Option Warrants is equal to the product of the Warrant Purchase Price multiplied by the number of Option Warrants to be purchased (the aggregate purchase price to be paid on an Option Closing Date, the “Option Closing Purchase Price”).

(c) The Over-Allotment Option granted pursuant to this Section 2.2 may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares and/or Option Warrants in any combination thereof within 45 days after the Execution Date. An Underwriter will not be under any obligation to purchase any Option Securities prior to the exercise of the Over-Allotment Option by the Representative. The Over-Allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed in writing by overnight mail or facsimile or other electronic transmission setting forth the number of Option Shares and/or Option Warrants to be purchased and the date and time for delivery of and payment for the Option Securities (each, an “Option Closing Date”), which will not be later than the earlier of (i) 45 days after the Execution Date and (ii) two (2) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of Littman Krooks LLP or at such other place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option Securities does not occur on the Closing Date, each Option Closing Date will be as set forth in the notice. Upon exercise of the Over-Allotment Option, the Company will become obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters will become obligated to purchase, the number of Option Shares and/or Option Warrants specified in such notice. The Representative may cancel the Over-Allotment Option at any time prior to the expiration of the Over-Allotment Option by written notice to the Company.

2.3 Deliveries. The Company shall deliver or cause to be delivered to each Underwriter (if applicable) the following:

(a) At the Closing Date, the Closing Shares including in the Closing Units and, as to each Option Closing Date, if any, the applicable Option Shares, which shares shall be delivered via The Depository Trust Company Deposit or Withdrawal at Custodian system for the accounts of the several Underwriters;

(b) At the Closing Date, the Closing Warrants included in the Closing Units and, as to each Option Closing Date, if any, the applicable Option Warrants, which Warrants shall be delivered via The Depository Trust Company Deposit or Withdrawal at Custodian system for the accounts of the several Underwriters;

(c) At the Closing Date, the executed Representative’s Warrant Agreement(s) shall be issued in the name or names and in such authorized denominations as the Representative may request;

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(d) At the Closing Date and at each Option Closing Date, if any, the duly executed and delivered legal opinion and negative assurance letter of Company Counsel addressed to the Underwriters, dated as of the Closing Date and as to each Option Closing Date, if any, bring-down opinions and negative assurance letters from Company Counsel addressed to the Underwriters in form and substance satisfactory to counsel to the Underwriters;

(e) At the Closing Date and at each Option Closing Date, if any, the duly executed and delivered legal opinion and negative assurance letter of Special Brazil Counsel for the Company with respect to certain matters, addressed to the Underwriters, dated as of the Closing Date and each Option Closing Date, if any, in form and substance satisfactory to counsel to the Underwriters;

(f) Contemporaneously herewith, a cold comfort letter, addressed to the Underwriters and in form and substance satisfactory in all respects to the Representative from the Company Auditor dated, respectively, as of the date of this Agreement and a bring-down letter dated as of the Closing Date and each Option Closing Date, if any;

(g) On the Closing Date and on each Option Closing Date, if any, the duly executed and delivered Officer’s Certificate, substantially in the form required by Exhibit B attached hereto;

(h) On the Closing Date and on each Option Closing Date, if any, the duly executed and delivered Secretary’s Certificate, substantially in the form required by Exhibit C attached hereto;

(i) On the Closing Date and on each Option Closing Date, if any, a duly executed and delivered Chief Financial Officer’s Certificate, substantially in the form required by Exhibit D attached hereto, addressed to the Underwriters; and

(j) Such other customary certificates or documents as the Underwriters and Underwriters’ Counsel may have reasonably requested.

2.4 Closing Conditions. The respective obligations of each Underwriter hereunder in connection with the Closing and each Option Closing Date are subject to the following conditions being met:

(a) the accuracy in all material respects when made and on the date in question (other than representations and warranties of the Company already qualified by materiality, which shall be true and correct in all respects) of the representations and warranties of the Company contained herein (unless as of a specific date therein);

(b) all obligations, covenants and agreements of the Company required to be performed at or prior to the date in question shall have been performed;

(c) the delivery by the Company of the items set forth in Section 2.3 of this Agreement;

(d) the Registration Statement shall be effective on the date of this Agreement and at each of the Closing Date and each Option Closing Date, if any, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending or contemplated by the Commission and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of the Representative;

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(e) by the Execution Date, if required by FINRA, the Underwriters shall have received a notice of no objections from FINRA as to the amount of compensation allowable or payable to and the terms and arrangements for acting as the Underwriters as described in the Registration Statement;

(f) the (i) shares of Common Stock, including the Closing Shares, the Option Shares, the Warrant Shares, and the shares of Common Stock issuable upon exercise of the Representative’s Warrants, and (ii) Warrants have been approved for listing on the Nasdaq Capital Market;

(g) the Company has filed with the Commission a Form 8-A (File No. ____-______) providing for the registration pursuant to Section 12(b) under the Exchange Act of the shares of Common Stock and the Warrants; and such Form 8-A has become effective under the Exchange Act. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the shares of Common Stock or the Warrants under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration; and

(h) prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have been no material adverse change or development involving a prospective material adverse change in the condition or prospects or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the General Disclosure Package and Prospectus; (ii) no action suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Affiliate of the Company before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement, the General Disclosure Package and Prospectus; (iii) no stop order applicable to the Company shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; (iv) the Company has not incurred any material liabilities or obligations, direct or contingent, nor has it entered into any material transactions not in the ordinary course of business, other than pursuant to this Agreement and the transactions referred to herein; (v) the Company has not paid or declared any dividends or other distributions of any kind on any class of its capital stock; (vi) the Company has not altered its method of accounting; and (vii) the Registration Statement, the General Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the rules and regulations thereunder and shall conform in all material respects to the requirements of the Securities Act and the rules and regulations thereunder, and neither the Registration Statement, the General Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

If any of the conditions specified in this Section 2.4 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to the Representative or to Representative’s counsel pursuant to this Section 2.4 shall not be reasonably satisfactory in form and substance to the Representative and to Representative’s counsel, all obligations of the Underwriters hereunder may be cancelled by the Representative at, or at any time prior to, the consummation of the Closing. Notice of such cancellation shall be given to the Company in writing or orally. Any such oral notice shall be confirmed promptly thereafter in writing.

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2.5 Representative’s Warrants.

(i) Warrant Amount; Term. The Company hereby agrees to issue and sell to the Representative (and/or its designees) on the Closing Date for an aggregate purchase price of $100.00, warrants (the “Representative’s Warrants”) for the purchase of an aggregate of up to _______ shares of Common Stock (which is equal to an aggregate of 7% of the Closing Shares and Warrant Shares included in the Closing Units sold in the Offering, and any Option Shares and Option Warrants sold in the Over-Allotment Option, if any). The Representative’s Warrants shall be issuable pursuant to the Representative’s Warrant Agreement in the form attached hereto as Exhibit F (the “Representative’s Warrant Agreement”) and exercisable, in whole or in part, commencing on a date which is one hundred eighty (180) days after the Effective Date of the Registration Statement (the “Initial Exercise Date”) and expiring on the three-year anniversary of the Initial Exercise Date at an initial exercise price per share of Common Stock of $____, which is equal to 115% of the public offering price of each Unit. The Representative’s Warrant Agreement and the shares of Common Stock issuable upon exercise of the Representative’s Warrant Agreement (the “Representative’s Warrant Shares”) are sometimes hereinafter referred to together as the “Representative’s Securities.” The Representative understands and agrees that there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Representative’s Warrant and the Representative’s Warrant Shares during the one hundred eighty (180) days after the Effective Date and by its acceptance thereof each shall agree that it will not sell, transfer, assign, pledge or hypothecate the Representative’s Warrant Agreement, or any portion thereof, the Representative’s Warrant Shares, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of one hundred eighty (180) days following the Effective Date to anyone other than (i) an Underwriter or a selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such Underwriter or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.

(ii) Delivery. Delivery of the Representative’s Warrant Agreement shall be made on the Closing Date and shall be issued in the name or names and in such authorized denominations as the Representative may request.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the Disclosure Schedules, the Company represents and warrants to the Underwriters as of the Execution Date, as of the Closing Date and as of each Option Closing Date, if any, as follows:

(a) Subsidiaries. All of the Subsidiaries of the Company are set forth on Schedule 3.1(a). Except as indicated on Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

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(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted . Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which the Company is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

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(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filing with the Commission of the Prospectus, (ii) such filings as are required to be made under applicable state securities laws and (iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrants for trading thereon in the time and manner required thereby (collectively, the “Required Approvals”).

(f) Registration Statement. The Company has filed with the Commission the Registration Statement, including any related Preliminary Prospectus or Prospectuses, for the registration of the Securities under the Securities Act, which Registration Statement has been prepared by the Company in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act. The registration of the Common Stock and the Warrants (which are included in the Units) under the Exchange Act has been declared effective by the Commission on the date hereof. Copies of such Registration Statement and of each amendment thereto, if any, including the related Preliminary Prospectuses, heretofore filed by the Company with the Commission have been delivered to the Underwriters. The term “Registration Statement” means such registration statement on Form S-1 (File No. 333-237634), as amended, as of the relevant Effective Date, including financial statements, all exhibits and any information deemed to be included or incorporated by reference therein, including any information deemed to be included pursuant to Rule 430A or Rule 430B of the Securities Act and the rules and regulations thereunder, as applicable. If the Company files a registration statement to register a portion of the Securities and relies on Rule 462(b) of the Securities Act and the rules and regulations thereunder for such registration statement to become effective upon filing with the Commission (the “Rule 462 Registration Statement”), then any reference to the “Registration Statement” shall be deemed to include the Rule 462 Registration Statement, as amended from time to time. The term “Preliminary Prospectus” as used herein means a preliminary prospectus as contemplated by Rule 430 or Rule 430A of the Securities Act and the rules and regulations thereunder as included at any time as part of, or deemed to be part of or included in, the Registration Statement. The term “Prospectus” means the final prospectus in connection with this Offering as first filed with the Commission pursuant to Rule 424(b) of the Securities Act and the rules and regulations thereunder or, if no such filing is required, the form of final prospectus included in the Registration Statement at the Effective Date, except that if any revised prospectus or prospectus supplement shall be provided to the Representative by the Company for use in connection with the Securities which differs from the Prospectus (whether or not such revised prospectus or prospectus supplement is required to be filed by the Company pursuant to Rule 424(b)), the term “Prospectus” shall also refer to such revised prospectus or prospectus supplement, as the case may be, from and after the time it is first provided to the Representative for such use. Any reference herein to the terms “amend”, “amendment” or “supplement” with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include: (i) the filing of any document under the Exchange Act after the Effective Date, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be, which is incorporated therein by reference, and (ii) any such document so filed. All references in this Agreement to the Registration Statement, a Preliminary Prospectus and the Prospectus, or any amendments or supplements to any of the foregoing shall be deemed to include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”). The term “General Disclosure Package” means, collectively, the Permitted Free Writing Prospectus(es) (as defined below) issued at or prior to the date hereof, the most recent preliminary prospectus related to this Offering, and the information included on Schedule I and Schedule II hereto.

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(g) Issuance of Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Warrant Shares are duly authorized and, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Representative’s Warrant Shares are duly authorized and, when issued in accordance with the terms of the Representative’s Warrant Agreement, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement, the Warrants and the Representative’s Warrant Agreement. The Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. All corporate action required to be taken for the authorization, issuance and sale of the Securities has been duly and validly taken. The Securities will conform in all material respects to all statements with respect thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus.

(h) Capitalization. The capitalization of the Company as of the date hereof is as set forth on Schedule 3.1(h). Except as set forth on Schedule 3.1(h), the Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person other than the Representative has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents, except such rights which have been waived prior to the date hereof. Except as a result of the purchase and sale of the Securities or as set forth on Schedule 3.1(h), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or the capital stock of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person (other than the Underwriters). There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities and other laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. All of the securities of the Company have been duly authorized and validly issued in accordance with all requisite laws. The authorized shares of the Company conform in all material respects to all statements relating thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus. The offers and sales of the Company’s securities were at all relevant times either registered under the Securities Act and the applicable state securities or Blue Sky laws or, based in part on the representations and warranties of the purchasers, exempt from such registration requirements. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

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(i) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Prospectus, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package, the Prospectus and the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. The agreements and documents described in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package, the Prospectus, and the SEC Reports conform in all material aspects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act and the rules and regulations thereunder to be described in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package, the Prospectus or the SEC Reports or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement, the General Disclosure Package, the Prospectus or the SEC Reports, or (ii) is material to the Company’s business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefore may be brought. None of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder. To the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses, including, without limitation, those relating to environmental laws and regulations.

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(j) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the Registration Statement, except as specifically disclosed in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package, or the Prospectus, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans and the issuance of Common Stock Equivalents as disclosed in the Registration Statement. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made. Unless otherwise disclosed in the Registration Statement, the Company has not: (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.

(k) Litigation. There has not been, and to the knowledge of the Company there is not pending or contemplated, any action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor, to the Company’s knowledge, any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. To the knowledge of the Company, there has not been, and there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

(l) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or the Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of the Subsidiaries is a party to a collective bargaining agreement, and the Company and the Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of the Subsidiaries to any liability with respect to any of the foregoing matters that would reasonably be expected to have a Material Adverse Effect. The Company and the Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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(m) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

(n) Environmental Laws. The Company and the Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

(o) Privacy and Data Security Laws and Regulations. The Company and the Subsidiaries have (A) operated and currently operate their respective businesses in a manner compliant with all applicable foreign, federal, state and local laws and regulations, all contractual obligations and all Company policies (internal and posted) related to privacy and data security applicable to the Company’s and the Subsidiaries’ collection, use, handling, transfer, transmission, storage, disclosure and/or disposal of the data of their respective customers, employees and other third parties (the “Privacy and Data Security Laws”), and (B) implemented, monitored and have been and are in compliance with, applicable administrative, technical and physical safeguards and policies and procedures designed to ensure compliance with Privacy and Data Security Laws, except as would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. Except as described in the Registration Statement, the General Disclosure Package or the Prospectus, there has been no loss or unauthorized access, use, modification or breach of security of customer, employee or third party data maintained by or on behalf of the Company and the Subsidiaries, and neither the Company nor any of the Subsidiaries has notified, nor has the current intention to notify, any customer, governmental entity or the media of any such event with regard to any material data breach.

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(p) Title to Assets. Except as described in the Registration Statement, the General Disclosure Package or the Prospectus, the Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

(q) Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights it believes are necessary or required for use in connection with their respective businesses as described in the Registration Statement, the General Disclosure Package or the Prospectus and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). To the knowledge of the Company, the Company is not now infringing, and upon commercialization, will not infringe, any valid claim of any issued patents, copyrights or trademarks of others. The Company has not conducted a “freedom to operate” study. Neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement, except where such action would not reasonably be expected to have a Material Adverse Effect. Other than as specifically described in the Registration Statement, the General Disclosure Package or the Prospectus, neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the Registration Statement, the General Disclosure Package, the Prospectus or the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Company’s products or planned products as described in the Registration Statement, the General Disclosure Package or the Prospectus violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and the Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(r) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost. The Company carries (or will carry at the Closing Date) and is entitled to the benefits of directors and officers insurance coverage at least equal to $1,000,000, which coverage will increase to $2,000,000 on November 21, 2020. There are no material claims by the Company under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause.

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(s) Transactions With Affiliates and Employees. Except as set forth in the Registration Statement, General Disclosure Package or Prospectus, none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from, any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

(t) Sarbanes-Oxley; Internal Accounting Controls. The Company’s disclosure controls and procedures and internal controls are not effective. Except as set forth in the Registration Statement, the Company and the Subsidiaries are in material compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as set forth in the Registration Statement, the Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company and the Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and the Subsidiaries.

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(u) Certain Fees. Except as set forth in the Registration Statement, the General Disclosure Package and Prospectus, no brokerage or finder’s fees or commissions are or will be payable by the Company, any Subsidiary or Affiliate of the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. There are no other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its stockholders that may affect the Underwriters’ compensation, as determined by FINRA. Other than payments to the Underwriters for this Offering or as disclosed in the Registration Statement, the Company has not made and has no agreements, arrangements or understanding to make any direct or indirect payments (in cash, securities or otherwise) to: (i) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the 180-day period preceding the initial filing of the Registration Statement through the 90-day period after the Effective Date. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.

(v) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

(w) Registration Rights. No Person has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act of any securities of the Company or any Subsidiary, other than those rights that have been disclosed in the Registration Statement or have been waived or satisfied.

(x) Compliance with Exchange Act. (i) The Common Stock and the Warrants are registered pursuant to Section 12(b) of the Exchange Act and the Company has filed with the Commission a Form 8-A (Accession No. ___-_____) providing for the registration of the Common Stock and Warrant pursuant to Section 12(b) under the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as set forth on Schedule 3.1(x), the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. Except as set forth on Schedule 3.1(x), the Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees of the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer. The (i) shares of Common Stock, including the Closing Shares, the Option Shares, the Warrant Shares, and the shares of Common Stock issuable upon exercise of the Representative’s Warrants, and (ii) Warrants have been approved for listing on the Nasdaq Capital Market.

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(ii) Compliance with Continued Listing Requirements. The Company has taken all necessary actions to ensure that, upon such time as the Nasdaq Stock Market LLC shall have approved the shares of Common Stock and Warrants for listing, it will be in compliance with all applicable corporate governance requirements set forth in the rules of the Nasdaq Stock Market LLC that are in effect.

(y) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable as a result of the Underwriters and the Company fulfilling their obligations or exercising their rights under the Transaction Documents.

(z) Disclosure; 10b-5. The Registration Statement (and any further documents to be filed with the Commission in connection with the Offering) contains all exhibits and schedules as required by the Securities Act. Each of the Registration Statement and any post-effective amendment thereto, if any, at the time it became effective, complied in all material respects with the Securities Act and the Exchange Act and the applicable rules and regulations under the Securities Act and did not and, as amended or supplemented, if applicable, will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Preliminary Prospectus and the Prospectus, each as of its respective date, comply in all material respects with the Securities Act and the Exchange Act and the applicable rules and regulations. The Prospectus, as amended or supplemented, did not and will not contain as of the date thereof any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to the Underwriters’ Information. As of its date and the date hereof, the General Disclosure Package did not and does not include any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The SEC Reports, when they were filed with the Commission, conformed in all material respects to the requirements of the Securities Act and the Exchange Act, as applicable, and the applicable rules and regulations, and none of such documents, when they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein (with respect to the SEC Reports incorporated by reference in the Prospectus), in light of the circumstances under which they were made not misleading; and any further documents so filed and incorporated by reference in the Prospectus, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act and the applicable rules and regulations, as applicable, and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made not misleading. No post-effective amendment to the Registration Statement reflecting any facts or events arising after the date thereof which represent, individually or in the aggregate, a fundamental change in the information set forth therein is required to be filed with the Commission. There are no documents required to be filed with the Commission in connection with the transaction contemplated hereby that (x) have not been filed as required pursuant to the Securities Act or (y) will not be filed within the requisite time period. There are no contracts or other documents required to be described in the Preliminary Prospectus or Prospectus, or to be filed as exhibits or schedules to the Registration Statement, which have not been described or filed as required. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.

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(aa) No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this Offering of the Securities to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

(bb) Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

(cc) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and the Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. The term “taxes” mean all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments, or charges of any kind whatsoever, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements, and other documents required to be filed in respect to taxes.

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(dd) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the FCPA.

(ee) Accountants. To the knowledge and belief of the Company, the Company Auditor (i) is an independent registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal years ending May 31, 2021 and 2020.

(ff) Regulatory. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities, or by any similar foreign, federal, state or local governmental or regulatory authority performing functions similar to those performed by such authorities necessary to conduct their respective businesses as described in the Registration Statement, the General Disclosure Package or the Prospectus, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (each, a “Material Permit”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. The disclosures in the Registration Statement concerning the effects of federal, state, local and all foreign regulation on the Company’s business as currently contemplated are correct in all material respects.

(gg) Stock Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or the Subsidiaries or their financial results or prospects.

(hh) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department.

(ii) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon the Representative’s request.

(jj) Bank Holding Company Act. Neither the Company nor any of the Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of the Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of the Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

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(kk) Money Laundering. The operations of the Company and the Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

(ll) D&O Questionnaires. To the Company’s knowledge, all information contained in the questionnaires completed by each of the Company’s directors and officers immediately prior to the Offering is true and correct in all respects and the Company has not become aware of any information which would cause the information disclosed in such questionnaires to become inaccurate and incorrect.

(mm) FINRA Affiliation. No officer, director or, to the Company’s knowledge, any beneficial owner of 5% or more of the Company’s shares of Common Stock or Common Stock Equivalents has any direct or indirect affiliation or association with any FINRA member (as determined in accordance with the rules and regulations of FINRA) that is participating in the Offering. Except for securities purchased on the open market, no Company Affiliate is an owner of stock or other securities of any member of FINRA. No Company Affiliate has made a subordinated loan to any member of FINRA. No proceeds from the sale of the Securities (excluding underwriting compensation as disclosed in the Registration Statement and the Prospectus) will be paid to any FINRA member, any persons associated with a FINRA member or an affiliate of a FINRA member. Except as disclosed in the Prospectus, the Company has not issued any warrants or other securities or granted any options, directly or indirectly, to the Representative or any of the Underwriters named on Schedule I hereto within the 180-day period prior to the initial filing date of the Prospectus. Except as disclosed in the Registration Statement and except for securities issued to the Representative as disclosed in the Prospectus and securities sold by the Representative on behalf of the Company, no person to whom securities of the Company have been privately issued within the 180-day period prior to the initial filing date of the Prospectus is a FINRA member, is a person associated with a FINRA member or is an affiliate of a FINRA member. To the Company’s knowledge, no FINRA member participating in the Offering has a conflict of interest with the Company. For this purpose, a “conflict of interest” exists when a FINRA member, the parent or affiliate of a FINRA member or any person associated with a FINRA member in the aggregate beneficially own 5% or more of the Company’s outstanding subordinated debt or common equity, or 5% or more of the Company’s preferred equity. “FINRA member participating in the Offering” includes any associated person of a FINRA member that is participating in the Offering, any member of such associated person’s immediate family and any affiliate of a FINRA member that is participating in the Offering. “Any person associated with a FINRA member” means (1) a natural person who is registered or has applied for registration under the rules of FINRA and (2) a sole proprietor, partner, officer, director, or branch manager of a FINRA member, or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a FINRA member. When used in this Section 3.1(mm) the term “affiliate of a FINRA member” or “affiliated with a FINRA member” means an entity that controls, is controlled by or is under common control with a FINRA member. The Company will advise the Representative and Littman Krooks LLP if it learns that any officer, director or owner of 5% or more of the Company’s outstanding shares of Common Stock or Common Stock Equivalents is or becomes an affiliate or associated person of a FINRA member firm.

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(nn) Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to Littman Krooks LLP on behalf of the Representative shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.

(oo) Board of Directors. The Board of Directors is comprised of the persons set forth under the heading of the Prospectus captioned “Management.” The qualifications of the persons serving as board members and the overall composition of the Board of Directors comply with the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder applicable to the Company and the rules of the Trading Market. At least one member of the Board of Directors qualifies as a “financial expert” as such term is defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and the rules of the Trading Market. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent” as defined under the rules of the Trading Market.

(pp) ERISA. The Company is not a party to an “employee benefit plan,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), which: (i) is subject to any provision of ERISA and (ii) is or was at any time maintained, administered or contributed to by the Company or any of its ERISA Affiliates (as defined hereafter). These plans are referred to collectively herein as the “Employee Plans.” An “ERISA Affiliate” of any person or entity means any other person or entity which, together with that person or entity, could be treated as a single employer under Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the “Code”). Each Employee Plan has been maintained in material compliance with its terms and the requirements of applicable law. No Employee Plan is subject to Title IV of ERISA. The Registration Statement, Preliminary Prospectus and the Prospectus identify each employment, severance or other similar agreement, arrangement or policy and each material plan or arrangement required to be disclosed pursuant to the Rules and Regulations providing for insurance coverage (including any self-insured arrangements), workers’ compensation, disability benefits, severance benefits, supplemental unemployment benefits, vacation benefits or retirement benefits, or deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights or other forms of incentive compensation, or post-retirement insurance, compensation or benefits, which: (i) is not an Employee Plan; (ii) is entered into, maintained or contributed to, as the case may be, by the Company or any of its ERISA Affiliates; and (iii) covers any officer or director or former officer or director of the Company or any of its ERISA Affiliates. These agreements, arrangements, policies or plans are referred to collectively as “Benefit Arrangements.” Each Benefit Arrangement has been maintained in material compliance with its terms and with the requirements of applicable law. Except as disclosed in the Registration Statement, Preliminary Prospectus and the Prospectus, there is no liability in respect of post-retirement health and medical benefits for retired employees of the Company or any of its ERISA Affiliates, other than medical benefits required to be continued under applicable law. No “prohibited transaction” (as defined in either Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any Employee Plan; and each Employee Plan that is intended to be qualified under Section 401(a) of the Code is so qualified, and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification.

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(qq) COVID 19. Since the onset of the COVID-19 pandemic, the Company has (i) complied, in all material respects, with all is in compliance with, all statutes, rules, or regulations applicable to the Company’s business and operation relating to COVID-19, including those relating to (A) shelter-in-place, quarantine and other similar orders, (B) the maintenance of safe and acceptable working conditions, , and (C) employee benefits, privacy or labor and employment, including with respect to the furlough or termination of employees, the reduction or modification of compensation or employee benefits or the administration of employee leaves of absence.

(rr) IT Systems. Except as would not, individually or in the aggregate, have a Material Adverse Effect, the Company reasonably believes that (i) the Company and the Subsidiaries own or have a valid right to access and use all computer systems, networks, hardware, software, databases, websites, and equipment used to process, store, maintain and operate data, information, and functions used in connection with the business of the Company and the Subsidiaries (the “Company IT Systems”), (ii) the Company IT Systems are adequate for, and operate and perform as required in connection with, the operation of the business of the Company and the Subsidiaries as currently conducted and (iii) the Company and the Subsidiaries have implemented reasonable backup, security and disaster recovery technology consistent with applicable regulatory standards;

(ss) Reverse Stock Split. The Company has the requisite corporate power and authority, and has obtained all requisite approval or authorization of any stockholder, the Board of Directors or others, in order to effect the reverse stock split of the Company’s shares of Common Stock (the “Reverse Stock Split”) as described in the Registration Statement, General Disclosure Package and Prospectus. No further approval or authorization of any stockholder, the Board of Directors or others is required in order to effect the Reverse Stock Split.

(tt) Ineligible Issuer Status. At the time of filing the Registration Statement and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined under Rule 405 under the Securities Act.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Amendments to Registration Statement. The Company has delivered, or will as promptly as practicable deliver, to the Underwriters complete conformed copies of the Registration Statement and of each consent and certificate of experts, as applicable, filed as a part thereof, and conformed copies of the Registration Statement (without exhibits), the Prospectus, as amended or supplemented, and the General Disclosure Package in such quantities and at such places as an Underwriter reasonably requests. Neither the Company nor any of its directors and officers has distributed and none of them will distribute, prior to the Closing Date, any offering material in connection with the offering and sale of the Securities other than the Prospectus, the General Disclosure Package and the Registration Statement. The Company shall not file any such amendment or supplement to which the Representative shall reasonably and timely object in writing.

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4.2 Federal Securities Laws.

(a) Compliance. During the time when a Prospectus is required to be delivered under the Securities Act, the Company will use its best efforts to comply with all requirements imposed upon it by the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Securities in accordance with the provisions hereof and the Prospectus. If at any time when a Prospectus relating to the Securities is required to be delivered under the Securities Act, any event shall have occurred as a result of which, in the opinion of counsel for the Company or counsel for the Representative, the Prospectus, as then amended or supplemented, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Securities Act, the Company will notify the Underwriters promptly and prepare and file with the Commission, subject to Section 4.1 hereof, an appropriate amendment or supplement in accordance with Section 10 of the Securities Act.

(b) Exchange Act Registration. For a period of three years from the Execution Date, the Company will use its best efforts to maintain the registration of the Common Stock and the Warrants under the Exchange Act; provided, that such provision shall not prevent a sale, merger or similar transaction involving the Company. The Company will not deregister the Common Stock under the Exchange Act without the prior written consent of the Representative, which consent shall not be unreasonably withheld and provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.

(c) Free Writing Prospectuses. The Company represents and agrees that it has not made and will not make any offer relating to the Securities that would constitute an issuer free writing prospectus, as defined in Rule 433 of the rules and regulations under the Securities Act, without the prior written consent of the Representative. Any such free writing prospectus consented to by the Representative is herein referred to as a “Permitted Free Writing Prospectus.” The Company represents that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus” as defined in the rules and regulations under the Securities Act, and has complied and will comply with the applicable requirements of Rule 433 of the Securities Act, including timely Commission filing where required, legending and record keeping.

4.3 Delivery to the Underwriters of Prospectuses. The Company will deliver to the Underwriters, without charge, from time to time during the period when the Prospectus is required to be delivered under the Securities Act or the Exchange Act such number of copies of each Prospectus as the Underwriters may reasonably request.

4.4 Effectiveness and Events Requiring Notice to the Underwriters. The Company will use its best efforts to cause the Registration Statement to remain effective with a current prospectus until the later of nine (9) months from the Execution Date and the date on which the Warrants are no longer outstanding, and will notify the Underwriters and holders of the Warrants immediately and confirm the notice in writing: (i) of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) the electronic filing with the Commission of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 4.4 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the General Disclosure Package or the Prospectus untrue or that requires the making of any changes in the Registration Statement, the General Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company will make every reasonable effort to obtain promptly the lifting of such order.

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4.5 Review of Financial Statements. For a period of three (3) years from the Execution Date, the Company shall file with the SEC all reports required to be filed pursuant to the Exchange Act and, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s financial statements included in such reports, provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.

4.6 Reports to the Underwriters; Expenses of the Offering.

(a) Periodic Reports, etc. For a period of three years from the Execution Date, the Company will furnish or make available to the Underwriters copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities registered under the Exchange Act and also promptly furnish or make available to the Underwriters: (i) a copy of each periodic report the Company shall be required to file with the Commission; (ii) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each Form 8-K prepared and filed by the Company; (iv) a copy of each registration statement filed by the Company under the Securities Act; (v) such additional documents and information with respect to the Company and the affairs of any future Subsidiaries of the Company as the Representative may from time to time reasonably request; provided that the Underwriters shall each sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative in connection with such Underwriter’s receipt of such information. Documents filed with the Commission pursuant to its EDGAR system shall be deemed to have been delivered to the Underwriters pursuant to this Section.

(b) Transfer Sheets. For a period of one year from the Execution Date, the Company shall retain the Transfer Agent or a transfer and registrar agent acceptable to the Representative and will furnish to the Underwriters at the Company’s sole cost and expense such transfer sheets of the Company’s securities as an Underwriter may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and the DTC, provided, however, that such requests cannot be made more than once monthly; and provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.

(c) Trading Reports. For a period of one (1) year after the date of this Agreement, the Company shall provide to the Underwriters, at the Company’s expense, such reports published by the Trading Market relating to price and trading of such securities, as the Underwriters shall reasonably request; provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.

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(d) General Expenses Related to the Offering. The Company hereby agrees to pay on each of the Closing Date and each Option Closing Date, if any, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the Securities to be sold in the Offering (including the Option Securities) with the Commission; (b) all FINRA Public Offering Filing System fees associated with the review of the Offering by FINRA; all fees and expenses relating to the listing of such Closing Units, Option Shares and Warrant Shares on the Trading Market and such other stock exchanges as the Company and the Representative together determine; (c) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement, and any Blue Sky Surveys and, if appropriate, any Agreement Among Underwriters, any agreements with Selected Dealers, Underwriters’ Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (d) the costs of preparing, printing and delivering the Securities; (e) fees and expenses of the Transfer Agent for the Securities (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company); (f) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (g) the fees and expenses of the Company’s accountants; (h) the fees and expenses of the Company’s legal counsel and other agents and representatives; (i) the Underwriters’ costs of mailing prospectuses to prospective investors; (j) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors not to exceed $15,000 in the aggregate; (k) the fees and expenses associated with the Underwriters’ use of i-Deal’s book-building, prospectus tracking and compliance software (or other similar software) for the Offering; and (l) the Company’s actual “road show” expenses for the Offering. The Underwriters may also deduct from the net proceeds of the Offering payable to the Company on the Closing Date, or each Option Closing Date, if any, all out-of-pocket fees, expenses and disbursements (including legal fees and expenses) of the Underwriters incurred as a result of providing services related to the Offering to be paid by the Company to the Underwriters; provided, however, that all such costs and expenses pursuant to this Section 4.6(d), including those referenced in clauses (k) and (l) above and legal expenses of counsel to the Underwriters and otherwise, which are incurred by the Underwriters and for which the Company shall be responsible shall not exceed $110,000 in the aggregate in the event of a Closing of the Offering ($15,000 of which has been paid as an advance (the “Advance”) prior to the Execution Date). In the event the offering is terminated, the Advance received against reasonable out-of-pocket expenses incurred in connection with the offering will be returned to the Company to the extent not actually incurred in accordance with FINRA Rule 5110(f)(2)(C).

