UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
(Amendment No. 1)
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CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 13, 2018
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StemGen, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
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000-21555 |
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54-1812385 |
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(state or other jurisdiction of incorporation) |
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(Commission File Number) |
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(IRS Employer Identification Number) |
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1 Performance Drive, Suite F Angleton, TX |
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77515 |
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(address of principal executive offices) |
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(zip code) |
832-954-7569
(registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark 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 13(a) of the Exchange Act. ☐
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS |
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EXPLANATORY NOTE |
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THE ACQUISITION AGREEMENT AND RELATED TRANSACTIONS |
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DESCRIPTION OF BUSINESS |
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WHERE YOU CAN FIND MORE INFORMATION |
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RISK FACTORS |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
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DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS |
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EXECUTIVE COMPENSATION |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
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LEGAL PROCEEDINGS |
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DESCRIPTION OF SECURITIES |
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MARKET PRICE OF AND DIVIDENDS ON THE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS |
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INDEMNIFICATION OF DIRECTORS AND OFFICERS |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report (the “Report”) contains forward-looking statements, including, without limitation, in the sections captioned “ Description of Business ,” “ Risk Factors ,” and “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.
The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the accuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation:
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Market acceptance of our products and services; |
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Competition from existing products or new products that may emerge; |
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The implementation of our business model and strategic plans for our business and our products; |
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Estimates of our future revenue, expenses, capital requirements and our need for financing; |
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Our financial performance; |
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Current and future government regulations; |
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Developments relating to our competitors; and |
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Other risks and uncertainties, including those listed under the section titled “ Risk Factors .” |
Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise, except as required by law.
Readers should read this Report in conjunction with the discussion under the caption “ Risk Factors ,” our financial statements and the related notes thereto in this Report, and other documents which we may file from time to time with the SEC.
EXPLANATORY NOTE
We were incorporated under the laws of the State of Delaware, August 18, 1992. Prior to the Acquisition (as defined below), we were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended). As a result of the Acquisition, we have ceased to be a “shell company” and will continue as a publicly traded company under the name StemGen, Inc. The existing business operations of D3esports, Inc. will continue as our wholly subsidiary.
On January 29, 2019 (the “Closing Date”), we completed and closed the acquisition (the “Acquisition”) under an Agreement and Plan of Reorganization (the “Reorganization Agreement”), entered into by and among by and among (i) StemGen, Inc.(“StemGen”); (ii) D3esports, Inc., a Wyoming corporation ( “D3esports”); (ii) and the shareholders of D3esportst (“Sellers”) pursuant to which D3esports became a wholly owned subsidiary of ours. Pursuant to the Reorganization Agreement, we acquired from the Sellers all of the issued and outstanding equity interests of D3esports in exchange for 39,631,587 shares of our common stock, par value $0.001 per share and 7,000,000 shares of Preferred Stock, par value $0.001 per share. As a result of the Acquisition, the Sellers, as the former shareholders of D3esports, became the controlling shareholders of the Company. The Acquisition was accounted for as a reverse merger notwithstanding it is legally a reverse acquisition.
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As used in this Report henceforward, unless otherwise stated or the context clearly indicates otherwise, the terms the “Registrant,” “we,” “us” and “our” refer to the consolidated Company and its subsidiaries at and after the Closing, giving effect to the Acquisition.
This Current Report is being filed in connection with a transaction consummated by the Company and certain related events and actions taken by the Company.
This Current Report responds to the following Items in Form 8-K:
Item 1.01 Entry into a Material Definitive Agreement
The information contained in Item 2.01 below relating to the various agreements described therein is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
THE ACQUISITION AGREEMENT AND RELATED TRANSACTIONS
Agreement and Plan of Reorganization
On December 13, 2018, StemGen, Inc. (“StemGen” “us”, “we” or the “Company”) entered into an Agreement and Plan of Reorganization (the “Agreement”) with D3esports Corp., a Wyoming corporation, and the stockholders of D3esports Corp. Pursuant to the Agreement, we acquired all the outstanding equity securities of D3esports Corp. and D3sports, Inc. will be domiciled in Texas as a wholly owned subsidiary of StemGen, Inc. The purchase price for the acquisition consists of the issuance to the stockholders of D3esports Corp. by StemGen 39,631,587 shares of our common stock, par value $0.001 per share and 7,000.000 shares of Preferred Stock, par value $0.00001 per share.
The acquisition was completed pursuant to the Agreement on the 29 th day of January 2019. As a result of the acquisition D3esports became a wholly owned subsidiary of StemGen and the former shareholders of D3esports became the owners of 61.94% of our common stock and will be accounted for as a reverse merger. The name of the registrant will not change. On the closing date, the registrant was a shell company as defined in Rule 12b-2 of the Exchange Act.
Information in response to this Item 2.01 is provided under the Item numbers of Form 10.
Pro-Forma Ownership
See “ Market Price of and Dividends on the Company’s Common Stock and Related Stockholder Matters .”
Accounting Treatment; Change of Control
See Exhibits 99.1, 99.2 and 99.3
Form 10 Information
Prior to the Acquisition, the Company had nominal operations. We were deemed a “shell company,” as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act, because of the lack of operations prior to the completion of the Acquisition.