4.7 Non-accountable Expenses. The Company further agrees that, in addition to the expenses payable pursuant to Section 4.6(d), on the Closing Date it shall pay to the Representative, by deduction from the net proceeds of the Offering contemplated herein, a non-accountable expense allowance equal to one percent (1%) of the gross proceeds received by the Company from the sale of the Closing Securities less the Advance (as such term is defined in Section 4.6(d)). Notwithstanding the foregoing, any advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(f)(2)(C).

4.8 Application of Net Proceeds. The Company will apply the net proceeds from the Offering received by it in a manner consistent with the application described under the caption “Use of Proceeds” in the Prospectus.

4.9 Delivery of Earnings Statements to Security Holders. The Company will timely file such reports pursuant to the Exchange Act as are necessary in order to make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth full calendar month following the Execution Date, an earnings statement (which need not be certified by independent public or independent certified public accountants unless required by the Securities Act or the rules and regulations under the Securities Act, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least twelve consecutive months beginning after the Execution Date.

4.10 Stabilization. Neither the Company, nor, to its knowledge, any of its employees, directors or shareholders (without the consent of the Representative) has taken or will take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.

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4.11 Internal Controls. The Company will maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

4.12 Accountants. For a period of three (3) years from the Effective Date, the Company shall continue to retain a nationally recognized, independent PCAOB registered public accounting firm. The Underwriters acknowledge that the Company Auditor is acceptable to the Underwriters.

4.13 FINRA. The Company shall advise the Underwriters (who shall make an appropriate filing with FINRA) if it is aware that any officer, director, 5% or greater shareholder of the Company or Person that received the Company’s unregistered equity securities in the past 180 days is or becomes an affiliate or associated person of a FINRA member firm prior to the earlier of the termination of this Agreement or the conclusion of the distribution of the Offering.

4.14 No Fiduciary Duties. The Company hereby acknowledges that each Underwriter is acting solely as underwriter in connection with the Offering of the Securities. The Company further acknowledges that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Company, its management, shareholders, creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of the Offering, either before or after the date hereof. The Representative on its own behalf and on behalf of the Underwriters, each expressly disclaims any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect. The Company, the Representative on its own behalf and on behalf of the Underwriters, agree that they are each responsible for making their own independent judgments with respect to any such transactions, and that any opinions or views expressed by the Underwriters to the Company regarding such transactions, including but not limited to any opinions or views with respect to the price or market for the Company’s securities, do not constitute advice or recommendations to the Company. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.

4.15 Warrant Shares. If all or any portion of a Warrant or a Representative’s Warrants is exercised at a time when there is an effective registration statement to cover the issuance of the Warrant Shares or the Representative’s Warrant Shares, as the case may be, or if the Warrant or Representative’s Warrants is exercised via cashless exercise at a time when such Warrant Shares or Representative’s Warrant Shares are eligible for resale under Rule 144 by a non-affiliate of the Company, the Warrant Shares or the Representative’s Warrant Shares issued pursuant to any such exercise shall be issued free of all restrictive legends. If at any time following the date hereof the Registration Statement (or any subsequent registration statement registering the sale or resale of the Warrant Shares or the Representative’s Warrant Shares) is not effective or is not otherwise available for the sale of the Warrant Shares or the Representative’s Warrant Shares, the Company shall immediately notify the holders that have provided it an address of the Warrants or the Representative’s Warrant Agreement in writing that such registration statement is not then effective and thereafter shall promptly notify such holders when the registration statement is effective again and available for the sale of the Warrant Shares or the Representative’s Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue, or any holder thereof to sell, any of the Warrant Shares in compliance with applicable federal and state securities laws).

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4.16 Board Composition and Board Designations. The qualifications of the persons serving as board members of the Company and the overall composition of the Board of Directors shall comply with the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and with the listing requirements of the Nasdaq Stock Market LLC and, if applicable, at least one member of the Board of Directors must qualify as a “financial expert” as such term is defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.

4.17 Securities Laws Disclosure; Publicity. At the request of the Representative, by 9:00 a.m. (New York City time) on the date hereof, the Company shall issue a press release disclosing the material terms of the Offering. The Company and the Representative shall consult with each other in issuing any press releases with respect to the Offering, and neither the Company nor any Underwriter shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. The Company will not issue press releases or engage in any other publicity, without the Representative’s prior consent, which consent will not be unreasonably withheld, for a period ending at 5:00 p.m. (New York City time) on the first business day following the 45th day following the Closing Date, other than normal and customary releases issued in the ordinary course of the Company’s business.

4.18 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Underwriter of the Securities is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Underwriter of Securities could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities.

4.19 Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times while any of the Warrants or Representative’s Warrants are outstanding, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Option Shares pursuant to the Over-Allotment Option, Warrant Shares pursuant to any exercise of the Warrants and Representative’s Warrant Shares pursuant to any exercise of the Representative’s Warrants.

4.20 Listing of Common Stock and Warrants. The Common Stock and the Warrants have been approved for trading on the Nasdaq Capital Market. The Company agrees to use its commercially reasonable best efforts to effect and maintain the trading of the Common Stock and the Warrants on the Nasdaq Capital Market for at least three (3) years after the Closing Date; provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.

4.21 Right of First Refusal. Upon the Closing of the Offering, for a period of eighteen (18) months from such Closing, the Company grants each of Maxim and Joseph Gunnar & Co. LLC (“JG”) the right of first refusal (the “Right of First Refusal”) to act as lead managing underwriter and book-runner and/or placement agent for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings undertaken during such period by the Company, any Subsidiary, or any successor to the Company (each, a “Subject Transaction”), at each of Maxim’s and JG’s sole and exclusive discretion, on terms and conditions customary to each of Maxim and JG for such Subject Transactions. In the event that both Maxim and JG exercise their respective Right of First Refusal as to the same public equity offering, the economic participation between Maxim and JG for this Right of First Refusal on such future public equity offering shall be 50% to Maxim and 50% to JG. For the avoidance of any doubt, the Company shall not retain, engage or solicit any additional investment banker, book-runner, financial advisor, underwriter and/or placement agent in a Subject Transaction without the express written consent of Maxim and JG.

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The Company shall notify Maxim and JG of its intention to pursue a Subject Transaction, including the material terms thereof, by providing written notice thereof by registered mail or overnight courier service addressed to Maxim. If Maxim fails to exercise its Right of First Refusal with respect to any Subject Transaction within ten (10) Business Days after the mailing of such written notice, then Maxim shall have no further claim or right with respect to the Subject Transaction. If JG fails to exercise its Right of First Refusal with respect to any Subject Transaction within ten (10) Business Days after the mailing of such written notice, then JG shall have no further claim or right with respect to the Subject Transaction. Each of Maxim and JG may elect, in its sole and absolute discretion, not to exercise its Right of First Refusal with respect to any Subject Transaction; provided that any such election by Maxim or JG shall not adversely affect its Right of First Refusal with respect to any other Subject Transaction during the eighteen (18) month period agreed to above.

4.22 Subsequent Equity Sales.

(a) From the date hereof until ninety (90) days after the Closing Date, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents.

(b) Notwithstanding the foregoing, this Section 4.22 shall not apply in respect of an Exempt Issuance.

4.23 Capital Changes. Until ninety (90) days after the Closing Date and except for reverse stock splits as disclosed in the Registration Statement, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of Maxim.

4.24 Post Offering Investments. Notwithstanding any other provision of this Agreement, including, but not limited to, Section 4.21, provided that the Securities are sold in accordance with the terms of this Agreement, in the event any individual or entity (including affiliates of such persons) that was directly introduced to the Company by any Underwriter subsequently provides the Company capital in any transaction, during the period commencing three (3) months following the Closing Date and ending eighteen (18) months thereafter, the Company shall be obligated to pay the applicable Underwriter a cash fee of 7.0% of the gross proceeds of any such investments.

4.25 Financial Public Relations Firm. As of the Execution Date, the Company has retained a financial public relations firm reasonably acceptable to the Representative and the Company, which shall initially be Barwicki Investor Relations Inc., which firm is experienced in assisting issuers in public offerings of securities and in their relations with their security holders, and shall retain such firm or another firm reasonably acceptable to the Representative for a period of not less than two (2) years after the Execution Date.

4.26 Research Independence. The Company acknowledges that each Underwriter’s research analysts and research departments, if any, are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and that such Underwriter’s research analysts may hold and make statements or investment recommendations and/or publish research reports with respect to the Company and/or the Offering that differ from the views of its investment bankers. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against such Underwriter with respect to any conflict of interest that may arise from the fact that the views expressed by their independent research analysts and research departments may be different from or inconsistent with the views or advice communicated to the Company by such Underwriter’s investment banking divisions. The Company acknowledges that each Representative is a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short position in debt or equity securities of the Company.

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ARTICLE V.

DEFAULT BY UNDERWRITERS

If on the Closing Date or any Option Closing Date, if any, any Underwriter shall fail to purchase and pay for the portion of the Closing Securities or Option Securities, as the case may be, which such Underwriter has agreed to purchase and pay for on such date (otherwise than by reason of any default on the part of the Company), the Representative, or if a Representative is the defaulting Underwriter, the non-defaulting Underwriters, shall use their reasonable efforts to procure within 36 hours thereafter one or more of the other Underwriters, or any others, to purchase from the Company such amounts as may be agreed upon and upon the terms set forth herein, the Closing Securities or Option Securities, as the case may be, which the defaulting Underwriter or Underwriters failed to purchase. If during such 36 hours the Representative shall not have procured such other Underwriters, or any others, to purchase the Closing Securities or Option Securities, as the case may be, agreed to be purchased by the defaulting Underwriter or Underwriters, then (a) if the aggregate number of Closing Securities or Option Securities, as the case may be, with respect to which such default shall occur does not exceed 10% of the Closing Securities or Option Securities, as the case may be, covered hereby, the other Underwriters shall be obligated, severally, in proportion to the respective numbers of Closing Securities or Option Securities, as the case may be, which they are obligated to purchase hereunder, to purchase the Closing Securities or Option Securities, as the case may be, which such defaulting Underwriter or Underwriters failed to purchase, or (b) if the aggregate number of Closing Securities or Option Securities, as the case may be, with respect to which such default shall occur exceeds 10% of the Closing Securities or Option Securities, as the case may be, covered hereby, the Company or the Representative will have the right to terminate this Agreement without liability on the part of the non-defaulting Underwriters or of the Company except to the extent provided in Article VI hereof. In the event of a default by any Underwriter or Underwriters, as set forth in this Article V, the applicable Closing Date may be postponed for such period, not exceeding seven days, as the Representative, or if a Representative is the defaulting Underwriter, the non-defaulting Underwriters, may determine in order that the required changes in the Prospectus or in any other documents or arrangements may be effected. The term “Underwriter” includes any person substituted for a defaulting Underwriter. Any action taken under this Section shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.

ARTICLE VI.

INDEMNIFICATION

6.1 1 Indemnification of the Underwriters. The Company shall indemnify and hold harmless each Underwriter, its affiliates, the directors, officers, employees and agents of such Underwriter and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the information deemed to be a part of the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Securities Act and the rules and regulations thereunder, as applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, any preliminary prospectus supplement, any Permitted Free Writing Prospectus or the Prospectus (or any amendment or supplement to any of the foregoing) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iii) any untrue statement or alleged untrue statement of a material fact contained in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering of the Securities, including any roadshow or investor presentations made to investors by the Company (whether in person or electronically) (collectively, “Marketing Materials”) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iv) in whole or in part any inaccuracy in any material respect in the representations and warranties of the Company contained herein; provided, however, that the Company shall not be liable to the extent that such loss, claim, liability, expense or damage is based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with Underwriters’ Information. This indemnity agreement will be in addition to any liability that the Company might otherwise have. For all purposes of this Agreement, the information set forth in the Prospectus in the “Discretionary Accounts,” “Price Stabilization, Short Positions and Penalty Bids” and “Electronic Distribution” sections under the caption “Underwriting” constitutes the only information (the “Underwriters’ Information”) relating to the Underwriters furnished in writing to the Company by the Underwriters through the Representative specifically for inclusion in the preliminary prospectus, the Registration Statement or the Prospectus.

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6.2 Indemnification of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its affiliates, the directors, officers, employees and agents of the Company and each other person or entity, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever, as incurred (including but not limited to reasonable attorneys’ fees and any and all reasonable expenses whatsoever, incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Securities Act and the rules and regulations thereunder, any Preliminary Prospectus, the Prospectus, or any amendment or supplement to any of them, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense (or action in respect thereof) arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon the Underwriters’ Information; provided, however, that in no case shall any Underwriter be liable or responsible for any amount in excess of the underwriting discount and commissions applicable to the Securities purchased by such Underwriter hereunder.

6.3 Indemnification Procedures. Any party that proposes to assert the right to be indemnified under this Section 6 shall, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 6, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party shall not relieve the indemnifying party from any liability that it may have to any indemnified party under the foregoing provisions of this Section 6 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable out-of-pocket costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by one of the indemnifying parties in connection with the defense of such action, (ii) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) the indemnified party has reasonably concluded that a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party), (iv) the indemnifying party does not diligently defend the action after assumption of the defense, or (v) the indemnifying party has not in fact employed counsel satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel shall be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges shall be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party shall not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld or delayed). No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 6 (whether or not any indemnified party is a party thereto), unless (x) such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party, and (y) the indemnifying party confirms in writing its indemnification obligations hereunder with respect to such settlement, compromise or judgment. Notwithstanding the foregoing, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a) effected without its written consent if (A) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (B) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

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6.4 Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 6 is applicable in accordance with its terms but for any reason is held to be unavailable, the Company and the Underwriters shall contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than the Underwriters, such as persons who control the Company within the meaning of the Securities Act, officers of the Company who signed the Registration Statement and directors of the Company, who may also be liable for contribution), to which the Company and the Underwriter may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the Offering of the Securities pursuant to this Agreement. The relative benefits received by the Company and the Underwriters shall be deemed to be in the same proportion as (x) the total proceeds from the Offering (net of underwriting discount and commissions but before deducting expenses) received by the Company bears to (y) the underwriting discount and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 6.4 were to be determined by pro rata allocation or by any other method of allocation (even if the Underwriters were treated as one entity for such purpose) which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 6.4 shall be deemed to include, for purpose of this Section 6.4, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6.4, no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions received by it. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6.4, any person who controls a party to this Agreement within the meaning of the Securities Act will have the same rights to contribution as that party, and each officer of the Company who signed the Registration Statement will have the same rights to contribution as the Company, and each director, officer, employee, counsel or agent of an Underwriter will have the same rights to contribution as such Underwriter, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 6.4, will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 6.4. The obligations of the Underwriters to contribute pursuant to this Section 6.4 are several in proportion to the respective number of Securities to be purchased by each of the Underwriters hereunder and not joint. No party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld).

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6.5 Survival. The indemnity and contribution agreements contained in this Section 6 and the representations and warranties of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or any controlling Person thereof, (ii) acceptance of any of the Securities and payment therefor or (iii) any termination of this Agreement.

ARTICLE VII.

MISCELLANEOUS

7.1 Termination.

(a) Termination Right. The Representative shall have the right to terminate this Agreement by notifying the Company at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in their opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on any Trading Market shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction, or (iii) if the United States shall have become involved in a new war or an increase in major hostilities, or (iv) if a banking moratorium has been declared by a New York State or federal authority, or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets, or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in the Representative’s opinion, make it inadvisable to proceed with the delivery of the Securities, or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder, or (viii) if the Representative shall have become aware after the date hereof of such a material adverse change in the conditions or prospects of the Company, or such adverse material change in general market conditions as in the Representative’s judgment would make it impracticable to proceed with the Offering, sale and/or delivery of the Securities or to enforce contracts made by the Underwriters for the sale of the Securities.

(b) Expenses. In the event this Agreement shall be terminated pursuant to Section 7.1(a), within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to Maxim its actual and accountable out of pocket expenses related to the transactions contemplated herein then due and payable up to $25,000 (which $15,000 has been paid as an Advance prior to the Execution Date) (provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement). Notwithstanding the foregoing, any Advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(f)(2)(C).

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(c) Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Article VI shall not be in any way effected by such election or termination or failure to carry out the terms of this Agreement or any part hereof.

7.2 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, any Preliminary Prospectus and the Prospectus, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. Notwithstanding anything herein to the contrary, the Engagement Agreement, dated September 15, 2020, as amended on September 28, 2020 and October 12, 2021 and from time to time (“Engagement Agreement”), by and between the Company and Maxim, shall continue to be effective and the terms therein, including, without limitation, Section 14 with respect to any future offerings, shall continue to survive and be enforceable by Maxim in accordance with its terms, provided that, in the event of a conflict between the terms of the Engagement Agreement and this Agreement, the terms of this Agreement shall prevail.

7.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number (if any) or e-mail attachment at the email address set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or e-mail attachment at the e-mail address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2^nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.

7.4 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and Maxim. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

7.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

7.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.

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7.7 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any action, suit or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Article VI, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

7.8 Survival. The representations and warranties contained herein shall survive the Closing and the Option Closing, if any, and the delivery of the Securities.

7.9 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

7.10 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

7.11 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Underwriters and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

7.12 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

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7.13 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

7.14 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE FOREVER ANY RIGHT TO TRIAL BY JURY.

7.15 No Third Party Beneficiaries. This Agreement shall inure solely to the benefit of and shall be binding upon the Underwriters, the Company, JG solely for the purposes of Section 4.21 of this Agreement and the directors, officers and Controlling Persons referred to in Section 6 hereof, and their respective successors, legal representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from the Underwriters.

(Signature Pages Follow)

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If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among the Company and the several Underwriters in accordance with its terms.

Very truly yours,
SIMPLICITY ESPORTS AND GAMING COMPANY
By:
Name:	Roman Franklin
Title:	Chief Executive Officer

Address for Notice:

If to the Company:

Simplicity Esports and Gaming Company

7000 W. Palmetto Park Rd., Suite 505

Boca Raton, FL 33433

Attention: Roman Franklin, Chief Executive Officer

E-mail: roman@simplicityesports.com

Fax: [•]

with a copy (which shall not constitute notice) to:

Anthony L.G., PLLC

625 N. Flagler Drive, Suite 600

West Palm Beach, Florida 33401

Attention: Laura Anthony, Esq.

Email: LAnthony@anthonypllc.com

Fax: (561) 514-0832

Accepted by the Representative, acting for themselves and as

Representative of the Underwriters named on Schedule I hereto,

as of the date first above written:

MAXIM GROUP LLC
By:
Name:	Clifford A. Teller
Title:	Executive Managing Director, Investment Banking

Address for Notice:

405 Lexington Avenue

New York, New York 10174

Facsimile: (212) 895-3783 or e-mail: cteller@maximgrp.com

Attention: Clifford A. Teller

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with a copy (which shall not constitute notice) to:

Littman Krooks LLP

655 Third Avenue, 20th Floor

New York, NY 10017

Attn: Steven Uslaner, Esq.

Email: suslaner@littmankrooks.com

Fax: (212) 490-2990

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SCHEDULE I

Schedule of Underwriters

Underwriters	Closing Units	Closing Shares	Closing Warrants	Closing Purchase Price
Maxim Group LLC
Joseph Gunnar & Co. LLC
Total

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SCHEDULE II

Pricing Information

Number of Closing Units:

Number of Closing Shares:

Number of Closing Warrants:

Number of Option Shares:

Number of Option Warrants:

Public Offering Price per Closing Unit: $

Public Offering Price per Option Share: $

Public Offering Price per Option Warrant: $0.01

Underwriting Discount per Closing Unit: $

Underwriting Discount per Option Share: $

Underwriting Discount per Option Warrant: $0.0007

Proceeds to Company per Closing Unit (before expenses): $

Proceeds to Company per Option Share (before expenses): $

Proceeds to Company per Option Warrant (before expenses): $

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EXHIBIT A

FORM OF LOCK-UP AGREEMENT

[_____________], 2021

Maxim Group LLC

405 Lexington Avenue

New York, New York 10174

Re: Simplicity Esports and Gaming Company—Public Offering

Ladies and Gentlemen:

The undersigned, an officer, director and/or a holder of common stock, par value $0.0001 per share (the “Common Stock”), or rights to acquire shares of Common stock (the “Shares”), of Simplicity Esports and Gaming Company (the “Company”), understands that you are the representative (the “Representative”) of the several underwriters (collectively, the “Underwriters”), named or to be named in the final form of Schedule I to the underwriting agreement (the “Underwriting Agreement”) to be entered into among the Underwriters and the Company, providing for the public offering (the “Public Offering”) of Shares and warrants to purchase Shares (collectively, the “Securities”) pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (the “SEC”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Underwriting Agreement.

In consideration of the Underwriters’ agreement to enter into the Underwriting Agreement and to proceed with the Public Offering of the Securities, and for other good and valuable consideration, receipt of which is hereby acknowledged, the undersigned hereby agrees, for the benefit of the Company, the Representative and the other Underwriters that, without the prior written consent of the Representative, the undersigned will not, during the period specified in the following paragraph (the “Lock-Up Period”), directly or indirectly, unless otherwise provided herein, (a) offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, encumber, assign, borrow or otherwise dispose of (each a “Transfer”) any Relevant Security (as defined below) or otherwise publicly disclose the intention to do so, or (b) establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” with respect to any Relevant Security (in each case within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder) with respect to any Relevant Security or otherwise enter into any swap, derivative or other transaction or arrangement that Transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by the delivery of Relevant Securities, other securities, cash or other consideration, or otherwise publicly disclose the intention to do so. As used herein, the term “Relevant Security” means any Share, any warrant to purchase Shares or any other security of the Company or any other entity that is convertible into, or exercisable or exchangeable for, Shares or any other equity security of the Company, in each case owned beneficially or otherwise by the undersigned on the date of closing of the Public Offering or acquired by the undersigned during the Lock-Up Period.

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The restrictions in the foregoing paragraph shall not apply to (a) any exercise (including a cashless exercise or broker-assisted exercise and payment of tax obligations) of options or warrants to purchase Shares; provided that any Shares received upon such exercise, conversion or exchange will be subject to the restrictions set forth above during the Lock-Up Period, (b) any establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Shares (a “Trading Plan”), provided that (i) the Trading Plan shall not provide for or permit any transfers, sales or other dispositions of Shares during the Lock-Up Period and (ii) the Trading Plan would not require any filing under Section 16(a) of the Exchange Act and no such filing is voluntarily made, or (c) any transfer of Shares acquired in open market transactions following the closing of the Public Offering, provided the transfer would not require any filing under Section 16(a) of the Exchange Act and no such filing is voluntarily made. The Lock-Up Period will commence on the date of this Lock-up Agreement and continue and include the date that is one-hundred and twenty (120) days after the closing of the Public Offering.

In addition, the undersigned further agrees that, except for the registration statement filed or to be filed in connection with the Public Offering, during the Lock-Up Period the undersigned will not, without the prior written consent of the Representative: (a) file or participate in the filing with the SEC of any registration statement or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document, in each case with respect to any proposed offering or sale of a Relevant Security beneficially owned by the undersigned, or (b) exercise any rights the undersigned may have to require registration with the SEC of any proposed offering or sale of a Relevant Security beneficially owned by the undersigned.

In furtherance of the undersigned’s obligations hereunder, the undersigned hereby authorizes the Company during the Lock-Up Period to cause any transfer agent for the Relevant Securities to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, Relevant Securities for which the undersigned is the record owner and the transfer of which would be a violation of this Lock-Up Agreement and, in the case of Relevant Securities for which the undersigned is the beneficial but not the record owner, agrees that during the Lock-Up Period it will use its reasonable best efforts to cause the record owner to authorize the Company to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, such Relevant Securities to the extent such transfer would be a violation of this Lock-Up Agreement.

Notwithstanding the foregoing, the undersigned may transfer the undersigned’s Relevant Securities:

(i) as a bona fide gift or gifts,

(ii) to any trust, partnership, limited liability company or other legal entity commonly used for estate planning purposes which is established for the direct or indirect benefit of the undersigned or a member or members of the immediate family of the undersigned,

(iii) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity (1) to another corporation, partnership, limited liability company, trust or other business entity that is a direct or indirect affiliate (as defined in Rule 405 under the Securities Act of 1933, as amended) of the undersigned, (2) to limited partners, limited liability company members or stockholders of the undersigned or holders of similar equity interests in the undersigned, or (3) in connection with a sale, merger or transfer of all or substantially all of the assets of the undersigned or any other change of control of the undersigned, not undertaken for the purpose of avoiding the restrictions imposed by this Lock-Up Agreement,

(iv) if the undersigned is a trust, to the beneficiary of such trust,

(v) by testate or intestate succession,

(vi) by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement,

(vii)	pursuant to the Underwriting Agreement;
(viii)	to the Company solely in an amount necessary to satisfy tax obligations (withholding or otherwise) in connection with any grant of restricted Shares, exercise or vesting of options or warrants to purchase Shares;

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provided, in the case of clauses (i)-(vi), that (A) such transfer shall not involve a disposition for value, (B) the transferee agrees in writing with the Underwriters and the Company to be bound by the terms of this Lock-Up Agreement, and (C) such transfer would not require any filing under Section 16(a) of the Exchange Act and no such filing is voluntarily made.

For purposes of this Lock-Up Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin.

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Agreement and that this Lock-Up Agreement has been duly authorized (if the undersigned is not a natural person) and constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Upon request, the undersigned will execute any additional documents necessary in connection with the enforcement hereof. Any obligations of the undersigned shall be binding upon the successors and assigns of the undersigned from the date of this Lock-Up Agreement.

The undersigned understands that, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Securities to be sold thereunder, the undersigned shall be released from all obligations under this Lock-Up Agreement.

The undersigned, whether or not participating in the Public Offering, understands that the Underwriters are entering into the Underwriting Agreement and proceeding with the Public Offering in reliance upon this Lock-Up Agreement.

This Lock-Up Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof. Delivery of a signed copy of this Lock-Up Agreement by facsimile or e-mail/.pdf transmission shall be effective as the delivery of the original hereof.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGE FOLLOWS]

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Very truly yours,

Signature:

Name (printed):

Title (if applicable):

Entity (if applicable):

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EXHIBIT B

OFFICERS’ CERTIFICATE

SIMPLICITY ESPORTS AND GAMING COMPANY

The undersigned, Roman Franklin, the duly elected and duly qualified Chief Executive Officer of Simplicity Esports and Gaming Company, a Delaware corporation (the “Company”), hereby certify the following on behalf of the Company, in connection with the transactions contemplated by the Underwriting Agreement (the “Underwriting Agreement”), dated [___], 2021, by and between the Company and Maxim Group LLC, as representative of the several Underwriters named on Schedule I thereto:

1. The undersigned officers have carefully examined the Registration Statement, the General Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of time it became effective and as of the Closing Date did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the General Disclosure Package, as of its date and as of the Closing Date, any Issuer Free Writing Prospectus as of its date and as of the Closing Date and the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading.

2. Since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the General Disclosure Package or the Prospectus.

3. To the best of the undersigned’s knowledge after reasonable investigation, as of the Closing Date, the representations and warranties of the Company in the Underwriting Agreement are true and correct and the Company has complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date.

4. There has not been, subsequent to August 31, 2021, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a Material Adverse Effect.

5. All correspondence between the Company or its counsel and the Commission are accurate and complete in all material respects.

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Underwriting Agreement.

This certificate is to assist the Underwriters in conducting and documenting their investigation of the affairs of the Company in connection with the Offering of the Securities pursuant to the terms of the Underwriting Agreement and the other transactions described in the Transaction Documents, and each of the Underwriters, Littman Krooks LLP and Anthony L.G., PLLC is entitled to rely on this Certificate for such purpose and (if applicable) in connection with the delivery by such counsel of their respective legal opinions and negative assurance statement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the undersigned have executed this Officers’ Certificate on behalf of the Company as of this [__] day of [____], 2021.

Name:	Roman Franklin
Title:	Chief Executive Officer

[SIGNATURE PAGE TO OFFICERS’ CERTIFICATE]

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EXHIBIT C

SECRETARY’S CERTIFICATE

SIMPLICITY ESPORTS AND GAMING COMPANY

[___], 2021

The undersigned, acting solely in his/her capacity as the duly elected, qualified and acting Secretary of Simplicity Esports and Gaming Company, a Delaware corporation (the “Company”), and not in his/her individual capacity, hereby gives this certificate pursuant to Section 2.3(i) of that certain underwriting agreement, dated [___], 2021, by and between the Company and Maxim Group LLC, as representative of the several Underwriters named on Schedule I thereto (the “Underwriting Agreement”). Unless otherwise defined herein, the capitalized terms used herein shall have the meanings ascribed to them in the Underwriting Agreement.

The undersigned, Steven Grossman, Secretary of the Company, hereby certifies as of the date hereof as follows:

1. Attached hereto as Exhibit A is a true, correct and complete copy of the Company’s [ amended and restated certificate of incorporation, as further amended], in effect on the date hereof (the “Certificate of Incorporation”). The Certificate of Incorporation is in full force and effect on the date hereof, and no amendments or modifications to the Certificate of Incorporation have been authorized or filed with the Secretary of State of the State of Nevada.

2. Attached hereto as Exhibit B is a true, correct and complete copy of the Company’s amended and restated bylaws, in effect on the date hereof (the “Bylaws”), and no amendments or modifications to the Bylaws have been authorized.

3. Attached hereto as Exhibit C is a true, correct and complete copies of resolutions duly adopted by the Company’s board of directors or a committee thereof at meetings held on ______ __2021, in which the transactions contemplated by the Registration Statement, the Prospectus and the Transaction Documents were authorized and approved. Such resolutions are in full force and effect, have not been amended, modified or rescinded and are the only resolutions related to the subject matter thereof.

4. Each person who, as a director or officer of the Company, signed, and delivered by facsimile, portable document file (.pdf) or otherwise (a) the Underwriting Agreement, (b) the Transaction Documents and (c) any and all other documents or instruments executed and delivered to the Representative in connection with the transactions contemplated by the Underwriting Agreement, was duly elected or appointed, qualified and acting as such director or officer, and was duly authorized to execute and deliver such documents or other instruments at the respective times of such execution and delivery.

5. All persons who, as officers or directors of the Company or attorneys-in-fact of such officers or directors, signed, and delivered by facsimile, portable document file (.pdf) or otherwise: (a) the Registration Statement on Form S-1, as amended (File No. 333-237634), that the Company filed with the Commission on April 10, 2020, July 2, 2020, September 28, 2020, October 23, 2020, January 19, 2021, April 16, 2021, July 15, 2021 and October 12, 2021, which was subsequently declared effective by the Commission on _______________, 2021, and (b) any and all other documents or instruments executed and delivered to the Commission in connection with such Registration Statement were, at the respective times of such signing, delivery or filing, duly elected or appointed, qualified and acting as such director, officer or duly appointed and acting as such attorney-in-fact, and the signatures of such persons appearing on such documents are their genuine signatures or true facsimiles or portable document thereof.

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6. Attached hereto as Exhibit D are true, correct and complete copies of a good standing (or equivalent) certificate as of a recent date for the Company and each Subsidiary by the relevant authority of its jurisdiction of incorporation or organization, and such certificates attached thereto have not been amended (except as attached thereto) since the date reflected thereon.

7. Jed Kaplan, the Company’s Chief Executive Officer, has executed and delivered on behalf of the Company the Underwriting Agreement and the other Transaction Documents in accordance with their respective terms thereof.

This certificate is to assist the Underwriters in conducting and documenting their investigation of the affairs of the Company in connection with the Offering of the Securities pursuant to the terms of the Underwriting Agreement and the other transactions described in the Transaction Documents, and each of the Underwriters, Littman Krooks LLP and Anthony L.G., PLLC is entitled to rely on this Certificate for such purpose and (if applicable) in connection with the delivery by such counsel of their respective legal opinions and negative assurance statement.

This certificate may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Delivery of an executed signature page of this certificate by electronic or facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof.

[Signature page follows]

51

IN WITNESS WHEREOF, I have hereunder signed my name on this [__] day of [___], 2021.

Name:	Steven Grossman
Title:	Secretary

The undersigned as Chief Executive Officer of the Company hereby certifies that Steven Grossman is the duly elected, appointed, qualified and acting Secretary of the Company, and that the signature appearing above is his genuine signature.

Jed Kaplan, Chief Executive Officer

[Signature page to Simplicity Esports and Gaming Company Secretary’s Certificate]

52

Secretary’s Certificate

Exhibit A

Certificate of Incorporation

53

Secretary’s Certificate

Exhibit B

Bylaws

54

Secretary’s Certificate

Exhibit C

Board Resolutions

55

Secretary’s Certificate

Exhibit D

Good Standing Certificates

56

EXHIBIT D

CHIEF FINANCIAL OFFICER’S CERTIFICATE

SIMPLICITY ESPORTS AND GAMING COMPANY

[____], 2021

I, Nancy Hennessy, do hereby certify that I am the Chief Financial Officer, of Simplicity Esports and Gaming Company, a Delaware corporation (the “Company”), and, in my capacity as such and not in any individual capacity, and based upon a diligent examination of the financial records of the Company, the scope and nature of such examination being designed to identify information relevant to the subjects addressed below, do hereby certify to the Representative (as defined below) that:

1. I am providing this certificate in connection with the offering (the “Offering”) by the Company of an aggregate of [_____] Units (“Units”), with each Unit consisting of one share of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) and one warrant to purchase one share of Common Stock pursuant to Section 2.3(j) of that certain underwriting agreement, dated [___], 2021 (the “Underwriting Agreement”), by and between the Company and Maxim Group LLC, as representative of the several Underwriters named on Schedule I thereto. The Offering is being made pursuant to the registration statement on Form S-1, as amended (File No. 333-237634) (the “Registration Statement”) that was filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, and that was subsequently declared effective by the SEC on [___], 2021. Unless otherwise defined herein, the capitalized terms used herein shall have the meanings ascribed to them in the Underwriting Agreement.

2. I am familiar with the accounting, operations and records systems of the Company and its subsidiaries and I have responsibility for the Company’s financial and accounting matters. I have (i) read the Registration Statement and the Prospectus; and (ii) supervised the compilation of and reviewed the financial information set forth in the Registration Statement and the Prospectus (collectively, the “Financial Information”). Such Financial Information has been derived from the applicable accounting or financial records of the Company or its subsidiaries, which I believe, to the best of my knowledge, are accurate, complete and reliable.

3. I have prepared or reviewed the amounts and information identified in the pages of the Registration Statement and the Prospectus and Company’s investor presentation, attached as Annex A hereto (collectively, the “Financial and Numerical Information”). To the best of my knowledge, such Financial and Numerical Information, as of the date hereof, matches or is accurately derived from the applicable accounting or financial records of the Company or its subsidiaries.

This certificate is to assist the Underwriters in conducting and documenting their investigation of the affairs of the Company in connection with the Offering of the Securities pursuant to the terms of the Underwriting Agreement and the other transactions described in the Transaction Documents, and each of the Underwriters, Littman Krooks LLP and Anthony L.G., PLLC is entitled to rely on this Certificate for such purpose and (if applicable) in connection with the delivery by such counsel of their respective legal opinions and negative assurance statement.

[Signature page follows]

57

IN WITNESS WHEREOF, the undersigned has executed and delivered this Chief Financial Officer Certificate on behalf of the Company as of the date first written above.

SIMPLICITY ESPORTS AND GAMING COMPANY
By:
Name:	Nancy Hennessy
Title:	Chief Financial Officer

[Signature page to Chief Financial Officer Certificate—Simplicity Esports and Gaming Company]

58

EXHIBIT E

FORM OF WARRANT

[attached hereto]

59

EXHIBIT F

FORM OF REPRESENTATIVE’S WARRANT

[attached hereto]

60

EXHIBIT G

FORM OF WARRANT AGENT AGREEMENT

[attached hereto]

61

Simplicity Esports and Gaming Company Underwriting Agreement Schedules

Schedule 3.1(a) - Subsidiaries

Entity Name	Place of Organization
Simplicity Esports, LLC *	Florida
PLAYlive Nation, Inc *	Delaware
Simplicity One Brasil Ltda **	Brazil
Simplicity Happy Valley, LLC ***	Oregon
Simplicity Redmond, LLC ***	Washington

* 100% owned subsidiary of Simplicity Esports and Gaming Company

**76% owned subsidiary of Simplicity Esports and Gaming Company

***79% owned subsidiary of Simplicity Esports and Gaming Company

Schedule 3.1(h) – Capitalization Table as of __________________

Security	Number Outstanding (pre-reverse split)
Shares of common stock
Warrants

Schedule 3.1(x) - Compliance with Exchange Act

None.

62

EX-5.1

EXHIBIT 5.1

ANTHONY L.G., PLLC

laura aNTHONy, esq	www.ANTHONYPLLC.com
GEOFFREY ASHBURNE, ESQ*	WWW.SECURITIESLAWBLOG.COM
JOHN CACOMANOLIS, ESQ**	WWW.LAWCAST.COM
CHAD FRIEND, ESQ, LLM
SVETLANA ROVENSKAYA, ESQ***
OF COUNSEL:	DIRECT E-MAIL: LANTHONY@ANTHONYPLLC.COM
MICHAEL R. GEROE, ESQ, CIPP/US****
CRAIG D. LINDER, ESQ*****
PETER P. LINDLEY, ESQ, CPA, MBA
john lowy, esq.******
STUART REED, ESQ
MARC S. WOOLF, ESQ

*licensed in CA

**licensed in FL and NY

***licensed in NY and NJ

****licensed in CA, DC, MO and NY

*****licensed in CA, FL and NY

******licensed in NY and NJ

October 12, 2021

Simplicity Esports and Gaming Company

7000 W. Palmetto Park Rd., Suite 505

Boca Raton, FL 33433

Re: Simplicity Esports and Gaming Company - Pre-Effective Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-237634)

Ladies and Gentlemen:

We have acted as counsel to Simplicity Esports and Gaming Company, a Delaware corporation (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”), of a Registration Statement on Form S-1, filed on April 10, 2020, with the File No. 333-237634 (as amended through the date hereof, the “Registration Statement”) relating to the registration by the Company of (i) up to an aggregate of $10,000,000 of units (the “Units”) consisting of shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and warrants to purchase shares of Common Stock (the “Common Warrants”), (ii) up to an aggregate of $1,500,000 of Shares and Common Warrants for which the Underwriters (as defined below) have been granted an over-allotment option, and (iii) up to an aggregate of $12,650,000 of shares of Common Stock issuable from time to time upon exercise of the Common Warrants (the “Common Warrant Shares”). The Units, the Shares, the Common Warrants and the Common Warrant Shares are collectively referred to as the “Securities”. The Securities are to be sold by the Company pursuant to an underwriting agreement (the “Underwriting Agreement”) to be entered into by and between the Company and Maxim Group LLC, acting as the sole underwriter (the “Underwriter”), the form of which has been filed as Exhibit 1.1 to the Registration Statement. The Company is also registering (i) warrants to purchase up to $1,851,500 of shares of Common Stock of the Company to be issued to the Underwriter as additional compensation pursuant to the Underwriting Agreement (the “Representative’s Warrants”), and (ii) up to an aggregate of $1,851,500 of Common Stock issuable upon exercise of the Representative’s Warrants (the “Representative’s Warrant Shares”).

In rendering the opinion set forth herein, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments as we have deemed necessary or advisable. In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all items submitted to us as originals, the conformity with originals of all items submitted to us as copies, and the authenticity of the originals of such copies. As to any facts material to the opinions expressed herein that we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Company and public officials.

We express no opinion herein as to the laws of any state or jurisdiction other than the substantive laws of the State of New York as it relates to the Common Warrants and Representative’s Warrants, the Delaware General Corporation Law (including all related provisions of the Delaware Constitution and all reported judicial decisions interpreting the Delaware General Corporation Law and the Delaware Constitution) and the federal laws of the United States of America.

With regard to our opinion concerning the Units constituting valid and binding obligations of the Company, our opinion is subject to, and may be limited by, (a) applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance, debtor and creditor, and similar laws which relate to or affect creditors’ rights generally, and (b) general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing) regardless of whether considered in a proceeding in equity or at law.

With regard to our opinion concerning the Common Warrants and Representative’s Warrants constituting valid and binding obligations of the Company:

(i) Our opinion is subject to, and may be limited by, (a) applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance, debtor and creditor, and similar laws which relate to or affect creditors’ rights generally, and (b) general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing) regardless of whether considered in a proceeding in equity or at law.

(ii) Our opinion is subject to the qualification that the availability of specific performance, an injunction or other equitable remedies is subject to the discretion of the court before which the request is brought.

(iii) We express no opinion as to any provision of the Common Warrants and the Representative’s Warrants that: (a) provides for liquidated damages, buy-in damages, monetary penalties, prepayment or make-whole payments or other economic remedies to the extent such provisions may constitute unlawful penalties, (b) relates to advance waivers of claims, defenses, rights granted by law, or notice, opportunity for hearing, evidentiary requirements, statutes of limitations, trial by jury, or procedural rights, (c) restricts non-written modifications and waivers, (d) provides for the payment of legal and other professional fees where such payment is contrary to law or public policy, (e) relates to exclusivity, election or accumulation of rights or remedies, (f) authorizes or validates conclusive or discretionary determinations, or (g) provides that provisions of the Common Warrants and the Representative’s Warrants are severable to the extent an essential part of the agreed exchange is determined to be invalid and unenforceable.

(iv) We express no opinion as to whether a state court outside of the State of New York or a federal court of the United States would give effect to the choice of New York law or jurisdiction provided for in the Common Warrants and the Representative’s Warrants.

In rendering this opinion we have assumed that prior to the issuance of the Common Warrants forming part of the Units and the over-allotment option and the Representative’s Warrants (i) the Registration Statement, as then amended, will have become effective under the Securities Act, and (ii) the Board of Directors of the Company will have taken action to set the sale price of the Common Warrants and the Representative’s Warrants and the exercise price of the Common Warrants and the Representative’s Warrants.

With regard to our opinion regarding the Common Warrants and the Representative’s Warrants, we express no opinion to the extent that, notwithstanding its current reservation of shares of Common Stock, future issuances of securities, including the Common Warrant Shares and the Representative’s Warrant Shares, of the Company and/or antidilution adjustments to outstanding securities, including the Common Warrants and the Representative’s Warrants, of the Company cause the Common Warrants and the Representative’s Warrants to be exercisable for more shares of Common Stock than the number that then remain authorized but unissued.

Based upon and subject to the foregoing, we are of the opinion that: (i) the Units have been duly authorized for issuance and, when issued, delivered and paid for in accordance with the terms of the Underwriting Agreement, the Units will be validly issued, fully paid and non-assessable, and will be legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms; (ii) the Shares have been duly authorized for issuance and, when issued, delivered and paid for in accordance with the terms of the Underwriting Agreement, the Shares will be validly issued, fully paid and non-assessable; (iii) the Common Warrants, when executed and delivered by the Company in accordance with and in the manner described in the Registration Statement, the Underwriting Agreement and the Common Warrants, will constitute legal, valid and binding agreements of the Company, enforceable against the Company in accordance with their terms; (iv) the Common Warrant Shares have been duly authorized for issuance and, when issued and sold by the Company and delivered by the Company and upon valid exercise thereof and against receipt of the exercise price therefor, in accordance with and in the manner described in the Registration Statement, the Underwriting Agreement and the Common Warrants, will be validly issued, fully paid and non-assessable; (v) the Representative’s Warrants, when executed and delivered by the Company in accordance with and in the manner described in the Registration Statement, the Underwriting Agreement and the Representative’s Warrants, will constitute a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, moratorium and similar laws affecting creditors’ rights generally and equitable principles of general applicability; and (vi) the Representative’s Warrant Shares have been duly authorized for issuance and, when issued and sold by the Company and delivered by the Company and upon valid exercise thereof and against receipt of the exercise price therefor, in accordance with and in the manner described in the Registration Statement, the Underwriting Agreement and the Representative’s Warrants, will be validly issued, fully paid and non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption “Legal Matters” in the Registration Statement. In so doing, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act and the rules and regulations of the Commission promulgated thereunder.

Sincerely yours,

/s/ Laura E. Anthony

Laura E. Anthony,

For the Firm

625 N. FLAGLER DRIVE, SUITE 600 ● WEST PALM BEACH, FLORIDA ● 33401 ● PHONE: 561-514-0936 ● FAX 561-514-0832

EX-10.80

EXHIBIT 10.80

Amendment No. 1 to Convertible Promissory Note

Dated as of September 17, 2021

This Amendment No. 1 to Convertible Promissory Note (this “Amendment”), dated as of the date first set forth above, is entered into by and between Simplicity Esports and Gaming Company, a Delaware corporation (the “Company”) and FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC, a Delaware limited liability company (“Holder”). The Company and Holder may be referred to herein individually as a “Party” and collectively as the “Parties.”

WHEREAS, the Holder is the holder of that certain Convertible Promissory Note of the Company, dated as of March 10, 2021 (the “Note”) and now wish to amend the Note as set forth herein;

WHEREAS, pursuant to Section 4.3 of the Note, the Note may be amended in writing;

NOW THEREFORE, in consideration of the foregoing and of the agreements and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1. Defined terms used herein without definition shall have the meaning given to them in the Note.

2. Subject to the provisions herein, the Note is hereby amended as follows:

(a) The Parties acknowledge and agree that a payment of $123,200 was due and payable to the Holder on September 10, 2011 (the “Interim Payment”), and the Interim Payment has not been made as of the date hereof. Holder hereby waives any Event of Default under the Note and any other consequences under the Note as a result of the Interim Payment note being made as originally required by the Note.

(b) The Parties agree that the Interim Payment shall hereafter be due and payable on the Maturity Date together with any other amounts due and payable pursuant to the Note at such time.

3. In consideration of the agreements of Holder hereunder, on the date hereof the Company shall issue to Holder, for no additional consideration, a warrant to acquire 40,000 shares of Common Stock in the form as attached hereto as Exhibit 1 (the “Warrant”).

4. Other than as amended herein, the Note shall remain in full force and effect.

5. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. All questions concerning jurisdiction, venue and the construction, validity, enforcement and interpretation of this Amendment shall be determined in accordance with the provisions of the Purchase Agreement.

6. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each Party and delivered to the other Party. A facsimile or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or .pdf signature. Delivery of a counterpart signature hereto by facsimile or email/.pdf transmission shall be deemed validly delivery thereof.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.

Simplicity Esports and Gaming Company
By:	/s/ Roman Franklin
Name:	Roman Franklin
Title:	Chief Executive Officer

FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC
By:	FirstFire Capital Management, LLC, its Manager
By:	/s/ Eli Fireman
Name:	Eli Fireman
Title:	Manager

Exhibit 1 Warrant

(Attached)

EX-21.1

EXHIBIT 21.1

List of Subsidiaries of

Simplicity Esports and Gaming Company

Entity Name	Place of Organization
Simplicity Esports, LLC *	Florida
PLAYlive Nation, Inc *	Delaware
PLAYlive Nation Holdings, LLC *	Delaware
Simplicity One Brasil Ltda **	Brazil
Simplicity Happy Valley, LLC ***	Oregon
Simplicity Redmond, LLC ***	Washington
Simplicity El Paso, LLC****	Texas
Simplicity Union Gap, LLC *	Washington
Simplicity Kennewick, LLC *	Washington
Simplicity Humble, LLC *	Texas
Simplicity Frisco, LLC *	Texas
Simplicity Billings, LLC *	Montana
Simplicity Brea, LLC *	California
Simplicity Santa Rosa, LLC *	California
Simplicity St. Louis, LLC *	Missouri
Simplicity St. Petersburg, LLC *	Florida
Simplicity Fullerton, LLC*	California
Simplicity Vancouver, LLC*	Washington
Simplicity Salinas, LLC*	California
Simplicity Tracy, LLC*	California

* 100% owned subsidiary of Simplicity Esports and Gaming Company

**76% owned subsidiary of Simplicity Esports and Gaming Company

***79% owned subsidiary of Simplicity Esports and Gaming Company

****51% owned subsidiary of Simplicity Esports and Gaming Company

EX-23.1

EXHIBIT 23.1

To the Board of Directors and Stockholders of

Simplicity Esports and Gaming Company

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

We consent to the inclusion in this Pre-Effective Amendment No. 7 to Registration Statement of Simplicity Esports and Gaming Company on Form S-1 of our report dated August 30, 2021 with respect to our audit of the financial statements of Simplicity Esports and Gaming Company (which report expresses an unqualified opinion and includes an explanatory paragraph related to Simplicity Esports and Gaming Company’s ability to continue as a going concern) as of May 31, 2021 and 2020 and for the years then ended, which appears in the prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading “Experts” in such Pre-Effective Amendment No. 7 to Registration Statement.

/s/ Prager Metis CPAs, LLP

Prager Metis CPAs, LLP

El Segundo, CA

October 12, 2021

XML

Cover	3 Months Ended
	Aug. 31, 2021
Entity Addresses [Line Items]
Document Type	S-1/A
Amendment Flag	true
Amendment Description	PRE-EFFECTIVE AMENDMENT NO. 7
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 Rd.
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 Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false
Business Contact [Member]
Entity Addresses [Line Items]
Entity Address, Address Line One	625 N. Flagler Drive
Entity Address, Address Line Two	Suite 600
Entity Address, City or Town	West Palm Beach
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33401
City Area Code	(855)
Local Phone Number	345-9467

XML

Condensed Consolidated Balance Sheets - USD ($)	Aug. 31, 2021	May 31, 2021	May 31, 2020
Current Assets
Cash and cash equivalents	$ 673,693	$ 414,257	$ 160,208
Accounts receivable, net	139,166	160,101	127,653
Inventory	297,013	206,974	15,787
Other current assets	41,250	52,643	5,588
Total Current Assets	1,151,122	833,975	309,236
Non Current  Assets
Goodwill	5,180,141	5,180,141	5,155,141
Intangible assets, net	1,558,039	1,635,227	2,141,374
Deferred brokerage fees	77,539	79,943	149,223
Property and equipment, net	566,970	574,308	232,733
Right of use asset, operating leases, net	1,562,617	1,533,010	490,984
Security deposits	40,307	40,307	14,885
Due from franchisees	3,037	23,007
Deferred financing costs	320,399	307,494	98,198
Total Non Current  Assets	9,309,049	9,373,437	8,282,538
TOTAL ASSETS	10,460,171	10,207,412	8,591,774
Current Liabilities
Accounts payable	209,594	438,466	126,716
Accrued expenses	1,147,434	1,166,433	1,381,342
Current portion of convertible note payable, net of discount	1,323,051	2,211,097	1,127,320
Loan payable	82,235	82,235	40,500
Note payable - related party			64,728
Operating lease obligation, current	311,116	307,013	151,867
Current portion of deferred revenues	30,034	30,034	3,795
Stock payable			75,000
Total Current Liabilities	3,103,464	4,235,278	2,971,268
Operating lease obligation, net of current portion	1,245,699	1,199,748	339,116
Deferred revenues, less current portion	176,127	182,342	365,718
Non current portion of convertible notes payable,net of discount	235,030
Total Non Current Liabilities	1,656,856	1,382,090
Total Liabilities	4,760,320	5,617,368	3,676,102
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; 1,492,595 and 1,427,124 shares issued and outstanding as of August 31, 2021 and May 31, 2021 respectively	149	142	100
Common stock issuable	850,775
Additional paid-in capital	21,233,531	16,708,762	11,132,103
Accumulated deficit	(16,502,806)	(12,291,899)	(6,195,044)
Total Simplicity Esports and Gaming Company Stockholders’ Equity	5,581,649	4,417,005	4,937,159
Non-Controlling Interest	118,202	173,039	(21,487)
Total Stockholders’ Equity	5,699,851	4,590,044	4,915,672
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 10,460,171	$ 10,207,412	$ 8,591,774

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Aug. 31, 2021	May 31, 2021	Aug. 31, 2020	May 31, 2020
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	1,000,000	1,000,000	1,000,000	1,000,000
Preferred stock shares issued	0	0		0
Preferred stock, shares outstanding	0	0		0
Common stock, par value	$ 0.0001	$ 0.0001		$ 0.0001
Common stock, shares authorized	36,000,000	36,000,000		36,000,000
Common stock, shares issued	1,492,595	1,427,124		998,622
Common stock, shares outstanding	1,492,595	1,427,124		998,622

XML

Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended		12 Months Ended
	Aug. 31, 2021	Aug. 31, 2020	May 31, 2021	May 31, 2020
Revenues:
Total Revenues	$ 904,840	$ 200,601	$ 1,551,923	$ 861,410
Cost of Goods Sold	607,122	67,645	1,014,310	591,541
Gross Profit	297,718	132,956	537,613	269,869
Operating Expenses:
Compensation and related benefits	1,303,126	302,568	2,804,177	1,577,245
Professional fees	449,353	73,891	771,859	499,568
General and administrative expenses	443,695	241,769	1,399,947	925,177
Impairment loss			359,129
Total Operating Expenses	2,196,174	618,228	5,335,112	3,001,990
Loss from Operations	(1,898,456)	(485,272)	(4,797,499)	(2,732,121)
Other Income (Expense):
Debt forgiveness Income				93,761
Loss on extinguishment of debt	(1,759,969)	(12,135)
Interest expense	(659,696)	(154,128)	(1,399,598)	(32,472)
Interest income	19	7	29	3,034
Other income	52,358
Gain on bargain acquisition			21,812	2,019
Foreign exchange gain/(loss)		(19,572)	(19,572)
Total Other Income (Expense)	(2,367,288)	(185,828)	(1,397,329)	66,342
Loss Before Provision for Income Taxes	(4,265,744)	(671,100)	(6,194,828)	(2,665,779)
Provision for Income Taxes
Net Loss	(4,265,744)	(671,100)	(6,194,828)	(2,665,779)
Net loss attributable to noncontrolling interest	54,837	15,886	97,973	45,541
Net loss attributable to common shareholders	$ (4,210,907)	$ (655,214)	$ (6,096,855)	$ (2,620,238)
Basic and Diluted Net Loss per share	$ (2.89)	$ (0.61)	$ (4.91)	$ (2.71)
Basic and diluted Weighted Average Number of Common Shares Outstanding	1,459,485	1,074,408	1,242,981	965,371
Franchise Royalties And License Fees [Member]
Revenues:
Total Revenues			$ 305,925	$ 523,007
Esports Revenue [Member]
Revenues:
Total Revenues	$ 168,981	$ 36,380	1,053,226	174,042
Company Owned Stores Sales [Member]
Revenues:
Total Revenues	673,501	76,938	$ 192,772	$ 164,361
Franchise Revenues [Member]
Revenues:
Total Revenues	$ 62,358	$ 87,283

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Noncontrolling Interest [Member]	Retained Earnings [Member]	Total
Balance at May. 31, 2019	$ 88	$ 9,442,027		$ (3,574,806)	$ 5,867,309
Balance, shares at May. 31, 2019	875,497
Shares issued for PLAYlive Nation acquisition	$ 9	1,439,991			1,440,000
Shares issued for PLAYlive Nation acquisition, shares	93,750
Shares issued for vesting of employment agreement awards	$ 1	153,000			153,001
Shares issued for vesting of employment agreement awards, shares	13,125
Shares issued for cash	$ 2	87,698			$ 87,700
Shares issued for cash, shares	15,625				123,000
Shares issued to directors, officers and employees as compensation		5,900			$ 5,900
Shares issued to directors, officers and employees as compensation, shares	625
Shares issued in connection with note payable		3,487			3,487
Non-controlling interest of original investment in subsidiaries			24,054		24,054
Net loss attributable to noncontrolling interest			(45,541)		(45,541)
Net Loss				(2,620,238)	(2,620,238)
Balance at May. 31, 2020	$ 100	11,132,103	(21,487)	(6,195,044)	4,915,672
Balance, shares at May. 31, 2020	998,622
Shares issued for contracted services		68,778			68,778
Shares issued for contracted services, Shares	6,597
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 for cash		25,000			25,000
Shares issued for cash, shares	2,976
Shares issued to directors, officers and employees as compensation	$ 12	819,297			819,309
Shares issued to directors, officers and employees as compensation, shares	116,174
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			(15,886)		(15,886)
Net Loss				(655,214)	(655,214)
Balance at Aug. 31, 2020	$ 116	12,412,391	202,627	(6,850,258)	5,764,876
Balance, shares at Aug. 31, 2020	1,166,149
Balance at May. 31, 2020	$ 100	11,132,103	(21,487)	(6,195,044)	4,915,672
Balance, shares at May. 31, 2020	998,622
Shares issued for contracted services	$ 5	624,870			624,875
Shares issued for contracted services, Shares	53,817
Shares issued in connection with issuance and amendments of notes payable	$ 4	1,313,554			1,313,558
Shares issued in connection with issuance and amendments of notes payable, Shares	42,040
Shares issued for cash	$ 4	574,996			575,000
Shares issued for cash, shares	48,396
Shares issued to directors, officers and employees as compensation	$ 22	2,359,379			2,359,401
Shares issued to directors, officers and employees as compensation, shares	219,535
Shares issued in connection with franchise acquisition	$ 7	703,860			703,867
Shares issued in connection with franchise acquisition, shares	64,714
Non-controlling interest of original investment in subsidiaries			292,500		292,500
Net loss attributable to noncontrolling interest			(97,974)		(97,973)
Net Loss				(6,096,855)	(6,096,855)
Balance at May. 31, 2021	$ 142	16,708,762	173,039	(12,291,899)	4,590,044
Balance, shares at May. 31, 2021	1,427,124
Shares issued for contracted services	$ 2	224,875			224,877
Shares issued for contracted services, Shares	21,346
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
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
Common stock issuable					850,775
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	$ (16,502,806)	$ 5,699,851
Balance, shares at Aug. 31, 2021	1,492,595

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Consolidated Statements of Cash Flows - USD ($)	3 Months Ended		12 Months Ended
	Aug. 31, 2021	Aug. 31, 2020	May 31, 2021	May 31, 2020
Cash flows from operating activities:
Net loss	$ (4,265,744)	$ (671,100)	$ (6,194,828)	$ (2,665,779)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense	620,178		1,117,667
Deferred guaranteed interest	(116,000)
Depreciation expense	81,737	27,135	229,513	57,473
Amortization expense	77,188	66,614	295,709	211,067
Provision for uncollectible accounts	14,137	52,549
Debt forgiveness loss
Lease liability net of leased asset	20,447
Deferred financing costs	(12,905)	(30,416)
Gain on acquisition	(2,357)
Issuance of shares for interest payment	81,508
Issuance of shares for inventory purchases	11,919
Loss on extinguishment of debt	1,759,969
Stock-based compensation	850,775
Impairment loss			359,129
Deferred lease expense			(26,248)	(776)
Debt forgiveness income				(93,761)
Issuance of shares for services	224,877	150,095	2,984,271	161,776
Changes in operating assets and liabilities:
Accounts receivable	20,935	5,478	(32,448)	(127,653)
Inventory	(90,039)	11,127	(63,474)	(15,787)
Prepaid expenses	11,393	(17,087)	(16,500)	(5,588)
Security deposits			(25,422)	(2,568)
Deferred brokerage fees	2,404	4,525	69,280	(18,592)
Deferred revenues	(6,215)	(7,414)	(157,137)	123,882
Accounts payable	(228,872)	(10,538)	337,022	123,142
Accrued expenses	(18,999)	185,620	(245,464)	729,902
Due from franchisee	19,970		(23,007)
Net cash used in operating activities	(943,694)	(233,412)	(1,391,938)	(1,523,262)
Cash flows from investing activities:
Cash (used in)/acquired from acquisition			(150,000)	26,180
Purchase of property and equipment	(20,961)		(1,949)	(163,472)
Net cash provided by (used in) investing activities	(20,961)		(151,949)	(137,292)
Cash flows from financing activities:
Proceeds from sale of warrants	100,000
Repayment of note payable	(590,909)	(201,300)	(2,137,753)
Proceeds from note payable	1,715,000	748,150	3,417,430	192,048
Proceeds from sale of Private Units		25,000	500,000	87,700
Deferred financing costs			(209,296)	(98,198)
Non-controlling interest of original investment in subsidiaries			202,500	24,054
Private placement funds received			41,735	75,000
Net cash provided by financing activities	1,224,091	571,850	1,814,616	280,604
Net change in cash	259,436	338,438	254,049	(1,379,950)
Cash - beginning of period	414,257	160,208	160,208	1,540,158
Cash - end of period	673,693	498,646	414,257	160,208
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	109,091	48,800
Cash paid for income taxes
Supplemental Non-Cash Investing and Financing Information
Common stock issued for consideration in an acquisition of fixed assets	63,000	165,000	871,852	1,440,000
Common stock issued in connection with notes payable	238,918
Beneficial conversion feature with warrants issued for debt discount	$ 1,505,387
Conversion of debt to common shares			100,000
Increase in prepaid expenses and accrued expenses			30,555
Warrants issued for debt discount			(1,521,754)
Acquisition of PLAYlive:
Goodwill				2,226,166
Property and equipment				9,503
Deferred brokerage fees				805,975
Accounts payable				(3,574)
Deferred revenue				$ (1,624,250)

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ORGANIZATION AND DESCRIPTION OF BUSINESS

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 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 F/K/A Smaaash Entertainment Inc. (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 2, 2019, 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 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 August 31, 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS

Simplicity Esports and Gaming Company F/K/A Smaaash Entertainment Inc. (the “Company,” “we,” or “our”), was an 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 2, 2019, the Company changed its name from Smaaash Entertainment Inc. to Simplicity Esports and Gaming Company.

Through our wholly subsidiary, Simplicity Esports, LLC, acquired on January 2, 2019 (see Note 6). 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 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 (see Note 6), the Company has a network of franchised Gaming Centers. As May 31, 2020, approximately 43 locations were open and operating, in various states including Arizona, California, Idaho, Florida, Maryland, Michigan, Mississippi, Montana, Oregon, South Carolina, Texas, Utah 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 sponsor was I-AM Capital Partners LLC (the “Sponsor”). The Company selected May 31 as its fiscal year end.

Initial Business Combination

The Company’s management had broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

On August 21, 2018, the Company deposited into the Trust Account an aggregate of $303,610 (including interest earned on the funds in the Trust Account available for withdrawal), representing $0.058 per public share. As a result of such payment, the Company extended the period of time it had to consummate a Business Combination by three months to November 21, 2018.

On November 20, 2018, the parties consummated the initial Business Combination.

Upon consummation of the Business Combination, the Company issued 208,000 restricted shares to Chardan Capital Markets in consideration for advisory services provided. These restricted shares are valued at $10.21 per share totaling $2,125,000 and are on the statement of operations included in general and administrative expenses.

At the special meeting of stockholders held on November 9, 2018, holders of 4,448,260 shares of the Company’s common stock sold in its Initial Public Offering (“Public Shares”) exercised their right to redeem those shares for cash at a price of $10.2187363 per share, for an aggregate of approximately $45,455,596. Immediately after giving effect to the initial Business Combination (including as a result of the redemptions described above) the issuance of 2,000,000 shares of common stock to the Smaaash founders, the issuance of 520,000 shares of common stock upon conversion of the rights at the Closing and the issuance of 208,000 shares of common stock to Chardan Capital Markets as consideration for services), there were 5,119,390 shares of common stock and warrants to purchase approximately 5,461,500 shares of common stock issued and outstanding. Upon the Closing, the Company’s rights ceased to exist, and its common stock and warrants began trading on The Nasdaq Stock Market (“Nasdaq”).

On the Closing Date, the Company entered into a master franchise agreement (“Master Franchise Agreement”) and a master license and distribution agreement (“Master Distribution Agreement”) with Smaaash. As of May 31, 2020, the Master Franchise Agreement and Master Distribution Agreement continue to be in effect.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 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, as filed with the SEC on August 30, 2021. The interim results for the three months ended August 31, 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 months ended August 31, 2020 has been corrected for a reclassification of depreciation expense of $27,134 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 increased from $40,511 to $67,645 with a corresponding decrease of General and administrative expenses, resulting in a decrease to Gross Profit from $160,090 to $132,956. The correction had no impact on Total operating loss 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

Basis of Consolidation

The condensed consolidated financial statements include the operations of the Company and its wholly owned subsidiaries, Simplicity Esports, LLC, PLAYlive Nation, Inc., and PLAYlive Nation Holdings, LLC, its 76% owned subsidiary Simplicity One Brasil Ltd, its 79% owned subsidiaries Simplicity Happy Valley, LLC and Simplicity Redmond, LLC, and its 51% owned subsidiary Simplicity El Paso, LLC.

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 cash equivalents.

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. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

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 period.

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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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 years. Franchise license renewal fees, which generally occur every 10 years, are billed before the renewal date. Fees received for future license renewal periods are amortized over the life of the renewal period.

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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

Deferred costs include commissions paid to brokers related to the sale of specific new franchises which have not met revenue recognition criteria as of August 31, 2021. These costs are recognized in the same period as the initial franchise fee revenue is recognized

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. Management has assessed accounts receivable and an allowance for doubtful accounts of approximately $42,479 has been recorded.

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 years), of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if they benefit future periods.

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 to 10 years.

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 August 31, 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 and ASC 505-50, Equity-Based Payments to Non-Employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.

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, which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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 and operating lease liability of $107,678. Due to the simplistic nature of the Company’s leases, no retained earnings adjustment was required. See Note 6 for further details.

Basic Income (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,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the consolidated financial statements and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

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

AUGUST 31, 2021

(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 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 $16,502,806, a working capital deficit of $1,952,342 as of August 31, 2021, and a net loss attributable to common shareholders of $4,210,907 for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the of the date that the unaudited financial statements are issued.

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 and/or public 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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 16 company owned stores and 12 franchise 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 impacted the Company’s business for the fiscal year ended May 31, 2021 as well as the fiscal quarter ended August 31, 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.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company views its operations as one reporting entity and accordingly does not report on segments.

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 consolidated financial statements include the operations of the Company and its wholly owned subsidiaries, Simplicity Esports, LLC, PLAYlive Nation, Inc., and PLAYlive Nation Holdings, LLC, its 76% owned subsidiary Simplicity One Brasil Ltd, and its 79% owned subsidiaries Simplicity Happy Valley, LLC and Simplicity Redmond, LLC and its 51% owned subsidiary Simplicity El Paso.

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 cash equivalents.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the consolidated balance sheet.

Use of Estimates

The preparation of 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 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 its 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.

The following describes principal activities, separated by major product or service, from which the Company generates its revenues.

Company-owned Stores 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Franchise Royalties and Fees

Franchise royalties which 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 years. Franchise license renewal fees, which generally occur every 10 years, are billed before the renewal date. Fees received for future license renewal periods are amortized over the life of the renewal period.

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 food 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 is a form of competition using video games. Most commonly, esports takes the form of organized, single player and multiplayer video game competitions, particularly between professional players, individually or as teams. Revenues from Esports revenue are recognized when the competition is completed, and prize money is awarded. Revenues earned from league sponsorships from the Company’s share of league revenues including domestic esports teams competing in games such as Overwatch, Apex Legends, PUBG and more are included here. Revenue from international esports teams including Flamengo esports are included here. League revenues are earned through sponsorship fees on a per tournament, or per season basis. As of March 22, 2020, the Company commenced online esports tournaments promoted directly to its existing customer base. Revenue from these tournaments, comprised of registration fees on a per player basis, is included here.

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 May 31, 2021 and 2020. These costs are recognized in the same period as the initial franchise fee revenue is recognized.

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. Management has assessed accounts receivable as of May 31, 2021 and 2020, and an allowance for doubtful accounts of approximately $38,000 and $52,400, respectively has been recorded

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 years) of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if it benefits future periods.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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 were included in intangible assets on our balance sheet and amortized on a straight-line basis when placed into service over the estimated useful lives of the costs, which is 3 to 5 years.

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. For the year ended May 31, 2021, we performed a third-party evaluation of the intangible assets which indicated no impairment was required.

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. Our assessment date was May 31, 2020, and we performed a third-party evaluation of the goodwill value at May 31, 2021 which quantitative 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 May 31, 2021, approximately 12 locations were open and operating, in various states including Arizona, California, Florida, Idaho, Maryland, Michigan, Mississippi, Montana, Oregon, South Carolina, Texas, Utah and Washington.

Stock-based compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation and ASC 505-50, Equity-Based Payments to Non-Employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.

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, which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Leases

In February of 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 adopted this update as of January l, 2019 using the modified retrospective transition method and prior periods have not been restated. Upon implementation, the Company recognized initial operating lease right-of-use assets of $110,003 and operating lease liabilities of $107,678. Due to the simplistic nature of the Company’s leases, no retained earnings adjustment was required. See Note 9 for further details.

Deferred Financing Costs

The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — “Expenses of Offering”. Offering costs of $307,494 and $98,198 consisting principally of legal and professional fees have been recorded as an asset as of May 31, 2021, and 2020, respectively. These amounts will be charged to additional paid in capital upon the completion of the Company’s ongoing Public Offering.

Basic Income (Loss) per share

The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted earnings or loss per common share is calculated by dividing net income or loss available to common stockholders by the diluted weighted-average number of common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities for this calculation consist primarily of warrants, outstanding options, and shares into which the convertible notes 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,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement 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.

Recent 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 are a 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), followed by other related ASUs that provided targeted improvements and additional practical expedient options (collectively “ASC 842”). ASC 842 requires lessees to recognize right-of-use (“ROU”) assets and lease payment liabilities on the balance sheet for leases representing the Company’s right to use the underlying assets over the lease term. Each lease that is recognized on the balance sheet is classified as either finance or operating, with such classification affecting the pattern and classification of expense recognition in the Statements of Operations and presentation within the Statements of Cash Flows.

The Company adopted ASC 842 on January 1, 2019 using the modified retrospective method. The Company elected as part of its adoption to also use the optional transition methodology whereby previously reported periods continue to be reported in accordance with historical accounting guidance for leases that were in effect for those prior periods. Policy elections and practical expedients that the Company has implemented as part of adopting ASC 842 include (a) excluding from the balance sheet leases with terms that are less than or equal to one year, (b) for all existing asset classes that contain both lease and non-lease components, combining these components together and accounting for them as a single lease component, (c) the package of practical expedients, which among other things, allows the Company to avoid reassessing contracts that commenced prior to adoption that were properly evaluated under legacy GAAP, and (d) excluding land easements, which were not accounted for under the previous leasing guidance, that existed or expired before adoption of ASC 842. The scope of ASC 842 does not apply to leases used in the exploration for minerals or use thereof, including oil, natural gas and natural gas liquids.

The Company’s adoption of ASC 842 resulted in an increase in other assets, accounts payable and accrued liabilities, and other liabilities line items on the accompanying Consolidated Balance Sheets as a result of the additional ROU assets and related lease liabilities. Upon adoption on January 1, 2019, the Company recognized approximately $0.5 million in ROU assets and liabilities for its operating leases. There was no cumulative effect to accumulated deficit upon the adoption of this guidance.

Going Concern, Liquidity and Management’s Plan

The Company’s 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 consolidated financial statements, the Company has an accumulated deficit as of May 31, 2021 and 2020 of $12,291,899 and $6,195,044 respectively. The Company also has a net loss for the year ended May 31, 2021 and 2020 of $6,096,855 and $2,620,238, respectively. Net cash used in operating activities for the year ended May 31, 2021 and 2020 was $1,408,609 and $1,523,262, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the of the date that the financial statements are issued.

The Company’s cash position may not be sufficient to support the Company’s daily operations. Management plans to raise additional funds by way of a private or ongoing public offering. 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 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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 had been closed effective April 1, 2020. 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. As of May 31, 2021 all but one company owned store and a few franchise stores have begun to re-open in conformity with local and state COVID-19 regulations.

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 impacted the Company’s business for the fiscal year and potentially beyond. 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.

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INITIAL PUBLIC OFFERING AND PRIVATE PLACEMENT

12 Months Ended

May 31, 2021

Initial Public Offering And Private Placement

INITIAL PUBLIC OFFERING AND PRIVATE PLACEMENT

NOTE 3 — INITIAL PUBLIC OFFERING AND PRIVATE PLACEMENT

Initial Public Offering

On August 22, 2017, the Company sold 625,000 Public Units at a purchase price of $80.00 per Public Unit, on a pre reverse-split basis, in the Initial Public Offering, generating gross proceeds of $50.0 million. The Company incurred offering costs of approximately $3.7 million, inclusive of approximately $3.2 million of underwriting fees. The Company paid $1 million of underwriting fees upon the closing of the Initial Public Offering, issued 50,000 shares of common stock, on a pre reverse-split basis, for underwriting fees, and deferred $1.82 million of underwriting fees until the consummation of the initial Business Combination.

Each Unit consisted of one share of the Company’s common stock, one right to receive one-tenth of one share of the Company’s common stock upon consummation of the Company’s initial Business Combination (“Right”), and one redeemable warrant (“Warrant”). Each Warrant entitles the holder to purchase one share of common stock at an exercise price of $92.00 on a pre reverse-split basis, per share, subject to adjustment. No fractional shares will be issued upon exercise of the Warrants. The Warrants became exercisable 30 days after the completion of the initial Business Combination and will expire five years after the completion of the initial Business Combination or earlier upon redemption or liquidation.

The Company may redeem the Warrants, in whole and not in part, at a price of $0.01 per Warrant upon 30 days’ notice (“30-day redemption period”), only in the event that the last sale price of the common stock equals or exceeds $21.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which notice of redemption is given, provided there is an effective registration statement with respect to the shares of common stock underlying such Warrants and a current prospectus relating to those shares of common stock is available throughout the 30-day redemption period. If the Company calls the Warrants for redemption as described above, the Company’s management will have the option to require all holders that wish to exercise Warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” management will consider, among other factors, the Company’s cash position, the number of Warrants that are outstanding and the dilutive effect on the Company’s stockholders of issuing the maximum number of shares of common stock issuable upon the exercise of the Warrants.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Each holder of a Right received one-tenth (1/10) of one share of common stock upon consummation of the Business Combination. No fractional shares were issued upon exchange of the Rights. No additional consideration was paid by a holder of Rights in order to receive its additional shares upon consummation of the Business Combination as the consideration related thereto has been included in the Unit purchase price paid for by investors in the Initial Public Offering.

The Company granted the underwriters a 45-day option to purchase up to 93,750 additional Public Units to cover any over-allotment, at the initial public offering price less any underwriting discounts and commissions. On September 13, 2017, the underwriters purchased 25,000 additional Public Units for gross proceeds of $2,000,000, less commissions of $110,000, of which $70,000 are deferred.

The Company issued Maxim Group LLC (“Maxim”), as compensation for the Initial Public Offering, an aggregate of 6,500 shares, including 250 shares issued in connection with the partial exercise of the over-allotment option. The Company accounted for the fair value of these shares as an expense of the Initial Public Offering resulting in a charge directly to stockholders’ equity.

Settlement Agreement

On November 20, 2018, the Company entered into a settlement and release agreement (“Settlement Agreement”) with Maxim. Pursuant to the Settlement Agreement, the Company made a cash payment of $20,000 to Maxim and issued the Note in favor of Maxim in order to settle the payment obligations of the Company under the underwriting agreement dated August 16, 2017, by and between the Company and Maxim. The Company also agreed to remove the restrictive legends on an aggregate of 6,500 shares of its common stock held by Maxim and its affiliate. See “Note Payable” under Note 8 below.

Unit Purchase Option

At the time of the closing of the Initial Public Offering, the Company sold to Maxim, for an aggregate of $100, an option (the “UPO”) to purchase 31,250 Units (which increased to 32,500 units upon the partial exercise of the underwriters’ over-allotment option). The Company has accounted for the fair value of the UPO, inclusive of the receipt of the $100 cash payment, as an expense of the Initial Public Offering resulting in a charge directly to shareholders’ equity. The Company estimates that the fair value of this UPO is approximately $743,600 (or $2.86 per Unit) using the Black-Scholes option-pricing model. The fair value of the UPO is estimated as of the date of grant using the following assumptions: (1) expected volatility of 35%, (2) risk-free interest rate of 1.73% and (3) expected life of five years. The UPO may be exercised for cash or on a “cashless” basis, at the holder’s option (except in the case of a forced cashless exercise upon the Company’s redemption of the Warrants, as described above), such that the holder may use the appreciated value of the UPO (the difference between the exercise prices of the UPO and the underlying Warrants and Rights, and the market price of the Units and underlying shares of common stock) to exercise the UPO without the payment of any cash. The Company will have no obligation to net cash settle the exercise of the UPO or the Warrants or Rights underlying the UPO. The holder of the UPO will not be entitled to exercise the UPO or the Warrants or Rights underlying the UPO unless a registration statement covering the securities underlying the UPO is effective or an exemption from registration is available. If the holder is unable to exercise the UPO or underlying Warrants or Rights, the UPO, Warrants or Rights, as applicable, will expire worthless.

The Company granted the holders of the UPO, demand and “piggy back” registration rights for periods of five and seven years, respectively, from the effective date of the registration statement relating to the Initial Public Offering, including securities directly and indirectly issuable upon exercise of the UPO.

Private Placement

Concurrently with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 31,812 Private Units at $80.00 per Private Unit, generated gross proceeds of $2,545,000 in a Private Placement all on a pre reverse-split basis. The proceeds from the Private Units were added to the proceeds from the Initial Public Offering held in the Trust Account. The Private Units (including their component securities) were not transferable, assignable or salable until 30 days after the completion of the initial Business Combination and the warrants included in the Private Units (the “Private Placement Warrants”) will be non-redeemable so long as they are held by the Sponsor or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Warrants included in the Public Units sold in the Initial Public Offering. Otherwise, the Private Placement Warrants and the Rights underlying the Private Units have terms and provisions that are identical to those of the Warrants and Rights, respectively, sold as part of the Public Units in the Initial Public Offering and have no net cash settlement provisions.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

On September 13, 2017, the Sponsor purchased 875 additional Private Units for gross proceeds of $70,000 upon the partial exercise of the over-allotment option.

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PROPERTY, PLANT AND EQUIPMENT

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 2021

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

NOTE 3 — PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation:

	August 31, 2021			May 31, 2021
Leasehold improvements	$	110,849		$	110,849
Property and equipment		830,141			755,741
Total cost		940,990			866,590
Less accumulated depreciation		(374,020	)		(292,282	)
Net property plant and equipment	$	566,970		$	574,308

Depreciation expense for the three months ended August 31, 2021 and 2020 was $81,737 and $27,135, respectively.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation:

	May 31,			May 31,
	2021			2020
Leasehold improvements		110,849			52,189
Property and equipment		755,741			243,314
Total cost		866,590			295,503
Less accumulated depreciation		(292,282	)		(62,771	)
Net, property plant and equipment	$	574,308		$	232,733

Depreciation expense for the years ended May 31, 2021, and 2020 was $229,511 and $57,473, respectively.

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INTANGIBLE ASSETS

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 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 August 31, 2021:

	August 31, 2021
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value
Non-Competes	4 years	$	1,023,118	$	548,642	$	474,476
Trademarks	Indefinite		866,000		-		866,000
Customer database	2 years		35,000		20,417		14,583
Restrictive covenant	2 years		115,000		67,083		47,917
Customer contracts	10 years		546,000		391,270		154,730
Internet domain	2 years		3,000		2,667		333
		$	2,588,118	$	944,537	$	1,558,039

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 years	$	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 years		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 August 31, 2021 for the fiscal years ending May 31:

	2022		2023		2024		2025		2026		Thereafter		Total
Non-Competes	$	153,468	$	204,624	$	116,384	$	-	$	-	$	-	$	474,476
Customer contracts		12,158		16,211		16,211		16,211		16,211		77,728		154,730
Restrictive covenant		43,125		4,792				-		-		-		47,917
Customer database		13,125		1,458				-		-		-		14,583
Internet domain		333		-		-		-		-		-		333
Total	$	222,209	$	227,085	$	132,595	$	16,211	$	16,211	$	77,728	$	692,039

Amortization expense for the three months ended August 31, 2021 and 2020 was $77,188 and $66,614, respectively.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 5 - INTANGIBLE ASSETS

The following tables set forth the intangible assets, including accumulated amortization at May 31, 2021 and 2020:

	May 31, 2021
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value
Non-Competes	4.50 years	$	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 years		3,000		2,417		583
		$	2,438,118	$	802,891	$	1,635,227

	May 31, 2020
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value
Non-Competes	4.50 years	$	1,023,118	$	289,884	$	733,234
Trademarks	Indefinite		866,000		-		866,000
Customer Contracts	10 years		546,000		5,443		540,557
Internet domain	2.50 years		3,000		1,417		1,583
		$	2,438,118	$	296,744	$	2,141,374

The following table sets forth the future amortization of the Company’s intangible assets at May 31, 2021:

	2022		2023		2024		2025		2026		Thereafter		Total
Non-Competes	$	204,624	$	204,624	$	119,363	$	-	$	-	$	-	$	528,611
Customer contracts		89,647		20,897		14,647		14,647		14,647		89,840		244,325
Internet domain		583		-		-		-		-		-		583
Total	$	260,224	$	259,807	$	259,224	$	173,962	$	54,600	$	267,557	$	1,275,374

Amortization expense for the years ended May 31, 2021, and 2020 was $295,709 and $211,067, respectively.

Goodwill

The Company’s goodwill carrying amounts relate to the acquisitions of Simplicity Esports LLC and PLAYlive Nation Inc. The composition of the goodwill balance, is as follows:

	Fiscal Year Ended May 31, 2021		Fiscal Year Ended May 31, 2020
Simplicity Esports LLC	$	4,456,250	$	4,456,250
PLAYlive Nation Inc.		698,891		698,891
Ft. Bliss		25,000		25,000
Total Goodwill	$	5,180,141	$	5,180,141

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

XML

ACQUISITIONS

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 2021

Business Combination and Asset Acquisition [Abstract]

ACQUISITIONS

NOTE 5 — ACQUISITIONS

Simplicity Salinas, LLC

On July 26, 2021 the Company through its wholly owned subsidiary, Simplicity Salinas, LLC acquired all of the inventory and property, plant and equipment assets of an existing franchise in exchange for 6,000 shares of common stock at $10.85 per share.

NOTE 6 - ACQUISITIONS

The Simplicity Esports, LLC Acquisition

On January 4, 2019, the Company consummated the transactions contemplated by the share exchange agreement, dated December 21, 2018 (as amended by Amendment No. 1 to Share Exchange Agreement, dated December 28, 2018 and by Amendment No. 2 to Share Exchange Agreement, dated December 30, 2018, the “Share Exchange Agreement”) by and among the Company, Smaaash Entertainment, Inc. (“Smaaash”), each of the equity holders of Simplicity (“Simplicity Owners”) and Jed Kaplan, in the capacity as the representative of the Simplicity Owners (the “Representative”). Pursuant to the Share Exchange Agreement the Simplicity Owners transferred all the issued and outstanding equity interests of Simplicity to the Company in exchange for newly issued shares of common stock of the Company (the “Acquisition”).

The Simplicity Owners received an aggregate of 37,500 shares of common stock at the closing of the Acquisition and an additional aggregate of 87,500 shares of common stock on January 7, 2019 and the remaining 250,000 shares in March of 2019.

The acquisition of Simplicity, in an all-stock deal, creates a pure play esports team and entertainment platform opportunity, which we believe will increase shareholder value and boost our growth strategy as we endeavor the build out of our brick and mortar esports centers.

The acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. All fair value measurements of acquired assets and liabilities assumed are non-recurring in nature and classified as level 3 on the fair value hierarchy.

The aggregate purchase price consisted of the following:

Restricted stock consideration		6,090,000
Total	$	6,090,000

As noted in the table above, the Company issued 375,000 restricted shares of common stock as consideration which was valued at market at the date of the closing, fair value of approximately $6,090,000.

The following table summarizes the estimated fair value of The Simplicity Esports, LLC assets acquired, and liabilities assumed at the date of acquisition:

Cash		76,000
Internet Domain		3,000
Trade names and trademarks		588,000
Non-Competes		1,023,118
Accounts payable and accrued liabilities		(56,000	)
Goodwill		4,455,882
Total	$	6,090,000

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

PLAYlive Nation Acquisition

On July 29, 2019, the Company entered into a definitive agreement to acquire PLAYlive for total consideration of 93,750 shares of common stock. The PLAYlive acquisition closed on July 30, 2019.

The acquisition was accounted for by the Company using the acquisition method under business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on the fair value. Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. All fair value measurements of acquired assets and liabilities assumed are non-recurring in nature and classified as level 3 on the fair value hierarchy.

The aggregate purchase price consisted of the following:

Restricted stock consideration		1,440,000
Total	$	1,440,000

As noted in the table above, the Company issued 93,750 restricted shares of common stock as consideration which was valued at market at the date of the closing, fair value of approximately $1,440,000.

The following table summarizes the estimated fair value of the PLAYlive assets acquired and liabilities assumed at the date of acquisition:

Cash		26,000
Property, plant and equipment		10,000
Net deferred revenue		(115,000	)
Customer relationships
Accounts payable and accrued liabilities		(4,000	)
Goodwill		699,000
Trademarks		278,000
Customer contracts		546,000
Total	$	1,440,000

Revenue and net loss included in the year ended May 31, 2021 and 2020, consolidated financial statements attributable to PLAYlive is approximately $306,000 and $301,000_ and $523,000 and $124,000, respectively.

Company owned store acquisitions

During the year, the Company acquired thirteen gaming centers from prior franchisees in various locations throughout the United States. On a consolidated basis, the Company paid for these acquisitions by issuing 64,714 shares of stock to former franchise owners in return for the property, plant and equipment, the inventory on hand at the time of the acquisition and the leasehold improvements of the leased spaces. As part of the acquisition effort, the Company was able to renegotiate the lease terms with the landlords in order to provide more favorable operating terms to the Company.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

XML

RELATED PARTY TRANSACTIONS

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 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 August 31, 2021, the Company has accrued $25,000 and 375 shares of stock for the payments of this contract.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

The Company maintains a portion of its cash balance at a financial services company that is owned by an officer of the Company.

NOTE 7 — RELATED PARTY TRANSACTIONS

Private Units

In addition, the Sponsor purchased an aggregate of 31,812 Private Units, on a pre reverse-split asis, at $80.00 per Private Unit on a pre reverse-split basis for proceeds of $2,545,000 in the aggregate in the Private Placement. This purchase took place on a private placement basis simultaneously with the completion of the Initial Public Offering. This issuance was be made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

The Sponsor committed to purchase from the Company up to an additional 3,281 Private Units if the underwriters’ over-allotment option was exercised in full.

On September 13, 2017, 7,000 additional Private Units, on a pre reverse-split basis were purchased by the Sponsor at $80.00 per Private Unit on a pre reverse-split basis upon the partial exercise of the over-allotment option.

Kaplan Promissory Note

On May 12, 2020 (the “Issue Date”), the Company issued a promissory note (the “Kaplan Note”) in the principal sum of $90,000 in favor of Jed Kaplan, the Company’s Chief Executive Officer, interim Chief Financial Officer, member of the Company’s Board of Directors and greater than 5% stockholder of the Company. The Kaplan Note matures on the first business day following the 150-day anniversary of the Issue Date (the “Maturity Date”). The Company will use the proceeds of the Kaplan Note to fund the operations of Simplicity One Brasil Ltda, the Company’s majority owned subsidiary (“Simplicity Brasil”). As of May 31, 2020, advances under the terms of this note were $64,728 (Note 8). Inconsideration for a 10% equity stake in Brasil Ltda., the Kaplan Note was retired during the year ended May 31, 2021.

Equity Sales

On May 7, 2020, we authorized the sale of 2,867 shares of our restricted Common Stock at $8.72 per share to William H. Herrmann, Jr. a member of our board of directors for $25,000 (Note 10).

The Company maintains its cash balance at a financial services company that is owned by an officer of the Company.

XML

DEBT

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 2021

Debt Disclosure [Abstract]

DEBT

NOTE 8 - DEBT

The table below presents outstanding debt instruments as of August 31, and May 31, 2021

	AUGUST 31, 2021			MAY 31, 2021
Convertible Promissory Notes	$	3,952,424		$	3,157,970
Related Debt Discount		(2,394,343	)		(947,873	)
Total	$	1,558,081		$	2,211,097
Current portion of Convertible Promissory Notes, net	$	1,323,051		$	2,211,097
Non current portion of Convertible Promissory Notes, net		235,030			-

Amendments to the Series A-2 Exchange Convertible Note

On or about December 20, 2018, the Company issued that certain Series A-2 exchange convertible note in the original principal amount of $1,000,000 (the “Series A-2 Note”) to Maxim. The Series A-2 Note has terms substantially similar to those of the Series A-1 Note except that the Series A-2 Note has a maturity date of June 20, 2020, and an initial conversion price of $1.93, which will be automatically adjusted to the lower of (i) the conversion price then in effect, and (ii) the greater of the arithmetic average of the VWAP of the Company’s common stock in the five trading days prior to the notice of conversion and $0.50.

On June 4, 2020, $100,000 in principal was converted into 85,905 shares of common stock in accordance with the terms of the Maxim Note.

On June 18, 2020, the Company and Maxim entered into that certain first amendment to the Series A-2 Note (the “First Amendment”), pursuant to which such parties agreed to the following: (i) Maxim’s resale of the Company’s common stock (the “Common Stock”) underlying the Series A-2 Note shall be limited to 10% of the daily volume of the Common Stock on each respective trading day, (ii) the maturity date of the Series A-2 Note was extended to December 31, 2020, (iii) the principal amount of the Series A-2 Note was increased by $100,000 and (iv) the conversion price was reduced from $15.44 to $9.20.

On December 31, 2020, the Company and Maxim entered into a second amendment to the Series A-2 Note to extend the maturity date of Series A-2 Note to February 15, 2021.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

On April 14, 2021, the Company and Maxim entered into the third amendment to the Series A-2 Note with Maxim pursuant to which the Company and Maxim agreed to the following:

(i)	The maturity date of the Series A-2 Note is extended to October 15, 2021.
(ii)	The principal balance of the Series A-2 Note is increased by $50,000 as of April 14, 2021.
(iii)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before April 30, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.
(iv)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before May 15, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.
(v)	If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before July 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000.
(vi)	If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before September 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000, representing a total cumulative increase in the principal balance of $350,000 if the Series A-2 Note is not repaid in its entirety on or before September 15, 2021.
(vii)	The Company will, within five business days after the Company’s receipt of the Second Tranche Purchase Price of $999,996, pay $500,000 to Maxim, which will reduce the principal owed under the Series A-2 Note by $500,000.

While any portion of the Series A-2 Note is outstanding, if the Company receives cash proceeds from public offerings or private placements of the Company’s common stock to investors (except with respect to proceeds from officers and directors of the Company), the Company will, within five business days of the Company’s receipt of such proceeds, inform Maxim or such receipt, following which Maxim will have the right in its sole discretion to require the Company to immediately apply up to 25% of such proceeds received by the Company to repay the outstanding amounts owed under the Series A-2 Note. The parties understand that (a) each dollar applied toward repayment pursuant to this clause (viii) will reduce the balance owed under the Series A-2 Note by one dollar, and (b) this clause (viii) will not apply to the Tiger Trout transaction.

On August 19, 2021, the Company and Maxim entered into the fourth amendment (the “Fourth Amendment”) to the Series A-2 Maxim Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock. The Company also granted Maxim an irrevocable right of first refusal superseding all others to act as Company’s sole managing underwriter and sole bookrunner or exclusive placement agent or financial advisor, or finder in connection with any public or private offering by the Company or any subsidiary of or successor to the Company (if applicable) of its equity, equity linked or debt securities (including convertible securities) while the Company’s common stock is listed on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing, each, a “National Exchange”), within the period beginning on August 19, 2021 and ending on the close of business on January 1, 2023.

As a result of the Fourth Amendment, the Company issued to Maxim a common stock purchase warrant (the “Warrant”) for the purchase of 365,000 shares of the Company’s common stock (the “Warrant Shares”) at an exercise price of $13.00. On August 25, 2021, the Company paid Maxim $500,000 and recognized an expense on the extinguishment of debt in the amount of $1,759,969. On August 30, 2021 the Company issued Maxim 20,000 shares of its common stock in fulfillment of the Fourth Amendment.

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% promissory note (the “Note”) with a maturity date of February 19, 2022 (the “Maturity Date”), in the principal sum of $1,650,000. In addition, the Company issued 10,000 shares of its common stock to the Holder as a commitment fee pursuant to the SPA. Pursuant to the terms of the Note, the Company agreed to pay to $1,650,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum (provided that the first twelve months of interest shall be guaranteed). The Note carries an original issue discount (“OID”) of $165,000. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $1,485,000 in exchange for the Note. The Company intends to use the proceeds for its operational expenses, the repayment of those certain self-amortization promissory notes previously issued to the Holder on June 18, 2020 and November 23, 2020, and the repayment of certain other existing debt obligations. The Holder may convert the Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Note) at any time at a conversion price equal to $11.50 per share.

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.

The Company is required to make an interim payment to the Holder in the amount of $363,000, on or before August 19, 2021, towards the repayment of the balance of the Note. The Company and the Holder have agreed to extend the terms of this payment. The extension provides that the Company paid $100,000 to the Holder by the interim payment date and has agreed to pay an additional $100,000 upon the completion of a new debt deal that is anticipated to close by September 1, 2021 and the Company has agreed to pay $163,000 to the Holder at the earlier of the Company stock uplist or September 30, 2021. These extension payments were paid by the Company on September 30,2021.

During the quarter ended August 31, 2021 the Company paid interim payments to the Holder in the amount of $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 and the Company recorded $287,330 in interest expense for the amortization of debt discount. On August 31, 2021 the balance of the Note, net of the related debt discount is $903,588.

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 (provided, however, that this five (5) calendar day cure period shall not apply to any event of default under Sections 3.1, 3.2, and 3.19 of the Note), 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% (the “Default Amount”). 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.

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% promissory note (“March 10 FirstFire Note”) with a maturity date of March 10, 2022, in the principal sum of $560,000. The Company received net proceeds of $130,606, net of OID of $56,000, net of origination fees of $8,394, and the repayment of principal and interest of $365,000 on the August 7, 2020 Note. In addition, the Company issued 3,394 shares of its common stock to the FirstFire as a commitment fee pursuant to the SPA. Pursuant to the terms of the March 10 FirstFire Note, the Company agreed to pay to $560,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum (provided that the first twelve months of interest shall be guaranteed). The March 10 FirstFire Note carries an OID of $56,000. Accordingly, on the Closing Date (as defined in the March 10 FirstFire SPA), the Holder paid the purchase price of $504,000 in exchange for the Note. The FirstFire may convert the March 10 FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the March 10 FirstFire Note) at any time at a conversion price equal to $11.50 per share.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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.

On October 1, 2021, the Company issued a common stock purchase warrant for the purchase of an additional 40,000 shares of the Company’s common stock 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.

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 (provided, however, that this five (5) calendar day cure period shall not apply to any event of default under Sections 3.1, 3.2, and 3.19 of the March 10 FirstFire Note), 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% (the “Default Amount”). 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 quarter ended August 31, 2021, the Company recognized $65,533 of amortization of debt discount related to the FirstFire Note. On August 31, 2021, the balance of FirstFire Note, net of the related debt discount, is $419,468 all of which is included in the current portion of convertible notes payable, net of debt discount.

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% promissory note (the “June 11 FirstFire Note”) with a maturity date of June 10, 2023 (the “FirstFire Maturity Date”), in the principal sum of $1,266,666. In addition, the Company issued 11,875 shares of its common stock to FirstFire as a commitment fee pursuant to the June 11 FirstFire SPA. Pursuant to the terms of the June 11 FirstFire Note, the Company agreed to pay to $1,266,666 (the “FirstFire Principal Sum”) to FirstFire 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 FirstFire Note after 180 days from June 10, 2021). The June 11 FirstFire Note carries an original issue discount (“OID”) of $126,666. Accordingly, FirstFire paid the purchase price of $1,140,000 in exchange for the FirstFire Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. FirstFire may convert the June 11 FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the June 11 FirstFire Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by FirstFire upon, at the election of FirstFire, 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 June 11 FirstFire Note.

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-year warrant (the “June 11 FirstFire Warrant”) to purchase 593,750 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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. During the quarter, the Company recorded interest expense of $140,548. On August 31, 2021, the balance of the June 11 FirstFire Note, net of the related debt discount is $140,548 all of which is included in the long term portion of convertible notes payable, net of related debt discount.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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% promissory note (the “GS Note”) with a maturity date of June 10, 2023 (the “GS Maturity Date”), in the principal sum of $333,333. In addition, the Company issued 3,125 shares of its common stock to GS as a commitment fee pursuant to the GS SPA. Pursuant to the terms of the GS Note, the Company agreed to pay to $300,000.00 (the “GS Principal Sum”) to GS 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 GS Note after 180 days from June 10, 2021). The GS Note carries an original issue discount (“OID”) of $33,333. Accordingly, GS paid the purchase price of $300,000.00 in exchange for the GS Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. GS may convert the GS Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the GS Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by GS upon, at the election of GS, 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 GS Note.

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%.

Pursuant to the terms of the GS SPA, the Company also issued to GS a three-year warrant to purchase 156,250 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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 quarter, the Company recorded interest expense of $34,703. On August 31, 2021, the balance of the GS Note, net of the related debt discount is $34,703 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% promissory note (the “Jefferson Note”) with a maturity date of August 23, 2023 (the “Jefferson Maturity Date”), in the principal sum of $333,333. In addition, the Company issued 3,125 shares of its common stock to Jefferson as a commitment fee pursuant to the Jefferson SPA. Pursuant to the terms of the Jefferson Note, the Company agreed to pay to $300,000.00 (the “Jefferson Principal Sum”) to Jefferson 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 Jefferson Note after 180 days from August 23, 2021). The Jefferson Note carries an original issue discount (“OID”) of $33,333. Accordingly, Jefferson paid the purchase price of $300,000.00 in exchange for the Jefferson Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. Jefferson may convert the Jefferson Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Jefferson Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by Jefferson upon, at the election of Jefferson, 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 Jefferson Note.

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-year warrant to purchase 156,250 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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.

The Company recorded the Jefferson Note in the amount of $333,333 and a related debt discount of $274,239, interest payable of $20,000 and additional paid in capital of $205,905. During the quarter, the Company recorded interest expense of $685. On August 31, 2021, the balance of the Jefferson Note, net of the related debt discount is $59,779 all of which is included in the long term portion of convertible notes payable, net of related debt discount.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 8 – DEBT

The table below presents outstanding debt instruments as of May 31:

	2021			2020
Convertible Promissory Notes		3,157,970			152,500
Less: Related Discount		(946,873	)		(25,180	)
Related Party Note		-			64,728
Convertible Note Payable					1,000,000
Total	$	2,211,097		$	1,192,048

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

10% Fixed Convertible Promissory Note

On April 29, 2020 (the “Effective Date”), the Company issued a 10% Fixed Convertible Promissory Note (the “Harbor Gates Note”), with a maturity date of October 29, 2020 (the “Maturity Date”), in the principal sum of $152,000 in favor of Harbor Gates Capital, LLC (“Harbor Gates”). Pursuant to the terms of the Harbor Gates Note, the Company agreed to pay to Harbor Gates $152,500 (the “Principal Sum”) and to pay “guaranteed” interest on the principal balance at an amount equivalent to 10% of the Principal Sum, to the extent such Principal Sum and “guaranteed” interest and any other interest, fees, liquidated damages and/or items due to Harbor Gates have not been repaid or converted into Company common stock in accordance with the terms of the Harbor Gates Note. The Harbor Gates Note carries an original issue discount (“OID”) of $2,500. Accordingly, on the Effective Date, Harbor Gates delivered $150,000 to the Company in exchange for the Harbor Gates Note.

In addition to the “guaranteed” interest, and upon the occurrence of an Event of Default (as hereinafter defined), additional interest will accrue from the date of the Event of Default at the rate equal to the lower of 20% per annum or the highest rate permitted by law.

The Company may prepay the Harbor Gates Note according to the following schedule:

Days Since Effective Date	Payment Amount
Under 30	115% of Principal Amount (as hereinafter defined) so paid
31-60	120% of Principal Amount so paid
61-90	125% of Principal Amount so paid
91-180	135% of Principal Amount so paid

135% of the remaining unpaid and unconverted Principal Amount, plus all accrued and unpaid interest will be due and payable on the Maturity Date. “Principal Amount” refers to the sum of (i) the original principal amount of the Harbor Gates Note (including the OID, prorated if the Harbor Gates Note has not been funded in full); (ii) all guaranteed and other accrued but unpaid interest under the Harbor Gates Note; (iii) any fees due under the Harbor Gates Notes; (iv) liquidated damages; and (v) any default payments owing under the Harbor Gates Note, in each case previously paid or added to the Principal Amount.

Pursuant to the terms of the Harbor Gates Note, the Company agreed to issue Harbor Gates shares of Company common stock in two tranches as follows:

(i)

1,250 shares of common stock within three trading days of the Effective Date; and

(ii)

In the event the average of the three volume weighted average prices for the Company’s common stock during the three consecutive trading days immediately preceding the date which is the 180th day following the Effective Date is less than $1.00 per share, then Harbor Gates will be entitled, and the Company will issue to Harbor Gates additional shares of common stock as set forth in the Harbor Gates Note.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

If an Event of Default (as defined in the Promissory Note) occurs, the outstanding Principal Amount of the Harbor Gates Note owing in respect thereof through the date of acceleration, shall become, at Harbor Gates’ election, immediately due and payable in cash at the “Mandatory Default Amount”. The Mandatory Default Amount means 35% of the outstanding Principal Amount of the Harbor Gates Note will be automatically added to the Principal Sum of the Harbor Gates Note and tack back to the Effective Date for purposes of Rule 144 promulgated under the 1934 Act. Commencing five days after the occurrence of any Event of Default that results in the eventual acceleration of the Harbor Gates Note, the Harbor Gates Note will accrue additional interest, in addition to the Harbor Gates Note’s “guaranteed” interest, at a rate equal to the lesser of 20% per annum or the maximum rate permitted under applicable law.

If the Harbor Gates Note is not retired on or before the Maturity Date, then at any time and from time to time after the Maturity Date, and subject to the terms hereof and restrictions and limitations contained in the Harbor Gates Note, Harbor Gates has the right, at Harbor Gates’ sole option, to convert in whole or in part the outstanding and unpaid Principal Amount under the Harbor Gates Note into shares of the Company’s common stock at the Variable Conversion Price. The “Variable Conversion Price” will be equal to the lower of: (a) $1.00, or (b) 70% of the lowest volume weighted average price of the Company’s common stock during the 15 consecutive trading days prior to the date on Harbor Gates elects to convert all or part of the Harbor Gates Note. The Company intends to prepay the Harbor Gates Note in accordance with its terms so that no amount under the Harbor Gates Note is converted into shares of the Company’s common stock.

This note along with guaranteed interest of $15,000 was repaid on July 2, 2020.

Kaplan Promissory Note

On May 12, 2020 (the “Issue Date”), the Company issued a promissory note (the “Kaplan Note”) in the principal sum of $90,000 in favor of Jed Kaplan, the Company’s Chief Executive Officer, interim Chief Financial Officer, member of the Company’s Board of Directors and greater than 5% stockholder of the Company. The Kaplan Note matures on the first business day following the 150-day anniversary of the Issue Date (the “Maturity Date”). The Company will use the proceeds of the Kaplan Note to fund the operations of Simplicity One Brasil Ltda, the Company’s majority owned subsidiary (“Simplicity Brasil”).

Pursuant to the terms of the Kaplan Note, the Company agreed to pay to Mr. Kaplan the lesser of (i) the principal sum of $90,000 (the “Maximum Commitment”), or (ii) the aggregate principal amount of all direct advances of the proceeds of the Kaplan Note (each, an “Advance”), together with any interest thereon, and any and all other amounts which may be due and payable thereunder from time to time.

Subject to the terms of the Kaplan Note, Mr. Kaplan agreed to make one direct Advance to and for the benefit of the Company on the Issue Date in the amount of $45,000, and one additional Advance to and for the benefit of the Company at such time as the Company may request during the two month period following the Issue Date. The total of the aggregate principal balance of all Advances (collectively referred to herein as the “Principal Amount”) outstanding at any time shall not exceed the Maximum Commitment. Advances made by Mr. Kaplan to the Company under the Kaplan Note which have been repaid may not be borrowed again.

Prior to the Maturity Date or an Event of Default (as hereinafter defined), the Principal Amount outstanding under the Kaplan Note will bear interest at a rate of 3% (the “Interest Rate”). From and after the Maturity Date or upon and during the continuance of an Event of Default, interest will accrue on the unpaid Principal Amount during any such period at an annual rate (the “Default Rate”) equal to 10% plus the Interest Rate; provided, however, that in no event will the Default Rate exceed the maximum rate permitted by law.

The Company may prepay the Kaplan Note, in whole or in part, without a prepayment penalty, at any time provided that an Event of Default has not then occurred.

During the year ended May 31, 2021, the Kaplan Note was retired in exchange for a 10% equity stake in Simplicity Brasil.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Self-Amortization Promissory Note

On June 18, 2020 (the “Issue Date”), the Company entered into a securities purchase agreement (the “SPA”) with an accredited investor (the “Holder”), pursuant to which the Company issued a 12% self-amortization promissory note (the “Amortization Note”) with a maturity date of June 18, 2021 (the “Maturity Date”), in the principal sum of $550,000. Pursuant to the terms of the Amortization Note, the Company agreed to pay to $550,000 (the “Principal Sum”) to the Holder and to pay interest on the Principal Sum at the rate of 12% per annum. The Amortization Note carries an original issue discount (“OID”) of $55,000. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $495,000 in exchange for the Amortization Note. In addition, pursuant to the terms of the SPA, the Company agreed to issue 6,875 shares of the Company’s common stock to the Holder as additional consideration.

The Company may prepay the Amortization Note at any time prior to the date that an Event of Default (as defined in the Amortization Note) (each an “Event of Default”) occurs at an amount equal to 100% of the Principal Sum then outstanding plus accrued and unpaid interest with no prepayment premium. The Amortization Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Amortization Note or SPA.

The Company is required to make amortization payments to the Holder according to the following schedule:

Payment Date		Payment Amount
10/16/2020	$	66,125.00
11/16/2020	$	66,125.00
12/16/2020	$	66,125.00
01/18/2021	$	66,125.00
02/18/2021	$	66,125.00
03/18/2021	$	66,125.00
04/16/2021	$	66,125.00
05/18/2021	$	66,125.00
06/18/2021	$	65,921.26
Total:	$	594,921.26

In connection with the November 23, 2020 SPA discussed below, we repaid principal and interest of $198,375 on this June 18, 2020 Note.

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 calendar days as provided in the Amortization Note, the Amortization 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% (the “Default Amount”). 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. The Company shall have the right to pay the Default Amount in cash at any time, provided, however that the Holder may convert the Amortization Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% contained in the Amortization Note) at any time after the date that is five calendar days after the Amortization Note becomes immediately due and payable as a result of an Event of Default until the Company has repaid the Amortization Note in cash. If the aforementioned event occurs, the conversion price will be equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion. The Company intends to repay the Amortization Note in accordance with its terms so that no amount under the Amortization Note is converted into shares of the Company’s common stock.

While any portion of this Note is outstanding, if the Company receives cash proceeds of more than $2,000,000.00 (the “Minimum Threshold”) in the aggregate from public offerings or private placements to investors, the Company shall, within two business days of Company’s receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Company to immediately apply up to 50% of all proceeds received by the Company after the Minimum Threshold is reached to repay the outstanding amounts owed under this Note. As of November, 2020, we repaid the entire amount of principal and interest.

August 7, 2020 Self-Amortization Promissory Note

On August 7, 2020 (the “Issue Date”), the Company entered into a securities purchase agreement (the “SPA”) with FirstFire Global Opportunities Fund, LLC, an accredited investor (the “Holder”), pursuant to which the Company issued a 12% self-amortization promissory note (the “Self-Amortization Note”) with a maturity date of August 7, 2021 (the “Maturity Date”), in the principal sum of $333,333. Pursuant to the terms of the Self-Amortization Note, the Company agreed to pay $333,333 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum. The Amortization Note carries an original issue discount of $33,333. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $300,000 in exchange for the Self-Amortization Note. In addition, pursuant to the terms of the SPA, the Company agreed to issue 4,167 shares of the Company’s common stock to the Holder as additional consideration.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

The Company may prepay the Self-Amortization Note at any time prior to the date that an Event of Default (as defined in the Amortization Note) (each an “Event of Default”) occurs at an amount equal to 100% of the Principal Sum then outstanding plus accrued and unpaid interest with no prepayment premium. The Self-Amortization Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Self-Amortization Note or SPA.

The Company is required to make amortization payments to the Holder according to the following schedule:

Payment Date		Payment Amount
12/07/2020	$	40,075.75
01/07/2021	$	40,075.75
02/08/2021	$	40,075.75
03/08/2021	$	40,075.75
04/07/2021	$	40,075.75
05/07/2021	$	40,075.75
06/07/2021	$	40,075.75
07/07/2021	$	40,075.75
08/07/2021	$	39,952.34
Total:	$	360,558.34

On March 10, 2021, we repaid the outstanding principal and interest on the Self-Amortization Note.

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 calendar days as provided in the Amortization Note, the Amortization 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% (the “Default Amount”). 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. The Company shall have the right to pay the Default Amount in cash at any time, provided, however that the Holder may convert the Amortization Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% contained in the Amortization Note) at any time after the date that is five calendar days after the Amortization Note becomes immediately due and payable as a result of an Event of Default until the Company has repaid the Amortization Note in cash. If the aforementioned event occurs, the conversion price will be equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion. The Company intends to repay the Amortization Note in accordance with its terms so that no amount under the Amortization Note is converted into shares of the Company’s common stock.

While any portion of this Note is outstanding, if the Company receives cash proceeds of more than $2,000,000.00 (the “Minimum Threshold”) in the aggregate from public offerings or private placements to investors, the Company shall, within two business days of Company’s receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Company to immediately apply up to 50% of all proceeds received by the Company after the Minimum Threshold is reached to repay the outstanding amounts owed under this Note.

November 23, 2020 Self-Amortization Promissory Note

On November 25, 2020, the Company entered into a securities purchase agreement (the “November 2020 SPA”), dated as of November 23, 2020 (the “Effective Date”), with an accredited investor (the “Holder”) pursuant to which the Company issued a 12% self-amortization promissory note (the “November Amortization Note”) with a maturity date of November 23, 2021 (the “Maturity Date”), in the principal sum of $750,000. Pursuant to the terms of the November Amortization Note, the Company agreed to pay to $750,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum. The Company received net proceeds of $441,375, net of original issue discount of $75,000, origination fees of $35,250, and the partial repayment of principal and interest of $198,375 on the June 18, 2020 Note. In connection with the November Amortization Note, during the first twelve months of this note, interest equal to $90,000 shall be guaranteed and earned in full as of the Effective Date, provided, however, that if the November Amortization Note is repaid in its entirety on or prior to February 23, 2021, then the interest shall be accrued on a per annum basis based on the number of days elapsed as of the repayment date from the Effective Date.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

In connection with the November 23, 2020 SPA, the Company is required to issue warrants equal to 375,000 divided by the Exercise Price (as defined below) (the “Warrant Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. For purposes of this Warrant, the term “Exercise Price” shall mean 110% of the public offering price of the Company’s common stock under the public offering contemplated by the registration statement on Form S-1 filed by the Company on October 23, 2020 (the “Uplist Offering”), provided, however, that if the Uplist Offering has not been consummated on or before May 23, 2021, then the Exercise Price shall mean the closing bid price of the Company’s common stock on December 23, 2020, subject to adjustment as provided in the warrant (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing on the earlier of (i) the date of the Company’s consummation of the Uplist Offering or (ii) May 23, 2021, and ending on the five-year anniversary thereof. In connection with the issuance of these warrants, on the initial measurement date, the relative fair value of the warrants of $157,438 was recorded as a debt discount and an increase in paid-in capital.

The Company may prepay the Amortization Note at any time prior to the date that an Event of Default (as defined in the Amortization 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 Amortization Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the November Amortization Note or the November 2020 SPA.

The Company is required to make amortization payments to the Holder according to the following schedule:

Payment Date		Payment Amount
2/23/2021	$	84,000.00
3/23/2021	$	84,000.00
4/23/2021	$	84,000.00
5/21/2021	$	84,000.00
6/23/2021	$	84,000.00
7/23/2021	$	84,000.00
8/23/2021	$	84,000.00
9/23/2021	$	84,000.00
10/22/2021	$	84,000.00
11/23/2021	$	84,000.00
Total:	$	840,000.00

On February 19, 2021, we repaid the outstanding principal and interest on the November Amortization Note.

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 (provided, however, that this cure period shall not apply to certain events of default as set forth in the November Amortization Note), the November Amortization 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% (the “Default Amount”). Upon the occurrence of an Event of Default (as hereinafter defined), 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. The Company shall have the right to pay the Default Amount in cash at any time, provided, however that the Holder may convert the November Amortization Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% contained in the Amortization Note) at any time after the date that is five (5) calendar days after the November Amortization Note becomes immediately due and payable as a result of an Event of Default until the Company has repaid the Amortization Note in cash. If the aforementioned event occurs, the conversion price will be equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion.

The Holder shall have the right, at any time following an Uncured Default Date (as defined in this Note), to convert all or any portion of the then outstanding and unpaid principal amount and interest (including any default interest) into shares of the Company’s common stock at the Conversion Price. Following the Uncured Default Date, the Conversion Price shall equal the lesser of (i) 105% multiplied by the closing bid price of the Company’s common stock or (ii) the closing bid price of the Company’s common stock immediately preceding the date of the respective conversion (the “Conversion Price”).

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Amendments to the Series A-2 Exchange Convertible Note

On or about December 20, 2018, the Company issued that certain Series A-2 exchange convertible note in the original principal amount of $1,000,000 (the “Series A-2 Note”) to Maxim.

On June 18, 2020, the Company and Maxim entered into that certain first amendment to the Series A-2 Note (the “First Amendment”), pursuant to which such parties agreed to the following: (i) Maxim’s resale of the Company’s common stock (the “Common Stock”) underlying the Series A-2 Note shall be limited to 10% of the daily volume of the Common Stock on each respective trading day, (ii) the maturity date of the Series A-2 Note was extended to December 31, 2020, (iii) the principal amount of the Series A-2 Note was increased by $100,000 and (iv) the conversion price was reduced from $15.44 ($1.93 pre-reverse split) to $9.20 ($1.15 pre-reverse split).

On December 31, 2020, the Company and Maxim entered into a second amendment to the Series A-2 Note to extend the maturity date of Series A-2 Note to February 15, 2021. 

On April 14, 2021, the Company and Maxim entered into the third amendment to the Series A-2 Note with Maxim pursuant to which the Company and Maxim agreed to the following:

(i)	The maturity date of the Series A-2 Note is extended to October 15, 2021.
(ii)	The principal balance of the Series A-2 Note is increased by $50,000 as of April 14, 2021.
(iii)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before April 30, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.
(iv)	The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before May 15, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

(v)	If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before July 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000.
(vi)	If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before September 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000, representing a total cumulative increase in the principal balance of $350,000 if the Series A-2 Note is not repaid in its entirety on or before September 15, 2021.
(vii)	The Company will, within five business days after the Company’s receipt of the Second Tranche Purchase Price of $999,996, pay $500,000 to Maxim, which will reduce the principal owed under the Series A-2 Note by $500,000.

While any portion of the Series A-2 Note is outstanding, if the Company receives cash proceeds from public offerings or private placements of the Company’s common stock to investors (except with respect to proceeds from officers and directors of the Company), the Company will, within five business days of the Company’s receipt of such proceeds, inform Maxim or such receipt, following which Maxim will have the right in its sole discretion to require the Company to immediately apply up to 25% of such proceeds received by the Company to repay the outstanding amounts owed under the Series A-2 Note. The parties understand that (a) each dollar applied toward repayment pursuant to this clause (viii) will reduce the balance owed under the Series A-2 Note by one dollar, and (b) this clause (viii) will not apply to the Tiger Trout transaction.

On August 19, 2021, the Company and Maxim entered into the fourth amendment (the “Fourth Amendment”) to the Series A-2 Maxim Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock. The Company also granted Maxim an irrevocable right of first refusal superseding all others to act as Company’s sole managing underwriter and sole bookrunner or exclusive placement agent or financial advisor, or finder in connection with any public or private offering by the Company or any subsidiary of or successor to the Company (if applicable) of its equity, equity linked or debt securities (including convertible securities) while the Company’s common stock is listed on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing, each, a “National Exchange”), within the period beginning on August 19, 2021 and ending on the close of business on January 1, 2023.

On August 19, 2021, the Company issued to Maxim a common stock purchase warrant (the “Warrant”) for the purchase of 365,000 shares of the Company’s common stock (the “Warrant Shares”) at an exercise price of $13.00, subject to adjustment as provided in the Warrant. The Warrant is exercisable during the period commencing on August 19, 2021 and ending at 5:00 p.m. eastern standard time on the date that is the earlier of (i) three years from the effective date of a registration statement registering for resale by Maxim or its assigns the Warrant Shares (provided that such registration statement remains in effect at the end of the exercise period) and (ii) the 42 month anniversary after August 19, 2021.

The Company has paid the Maxim note, in its entirety by August 24, 2021

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% promissory note (the “Note”) with a maturity date of February 19, 2022 (the “Maturity Date”), in the principal sum of $1,650,000. In addition, the Company issued 10,000 shares of its common stock to the Holder as a commitment fee pursuant to the SPA. Pursuant to the terms of the Note, the Company agreed to pay to $1,650,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum (provided that the first twelve months of interest shall be guaranteed). The Note carries an original issue discount (“OID”) of $165,000. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $1,485,000 in exchange for the Note. The Company intends to use the proceeds for its operational expenses, the repayment of those certain self-amortization promissory notes previously issued to the Holder on June 18, 2020 and November 23, 2020, and the repayment of certain other existing debt obligations. The Holder may convert the Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Note) at any time at a conversion price equal to $11.50 per share.

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.

The Company is required to make an interim payment to the Holder in the amount of $363,000, on or before August 19, 2021, towards the repayment of the balance of the Note. Currently the Company and the Holder have agreed to extend the terms of this payment. The extension provides that the Company paid $100,000 to the Holder by the interim payment date and has agreed to pay an additional $100,000 upon the completion of a new debt deal that is anticipated to close by September 1, 2021 and the Company has agreed to pay $163,000 to the Holder at the earlier of the Company stock uplist or September 30, 2021.

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 (provided, however, that this five (5) calendar day cure period shall not apply to any event of default under Sections 3.1, 3.2, and 3.19 of the Note), 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% (the “Default Amount”). 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Note Payable

On November 20, 2018, the Company paid its underwriter $20,000 and issued its underwriter a secured demand promissory note (the “Note”) in the amount of $1,800,000. The Note accrued interest at 8% per annum from the date of the Note through and including May 20, 2019, 12% per annum from and including May 21, 2019, through and including August 20, 2019, and 15% per annum from and including August 21, 2019, through and including November 20, 2019. If a late payment had occurred and continued, the interest rate would have increased to 12% per annum from the date of the Note through and including August 20, 2019 and 18% per annum from after August 21, 2019. If a late payment had remained outstanding for over 48 hours, Maxim could have required the Company to redeem all or any part of the Note at a redemption price equal to 125% of the Alternate Payment Amount.

The principal and interest of the Note was payable upon demand by Maxim or from time to time, in accordance the following schedule:

(i)	one third of the principal, accrued and unpaid interest and any late charges on May 20, 2019;
(ii)	one third of the principal, accrued and unpaid interest and any late charges on August 20, 2019; and
(iii)	one third of the principal, accrued and unpaid interest and any late charges on November 20, 2019.

The Note was secured by a first priority security interest in all personal property and assets of the Company excluding the assets held in escrow with respect to (i) that certain stock purchase agreement with Polar, pursuant to which Polar agreed to sell up to 490,000 shares of the Company’s common stock to the Company thirty days after the consummation of the Business Combination and (ii) that certain stock purchase agreement with K2, pursuant to which K2 agreed to sell up to 220,000 shares of the Company’s common stock to the Company thirty days after the consummation of the Business Combination.

The amount payable under the Note could also have been paid in shares of common stock of the Company or securities convertible or exercisable into shares of common stock of the Company (the “Alternate Equity Payment”) if and only if the Company and Maxim mutually agree on both the purchase price and, if applicable, the conversion and/or exercise price of each security of the Company issued in such Alternative Equity Payment. Otherwise, the payment should be made in cash only.

So long as any amount under the Note remained outstanding, all cash proceeds received by the Company from any sales of its securities was to be used to repay this Note.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 7 — COMMITMENTS AND CONTINGENCIES

Unit Purchase Option

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 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 August 31, 2021, operating lease right-of-use assets and liabilities arising from operating leases was $1,562,617 and $1,556,815, respectively. During the quarter ended August 31, 2021 and 2020, the Company recorded operating lease expense of $140,516 and $20,623.

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 August 31, 2021.

2022	$	370,370
2023	$	468,377
2024	$	470,511
2025	$	423,795
2026 and thereafter	$	171,602
Total Operating Lease Obligations	$	1,904,655
Less: Amount representing interest	$	(347,840	)
Present Value of minimum lease payments	$	1,556,815

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

Employment Agreements, Board Compensation and Bonuses

On July 29, 2020, the Company entered into a new employment agreement (the “Kaplan 2020 Agreement”) with Mr. Kaplan and the Board of Directors approved for Mr. Kaplan a $75,000 cash bonus and authorized the issuance of 250,000 shares of the Company’s common stock both related to his performance during the fiscal year ended May 31, 2020. As of August 31, 2021 the Company still owed Mr. Kaplan $35,000 of the 2020 bonus award.

Effective March 29, 2021, the Company promoted Mr. Kaplan to be the Chairmen of the Board of Directors, and he ceased to be the Company’s Chief Executive Officer and Interim Chief Financial Officer. Upon this change, Mr. Kaplan’s new monthly salary became $4,000 per month and the Kaplan 2020 Agreement was terminated.

On July 29, 2020, the Company entered into a new employment agreement (the “Franklin 2020 Agreement”) with Mr. Franklin and the Board of Directors approved for Mr. Franklin a $75,000 cash bonus and authorized the issuance of 250,000 fully vested shares of the Company’s common stock both related to his performance during the fiscal year ended May 31, 2020. As of August 31, 2021, the Company still owed Mr. Franklin $35,000 of the 2020 bonus award.

On March 25, 2021, the Board of Directors appointed Mr. Franklin as the Company’s Chief Executive Officer, effective March 29, 2021. Mr. Franklin continues to be a member of our board of directors. In connection with Mr. Franklin’s appointment, on March 25, 2021, the Company entered into an employment agreement, dated as of March 29, 2021 by and between the Company and Mr. Franklin (the “2021 Franklin Employment Agreement”). Pursuant to the terms of the 2021 Franklin Employment Agreement, in exchange for Mr. Franklin’s services, the Company agreed to pay Mr. Franklin an annual base salary of $250,000. Mr. Franklin is also eligible to receive a quarterly bonus of up to $15,000 in the form of a cash bonus and/or equity grant of shares of the Company’s common stock. Mr. Franklin’s eligibility for any bonus and the amount thereof will be determined solely at the discretion of the Board of Directors.

On May 11, 2021, the Board appointed Nancy Hennessey to serve as the Company’s Chief Financial Officer, effective May 17, 2021. In connection with Ms. Hennessey’s appointment as the Company’s Chief Financial officer, the Company entered into an employment agreement, dated as of May 17, 2021 by and between the Company and Ms. Hennessey (the “Hennessey Employment Agreement”). Pursuant to the terms of the Hennessey Employment Agreement, in exchange for Ms. Hennessey’s services, the Company agreed to pay Ms. Hennessey an annual base salary of $140,000. In addition, Ms. Hennessey is entitled to receive compensation in the form of an equity grant of $5,000 in the Company’s common stock for each quarter during the term of the Hennessey Employment Agreement, which runs for a period ending one year after May 17, 2021 and automatically renews for successive one year terms unless either party gives 60 days’ advance written notice of its intention not to renew the Hennessey Employment Agreement. Ms. Hennessey is also eligible to receive a quarterly bonus of up to $12,500 in the form of a cash bonus and/or equity grant of shares of the Company’s common stock. Pursuant to the terms of the Hennessey Employment Agreement, Ms. Hennessey will also receive (i) 5,000 shares of common stock upon filing of the 2021 Annual Report on Form 10-K, if completed before July 31, 2021, and (ii) 5,000 shares of common stock upon completion of an uplisting to a national exchange, such as The Nasdaq Stock Market or the NYSE American. Ms. Hennessey’s eligibility for any bonus and the amount thereof will be determined solely at the discretion of the Board of Directors

On August 31, 2021, the Company has accrued $5,000 for the quarterly equity grant for Ms. Hennessey.

On August 20, 2021, the Board of Directors approved 82,500 shares of stock to its directors and officers with for prior services an issuance date of September 1, 2021. On August 31, 2021, the Company has accrued $833,250 as common stock issuable.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 9 — COMMITMENTS AND CONTINGENCIES

Unit Purchase Option

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 (or an aggregate exercise price of $2,990,000) upon the closing of the Initial Public Offering. The 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.

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 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 all the existing leases subject to the new lease standard were previously classified as operating leases by the Company, they were similarly classified as operating leases under the new standard. The Company has determined that the identified operating leases did not contain non-lease components and require no further allocation of the total lease cost. Additionally, the agreements in place did not contain information to determine the rate implicit in the leases, so we used our incremental borrowing rate as the discount rate. Our weighted average discount rate is 10.4% and the weighted average remaining lease terms are 41 months.

As of May 31, 2021, operating lease right-of-use assets and liabilities arising from operating leases was $1,527,286 and $1,527,967, respectively. As of May 31, 2020, operating lease right-of-use assets and liabilities arising from operating leases was $490,984 and $490,983, respectively. During the year ended May 31, 2021 and 2020, the Company recorded operating lease expense of approximately $353,000 and $147,000, respectively.

The following is a schedule showing the future minimum lease payments under operating leases by years and the present value of the minimum payments as of May 31, 2021.

2022	$	471,063
2023	$	450,377
2024	$	452,511
2025	$	405,795
2026	$	153,601
Total Operating Lease Obligations	$	1,945,347
Less: Amount representing interest	$	(418,061	)
Present Value of minimum lease payments	$	1,527,286

Employment Agreements, Board Compensation and Bonuses

On July 29, 2020, the Company entered into a new employment agreement (the “Kaplan 2020 Agreement”) with Mr. Kaplan. Such employment agreement replaced the Kaplan 2018 Agreement. As a result, the Kaplan 2018 Agreement was terminated and is of no further force or effect. Pursuant to the terms of the Kaplan 2020 Agreement, the Company agreed to pay Mr. Kaplan a monthly base salary of $5,000; provided, however, that the parties agreed that such base salary will be deferred and will accumulate until the Company has sufficient cash available to make such payments, to be reasonably determined by the Board of Directors and Mr. Kaplan, at which time all accrued and unpaid base salary will be paid. In addition, Mr. Kaplan will receive an equity grant of 15,000 shares of common stock per month, which shares will be fully vested upon grant. Mr. Kaplan will also be eligible to receive a quarterly bonus in the form of cash or equity shares and will be entitled to participate in the Company’s employee benefit plans. In addition, if, during the term of the Kaplan 2020 Agreement, the Company’s shares are approved for listing on a U.S. national securities exchange, the Company will pay Mr. Kaplan a $50,000 cash bonus, to be paid upon such listing begin effective.

The term of the Kaplan 2020 Agreement is for an initial one-year term, which shall automatically renew for successive one-year terms unless either party provides 60 days’ advance written notice of its intention not to renew the Kaplan 2020 Agreement at the conclusion of the then applicable term. The term of the Kaplan 2020 Agreement may be terminated by the Company with or without cause or by Mr. Kaplan with or without good reason, as such terms are defined therein.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

On July 29, 2020, the Board of Directors approved for Mr. Kaplan a $75,000 cash bonus and authorized the issuance of 250,000 shares of the Company’s common stock both related to his performance during the fiscal year ended May 31, 2020. As of May 31, 2020, the Company has accrued $75,000 related to Mr. Kaplans cash bonus and $216,625 related to the Common Shares to be issued to Mr. Kaplan.

On July 29, 2020, the Company entered into a new employment agreement (the “Franklin 2020 Agreement”) with Mr. Franklin. Such employment agreement replaced the Franklin 2018 Agreement. As a result, the Franklin 2018 Agreement was terminated and is of no further force or effect. Pursuant to the terms of the Franklin 2020 Agreement, the Company agreed to pay Mr. Franklin a monthly base salary of $12,500; provided, however, that the parties agreed that such base salary will be deferred and will accumulate until the Company has sufficient cash available to make such payments, to be reasonably determined by the Board of Directors and Mr. Franklin, at which time all accrued and unpaid base salary will be paid. In addition, Mr. Franklin will receive an equity grant of 6,250 shares of common stock per month, which shares will be fully vested upon grant. Mr. Franklin will also be eligible to receive a quarterly bonus in the form of cash or equity shares and will be entitled to participate in the Company’s employee benefit plans. In addition, if, during the term of the Franklin 2020 Agreement, the Company’s shares are approved for listing on a U.S. national securities exchange, the Company will pay Mr. Franklin a $50,000 cash bonus, to be paid upon such listing begin effective.

On July 29, 2020, the Board of Directors approved for Mr. Franklin a $75,000 cash bonus and authorized the issuance of 250,000 fully vested shares of the Company’s common stock both related to his performance during the fiscal year ended May 31, 2020. As of May 31, 2020, the Company has accrued $75,000 related to Mr. Franklins cash bonus and $216,625 related to the Common Shares to be issued to Mr. Franklin.

On July 29, 2020, the Board of Directors approved the issuance of 192,000 shares of common stock to an employee and the Directors of the Company for services provided during the fiscal year ended May 31, 2020. As of May 31, 2020, the Company has accrued $166,675 related to the authorized issuance of these shares.

During the year ended May 31, 2021, the Board of Directors approved the issuance of 17,125 shares of common stock for the Company’s Directors. These shares were issued during the year. The Board of Directors has not issued any year end stock awards for the year ended May 31, 2021 and there is no guarantee that they will issue any of this stock.

Litigation

On August 5, 2020, a lawsuit styled Duncan Wood v. PLAYlive Nation, Inc. and Simplicity eSports and Gaming Company (Case No. 20-1043) was filed in the U.S. District Court for the District of Delaware. The complaint alleges unlawful failure to make timely and reasonable payment of wages, breach of contract, breach of the duty of good faith and fair dealing and unjust enrichment. The plaintiff seeks monetary damages for compensation alleged to be owed, treble damages, interest on all wage compensation, reasonable attorneys’ fees and other relief as the Court deems just and proper. Defendants’ responsive pleading is not yet due and has not been filed. The litigation is in its initial stages and the Company is unable to reasonably predict its potential outcome. The Company, however, believes that the lawsuit is without merit and intends to vigorously defend the claims. On SOME DATE the lawsuit was withdrawn without prejudice.

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STOCKHOLDERS’ EQUITY

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 2021

Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 9 -STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of August 31, 2021 there were no shares of preferred stock issued or outstanding.

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 August 31, 2021 and May 31, 2021, there were 1,492,595 and 1,427,124 shares of common stock issued and outstanding respectively.

Stock - Based Compensation

During the quarter ended August 31, 2021, the company approved stock-based compensation to its officers or directors and share based compensation for the three months ended August 31, 2021 and August 31, 2020 was approximately $838,250 and $150,095, respectively.

Warrants

The Company issued warrants related to the convertible notes payable that were issued during the quarter ended August 31, 2021. Additinally, the Company sold 100,000 warrants for the purchase of 100,000 shares of common stock at an exercise price of $20.00 per share to a private investor for $100,000.

A summary of the status of the Company’s outstanding stock warrants as of August 31, 2021 is as follows:

	Number of Shares		Average Exercise Price
Outstanding – May 31, 2020		803,001	$	83.01
Granted during the year ended May 31, 2021		17,063	$	20.66
Outstanding – May 31, 2021		820,064	$	10.38
Warrants granted during the quarter ended August 31, 2021		1,257,312	$	11.26
Sale of warrants during the quarter		100,000	$	20.00
Warrants exercisable – August 31, 2021		2,177,376	$	38.08

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

NOTE 10 — STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. At May 31, 2021 and 2020, there were no shares of preferred stock issued or outstanding.

Common Stock

The Company is authorized to issue 36,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the shares of the Company’s common stock are entitled to one vote for each share. At May 31, 2021, and May 31, 2020, there were 1,427,124 and 988,622 shares of common stock issued and outstanding respectively.

2020 Transactions

During the year ended May 31, 2020, the Company issued 123,000 shares of its common stock on a post reverse split basis. Shares were issued in conjunction with the acquisition of Playlive Nation of 94,000, for compensation for employees, officers and directors in the amount of 14,000 shares, and 15,000 shares were issued for cash. 

2021 Transactions

During the year ended May 31, 2021, the Company issued 429,000 shares of its common stock. Shares were issued for compensation for employees, officers and directors in the amount of 240,000 shares, 84,000 shares in connection with notes payable, 65,000 shares for the acquisition of company owned stores from prior franchisees, 37,000 shares as satisfaction to vendors for services rendered and 3,000 shares were issued for cash.

Common Shares Issued subsequent May 31, 2021

From June 1, 2021 through August 27, 2021 the Company has issued 42,000 shares of its common stock. Of this, 21,000 shares were issued in satisfaction to vendors for services rendered, 15,000 shares were issued in connection with notes payable and 6,000 shares were issued for the acquisition of a company owned store from a prior franchisee.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Private Placement

Beginning in February of 2019 and closing in May of 2019, the Company sold units in connection with a private offering by the Company to raise working capital of up to $2,000,000 (the “Offering Amount”) through the sale to accredited investors only of up to up to 1,000,000 “Units” of the Company’s securities, at a purchase price of $2.00 per Unit, with each Unit consisting of (i) one share of common stock, par value $0.0001 per share of the Company (the “Common Stock”) and (ii) a warrant to purchase one share of Common Stock, exercisable at a price of $4.00 per share, exercisable at any time within five years of issuance (each, a “Warrant”) as provided for in the Company’s Term Sheet for Unit Offering dated February 6, 2019 (the “Term Sheet”).

The Company sold 962,500 units for gross proceeds of $1,925,000.

Stock Based Compensation

For the year ended May 31, 2020 the Company authorized the issuance of 95,000 shares of common stock to employees, officers and directors of the Company. The shares were issued in conjunction with their employment agreements or services such individuals provided to the Company and vested ratably through May 31, 2020.

For the year ended May 31, 2021, the Company authorized the issuance of 240,000 shares of common stock to employees, officers and directors of the Company. The shares were issued in conjunction with their employment agreements or services such individuals provided to the Company and vested ratably through May 31, 2021.

For the years ended May 31, 2021 and 2020, in connection with these issuances the Company recorded share-based compensation expense of $1,690,000 and $828,000 respectively. At May 31, 2021 and 2020, the Company has no unrecognized share-based compensation.

Warrants

During the year ended May 31, 2021, we issued 3,116 shares of common stock to an accredited investor upon the exercise of previously issued warrants. The warrants were exercised on a cashless or “net” basis. Accordingly, we did not receive any proceeds from such exercises. The cashless exercise of such warrants resulted in the cancellation of previously issued warrants. During the year ended May 31, 2020, there was no warrant activity.

A summary of the status of the Company’s outstanding stock warrants for the years ended May 31, 2021 and 2020 is as follows:

	Number of Shares		Average Exercise Price
Outstanding – May 31, 2019		803,001	$	83.01
Outstanding – May 31, 2020		803,001		83.01
Granted – May 31, 2020		17,063		20.66
Outstanding – May 31, 2021		820,064	$	81.71

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INCOME TAXES

12 Months Ended

May 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 11 - INCOME TAXES

For the year ended May 31, 2021 and 2020, the income tax provisions for current taxes were $0.

Deferred income taxes reflect the net tax effects of permanent and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences that result in deferred tax assets and liabilities are the results of carry forward tax losses, amortization and impairment expense.

The components of the net deferred tax assets for the year ended May 31, 2021 and 2020 are as follows:

	Year ended May 31, 2021			Year ended May 31, 2020
Net Operating Loss	$	1,926,000		$	770,000
Impairment of cost method investment		129,000			-
Accrued Expenses		98,000
Allowance for Doubtful Accounts		10,000
Gross deferred tax asset		2,163,000			770,000
Less: Valuation allowance		(1,972,000	)		(825,000	)
Net deferred tax asset	$	191,000		$	55,000
Deferred tax liabilities:
Amortization of intangible assets		(98,000	)		(55,000	)
Depreciation		(93,000	)
Net deferred assets/liabilities		-			-

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a valuation allowance, in an amount equal to gross deferred tax assets less deferred tax liabilities. For the years ended May 31, 2021 and 2020, the change in the valuation allowance was $1,257,000 and $444,000, respectively.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

The table below summarizes the reconciliation of our income tax provision computed at the federal statutory rate of 21% for the years ended May 31, 2021 and 2020 and the actual tax provisions for the year ended May 31, 2021 and 2020.

	2021			2020
Expected provision (benefit) at statutory rate		(21.0	)%		(21.0	)%
State taxes, net of federal tax benefit		(4.4	)%		(4.4	)%
Permanent differences-stock based compensation		9.0			15.0
Increase in valuation allowance		16.4	%		10.4	%
Total provision (benefit) for income taxes		0.0	%		0.0	%

At May 31, 2021 and May 31, 2020, the Company had Federal net operating loss carry forwards of approximately $7,600,000 and $3,800,000, respectively. The net operating loss of approximately $7,600,000 can be carried forward indefinitely subject to annual usage limitations. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOLs may be subject to an annual limitation in the event of a change in control as defined under the regulations.

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions and is subject to examination by the various taxing authorities.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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SUBSEQUENT EVENTS

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 2021

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

 NOTE 10 — SUBSEQUENT EVENTS

On September 1, 2021, the Company issued an aggregate of 82,500 restricted common shares of the Company to executive officers and directors of the Company for services rendered during the fiscal year ended May 31, 2021 which was approved by the Board of Directors on August 20, 2021 and which expense was accrued for the quarter ended August 31, 2021.

On August 31, 2021 pursuant to the terms of that certain Securities Purchase Agreement between the Company and Lucas Ventures, LLC, the Company issued a convertible promissory note in the principal amount of $200,000 with an effective date of September 2, 2021. In addition, the Company issued 3,749 shares of its common stock to the investor 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.

On August 31, 2021 pursuant to the terms of that certain Securities Purchase Agreement between the Company and LGH Investments, LLC, the Company issued a convertible promissory note in the principal amount of $200,000 effective September 2, 2021.

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 Global Opportunities Fund, LLC (“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.

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. 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-year warrant to purchase 729,167 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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.

On September 28, 2021 the Company received notice that the original Paycheck Protection Plan (“PPP”) loan was forgiven in the amount of $40,500. The company will record this along with the related accrued interest as debt forgiveness income in the quarter ending November 30, 2021.

On September 30, 2021, the Company paid $500,000 to the Holder of the February 19, 2021 12% Promissory Note and Securities Purchase Agreement in compliance with the renegotiated terms of an interim payment that was due on August 19, 2021.

On October 1, 2021, the Company issued a common stock purchase warrant for the purchase of an additional 40,000 shares of the Company’s common stock 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.

On October 7, 2021, the Company’s wholly owned subsidiary Simplicity Tracy, LLC entered into an Asset Purchase agreement company with a former franchisee to acquire the assets of the former franchisee in exchange for 4,500 shares of its common stock.

The above issuances/sales were made pursuant to an exemption from registration as set forth in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.

NOTE 12 — SUBSEQUENT EVENTS

Acquisitions

Simplicity Salinas, LLC:

On July 22, 2021, the Company’s wholly-owned subsidiary, Simplicity Salinas, LLC (“Simplicity Salinas”) entered into an Asset Purchase Agreement (“Simplicity Salinas APA”) with an existing franchisee (“”), to acquire the franchisee’s assets in exchange for 6,000 shares of the Company’s common stock with fair value of $65,100, or $10.85 per share, based on the fair value of assets acquired.

Debt Instruments Issued

June 11 FirstFire Global 12% Promissory Note and Securities Purchase Agreement

On June 11, 2021, the Company entered into a securities purchase agreement (the “FirstFire SPA”) dated as of June 10, 2021, with FirstFire Global Opportunities Fund, LLC (“FirstFire”), pursuant to which the Company issued a 12% promissory note (the “FirstFire Note”) with a maturity date of June 10, 2023 (the “FirstFire Maturity Date”), in the principal sum of $1,266,666. In addition, the Company issued 11,875 shares of its common stock to FirstFire as a commitment fee pursuant to the FirstFire SPA. Pursuant to the terms of the FirstFire Note, the Company agreed to pay to $1,266,666 (the “FirstFire Principal Sum”) to FirstFire 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 FirstFire Note after 180 days from June 10, 2021). The FirstFire Note carries an original issue discount (“OID”) of $126,666. Accordingly, FirstFire paid the purchase price of $1,140,000 in exchange for the FirstFire Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. FirstFire may convert the FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the FirstFire Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by FirstFire upon, at the election of FirstFire, 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 FirstFire Note.

The Company may prepay the FirstFire Note at any time prior to maturity in accordance with the terms of the FirstFire Note. The 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 FirstFire Note or the FirstFire SPA.

Upon the occurrence of any Event of Default (as defined in the FirstFire Note), which has not been cured within three calendar days, the 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 FirstFire SPA, the Company also issued to FirstFire a three-year warrant (the “FirstFire Warrant”) to purchase 593,750 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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 FirstFire SPA, including shares issued upon conversion of the FirstFire Note or exercise of the 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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% promissory note (the “GS Note”) with a maturity date of June 10, 2023 (the “GS Maturity Date”), in the principal sum of $333,333. In addition, the Company issued 3,125 shares of its common stock to GS as a commitment fee pursuant to the GS SPA. Pursuant to the terms of the GS Note, the Company agreed to pay to $300,000.00 (the “GS Principal Sum”) to GS 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 GS Note after 180 days from June 10, 2021). The GS Note carries an original issue discount (“OID”) of $33,333. Accordingly, GS paid the purchase price of $300,000.00 in exchange for the GS Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. GS may convert the GS Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the GS Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by GS upon, at the election of GS, 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 GS Note.

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%.

Pursuant to the terms of the GS SPA, the Company also issued to GS a three-year warrant to purchase 156,250 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $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.

Pursuant to the terms of the Series A-2 Maxim Note Amendments, on July 15, 2021 the Company was required to either pay the Maxim Series A-2 Note in its entirety or the Company would increase the Maxim Note to include an additional $100,000 in principal to Maxim. On July 15, 2021 the Company increased the Maxim Note by $100,000. 

Fourth Amendment to Series A-2 Maxim Note

On August 19, 2021, the Company and Maxim entered into the fourth amendment (the “Fourth Amendment”) to the Series A-2 Maxim Note, as amended, pursuant to which the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock. The Company also granted Maxim an irrevocable right of first refusal superseding all others to act as Company’s sole managing underwriter and sole bookrunner or exclusive placement agent or financial advisor, or finder in connection with any public or private offering by the Company or any subsidiary of or successor to the Company (if applicable) of its equity, equity linked or debt securities (including convertible securities) while the Company’s common stock is listed on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing, each, a “National Exchange”), within the period beginning on August 19, 2021 and ending on the close of business on January 1, 2023.

On August 19, 2021, the Company issued to Maxim a common stock purchase warrant (the “Warrant”) for the purchase of 365,000 shares of the Company’s common stock (the “Warrant Shares”) at an exercise price of $13.00, subject to adjustment as provided in the Warrant. The Warrant is exercisable during the period commencing on August 19, 2021 and ending at 5:00 p.m. eastern standard time on the date that is the earlier of (i) three years from the effective date of a registration statement registering for resale by Maxim or its assigns the Warrant Shares (provided that such registration statement remains in effect at the end of the exercise period) and (ii) the 42 month anniversary after August 19, 2021.

The Company is expected to pay the Maxim note, in its entirety by the end of August, 2021.

Jefferson Street Capital Stock Purchase Agreement & 12% Convertible Promissory Jefferson Note

On August 23, 2021, the Company entered into that certain securities purchase agreement (the “Jefferson SPA”), dated as of August 23, 2021, by and between the Company and Jefferson Street Capital LLC (“Jefferson”). Pursuant to the terms of the Jefferson SPA, (i) the Company agreed to issue and sell to Jefferson the Jefferson Note (as hereinafter defined); (ii) the Company agreed to issue to Jefferson the Warrant (as hereinafter defined); and (iii) the Company agreed to issue to Jefferson 3,125 commitment shares; and (iv) Jefferson agreed to pay to the Company $300,000.00 (the “Purchase Price”).

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Pursuant to the terms of the Jefferson SPA, on August 23, 2021, the Company issued a 12% convertible promissory Jefferson Note (the “Jefferson Note”) with a maturity date of August 23, 2023 (the “Maturity Date”), in the principal amount of $333,333.33. Pursuant to the terms of the Jefferson Note, the Company agreed to pay to Jefferson $333,333.33 (the “Principal Amount”), with a purchase price of $300,000 plus an original issue discount in the amount of $333,333.33 (the “OID”), and to pay interest on the Principal Amount at the rate of 12% per annum, with the understanding that the first six months of interest is guaranteed and the remaining 18 months of interest is deemed earned in full if any amount is outstanding under the Jefferson Note after 180 days from August 23, 2021.

Any Principal Amount or interest on the Jefferson Note that is not paid when due will bear interest at the rate of the lesser of (i) 20%, or (b) the maximum rate allowed by law.

Jefferson may, at any time while the shares issuable upon conversion of the Jefferson Note are subject to an effective registration statement, or if no registration statement covering such shares is effective, at any time after 180 days from August 23, 2021, so long as there are amounts outstanding under the Jefferson Note, convert all or any portion of the then outstanding and unpaid Principal Amount and interest into shares of the Company’s common stock at a conversion price of $11.50 per share; provided, however, that upon failure to make any payment under the Jefferson Note, the conversion price will be $10.00 per share, as the same may be adjusted as provided in the Jefferson Note. The Jefferson Note has a 4.99% equity blocker; provided, however, that the 4.99% equity blocker may be waived (up to 9.99%) by Jefferson, at Jefferson’s election, on not less than 61 days’ prior notice to the Company.

On August 23, 2021, Jefferson paid the purchase price of $300,000 in exchange for the Jefferson Note. The Company intends to use the proceeds for its operational expenses and to pay off certain debt.

The Company may prepay the Jefferson Note at any time in accordance with the terms of the Jefferson Note. While any portion of the outstanding Principal Amount and interest are due and owing, if the Company receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, the issuance of equity or debt, the conversion of outstanding warrants of the Company, the issuance of securities pursuant to an equity line of credit of the Company or the sale of assets, the Company must inform Jefferson of such receipt, following which Jefferson may, in its sole discretion, require the Company to immediately apply up to 50% of the proceeds therefrom to repay all or any portion of the outstanding Principal Amount and interest then due under the Jefferson Note; provided, however, that the first $3,000,000 of equity financing received by the Company will be excepted from this requirement.

The Jefferson SPA and the Jefferson Note contain 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 Jefferson SPA.

Jefferson Street Capital Registration Rights Agreement

On August 23, 2021, the Company also entered into a registration rights agreement (the “Jefferson Registration Rights Agreement”) with Jefferson pursuant to which the Company is obligated to file a registration statement to register the resale of the shares issuable pursuant to the Jefferson SPA. Pursuant to the Jefferson Registration Rights Agreement, the Company must (i) file the registration statement within 90 calendar days from August 23, 2021, and (ii) use reasonable best efforts to cause the registration statement to be declared effective under the Securities within 120 calendar days after August 23, 2021. The Company also agreed that it would not file any other registration statement, including those on Form S-8 or Form S-4, for other securities, for a period of 12 months from August 23, 2021, unless it has the prior written approval from Jefferson.

The Jefferson Registration Rights Agreement contains customary indemnification provisions.

Jefferson Street Capital Common Stock Purchase Warrant

Also on August 23, 2021, pursuant to the terms of the Jefferson SPA, the Company issued to Jefferson a common stock purchase warrant (the “Jefferson Warrant”) for the purchase of 156,250 shares of the Company’s common stock. The per share exercise price under the Jefferson Warrant is, subject to adjustment as described therein, as follows: (i) 110% of the per share offering price of the offering made in connection with any “up-listing” of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any “up-listing” of the common stock and following such time if the “up-listing” contemplated in the Jefferson Warrant is not completed by November 1, 2021, the exercise price shall be $10.73. The Jefferson Warrant is exercisable during the period commencing on August 23, 2021 and ending at the close of business on August 23, 2024.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 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, as filed with the SEC on August 30, 2021. The interim results for the three months ended August 31, 2021 are not necessarily indicative of the results to be expected for the year ending May 31, 2022 or for any future interim periods.

Basis of Presentation

The accompanying consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company views its operations as one reporting entity and accordingly does not report on segments.

Correction of Previously Issued Financial Statements

Correction of Previously Issued Financial Statements

The accompanying condensed consolidated statement of operations for the three months ended August 31, 2020 has been corrected for a reclassification of depreciation expense of $27,134 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 increased from $40,511 to $67,645 with a corresponding decrease of General and administrative expenses, resulting in a decrease to Gross Profit from $160,090 to $132,956. The correction had no impact on Total operating loss 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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, Simplicity Esports, LLC, PLAYlive Nation, Inc., and PLAYlive Nation Holdings, LLC, its 76% owned subsidiary Simplicity One Brasil Ltd, its 79% owned subsidiaries Simplicity Happy Valley, LLC and Simplicity Redmond, LLC, and its 51% owned subsidiary Simplicity El Paso, LLC.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Basis of Consolidation

The consolidated financial statements include the operations of the Company and its wholly owned subsidiaries, Simplicity Esports, LLC, PLAYlive Nation, Inc., and PLAYlive Nation Holdings, LLC, its 76% owned subsidiary Simplicity One Brasil Ltd, and its 79% owned subsidiaries Simplicity Happy Valley, LLC and Simplicity Redmond, LLC and its 51% owned subsidiary Simplicity El Paso.

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 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 cash equivalents.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

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.

Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the consolidated balance sheet.

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.

Use of Estimates

The preparation of 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 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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:

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 its 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.

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.

Company-owned Stores 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

Franchise Royalties and Fees

Franchise Royalties and Fees

Franchise royalties which 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 years. Franchise license renewal fees, which generally occur every 10 years, are billed before the renewal date. Fees received for future license renewal periods are amortized over the life of the renewal period.

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 food 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.

Esports Revenue

Esports revenue is a form of competition using video games. Most commonly, esports takes the form of organized, single player and multiplayer video game competitions, particularly between professional players, individually or as teams. Revenues from Esports revenue are recognized when the competition is completed, and prize money is awarded. Revenues earned from league sponsorships from the Company’s share of league revenues including domestic esports teams competing in games such as Overwatch, Apex Legends, PUBG and more are included here. Revenue from international esports teams including Flamengo esports are included here. League revenues are earned through sponsorship fees on a per tournament, or per season basis. As of March 22, 2020, the Company commenced online esports tournaments promoted directly to its existing customer base. Revenue from these tournaments, comprised of registration fees on a per player basis, is included here.

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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

Deferred costs include commissions paid to brokers related to the sale of specific new franchises which have not met revenue recognition criteria as of August 31, 2021. These costs are recognized in the same period as the initial franchise fee revenue is recognized

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 May 31, 2021 and 2020. These costs are recognized in the same period as the initial franchise fee revenue is recognized.

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. Management has assessed accounts receivable and an allowance for doubtful accounts of approximately $42,479 has been recorded.

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. Management has assessed accounts receivable as of May 31, 2021 and 2020, and an allowance for doubtful accounts of approximately $38,000 and $52,400, respectively has been recorded

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 years), of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if they benefit future periods.

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 years) of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if it benefits future periods.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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 to 10 years.

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.

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 were included in intangible assets on our balance sheet and amortized on a straight-line basis when placed into service over the estimated useful lives of the costs, which is 3 to 5 years.

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. For the year ended May 31, 2021, we performed a third-party evaluation of the intangible assets which indicated no impairment was required.

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.

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. Our assessment date was May 31, 2020, and we performed a third-party evaluation of the goodwill value at May 31, 2021 which quantitative 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 August 31, 2021, 12 franchise locations were considered to be operational in various states including Arizona, California, Florida, Idaho, Maryland, Ohio, South Carolina, Texas and Washington.

Franchise Locations

Through PLAYlive, the Company’s wholly owned subsidiary, the Company has entered into franchise agreements with third parties. As May 31, 2021, approximately 12 locations were open and operating, in various states including Arizona, California, Florida, Idaho, Maryland, Michigan, Mississippi, Montana, Oregon, South Carolina, Texas, Utah and Washington.

Stock-based Compensation

Stock-based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation and ASC 505-50, Equity-Based Payments to Non-Employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.

Stock-based compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation and ASC 505-50, Equity-Based Payments to Non-Employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period.

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, which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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 and operating lease liability of $107,678. Due to the simplistic nature of the Company’s leases, no retained earnings adjustment was required. See Note 6 for further details.

Leases

In February of 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 adopted this update as of January l, 2019 using the modified retrospective transition method and prior periods have not been restated. Upon implementation, the Company recognized initial operating lease right-of-use assets of $110,003 and operating lease liabilities of $107,678. Due to the simplistic nature of the Company’s leases, no retained earnings adjustment was required. See Note 9 for further details.

Deferred Financing Costs

Deferred Financing Costs

The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — “Expenses of Offering”. Offering costs of $307,494 and $98,198 consisting principally of legal and professional fees have been recorded as an asset as of May 31, 2021, and 2020, respectively. These amounts will be charged to additional paid in capital upon the completion of the Company’s ongoing Public Offering.

Basic Income (Loss) Per Share

Basic Income (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.

Basic Income (Loss) per share

The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted earnings or loss per common share is calculated by dividing net income or loss available to common stockholders by the diluted weighted-average number of common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities for this calculation consist primarily of warrants, outstanding options, and shares into which the convertible notes 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,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the consolidated financial statements and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

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

AUGUST 31, 2021

(UNAUDITED)

Income Taxes

The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement 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.

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 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.

Recent 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 are a 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), followed by other related ASUs that provided targeted improvements and additional practical expedient options (collectively “ASC 842”). ASC 842 requires lessees to recognize right-of-use (“ROU”) assets and lease payment liabilities on the balance sheet for leases representing the Company’s right to use the underlying assets over the lease term. Each lease that is recognized on the balance sheet is classified as either finance or operating, with such classification affecting the pattern and classification of expense recognition in the Statements of Operations and presentation within the Statements of Cash Flows.

The Company adopted ASC 842 on January 1, 2019 using the modified retrospective method. The Company elected as part of its adoption to also use the optional transition methodology whereby previously reported periods continue to be reported in accordance with historical accounting guidance for leases that were in effect for those prior periods. Policy elections and practical expedients that the Company has implemented as part of adopting ASC 842 include (a) excluding from the balance sheet leases with terms that are less than or equal to one year, (b) for all existing asset classes that contain both lease and non-lease components, combining these components together and accounting for them as a single lease component, (c) the package of practical expedients, which among other things, allows the Company to avoid reassessing contracts that commenced prior to adoption that were properly evaluated under legacy GAAP, and (d) excluding land easements, which were not accounted for under the previous leasing guidance, that existed or expired before adoption of ASC 842. The scope of ASC 842 does not apply to leases used in the exploration for minerals or use thereof, including oil, natural gas and natural gas liquids.

The Company’s adoption of ASC 842 resulted in an increase in other assets, accounts payable and accrued liabilities, and other liabilities line items on the accompanying Consolidated Balance Sheets as a result of the additional ROU assets and related lease liabilities. Upon adoption on January 1, 2019, the Company recognized approximately $0.5 million in ROU assets and liabilities for its operating leases. There was no cumulative effect to accumulated deficit upon the adoption of this guidance.

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 $16,502,806, a working capital deficit of $1,952,342 as of August 31, 2021, and a net loss attributable to common shareholders of $4,210,907 for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the of the date that the unaudited financial statements are issued.

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 and/or public 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

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 16 company owned stores and 12 franchise 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 impacted the Company’s business for the fiscal year ended May 31, 2021 as well as the fiscal quarter ended August 31, 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.

Going Concern, Liquidity and Management’s Plan

The Company’s 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 consolidated financial statements, the Company has an accumulated deficit as of May 31, 2021 and 2020 of $12,291,899 and $6,195,044 respectively. The Company also has a net loss for the year ended May 31, 2021 and 2020 of $6,096,855 and $2,620,238, respectively. Net cash used in operating activities for the year ended May 31, 2021 and 2020 was $1,408,609 and $1,523,262, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the of the date that the financial statements are issued.

The Company’s cash position may not be sufficient to support the Company’s daily operations. Management plans to raise additional funds by way of a private or ongoing public offering. 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 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.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2021

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 had been closed effective April 1, 2020. 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. As of May 31, 2021 all but one company owned store and a few franchise stores have begun to re-open in conformity with local and state COVID-19 regulations.

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 impacted the Company’s business for the fiscal year and potentially beyond. 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.

Foreign Currencies

Foreign Currencies

Revenue and expenses are translated at average rates of exchange prevailing during the period.

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 years. Franchise license renewal fees, which generally occur every 10 years, are billed before the renewal date. Fees received for future license renewal periods are amortized over the life of the renewal period.

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.

Non employee stock-based payments

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, which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions.

SIMPLICITY ESPORTS AND GAMING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2021

(UNAUDITED)

XML

PROPERTY, PLANT AND EQUIPMENT (Tables)

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 2021

Property, Plant and Equipment [Abstract]

SCHEDULE OF PROPERTY AND EQUIPMENT

The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation:

	August 31, 2021			May 31, 2021
Leasehold improvements	$	110,849		$	110,849
Property and equipment		830,141			755,741
Total cost		940,990			866,590
Less accumulated depreciation		(374,020	)		(292,282	)
Net property plant and equipment	$	566,970		$	574,308

The following is a summary of property, plant, and equipment—at cost, less accumulated depreciation:

	May 31,			May 31,
	2021			2020
Leasehold improvements		110,849			52,189
Property and equipment		755,741			243,314
Total cost		866,590			295,503
Less accumulated depreciation		(292,282	)		(62,771	)
Net, property plant and equipment	$	574,308		$	232,733

XML

INTANGIBLE ASSETS (Tables)

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

SCHEDULE OF INTANGIBLE ASSETS

The following table sets forth the intangible assets, including accumulated amortization as of August 31, 2021:

	August 31, 2021
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value
Non-Competes	4 years	$	1,023,118	$	548,642	$	474,476
Trademarks	Indefinite		866,000		-		866,000
Customer database	2 years		35,000		20,417		14,583
Restrictive covenant	2 years		115,000		67,083		47,917
Customer contracts	10 years		546,000		391,270		154,730
Internet domain	2 years		3,000		2,667		333
		$	2,588,118	$	944,537	$	1,558,039

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 years	$	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 years		3,000		2,417		583
		$	2,438,118	$	802,891	$	1,635,227

The following tables set forth the intangible assets, including accumulated amortization at May 31, 2021 and 2020:

	May 31, 2021
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value
Non-Competes	4.50 years	$	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 years		3,000		2,417		583
		$	2,438,118	$	802,891	$	1,635,227

	May 31, 2020
	Remaining			Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value
Non-Competes	4.50 years	$	1,023,118	$	289,884	$	733,234
Trademarks	Indefinite		866,000		-		866,000
Customer Contracts	10 years		546,000		5,443		540,557
Internet domain	2.50 years		3,000		1,417		1,583
		$	2,438,118	$	296,744	$	2,141,374

SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS

The following table sets forth the future amortization of the Company’s intangible assets as of August 31, 2021 for the fiscal years ending May 31:

	2022		2023		2024		2025		2026		Thereafter		Total
Non-Competes	$	153,468	$	204,624	$	116,384	$	-	$	-	$	-	$	474,476
Customer contracts		12,158		16,211		16,211		16,211		16,211		77,728		154,730
Restrictive covenant		43,125		4,792				-		-		-		47,917
Customer database		13,125		1,458				-		-		-		14,583
Internet domain		333		-		-		-		-		-		333
Total	$	222,209	$	227,085	$	132,595	$	16,211	$	16,211	$	77,728	$	692,039

The following table sets forth the future amortization of the Company’s intangible assets at May 31, 2021:

	2022		2023		2024		2025		2026		Thereafter		Total
Non-Competes	$	204,624	$	204,624	$	119,363	$	-	$	-	$	-	$	528,611
Customer contracts		89,647		20,897		14,647		14,647		14,647		89,840		244,325
Internet domain		583		-		-		-		-		-		583
Total	$	260,224	$	259,807	$	259,224	$	173,962	$	54,600	$	267,557	$	1,275,374

SCHEDULE OF GOODWILL

The Company’s goodwill carrying amounts relate to the acquisitions of Simplicity Esports LLC and PLAYlive Nation Inc. The composition of the goodwill balance, is as follows:

	Fiscal Year Ended May 31, 2021		Fiscal Year Ended May 31, 2020
Simplicity Esports LLC	$	4,456,250	$	4,456,250
PLAYlive Nation Inc.		698,891		698,891
Ft. Bliss		25,000		25,000
Total Goodwill	$	5,180,141	$	5,180,141

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ACQUISITIONS (Tables)

12 Months Ended

May 31, 2021

The Simplicity Esports L L C [Member]

Business Acquisition [Line Items]

SCHEDULE OF AGGREGATE PURCHASE PRICE

The aggregate purchase price consisted of the following:

Restricted stock consideration		6,090,000
Total	$	6,090,000

SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED

The following table summarizes the estimated fair value of The Simplicity Esports, LLC assets acquired, and liabilities assumed at the date of acquisition:

Cash		76,000
Internet Domain		3,000
Trade names and trademarks		588,000
Non-Competes		1,023,118
Accounts payable and accrued liabilities		(56,000	)
Goodwill		4,455,882
Total	$	6,090,000

P L A Y Live Nation Inc [Member]

Business Acquisition [Line Items]

SCHEDULE OF AGGREGATE PURCHASE PRICE

The aggregate purchase price consisted of the following:

Restricted stock consideration		1,440,000
Total	$	1,440,000

SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED

The following table summarizes the estimated fair value of the PLAYlive assets acquired and liabilities assumed at the date of acquisition:

Cash		26,000
Property, plant and equipment		10,000
Net deferred revenue		(115,000	)
Customer relationships
Accounts payable and accrued liabilities		(4,000	)
Goodwill		699,000
Trademarks		278,000
Customer contracts		546,000
Total	$	1,440,000

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DEBT (Tables)

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 2021

Short-term Debt [Line Items]

SCHEDULE OF OUTSTANDING DEBT INSTRUMENT

The table below presents outstanding debt instruments as of August 31, and May 31, 2021

	AUGUST 31, 2021			MAY 31, 2021
Convertible Promissory Notes	$	3,952,424		$	3,157,970
Related Debt Discount		(2,394,343	)		(947,873	)
Total	$	1,558,081		$	2,211,097
Current portion of Convertible Promissory Notes, net	$	1,323,051		$	2,211,097
Non current portion of Convertible Promissory Notes, net		235,030			-

The table below presents outstanding debt instruments as of May 31:

	2021			2020
Convertible Promissory Notes		3,157,970			152,500
Less: Related Discount		(946,873	)		(25,180	)
Related Party Note		-			64,728
Convertible Note Payable					1,000,000
Total	$	2,211,097		$	1,192,048

SCHEDULE OF PREPAYMENT OF DEBT NOTE

The Company may prepay the Harbor Gates Note according to the following schedule:

Days Since Effective Date	Payment Amount
Under 30	115% of Principal Amount (as hereinafter defined) so paid
31-60	120% of Principal Amount so paid
61-90	125% of Principal Amount so paid
91-180	135% of Principal Amount so paid

Self Amortization Promissory Note [Member]

Short-term Debt [Line Items]

SCHEDULE OF AMORTIZATION PAYMENTS

The Company is required to make amortization payments to the Holder according to the following schedule:

Payment Date		Payment Amount
10/16/2020	$	66,125.00
11/16/2020	$	66,125.00
12/16/2020	$	66,125.00
01/18/2021	$	66,125.00
02/18/2021	$	66,125.00
03/18/2021	$	66,125.00
04/16/2021	$	66,125.00
05/18/2021	$	66,125.00
06/18/2021	$	65,921.26
Total:	$	594,921.26

August 7, 2020 Self Amortization Promissory Note [Member]

Short-term Debt [Line Items]

SCHEDULE OF AMORTIZATION PAYMENTS

The Company is required to make amortization payments to the Holder according to the following schedule:

Payment Date		Payment Amount
12/07/2020	$	40,075.75
01/07/2021	$	40,075.75
02/08/2021	$	40,075.75
03/08/2021	$	40,075.75
04/07/2021	$	40,075.75
05/07/2021	$	40,075.75
06/07/2021	$	40,075.75
07/07/2021	$	40,075.75
08/07/2021	$	39,952.34
Total:	$	360,558.34

November 23, 2020 Self-Amortization Promissory Note [Member]

Short-term Debt [Line Items]

SCHEDULE OF AMORTIZATION PAYMENTS

The Company is required to make amortization payments to the Holder according to the following schedule:

Payment Date		Payment Amount
2/23/2021	$	84,000.00
3/23/2021	$	84,000.00
4/23/2021	$	84,000.00
5/21/2021	$	84,000.00
6/23/2021	$	84,000.00
7/23/2021	$	84,000.00
8/23/2021	$	84,000.00
9/23/2021	$	84,000.00
10/22/2021	$	84,000.00
11/23/2021	$	84,000.00
Total:	$	840,000.00

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COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 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 August 31, 2021.

2022	$	370,370
2023	$	468,377
2024	$	470,511
2025	$	423,795
2026 and thereafter	$	171,602
Total Operating Lease Obligations	$	1,904,655
Less: Amount representing interest	$	(347,840	)
Present Value of minimum lease payments	$	1,556,815

The following is a schedule showing the future minimum lease payments under operating leases by years and the present value of the minimum payments as of May 31, 2021.

2022	$	471,063
2023	$	450,377
2024	$	452,511
2025	$	405,795
2026	$	153,601
Total Operating Lease Obligations	$	1,945,347
Less: Amount representing interest	$	(418,061	)
Present Value of minimum lease payments	$	1,527,286

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STOCKHOLDERS’ EQUITY (Tables)

3 Months Ended

12 Months Ended

Aug. 31, 2021

May 31, 2021

Equity [Abstract]

SCHEDULE OF OUTSTANDING STOCK WARRANTS

A summary of the status of the Company’s outstanding stock warrants as of August 31, 2021 is as follows:

	Number of Shares		Average Exercise Price
Outstanding – May 31, 2020		803,001	$	83.01
Granted during the year ended May 31, 2021		17,063	$	20.66
Outstanding – May 31, 2021		820,064	$	10.38
Warrants granted during the quarter ended August 31, 2021		1,257,312	$	11.26
Sale of warrants during the quarter		100,000	$	20.00
Warrants exercisable – August 31, 2021		2,177,376	$	38.08

A summary of the status of the Company’s outstanding stock warrants for the years ended May 31, 2021 and 2020 is as follows:

	Number of Shares		Average Exercise Price
Outstanding – May 31, 2019		803,001	$	83.01
Outstanding – May 31, 2020		803,001		83.01
Granted – May 31, 2020		17,063		20.66
Outstanding – May 31, 2021		820,064	$	81.71

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INCOME TAXES (Tables)

12 Months Ended

May 31, 2021

Income Tax Disclosure [Abstract]

SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS

The components of the net deferred tax assets for the year ended May 31, 2021 and 2020 are as follows:

	Year ended May 31, 2021			Year ended May 31, 2020
Net Operating Loss	$	1,926,000		$	770,000
Impairment of cost method investment		129,000			-
Accrued Expenses		98,000
Allowance for Doubtful Accounts		10,000
Gross deferred tax asset		2,163,000			770,000
Less: Valuation allowance		(1,972,000	)		(825,000	)
Net deferred tax asset	$	191,000		$	55,000
Deferred tax liabilities:
Amortization of intangible assets		(98,000	)		(55,000	)
Depreciation		(93,000	)
Net deferred assets/liabilities		-			-

SCHEDULE OF RECONCILIATION OF THE STATUTORY FEDERAL INCOME TAX RATE

The table below summarizes the reconciliation of our income tax provision computed at the federal statutory rate of 21% for the years ended May 31, 2021 and 2020 and the actual tax provisions for the year ended May 31, 2021 and 2020.

	2021			2020
Expected provision (benefit) at statutory rate		(21.0	)%		(21.0	)%
State taxes, net of federal tax benefit		(4.4	)%		(4.4	)%
Permanent differences-stock based compensation		9.0			15.0
Increase in valuation allowance		16.4	%		10.4	%
Total provision (benefit) for income taxes		0.0	%		0.0	%

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ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative)					12 Months Ended
	Aug. 20, 2021 shares	Nov. 20, 2018 $ / shares shares	Nov. 20, 2018 USD ($) $ / shares	Nov. 09, 2018 USD ($) $ / shares shares	May 31, 2020 shares	Aug. 31, 2021 stores franchise	Aug. 21, 2018 USD ($) $ / shares	Aug. 22, 2017 $ / shares
Companies owned | stores						17
Franchise locations | franchise						12
Deposit in trust account | $							$ 303,610
Price per unit under trust account | $ / shares							$ 0.058
Number of shares issued	82,500				123,000
Number of shares issued upon conversion of convertible securities				520,000
Smaaash Entertainment Private Limited [Member]
Number of shares issued				2,000,000
IPO [Member]
Sale of stock, price per unit | $ / shares								$ 80.00
Number of common stock shares and warrants outstanding				5,119,390
Number of common stock shares eligible for outstanding warrants				5,461,500
IPO [Member] | I A M Capital Partners L L C [Member]
Number of shares redeemed				4,448,260
Sale of stock, price per unit | $ / shares				$ 10.2187363
Number of shares redeemed, value | $				$ 45,455,596
Chardan [Member] | Restricted Stock [Member]
Number of shares issued restricted shares		208,000
Share price | $ / shares		$ 10.21	$ 10.21
Chardan [Member] | Restricted Stock [Member] | General and Administrative Expense [Member]
Number of shares issued restricted shares, value | $			$ 2,125,000
Chardan Capital Markets [Member]
Number of shares issued upon conversion of convertible securities				208,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended			12 Months Ended
	Aug. 31, 2021	Aug. 30, 2021	Aug. 31, 2020	May 31, 2021	May 31, 2020	Jan. 01, 2019
Property, Plant and Equipment [Line Items]
Depreciation expense	$ 81,737		$ 27,135	$ 229,513	$ 57,473
Cost of goods sold	607,122		67,645	1,014,310	591,541
Gross profit	297,718		132,956	537,613	269,869
Cash equivalents	0			0
Federal depository insurance coverage	250,000			250,000
Allowance for doubtful accounts	42,479			38,000	52,400
Operating lease right-of-use asset	1,562,617			1,533,010	490,984
Operating lease liability	311,116			307,013	151,867
Offering costs				307,494	98,198
Accumulated deficit	16,502,806			12,291,899	6,195,044
Net loss attributable to common shareholders				6,096,855	2,620,238
Net cash used in operating activities	943,694		233,412	1,391,938	1,523,262
Working capital deficit	1,952,342
Net Income (Loss) Attributable to Parent	$ 4,210,907	$ 4,210,907	655,214	$ 6,096,855	$ 2,620,238
Companies owned and franchise reopened	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 16 company owned stores and 12 franchise locations.			As a result, all of our corporate and franchised Simplicity Gaming Centers had been closed effective April 1, 2020. 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
Franchise [Member]
Property, Plant and Equipment [Line Items]
Finite lived intangible asset, useful life	10 years
Accounting Standards Update 2016-02 [Member]
Property, Plant and Equipment [Line Items]
Operating lease right-of-use asset						$ 110,003
Operating lease liability						$ 107,678
Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	3 years			3 years
Finite lived intangible asset, useful life	2 years			3 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	5 years			5 years
Finite lived intangible asset, useful life	10 years			5 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 El Paso [Member]
Property, Plant and Equipment [Line Items]
Equity method investment, ownership percentage				51.00%
Simplicity ElPaso LLC [Member]
Property, Plant and Equipment [Line Items]
Equity method investment, ownership percentage	51.00%
Revision of Prior Period, Adjustment [Member]
Property, Plant and Equipment [Line Items]
Depreciation expense			27,134
Cost of goods sold			40,511
Gross profit			$ 160,090

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INITIAL PUBLIC OFFERING AND PRIVATE PLACEMENT (Details Narrative)				3 Months Ended		12 Months Ended
	Nov. 20, 2018 USD ($) shares	Sep. 13, 2017 USD ($) shares	Aug. 22, 2017 USD ($) $ / shares shares	Aug. 31, 2021 USD ($) shares	Aug. 31, 2020 USD ($)	May 31, 2021 USD ($) $ / shares shares	May 31, 2020 USD ($)
Offering costs						$ 307,494	$ 98,198
Amount of estimated fair value						$ 743,600
Fair value, per unit | $ / shares						$ 2.86
Proceeds from sale of private units					$ 25,000	$ 500,000	$ 87,700
Measurement Input, Price Volatility [Member]
Fair value measurement input						0.35
Measurement Input, Risk Free Interest Rate [Member]
Fair value measurement input						0.0173
Measurement Input, Expected Term [Member]
Represent equity maturity term						5 years
Maxim Group LLC [Member] | Settlement Agreement [Member]
Cash payment	$ 20,000
IPO [Member]
Number of shares purchased | shares			625,000	250,000		250,000
Sale of stock, price per unit | $ / shares			$ 80.00
Proceeds from sale of units, net of underwriting discounts paid			$ 50,000,000.0
Offering costs			3,700,000
Underwriter fees			$ 3,200,000			$ 1,000,000
Issuance of shares to underwriter, shares | shares						50,000
Deferred underwriting fees						$ 1,820,000
Securities included in one unit, description						Each Unit consisted of one share of the Company’s common stock, one right to receive one-tenth of one share of the Company’s common stock upon consummation of the Company’s initial Business Combination (“Right”), and one redeemable warrant (“Warrant”)
Description of warrants rights						Each Warrant entitles the holder to purchase
Exercise price of warrants per share | $ / shares			$ 0.01			$ 92.00
Warrants and Rights Outstanding, Term						5 years
Sale price per share | $ / shares						$ 21.00
Exchange of rights, description						Each holder of a Right received one-tenth (1/10) of one share of common stock upon consummation of the Business Combination. No fractional shares were issued upon exchange of the Rights.
Sale of stock, consideration received				$ 100		$ 100
Number of units issued under purchase option | shares						31,250
Demand registration rights term						five and seven years
IPO [Member] | Maxim Group LLC [Member]
Number of shares purchased | shares						6,500
IPO [Member] | Maxim Group LLC [Member] | Pre Reverse Split [Member]
Number of shares purchased | shares	6,500
IPO [Member] | Underwriters [Member]
Number of shares purchased | shares		25,000
Underwriter fees		$ 110,000
Deferred underwriting fees		70,000
Number of shares agreed to be purchased under commitment | shares						93,750
Proceeds from sale of equity		$ 2,000,000
Over-Allotment Option [Member] | Maxim Group LLC [Member]
Number of shares purchased | shares						250
Over-Allotment Option [Member] | Underwriters [Member]
Number of shares purchased | shares				260,000		260,000
Sale of stock, consideration received				$ 2,990,000		$ 2,990,000
Number of units issued under purchase option | shares						32,500
Private Placement [Member]
Number of shares purchased | shares		875				31,812
Sale of stock, price per unit | $ / shares						$ 80.00
Proceeds from sale of equity		$ 70,000
Proceeds from sale of private units						$ 2,545,000

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SCHEDULE OF PROPERTY AND EQUIPMENT (Details) - USD ($)	Aug. 31, 2021	May 31, 2021	May 31, 2020
Property, Plant and Equipment [Line Items]
Total cost	$ 940,990	$ 866,590	$ 295,503
Less accumulated depreciation	(374,020)	(292,282)	(62,771)
Net property plant and equipment	566,970	574,308	232,733
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Total cost	110,849	110,849	52,189
Property, Plant and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total cost	$ 830,141	$ 755,741	$ 243,314

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PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($)	12 Months Ended
	May 31, 2021	May 31, 2020
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 229,511	$ 57,473

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SCHEDULE OF INTANGIBLE ASSETS (Details) - USD ($)	3 Months Ended	12 Months Ended
	Aug. 31, 2021	May 31, 2021	May 31, 2020	Aug. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Finite lived intangible assets, Cost		$ 2,438,118	$ 2,438,118	$ 2,588,118
Accumulated Amortization		802,891	(296,744)	944,537
Intangible assets, Net Carrying Value	$ 1,558,039	1,635,227	2,141,374	1,558,039
Accumulated Amortization		$ (802,891)	$ 296,744	$ (944,537)
Noncompete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful life	4 years	4 years 6 months	4 years 6 months
Finite lived intangible assets, Cost	$ 1,023,118	$ 1,023,118	$ 1,023,118
Accumulated Amortization	548,642	498,799	(289,884)
Intangible assets, Net Carrying Value	474,476	524,319	733,234
Accumulated Amortization	(548,642)	(498,799)	289,884
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Finite lived intangible assets, Cost	866,000	866,000	866,000
Accumulated Amortization
Intangible assets, Net Carrying Value	$ 866,000	$ 866,000	$ 866,000
Intangible assets, useful life, description	Indefinite	Indefinite	Indefinite
Accumulated Amortization
Customer Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful life	10 years	10 years	10 years
Finite lived intangible assets, Cost	$ 546,000	$ 546,000	$ 546,000
Accumulated Amortization	391,270	301,675	(5,443)
Intangible assets, Net Carrying Value	154,730	244,325	540,557
Accumulated Amortization	$ (391,270)	$ (301,675)	$ 5,443
Internet Domain Names [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful life	2 years	2 years 6 months	2 years 6 months
Finite lived intangible assets, Cost	$ 3,000	$ 3,000	$ 3,000
Accumulated Amortization	2,667	2,417	(1,417)
Intangible assets, Net Carrying Value	333	583	1,583
Accumulated Amortization	$ (2,667)	$ (2,417)	$ 1,417
Customer Database [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful life	2 years
Finite lived intangible assets, Cost	$ 35,000
Accumulated Amortization	20,417
Intangible assets, Net Carrying Value	14,583
Accumulated Amortization	$ (20,417)
Restrictive Covenant [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful life	2 years
Finite lived intangible assets, Cost	$ 115,000
Accumulated Amortization	67,083
Intangible assets, Net Carrying Value	47,917
Accumulated Amortization	$ (67,083)

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SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS (Details) - USD ($)	Aug. 31, 2021	May 31, 2021
Finite-Lived Intangible Assets [Line Items]
2023	$ 227,085	$ 260,224
2024	132,595	259,807
2025	16,211	259,224
2026	16,211	173,962
2026		54,600
Thereafter		267,557
Total	692,039	1,275,374
2022	222,209
Thereafter	77,728
Total	692,039	1,275,374
Noncompete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
2023	204,624	204,624
2024	116,384	204,624
2025		119,363
2026
2026
Thereafter
Total	474,476	528,611
2022	153,468
Thereafter
Total	474,476	528,611
Customer Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
2023	16,211	89,647
2024	16,211	20,897
2025	16,211	14,647
2026	16,211	14,647
2026		14,647
Thereafter		89,840
Total	154,730	244,325
2022	12,158
Thereafter	77,728
Total	154,730	244,325
Internet Domain Names [Member]
Finite-Lived Intangible Assets [Line Items]
2023		583
2024
2025
2026
2026
Thereafter
Total	333	583
2022	333
Thereafter
Total	333	$ 583
Restrictive Covenant [Member]
Finite-Lived Intangible Assets [Line Items]
2023	4,792
2025
2026
Total	47,917
2022	43,125
Thereafter
Total	47,917
Customer Database [Member]
Finite-Lived Intangible Assets [Line Items]
2023	1,458
2025
2026
Total	14,583
2022	13,125
Thereafter
Total	$ 14,583

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SCHEDULE OF GOODWILL (Details) - USD ($)	Aug. 31, 2021	May 31, 2021	May 31, 2020
Restructuring Cost and Reserve [Line Items]
Goodwill	$ 5,180,141	$ 5,180,141	$ 5,155,141
The Simplicity Esports L L C [Member]
Restructuring Cost and Reserve [Line Items]
Goodwill		4,456,250	4,456,250
P L A Y Live Nation Inc [Member]
Restructuring Cost and Reserve [Line Items]
Goodwill		698,891	698,891
Ft Bliss [Member]
Restructuring Cost and Reserve [Line Items]
Goodwill		$ 25,000	$ 25,000

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INTANGIBLE ASSETS (Details Narrative) - USD ($)	3 Months Ended		12 Months Ended
	Aug. 31, 2021	Aug. 31, 2020	May 31, 2021	May 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 77,188	$ 66,614	$ 295,709	$ 211,067

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SCHEDULE OF AGGREGATE PURCHASE PRICE (Details)	12 Months Ended
	May 31, 2021 USD ($)
The Simplicity Esports L L C [Member]
Business Acquisition [Line Items]
Total	$ 6,090,000
The Simplicity Esports L L C [Member] | Restricted Stock [Member]
Business Acquisition [Line Items]
Total	6,090,000
P L A Y Live Nation Inc [Member]
Business Acquisition [Line Items]
Total	1,440,000
P L A Y Live Nation Inc [Member] | Restricted Stock [Member]
Business Acquisition [Line Items]
Total	$ 1,440,000

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SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED (Details)	May 31, 2021 USD ($)
The Simplicity Esports L L C [Member]
Business Acquisition [Line Items]
Cash	$ 76,000
Accounts payable and accrued liabilities	(56,000)
Goodwill	4,455,882
Total	6,090,000
The Simplicity Esports L L C [Member] | Internet Domain Names [Member]
Business Acquisition [Line Items]
Finite lived intangible assets	3,000
The Simplicity Esports L L C [Member] | Trademarks and Trade Names [Member]
Business Acquisition [Line Items]
Finite lived intangible assets	588,000
The Simplicity Esports L L C [Member] | Noncompete Agreements [Member]
Business Acquisition [Line Items]
Finite lived intangible assets	1,023,118
P L A Y Live Nation Inc [Member]
Business Acquisition [Line Items]
Cash	26,000
Accounts payable and accrued liabilities	(4,000)
Goodwill	699,000
Total	1,440,000
Property, plant and equipment	10,000
Net deferred revenue	(115,000)
Customer relationships
P L A Y Live Nation Inc [Member] | Trademarks [Member]
Business Acquisition [Line Items]
Finite lived intangible assets	278,000
P L A Y Live Nation Inc [Member] | Customer Contracts [Member]
Business Acquisition [Line Items]
Finite lived intangible assets	$ 546,000

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ACQUISITIONS (Details Narrative) - USD ($)					1 Months Ended	12 Months Ended
	Jul. 26, 2021	Jul. 29, 2019	Jan. 07, 2019	Jan. 04, 2019	Mar. 31, 2019	May 31, 2021	May 31, 2020
Business Acquisition [Line Items]
Stock Issued During Period, Shares, Acquisitions						65,000
The Simplicity Esports L L C [Member]
Business Acquisition [Line Items]
Number of share issued			87,500	37,500	250,000
Purchase price						$ 6,090,000
The Simplicity Esports L L C [Member] | Restricted Stock [Member]
Business Acquisition [Line Items]
Number of share issued						375,000
Purchase price						$ 6,090,000
P L A Y Live Nation Inc [Member]
Business Acquisition [Line Items]
Number of share issued		93,750
Purchase price						1,440,000
Revenue						306,000	$ 523,000
Net income (loss)						$ 301,000	$ 124,000
Stock Issued During Period, Shares, Acquisitions							94,000
P L A Y Live Nation Inc [Member] | Restricted Stock [Member]
Business Acquisition [Line Items]
Number of share issued						93,750
Purchase price						$ 1,440,000
Thirteen Gaming Centers [Member]
Business Acquisition [Line Items]
Number of share issued						64,714
Existing Franchisee [Member]
Business Acquisition [Line Items]
Stock Issued During Period, Shares, Acquisitions	6,000
Shares Issued, Price Per Share	$ 10.85

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RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)				3 Months Ended		12 Months Ended
	Aug. 27, 2021	May 07, 2020	Sep. 13, 2017	Aug. 31, 2021	Aug. 31, 2020	May 31, 2021	May 31, 2020	May 12, 2020
Related Party Transaction [Line Items]
Proceeds from sale of private units					$ 25,000	$ 500,000	$ 87,700
William H Herrmann [Member] | Restricted Stock [Member]
Related Party Transaction [Line Items]
Sale of stock, price per share		$ 8.72
Number of shares issued restricted shares		2,867
Number of shares issued restricted shares, value		$ 25,000
Laila Cavalcanti Loss [Member]
Related Party Transaction [Line Items]
[custom:StockIssuedDuringPeriodValuesStockAwardGross]	$ 2,500
[custom:StockIssuedDuringPeriodSharesStockAwardGross]	250
[custom:AccruedAmountForStockPayment]	$ 25,000
[custom:AccruedSharesForStockPayment]	375
Kaplan Promissory Note [Member]
Related Party Transaction [Line Items]
Debt instrument, face amount								$ 45,000
Kaplan Promissory Note [Member] | Jed Kaplan [Member]
Related Party Transaction [Line Items]
Debt instrument, face amount							$ 64,728	$ 90,000
Equity method investment, ownership percentage						10.00%		5.00%
I A M Capital Partners L L C [Member]
Related Party Transaction [Line Items]
Number of shares agreed to be purchased under commitment						3,281
Private Placement [Member]
Related Party Transaction [Line Items]
Number of shares purchased			875			31,812
Sale of stock, price per share						$ 80.00
Proceeds from sale of private units						$ 2,545,000
Private Placement [Member] | I A M Capital Partners L L C [Member]
Related Party Transaction [Line Items]
Number of shares purchased			7,000
Sale of stock, price per share			$ 80.00

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SCHEDULE OF OUTSTANDING DEBT INSTRUMENT (Details) - USD ($)	Aug. 31, 2021	May 31, 2021	May 31, 2020
Short-term Debt [Line Items]
Related Debt Discount	$ (2,394,343)	$ (947,873)	$ (25,180)
Related Party Note			64,728
Convertible Note Payable			1,000,000
Total	1,558,081	2,211,097	1,192,048
Total	1,558,081	2,211,097	1,192,048
Current portion of Convertible Promissory Notes, net	1,323,051	2,211,097
Non current portion of Convertible Promissory Notes, net	235,030
Convertible Promissory Note [Member]
Short-term Debt [Line Items]
Long term debt gross	$ 3,952,424	$ 3,157,970	$ 152,500

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SCHEDULE OF PREPAYMENT OF DEBT NOTE (Details)	12 Months Ended
	May 31, 2021
Under Thirty [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payment Amount	115% of Principal Amount (as hereinafter defined) so paid
Debt interest rate	115.00%
Thirty One To Sixty [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payment Amount	120% of Principal Amount so paid
Debt interest rate	120.00%
Sixty One To Ninety [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payment Amount	125% of Principal Amount so paid
Debt interest rate	125.00%
Ninety One To One Eighteen [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payment Amount	135% of Principal Amount so paid
Debt interest rate	135.00%

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SCHEDULE OF AMORTIZATION PAYMENTS (Details) - USD ($)	Aug. 31, 2021	May 31, 2021	Nov. 25, 2020	Aug. 07, 2020	Jun. 18, 2020	May 31, 2020
Short-term Debt [Line Items]
Total	$ 1,558,081	$ 2,211,097				$ 1,192,048
Self-Amortization Promissory Notes [Member]
Short-term Debt [Line Items]
Total					$ 594,921
Self-Amortization Promissory Notes [Member] | 10/16/2020 [Member]
Short-term Debt [Line Items]
Total					66,125
Self-Amortization Promissory Notes [Member] | 11/16/2020 [Member]
Short-term Debt [Line Items]
Total					66,125
Self-Amortization Promissory Notes [Member] | 12/16/2020 [Member]
Short-term Debt [Line Items]
Total					66,125
Self-Amortization Promissory Notes [Member] | 01/18/2021 [Member]
Short-term Debt [Line Items]
Total					66,125
Self-Amortization Promissory Notes [Member] | 02/18/2021 [Member]
Short-term Debt [Line Items]
Total					66,125
Self-Amortization Promissory Notes [Member] | 03/18/2021 [Member]
Short-term Debt [Line Items]
Total					66,125
Self-Amortization Promissory Notes [Member] | 04/16/2021 [Member]
Short-term Debt [Line Items]
Total					66,125
Self-Amortization Promissory Notes [Member] | 05/18/2021 [Member]
Short-term Debt [Line Items]
Total					66,125
Self-Amortization Promissory Notes [Member] | 06/18/2021 [Member]
Short-term Debt [Line Items]
Total					$ 65,921
August 7, 2020 Self Amortization Promissory Note [Member]
Short-term Debt [Line Items]
Total				$ 360,558
August 7, 2020 Self Amortization Promissory Note [Member] | 12/07/2020 [Member]
Short-term Debt [Line Items]
Total				40,076
August 7, 2020 Self Amortization Promissory Note [Member] | 01/07/2021 [Member]
Short-term Debt [Line Items]
Total				40,076
August 7, 2020 Self Amortization Promissory Note [Member] | 02/08/2021 [Member]
Short-term Debt [Line Items]
Total				40,076
August 7, 2020 Self Amortization Promissory Note [Member] | 03/08/2021 [Member]
Short-term Debt [Line Items]
Total				40,076
August 7, 2020 Self Amortization Promissory Note [Member] | 04/07/2021 [Member]
Short-term Debt [Line Items]
Total				40,076
August 7, 2020 Self Amortization Promissory Note [Member] | 05/07/2021 [Member]
Short-term Debt [Line Items]
Total				40,076
August 7, 2020 Self Amortization Promissory Note [Member] | 06/07/2021 [Member]
Short-term Debt [Line Items]
Total				40,076
August 7, 2020 Self Amortization Promissory Note [Member] | 07/07/2021 [Member]
Short-term Debt [Line Items]
Total				40,076
August 7, 2020 Self Amortization Promissory Note [Member] | 08/07/2021 [Member]
Short-term Debt [Line Items]
Total				$ 39,952
November 23, 2020 Self-Amortization Promissory Note [Member]
Short-term Debt [Line Items]
Total			$ 840,000
November 23, 2020 Self-Amortization Promissory Note [Member] | 2/23/2021 [Member]
Short-term Debt [Line Items]
Total			84,000
November 23, 2020 Self-Amortization Promissory Note [Member] | 3/23/2021 [Member]
Short-term Debt [Line Items]
Total			84,000
November 23, 2020 Self-Amortization Promissory Note [Member] | 4/23/2021 [Member]
Short-term Debt [Line Items]
Total			84,000
November 23, 2020 Self-Amortization Promissory Note [Member] | 5/21/2021 [Member]
Short-term Debt [Line Items]
Total			84,000
November 23, 2020 Self-Amortization Promissory Note [Member] | 6/23/2021 [Member]
Short-term Debt [Line Items]
Total			84,000
November 23, 2020 Self-Amortization Promissory Note [Member] | 7/23/2021 [Member]
Short-term Debt [Line Items]
Total			84,000
November 23, 2020 Self-Amortization Promissory Note [Member] | 8/23/2021 [Member]
Short-term Debt [Line Items]
Total			84,000
November 23, 2020 Self-Amortization Promissory Note [Member] | 9/23/2021 [Member]
Short-term Debt [Line Items]
Total			84,000
November 23, 2020 Self-Amortization Promissory Note [Member] | 10/22/2021 [Member]
Short-term Debt [Line Items]
Total			84,000
November 23, 2020 Self-Amortization Promissory Note [Member] | 11/23/2021 [Member]
Short-term Debt [Line Items]
Total			$ 84,000

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DEBT (Details Narrative) - USD ($)																								1 Months Ended		3 Months Ended			12 Months Ended
	Sep. 01, 2021	Aug. 30, 2021	Aug. 25, 2021	Aug. 23, 2021	Aug. 20, 2021	Aug. 19, 2021	Jun. 16, 2021	Jun. 11, 2021	Jun. 11, 2021	Apr. 14, 2021	Apr. 14, 2021	Mar. 10, 2021	Mar. 10, 2021	Feb. 19, 2021	Nov. 25, 2020	Aug. 07, 2020	Jun. 18, 2020	Jun. 18, 2020	Jun. 07, 2020	Jun. 04, 2020	Apr. 29, 2020	Dec. 20, 2018	Nov. 20, 2018	Sep. 30, 2021	Aug. 19, 2021	Aug. 31, 2021	Aug. 27, 2021	Aug. 31, 2020	May 31, 2021	May 31, 2020	Oct. 01, 2021	Sep. 17, 2021	Sep. 15, 2021	Jul. 15, 2021	May 15, 2021	Apr. 30, 2021	Feb. 28, 2021	Jul. 02, 2020	May 12, 2020
Short-term Debt [Line Items]
Original issue discount																										$ 2,394,343			$ 947,873	$ 25,180
Number of common stock issued					82,500																									123,000
Stock Issued During Period, Value, Conversion of Convertible Securities																		$ 100,000
Additional Paid in Capital																										21,233,531			16,708,762	$ 11,132,103
Interest Expense																										659,696		$ 154,128	$ 1,399,598	$ 32,472
Subsequent Event [Member]
Short-term Debt [Line Items]
Number of common stock issued																											42,000
Common Stock [Member]
Short-term Debt [Line Items]
Number of common stock issued																												2,976	48,396	15,625
Holder [Member]
Short-term Debt [Line Items]
Principal amount of debt instrument																										90,909
Repayment of debt																										225,000
Original issue discount																										903,588
Interest expense																										287,330
Guaranteed Interest Contracts																										109,091
[custom:AmendmentFee-0]																										25,000
FirstFire Global Oppurtunities Fund, LLC [Member] | Warrant [Member] | Subsequent Event [Member]
Short-term Debt [Line Items]
Warrants issued																															40,000	40,000
FirstFire Global Oppurtunities Fund, LLC [Member] | June FirstFire SPA [Member] | June FirstFire Warrant [Member]
Short-term Debt [Line Items]
Warrants issued								593,750	593,750
Warrant exercise price								$ 10.73	$ 10.73
Warrants and Rights Outstanding, Term								3 years	3 years
FirstFire Global Oppurtunities Fund, LLC [Member] | FirstFire SPA [Member]
Short-term Debt [Line Items]
Original issue discount												$ 56,000	$ 56,000
Proceeds from issuance of debt													$ 504,000
Debt conversion price												$ 11.50	$ 11.50
FirstFire Global Oppurtunities Fund, LLC [Member] | FirstFire SPA [Member] | Subsequent Event [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate								12.00%	12.00%
Debt maturity date									Jun. 10, 2023
Principal amount of debt instrument								$ 1,266,666	$ 1,266,666
Original issue discount								$ 126,666	126,666
Proceeds from issuance of debt									$ 1,140,000
Description of payment terms									the Company agreed to pay to $1,266,666 (the “FirstFire Principal Sum”) to FirstFire 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 FirstFire Note after 180 days from June 10, 2021).
Warrants issued								593,750	593,750
Warrant exercise price								$ 10.73	$ 10.73
Debt conversion price								$ 11.50	$ 11.50
FirstFire Global Oppurtunities Fund, LLC [Member] | Accredited Investor [Member] | Securities Purchase Agreement [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate																12.00%
Debt maturity date																Aug. 07, 2021
Principal amount of debt instrument																$ 333,333
Repayment of debt																333,333
Original issue discount																$ 33,333
Number of common stock issued																4,167
Debt description																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 calendar days as provided in the Amortization Note, the Amortization 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% (the “Default Amount”). 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. The Company shall have the right to pay the Default Amount in cash at any time, provided, however that the Holder may convert the Amortization Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% contained in the Amortization Note) at any time after the date that is five calendar days after the Amortization Note becomes immediately due and payable as a result of an Event of Default until the Company has repaid the Amortization Note in cash. If the aforementioned event occurs, the conversion price will be equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion.
FirstFire Global Oppurtunities Fund, LLC [Member] | Accredited Investor [Member] | Securities Purchase Agreement [Member] | Paid the Purchase Price In Exchange Of Amortization of Notes [Member]
Short-term Debt [Line Items]
Repayment of debt																$ 300,000
Maxim Group LLC [Member]
Short-term Debt [Line Items]
Repayment of debt			$ 500,000
Number of common stock issued		20,000
Gain (Loss) on Extinguishment of Debt			$ 1,759,969
Maxim [Member] | Subsequent Event [Member]
Short-term Debt [Line Items]
Restricted shares issued to purchase common stock	82,500
Maxim [Member] | Fourth Amendment [Member] | Subsequent Event [Member]
Short-term Debt [Line Items]
Repayment of debt																									$ 500,000
Description of payment terms																									the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock.
Restricted shares issued to purchase common stock																									20,000
Warrants issued						365,000																			365,000
Warrant exercise price						$ 13.00																			$ 13.00
Polar Asset Management Partners Inc [Member]
Short-term Debt [Line Items]
Number of shares agreed to sell																													490,000
K 2 Principal Fund L P [Member]
Short-term Debt [Line Items]
Number of shares agreed to sell																													220,000
GS Capital Partners, LLC [Member] | GS SPA [Member] | GS Warrant [Member]
Short-term Debt [Line Items]
Warrants issued							156,250
Warrant exercise price							$ 10.73
Warrants and Rights Outstanding, Term							3 years
Jefferson Street Capital, LLC [Member] | Jefferson SPA [Member] | Jefferson Warrant [Member]
Short-term Debt [Line Items]
Warrants issued				156,250
Warrant exercise price				$ 10.73
Warrants and Rights Outstanding, Term				3 years
10% Fixed Convertible Promissory Note [Member] | Harbor Gates Capital, LLC [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate																					10.00%
Debt maturity date																					Oct. 29, 2020
Principal amount of debt instrument																					$ 152,000
Repayment of debt																					152,500
Original issue discount																					2,500
Debt exchange																					$ 150,000
Remaining unpaid principal amount percentage																					135.00%
Interest repaid																																						$ 15,000
10% Fixed Convertible Promissory Note [Member] | Harbor Gates Capital, LLC [Member] | Mandatory Default Amount [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate																													35.00%
10% Fixed Convertible Promissory Note [Member] | Harbor Gates Capital, LLC [Member] | Two Tranches [Member]
Short-term Debt [Line Items]
Number of common stock issued																					1,250
Debt description																					In the event the average of the three volume weighted average prices for the Company’s common stock during the three consecutive trading days immediately preceding the date which is the 180th day following the Effective Date is less than $1.00 per share, then Harbor Gates will be entitled, and the Company will issue to Harbor Gates additional shares of common stock as set forth in the Harbor Gates Note.
Harbor Gates Note [Member]
Short-term Debt [Line Items]
Variable conversion price of common stock description																													The “Variable Conversion Price” will be equal to the lower of: (a) $1.00, or (b) 70% of the lowest volume weighted average price of the Company’s common stock during the 15 consecutive trading days prior to the date on Harbor Gates elects to convert all or part of the Harbor Gates Note.
Kaplan Promissory Note [Member]
Short-term Debt [Line Items]
Principal amount of debt instrument																																							$ 45,000
Kaplan Promissory Note [Member] | Jed Kaplan [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate																																							3.00%
Principal amount of debt instrument																														$ 64,728									$ 90,000
Equity method investment, ownership percentage																													10.00%										5.00%
Debt instrument, effective interest percentage																																							10.00%
June 18, 2020 Convertible Note [Member]. | Accredited Investor [Member] | Securities Purchase Agreement [Member]
Short-term Debt [Line Items]
Principal amount of debt instrument																	$ 550,000	550,000
Repayment of debt																	550,000
Original issue discount																	$ 55,000	$ 55,000
Number of common stock issued																	6,875
Debt description																	Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $495,000 in exchange for the Amortization Note.
Proceeds from equity																	$ 2,000,000
November 23, 2020 Convertible Note [Member] | Accredited Investor [Member] | Securities Purchase Agreement [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate															12.00%
Debt maturity date															Nov. 23, 2021
Principal amount of debt instrument															$ 750,000
Repayment of debt															750,000
Original issue discount															75,000
Partial repayment of principal and interest																	198,375
Proceeds from issuance of debt															441,375
Origination fees															35,250
Interest expense																	$ 90,000
November 23, 2020 Convertible Note [Member] | Accredited Investor [Member] | Securities Purchase Agreement [Member] | Warrant [Member]
Short-term Debt [Line Items]
Original issue discount															$ 157,438
Number of common stock issued															375,000
Debt description															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 (provided, however, that this cure period shall not apply to certain events of default as set forth in the November Amortization Note), the November Amortization 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% (the “Default Amount”). Upon the occurrence of an Event of Default (as hereinafter defined), 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. The Company shall have the right to pay the Default Amount in cash at any time, provided, however that the Holder may convert the November Amortization Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% contained in the Amortization Note) at any time after the date that is five (5) calendar days after the November Amortization Note becomes immediately due and payable as a result of an Event of Default until the Company has repaid the Amortization Note in cash. If the aforementioned event occurs, the conversion price will be equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion.
Febraury 2021 Convertible Note [Member] | Accredited Investor [Member] | Securities Purchase Agreement [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate														12.00%
Debt maturity date														Feb. 19, 2022
Principal amount of debt instrument														$ 1,650,000
Repayment of debt														1,650,000
Original issue discount														$ 165,000
Number of common stock issued														10,000
Debt description														The Company is required to make an interim payment to the Holder in the amount of $363,000, on or before August 19, 2021, towards the repayment of the balance of the Note. Currently the Company and the Holder have agreed to extend the terms of this payment. The extension provides that the Company paid $100,000 to the Holder by the interim payment date and has agreed to pay an additional $100,000 upon the completion of a new debt deal that is anticipated to close by September 1, 2021 and the Company has agreed to pay $163,000 to the Holder
Equity method investment, ownership percentage														4.99%
Partial repayment of principal and interest														$ 363,000
Proceeds from issuance of debt														$ 1,485,000
Debt conversion price														$ 11.50
Febraury 2021 Convertible Note [Member] | Accredited Investor [Member] | Securities Purchase Agreement [Member] | Subsequent Event [Member]
Short-term Debt [Line Items]
Partial repayment of principal and interest																								$ 100,000
Additional Repayment of Long Term Debt Principal and Interest																								100,000
Febraury 2021 Convertible Note [Member] | Holders [Member] | Securities Purchase Agreement [Member] | Minimum [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate																																					50.00%
Febraury 2021 Convertible Note [Member] | Holder [Member] | Securities Purchase Agreement [Member] | Subsequent Event [Member]
Short-term Debt [Line Items]
Partial repayment of principal and interest																								$ 163,000
Febraury 2021 Convertible Note [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | FirstFire SPA [Member]
Short-term Debt [Line Items]
Principal amount of debt instrument												$ 560,000	$ 560,000
Febraury 2021 Convertible Note [Member] | 03/02/2021 [Member] | FirstFire SPA [Member]
Short-term Debt [Line Items]
Number of common stock issued												3,394
Series A-2 Exchange Convertible Note [Member] | Maxim Group LLC [Member]
Short-term Debt [Line Items]
Repayment of debt						$ 500,000
Warrants issued						365,000																			365,000
Warrant exercise price						$ 13.00																			$ 13.00
Debt Instrument, Convertible, Terms of Conversion Feature						upon the satisfaction of the following obligations: (i) the Company’s payment of $
Series A-2 Exchange Convertible Note [Member] | Maxim Group LLC [Member] | Securities Exchange Agreement [Member]
Short-term Debt [Line Items]
Number of common stock issued																				85,905
Stock Issued During Period, Value, Conversion of Convertible Securities																				$ 100,000		$ 1,000,000
Debt conversion price																						$ 1.93
Debt Instrument, Convertible, Terms of Conversion Feature																						automatically adjusted to the lower of (i) the conversion price then in effect, and (ii) the greater of the arithmetic average of the VWAP of the Company’s common stock in the five trading days prior to the notice of conversion and $0.50
Series A-2 Exchange Convertible Note [Member] | Maxim Group LLC [Member] | Restricted Stock [Member]
Short-term Debt [Line Items]
Number of common stock issued						20,000
Series A-2 Exchange Convertible Note [Member] | Maxim Note [Member]
Short-term Debt [Line Items]
Debt description																	parties agreed to the following: (i) Maxim’s resale of the Company’s common stock (the “Common Stock”) underlying the Series A-2 Note shall be limited to
Maxim Note [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate																	10.00%	10.00%
Debt description																	parties agreed to the following: (i) Maxim’s resale of the Company’s common stock (the “Common Stock”) underlying the Series A-2 Note shall be limited to 10% of the daily volume of the Common Stock on each respective trading day, (ii) the maturity date of the Series A-2 Note was extended to December 31, 2020, (iii) the principal amount of the Series A-2 Note was increased by $100,000 and (iv) the conversion price was reduced from $15.44 ($1.93 pre-reverse split) to $9.20 ($1.15 pre-reverse split).
Series A Two Note One [Member]
Short-term Debt [Line Items]
Debt description										The maturity date of the Series A-2 Note is extended to October 15, 2021.
Series A Two Note Two [Member]
Short-term Debt [Line Items]
Debt description										The principal balance of the Series A-2 Note is increased by $50,000 as of April 14, 2021.
Series A Two Note Three [Member]
Short-term Debt [Line Items]
Debt description										The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before April 30, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.
Series A Two Note Four [Member]
Short-term Debt [Line Items]
Debt description										The Series A-2 Note was not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before May 15, 2021, and accordingly, the principal balance of the Series A-2 Note increased by an additional $50,000.
Series A Two Note Five [Member]
Short-term Debt [Line Items]
Debt description										If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before July 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000.
Series A Two Note Six [Member]
Short-term Debt [Line Items]
Debt description										If the Series A-2 Note is not repaid in its entirety (in cash and/or shares of the Company’s common stock pursuant to conversion(s) of the Series A-2 Note) on or before September 15, 2021, the principal balance of the Series A-2 Note will increase by an additional $100,000, representing a total cumulative increase in the principal balance of $350,000 if the Series A-2 Note is not repaid in its entirety on or before September 15, 2021.
Series A Two Note Seven [Member]
Short-term Debt [Line Items]
Debt description										The Company will, within five business days after the Company’s receipt of the Second Tranche Purchase Price of $999,996, pay $500,000 to Maxim, which will reduce the principal owed under the Series A-2 Note by $500,000.
Secured Demand Promissory Note [Member]
Short-term Debt [Line Items]
Principal amount of debt instrument																							$ 1,800,000
Underwriter fees																							$ 20,000
Accrued interest rate of debt instrument														125.00%									125.00%
Description of debt instrument priority terms																													The Note was secured by a first priority security interest in all personal property and assets of the Company excluding the assets held in escrow with respect to (i) that certain stock purchase agreement with Polar, pursuant to which Polar agreed to sell up to 490,000 shares of the Company’s common stock to the Company thirty days after the consummation of the Business Combination and (ii) that certain stock purchase agreement with K2, pursuant to which K2 agreed to sell up to 220,000 shares of the Company’s common stock to the Company thirty days after the consummation of the Business Combination.
Secured Demand Promissory Note [Member] | May 20, 2019 [Member]
Short-term Debt [Line Items]
Accrued interest rate of debt instrument																							8.00%
Secured Demand Promissory Note [Member] | May 21, 2019, through August 20, 2019 [Member]
Short-term Debt [Line Items]
Accrued interest rate of debt instrument																							12.00%
Secured Demand Promissory Note [Member] | August 21, 2019, through November 20, 2019 [Member]
Short-term Debt [Line Items]
Accrued interest rate of debt instrument																							15.00%
Secured Demand Promissory Note [Member] | August 21, 2019 [Member]
Short-term Debt [Line Items]
Accrued interest rate of debt instrument																							12.00%
Secured Demand Promissory Note [Member] | After August 21, 2019 [Member]
Short-term Debt [Line Items]
Accrued interest rate of debt instrument																							18.00%
Secured Demand Promissory Note [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | FirstFire SPA [Member]
Short-term Debt [Line Items]
Accrued interest rate of debt instrument												125.00%
Jefferson Note [Member]
Short-term Debt [Line Items]
Principal amount of debt instrument				$ 333,333
Original issue discount				274,239
Interest repaid				20,000
Additional Paid in Capital				$ 205,905
Interest Expense																										685
Debt instruments unamortized discount																										59,779
Series A-2 Note [Member]
Short-term Debt [Line Items]
Principal amount of debt instrument										$ 50,000	$ 50,000
Cumulative increase principal amounts		$ 350,000
Tranches Description											The Company will, within five business days after the Company’s receipt of the Second Tranche Purchase Price of $999,996, pay $500,000 to Maxim, which will reduce the principal owed under the Series A-2 Note by $500,000.
Series A-2 Note [Member] | Common Stock [Member]
Short-term Debt [Line Items]
Principal amount of debt instrument																																		$ 100,000	$ 50,000	$ 50,000
Series A-2 Note [Member] | Common Stock [Member] | Subsequent Event [Member]
Short-term Debt [Line Items]
Principal amount of debt instrument																																	$ 100,000
Series A-1 Exchange Convertible Note [Member] | Maxim Group LLC [Member] | Securities Exchange Agreement [Member] | Minimum [Member]
Short-term Debt [Line Items]
Debt conversion price																	$ 9.20	$ 9.20
Series A-1 Exchange Convertible Note [Member] | Maxim Group LLC [Member] | Securities Exchange Agreement [Member] | Maximum [Member]
Short-term Debt [Line Items]
Debt conversion price																	$ 15.44	$ 15.44
03/02/2021 [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | FirstFire SPA [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate												12.00%	12.00%
Debt maturity date												Mar. 10, 2022
Principal amount of debt instrument												$ 560,000	$ 560,000
Repayment of debt																			$ 365,000
Original issue discount												$ 56,000	$ 56,000
Equity method investment, ownership percentage												499.00%	499.00%
Partial repayment of principal and interest												$ 123,200
Proceeds from issuance of debt												130,606
Origination fees												$ 8,394
FirstFire Note[Member]
Short-term Debt [Line Items]
Principal amount of debt instrument								$ 1,266,667	$ 1,266,667
Original issue discount								1,266,667	1,266,667																	419,468
Interest repaid								76,000	76,000
Additional Paid in Capital								$ 1,053,999	$ 1,053,999
Interest Expense																										140,548
Debt instruments unamortized discount																										140,548
Recognized debt discount																										65,533
June FirstFire Promissory Note [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | June FirstFire SPA [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate								12.00%	12.00%
Debt maturity date								Jun. 10, 2023
Principal amount of debt instrument								$ 1,266,666	$ 1,266,666
Repayment of debt								1,266,666
Original issue discount								$ 126,666	$ 126,666
Number of common stock issued								11,875
Equity method investment, ownership percentage								4.99%	4.99%
Proceeds from issuance of debt								$ 1,140,000
Debt conversion price								$ 11.50	$ 11.50
Accrued interest rate of debt instrument								125.00%
GS Promissory Note [Member] | GS Capital Partners, LLC [Member] | GS SPA [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate							12.00%
Debt maturity date							Jun. 10, 2023
Principal amount of debt instrument							$ 333,333
Repayment of debt							300,000
Original issue discount							$ 33,333
Number of common stock issued							3,125
Equity method investment, ownership percentage							4.99%
Proceeds from issuance of debt							$ 300,000
Debt conversion price							$ 11.50
Accrued interest rate of debt instrument							125.00%
GS Note [Member]
Short-term Debt [Line Items]
Principal amount of debt instrument							$ 333,333
Original issue discount							333,333
Interest repaid							20,000
Additional Paid in Capital							$ 280,000
Interest Expense																										34,703
Debt instruments unamortized discount																										$ 34,703
Jefferson Promissory Note [Member] | Jefferson Street Capital, LLC [Member] | Jefferson SPA [Member]
Short-term Debt [Line Items]
Debt instrument, default interest rate				12.00%
Debt maturity date				Aug. 23, 2023
Principal amount of debt instrument				$ 333,333
Repayment of debt				300,000
Original issue discount				$ 33,333
Number of common stock issued				3,125
Equity method investment, ownership percentage				4.99%
Proceeds from issuance of debt				$ 300,000
Debt conversion price				$ 11.50
Accrued interest rate of debt instrument				125.00%

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SCHEDULE SHOWING THE FUTURE MINIMUM LEASE PAYMENTS (Details) - USD ($)	Aug. 31, 2021	May 31, 2021	May 31, 2020
Loss Contingencies [Line Items]
2023		$ 471,063
2024		450,377
2025		452,511
2026 and thereafter		405,795
2026		153,601
Total Operating Lease Obligations		1,945,347
Less: Amount representing interest		(418,061)
Present Value of minimum lease payments	$ 1,556,815	$ 1,527,286	$ 490,983
Operating Lease Liabilities [Member]
Loss Contingencies [Line Items]
2023	468,377
2024	470,511
2025	423,795
2026 and thereafter	171,602
Total Operating Lease Obligations	1,904,655
Less: Amount representing interest	(347,840)
Present Value of minimum lease payments	1,556,815
2022	$ 370,370

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COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)								3 Months Ended		12 Months Ended
	Aug. 20, 2021	May 17, 2021	Mar. 29, 2021	Jul. 29, 2020	Mar. 29, 2020	Sep. 13, 2017	Aug. 22, 2017	Aug. 31, 2021	Aug. 31, 2020	May 31, 2021	May 31, 2020
Subsidiary, Sale of Stock [Line Items]
Weighted average discount rate										10.40%
Weighted average remaining lease term										41 months
Operating lease right-of-use assets								$ 1,562,617		$ 1,533,010	$ 490,984
Operating lease liabilities								1,556,815		1,527,286	490,983
Operating lease expense								140,516	$ 20,623	147,000	353,000
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture									$ 819,309	2,359,401	$ 5,900
Shares issued for cash, shares	82,500										123,000
Accrued Liabilities								$ 833,250
Operating Lease [Member]
Subsidiary, Sale of Stock [Line Items]
Operating lease right-of-use assets										1,527,286
Operating lease liabilities										$ 1,527,967
Underwriter [Member]
Subsidiary, Sale of Stock [Line Items]
Sale of stock, price per share								$ 13.00		$ 13.00
Jed Kaplan [Member]
Subsidiary, Sale of Stock [Line Items]
Monthly base salary					$ 4,000
Cash bonus				$ 75,000						$ 216,625
Accrued interest										$ 75,000
Jed Kaplan [Member] | Kaplan 2020 Agreement [Member]
Subsidiary, Sale of Stock [Line Items]
Monthly base salary				$ 5,000
Number of shares of common stock fully vested upon grant				15,000
Cash bonus				$ 50,000
[custom:InitialTerm]				one-year term
Board of Directors [Member]
Subsidiary, Sale of Stock [Line Items]
Number of common stock shares issued										250,000
Number of common stock shares issuance directors										17,125
Mr. Franklin [Member]
Subsidiary, Sale of Stock [Line Items]
Number of shares of common stock fully vested upon grant				250,000
Cash bonus				$ 75,000						$ 216,625
Accrued interest										75,000
Due to Related Parties, Current								$ 35,000
Mr. Franklin [Member] | Franklin 2020 Agreement [Member]
Subsidiary, Sale of Stock [Line Items]
Monthly base salary				$ 12,500
Number of shares of common stock fully vested upon grant				6,250
Cash bonus				$ 50,000
Employee and Directors [Member]
Subsidiary, Sale of Stock [Line Items]
Accrued interest										166,675
Number of shares issued for services				192,000
MrKaplan [Member]
Subsidiary, Sale of Stock [Line Items]
Due to Related Parties, Current								35,000
Chief Financial Officer [Member] | Hennessey Employment Agreement [Member]
Subsidiary, Sale of Stock [Line Items]
Salary and Wage, Officer, Excluding Cost of Good and Service Sold		$ 140,000
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture		5,000
[custom:MaximumQuarterlyBonusAmount]		$ 12,500
[custom:EmploymentAgreementDescription]		Ms. Hennessey will also receive (i) 5,000 shares of common stock upon filing of the 2021 Annual Report on Form 10-K, if completed before July 31, 2021, and (ii) 5,000 shares of common stock upon completion of an uplisting to a national exchange, such as The Nasdaq Stock Market or the NYSE American.
Ms Hennessey [Member]
Subsidiary, Sale of Stock [Line Items]
[custom:AccruedEquityGrant-0]								5,000
Chief Executive Officer [Member] | Franklin Employment Agreement [Member]
Subsidiary, Sale of Stock [Line Items]
Salary and Wage, Officer, Excluding Cost of Good and Service Sold			$ 250,000
[custom:MaximumQuarterlyBonusAmount]			$ 15,000
IPO [Member]
Subsidiary, Sale of Stock [Line Items]
Aggregate exercise price of unit sold to underwriters								$ 100		$ 100
Number of shares issued under purchase option							625,000	250,000		250,000
Options exercisable, per unit										$ 11.50
Sale of stock, price per share							$ 80.00
[custom:OptionsExercisableSharePrice-0]								$ 11.50
IPO [Member] | Underwriters [Member]
Subsidiary, Sale of Stock [Line Items]
Number of shares issued under purchase option						25,000
Over-Allotment Option [Member] | Underwriters [Member]
Subsidiary, Sale of Stock [Line Items]
Aggregate exercise price of unit sold to underwriters								$ 2,990,000		$ 2,990,000
Number of shares issued under purchase option								260,000		260,000

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SCHEDULE OF OUTSTANDING STOCK WARRANTS (Details) - $ / shares	3 Months Ended	12 Months Ended
	Aug. 31, 2021	May 31, 2021	May 31, 2020
Warrant [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of Warrants, Outstanding, Beginning balance	820,064	803,001	803,001
Average exercise price stock warrants, Outstanding, Beginning balance	$ 81.71	$ 83.01	$ 83.01
Number of Warrants, Granted		17,063
Average exercise price stock warrants, Granted		$ 20.66
Number of Warrants, Outstanding, Ending balance		820,064	803,001
Average exercise price stock warrants, Outstanding, Ending balance		$ 81.71	$ 83.01
Warrants [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of Warrants, Outstanding, Beginning balance	820,064	803,001
Average exercise price stock warrants, Outstanding, Beginning balance	$ 10.38	$ 83.01
Number of Warrants, Granted	1,257,312	17,063
Average exercise price stock warrants, Granted	$ 11.26	$ 20.66
Number of Warrants, Sale of warrants	100,000
Average exercise price stock warrants, Sale of warrants	$ 20.00
Number of Warrants, Outstanding, Ending balance	2,177,376	820,064	803,001
Average exercise price stock warrants, Outstanding, Ending balance	$ 38.08	$ 10.38	$ 83.01

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STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)				3 Months Ended			4 Months Ended	12 Months Ended
	Aug. 20, 2021	Nov. 09, 2018	Sep. 13, 2017	Aug. 31, 2021	Aug. 27, 2021	Aug. 31, 2020	May 31, 2019	May 31, 2021	May 31, 2020	Aug. 17, 2020	Feb. 28, 2019
Accumulated Other Comprehensive Income (Loss) [Line Items]
Preferred stock, authorized				1,000,000		1,000,000		1,000,000	1,000,000
Preferred stock, par value				$ 0.0001		$ 0.0001		$ 0.0001	$ 0.0001
Preferred stock, issued				0				0	0
Preferred stock, outstanding				0				0	0
Common stock, authorized				36,000,000				36,000,000	36,000,000
Common stock, par value				$ 0.0001				$ 0.0001	$ 0.0001
Common stock holders rights								one vote for each share.
Common stock, issued				1,492,595				1,427,124	998,622
Common stock, outstanding				1,492,595				1,427,124	998,622
Number of shares issued	82,500								123,000
Number of shares issued for acquisition								65,000
Shares, issued								3,000
Number of shares issued upon conversion of convertible securities		520,000
Stock-based compensation				$ 838,250		$ 150,095		$ 1,690,000	$ 828,000
Employment Agreements [Member] | Vested Ratably Through May Thirty One Two Thousand Twenty [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares issued								240,000	95,000
Accredited Investors [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares issued								3,116
Maximum [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Common stock, authorized										36,000,000
Minimum [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Common stock, authorized										20,000,000
Private Placement [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares purchased			875					31,812
Private Placement [Member] | Accredited Investors [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of sale of stock, value									$ 1,925,000
Number of shares purchased									962,500
Common stock exchanged for warrants description							(i) one share of common stock, par value $0.0001 per share of the Company (the “Common Stock”) and (ii) a warrant to purchase one share of Common Stock, exercisable at a price of $4.00 per share, exercisable at any time within five years of issuance (each, a “Warrant”) as provided for in the Company’s Term Sheet for Unit Offering dated February 6, 2019 (the “Term Sheet”).
Private Placement [Member] | Maximum [Member] | Accredited Investors [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of sale of stock, value							$ 2,000,000
Number of shares purchased							1,000,000
Share price											$ 2.00
Subsequent Event [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares issued					42,000
Number of shares issued for services					21,000
Number of shares issued upon conversion of convertible securities					15,000
Franchise [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares issued for acquisition								65,000
Franchise [Member] | Subsequent Event [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares issued for acquisition					6,000
Common Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares issued						2,976		48,396	15,625
Number of common stock shares issued as compensation						116,174		219,535	625
Shares, issued								429,000
Number of shares issued for services				21,346		6,597		53,817
Employees [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of common stock shares issued as compensation									14,000
Officers And Directors [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of common stock shares issued as compensation								240,000	15,000
Vendor [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares issued for services								37,000
Private Investor [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Sale of warrants				100,000
Warrants to purchase shares of common stock				100,000
Warrants exercise price				$ 20.00
Proceeds from warrants				$ 100,000
P L A Y Live Nation Inc [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares issued for acquisition									94,000

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SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS (Details) - USD ($)	May 31, 2021	May 31, 2020
Income Tax Disclosure [Abstract]
Net Operating Loss	$ 1,926,000	$ 770,000
Impairment of cost method investment	129,000
Accrued Expenses	98,000
Allowance for Doubtful Accounts	10,000
Gross deferred tax asset	2,163,000	770,000
Less: Valuation allowance	(1,972,000)	(825,000)
Net deferred tax asset	191,000	55,000
Amortization of intangible assets	(98,000)	(55,000)
Depreciation	(93,000)
Net deferred assets/liabilities

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SCHEDULE OF RECONCILIATION OF THE STATUTORY FEDERAL INCOME TAX RATE (Details)	12 Months Ended
	May 31, 2021	May 31, 2020
Income Tax Disclosure [Abstract]
Expected provision (benefit) at statutory rate	(21.00%)	(21.00%)
State taxes, net of federal tax benefit	(4.40%)	(4.40%)
Permanent differences-stock based compensation	9.00%	15.00%
Increase in valuation allowance	16.40%	10.40%
Total provision (benefit) for income taxes	0.00%	0.00%

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INCOME TAXES (Details Narrative) - USD ($)	3 Months Ended		12 Months Ended
	Aug. 31, 2021	Aug. 31, 2020	May 31, 2021	May 31, 2020
Income Tax Disclosure [Abstract]
Income tax provisions
Change in valuation allowance			1,257,000	444,000
Federal net operating loss carry forwards			$ 7,600,000	$ 3,800,000

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SUBSEQUENT EVENTS (Details Narrative) - USD ($)								1 Months Ended						3 Months Ended		12 Months Ended
	Oct. 07, 2021	Sep. 28, 2021	Sep. 01, 2021	Aug. 20, 2021	Jul. 26, 2021	Jun. 11, 2021	Mar. 10, 2021	Sep. 30, 2021	Sep. 28, 2021	Aug. 23, 2021	Aug. 19, 2021	Jul. 22, 2021	Jun. 16, 2021	Aug. 31, 2021	Aug. 27, 2021	May 31, 2021	May 31, 2020	Oct. 01, 2021	Sep. 17, 2021
Subsequent Event [Line Items]
Original issue discount														$ 2,394,343		$ 947,873	$ 25,180
Stock Issued During Period, Shares, Acquisitions																65,000
Shares issued for cash, shares				82,500													123,000
[custom:DebtForgivenessIncome]																	$ 93,761
Holder [Member]
Subsequent Event [Line Items]
Principal amount of debt instrument														90,909
Original issue discount														903,588
Repayment of debt														225,000
Existing Franchisee [Member]
Subsequent Event [Line Items]
Shares issued price per share					$ 10.85
Stock Issued During Period, Shares, Acquisitions					6,000
Asset Purchase Agreement [Member] | Ventures LLC [Member]
Subsequent Event [Line Items]
Principal amount of debt instrument														$ 200,000
Warrants issued														187,400
Stock Issued During Period, Shares, Acquisitions														3,749
Asset Purchase Agreement [Member] | LGH Investments LLC [Member]
Subsequent Event [Line Items]
Principal amount of debt instrument														$ 200,000
FirstFire SPA [Member] | FirstFire Global Oppurtunities Fund, LLC [Member]
Subsequent Event [Line Items]
Original issue discount							$ 56,000
Proceeds from issuance of debt							$ 504,000
Debt conversion price							$ 11.50
Subsequent Event [Member]
Subsequent Event [Line Items]
Shares issued for cash, shares															42,000
Subsequent Event [Member] | Paycheck Protection Plan [Member]
Subsequent Event [Line Items]
[custom:DebtForgivenessIncome]									$ 40,500
Subsequent Event [Member] | Holder [Member]
Subsequent Event [Line Items]
Repayments of Related Party Debt								$ 500,000
Subsequent Event [Member] | FirstFire Global Oppurtunities Fund, LLC [Member] | Warrant [Member]
Subsequent Event [Line Items]
Warrants issued																		40,000	40,000
Subsequent Event [Member] | Maxim [Member]
Subsequent Event [Line Items]
Restricted shares issued to purchase common stock			82,500
Subsequent Event [Member] | Asset Purchase Agreement [Member] | Existing Franchisee [Member]
Subsequent Event [Line Items]
Shares issued to acquire assets, shares												6,000
Shares issued to acquire assets, value												$ 65,100
Shares issued price per share												$ 10.85
Subsequent Event [Member] | Asset Purchase Agreement [Member] | Simplicity Tracy LLC [Member]
Subsequent Event [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	4,500
Subsequent Event [Member] | FirstFire SPA [Member] | FirstFire Global Oppurtunities Fund, LLC [Member]
Subsequent Event [Line Items]
Debt instrument, default interest rate						12.00%
Debt maturity date						Jun. 10, 2023
Principal amount of debt instrument						$ 1,266,666
Shares issued for commitment fee, shares						11,875
Debt payment terms						the Company agreed to pay to $1,266,666 (the “FirstFire Principal Sum”) to FirstFire 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 FirstFire Note after 180 days from June 10, 2021).
Debt principal payment						$ 1,266,666
Original issue discount						126,666
Proceeds from issuance of debt						$ 1,140,000
Debt conversion, description						FirstFire Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. FirstFire may convert the FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the FirstFire Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by FirstFire upon, at the election of FirstFire, 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 FirstFire Note.
Debt conversion price						$ 11.50
Outstanding payment, percentage						125.00%
Warrants issued						593,750
Warrant expiration date						Nov. 01, 2021
Warrant exercise price						$ 10.73
Subsequent Event [Member] | GS SPA [Member] | GS Capital [Member]
Subsequent Event [Line Items]
Debt instrument, default interest rate													12.00%
Debt maturity date													Jun. 10, 2023
Principal amount of debt instrument													$ 333,333
Shares issued for commitment fee, shares													3,125
Debt payment terms													the Company agreed to pay to $300,000.00 (the “GS Principal Sum”) to GS 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 GS Note after 180 days from June 10, 2021).
Debt principal payment													$ 300,000
Original issue discount													33,333
Proceeds from issuance of debt													$ 300,000
Debt conversion, description													GS may convert the GS Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the GS Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by GS upon, at the election of GS, 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 GS Note.
Debt conversion price													$ 11.50
Outstanding payment, percentage													125.00%
Warrants issued													156,250
Warrant expiration date													Nov. 01, 2021
Warrant exercise price													$ 10.73
Increase in debt													$ 100,000
Subsequent Event [Member] | Fourth Amendment [Member] | Maxim [Member]
Subsequent Event [Line Items]
Debt payment terms											the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock.
Warrants issued											365,000
Warrant exercise price											$ 13.00
Debt payment terms											the Company and Maxim agreed that all obligations under the Series A-2 Maxim Note, as amended, shall be extinguished, and the Series A-2 Maxim Note, as amended, shall be deemed repaid in its entirety, upon the satisfaction of the following obligations: (i) the Company’s payment of $500,000 to Maxim within three business days of August 19, 2021, (ii) the Company’s issuance of 20,000 restricted shares of the Company’s common stock to Maxim within seven business days of August 19, 2021, and (iii) the Company’s issuance of a common stock purchase warrant to Maxim on August 19, 2021 for the purchase of 365,000 shares of the Company’s common stock.
Repayment of debt											$ 500,000
Restricted shares issued to purchase common stock											20,000
Subsequent Event [Member] | Fourth Amendment [Member] | Maxim [Member] | Common Stock [Member]
Subsequent Event [Line Items]
Shares reserved for future issuance											365,000
Subsequent Event [Member] | Jefferson SPA [Member] | Jefferson [Member]
Subsequent Event [Line Items]
Debt instrument, default interest rate										12.00%
Debt maturity date										Aug. 23, 2023
Principal amount of debt instrument										$ 333,333
Shares issued for commitment fee, shares										3,125
Debt principal payment										$ 333,333
Original issue discount										333,333
Proceeds from issuance of debt										$ 300,000
Debt conversion, description										that upon failure to make any payment under the Jefferson Note, the conversion price will be $10.00 per share, as the same may be adjusted as provided in the Jefferson Note. The Jefferson Note has a 4.99% equity blocker; provided, however, that the 4.99% equity blocker may be waived (up to 9.99%) by Jefferson, at Jefferson’s election, on not less than 61 days’ prior notice to the Company.
Warrants issued										156,250
Warrant expiration date										Nov. 01, 2021
Warrant exercise price										$ 10.73
Repayment of debt										$ 300,000
Proceeds from equity financing										$ 300,000
Subsequent Event [Member] | Ionic SPA [Member] | Ionic Ventures, LLC [Member] | Ionic Warrant [Member]
Subsequent Event [Line Items]
Warrants issued		729,167							729,167
Warrant exercise price		$ 10.73							$ 10.73
Warrants and Rights Outstanding, Term		3 years							3 years
Subsequent Event [Member] | Ionic SPA [Member] | Ionic Ventures, LLC [Member] | Ionic Promissory Note [Member]
Subsequent Event [Line Items]
Debt instrument, default interest rate		12.00%							12.00%
Debt maturity date		Sep. 28, 2023
Principal amount of debt instrument		$ 1,555,555.56							$ 1,555,555.56
Original issue discount		155,555.56							$ 155,555.56
Proceeds from issuance of debt		$ 1,400,000
Debt conversion price		$ 11.50							$ 11.50
Repayment of debt		$ 1,400,000
Shares issued for cash, shares		14,584
Equity Method Investment, Ownership Percentage		4.99%							4.99%
Debt Instrument, Interest Rate During Period		125.00%