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Immediately following the Acquisition, the business of D3esports became our business. D3esports is engaged in the business of e-sports with emphasis on the Virtual Racing championship we are building with Mainline.gg based on the Forza Motorsports game.
With the resulting change in our business, we are voluntarily providing the information as is required pursuant to Item 2.01(f) of Form 8-K as if we were filing a general form for registration of securities on Form 10 under the Exchange Act for our common stock, which is the only class of our securities subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act upon consummation of the Acquisition.
DESCRIPTION OF BUSINESS
Prior to the Acquisition, we were a shell company with no substantive operations. The purpose of the Company was to seek and investigating potential assets, properties or businesses to acquire while complying with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.
Immediately following the Acquisition, the businesses of D3esports became our businesses. D3esports is engaged in the business of esports.
The acquisition was completed pursuant to the Agreement on the 29 th day of January 2019. As a result of the acquisition D3esports became a wholly owned subsidiary of StemGen and the former shareholders of D3esports became the owners of 61.62% of our common stock and will be accounted for as a reverse merger.
Overview
D3esports is a Virtual to Real company offering global sports an opportunity to participate in virtual competition. Our focus is professional motorsports because of management’s extensive historical experience and personal relationships and connections in the space. We offer a time trial format competition through our Microsoft license managed by Mainline.gg for eSports athletes to compete to win a season of real racing and enhance their experience of motorsports though a virtual platform with a strong link to a real team and real race cars.
Corporate History
D3esports was founded in May 2018 and launched at Dave and Buster Houston flagship store in July 2018. We have created, built and made ready for the start of 2nd quarter an eSports competition based around Forza 7 Motorsports. We have extensive experience in real motorsports and recent technological advancements enable virtual motorsports to cross-over to virtual motor sports and attract substantial investment.
Current Business
We currently sell 3 screen Fanatec operated Logitech Playseats powered by a custom gamer PC built in house for all enthusiasts, gamers and eSports athletes to gain the best access to win a season of racing. We also are currently positioning and selling sponsorship for naming rights of the championship open and showdown series as well as each month long racing competition.
Effective October 22, 2018, D3esports entered into an Esports service agreement with Mainline.gg, to build, design, maintain and support the necessary platform to facilitate the D3 competitive racing program, including, the D3 open series for time trial submission and D3 Showdown Series for a monthly custom race.
Industry Overview
The eSports Industry has been rapidly expanding and presently has more than 300 million players. However, recently through social media and Twitch TV this underground world has been exposed to nontraditional gamers. It is quickly being accepted as a sport with 22 North American universities offering eSports scholarships. Newly built custom eSports arenas are taking over real sports stadiums. Many real sports are creating their own virtual offering but we see this as a substantial opportunity to optimize driving standards for first time drivers and elevate the performance of professional drivers as well as a new platform for companies to expose their brand and services.
Our Strengths
Real motorsport knowledge and experience at the highest level and partnership with industry leaders in real and virtual sports.
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Competition
We have partnered with our strongest competitors and created and encouraged others a white label opportunity to expand their real reach virtually. F1 eSports is a strong competitor.
Regulation
All the competition regulations are vigorously managed and maintained by MAINLINE.GG
Customers
We are open to all. Any race driver looking to exposure their sponsors to additional marketing avenues, we have a solution. For gamers searching for another disciple, we have a very connected offering. For the professional eSports athlete, we have a true connection to enable earned points to be converted to rewards to pay for education and items you may need. We offer a unique true Virtual to Real offering that many many layers and offerings. However, gamers wanting to win a season of racing and compete against the best drivers can come to us and as the customers register there will be three layers with prizes in each so there are several levels to work though make for a mega experience.
Intellectual Property
D3esports owns the technology and managed by our partner MAINLINE.GG using our license with Microsoft.
Protection of our intellectual property is a strategic priority for our business. We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality agreements, to establish and protect our proprietary rights. We do not rely on third-party licenses of intellectual property for use in our business.
We generally control access to and use of our proprietary and other confidential information through the use of internal and external controls, such as the use of confidentiality agreements with our employees and outside consultants.
Properties
Prior to the change in control, the Company’s office was located at 9601 Moss Haven Drive, Dallas, Texas 75231. Because the Company has had no business, its activities will be limited to keeping itself in good standing in the State of Delaware, seeking out acquisitions, reorganizations or mergers and preparing and filing the appropriate reports with the SEC. These activities have consumed an insubstantial amount of management’s time.
After the change in control, the business of StemGen is the business of D3esports. StemGen’s and D3esports’s corporate offices are located at 1 Performance Drive, Suite F, Angleton, Texas 77515.
Employees
We have one employee, our sole officer and director, Simon Dawson
Legal Proceedings
We are currently not aware of any material pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the requirements of the Exchange Act, and files reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the public reference room maintained by the SEC at its Public Reference Room, located at 100 F Street, N.E. Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at (800) SEC-0330. In addition, we are required to file electronic versions of those materials with the SEC through the SEC’s EDGAR system. The SEC also maintains a website at http://www.sec.gov, which contains reports, proxy statements and other information regarding registrants that file electronically with the SEC.
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RISK FACTORS
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. However, Risk factors included in our 10-K filed November 2, 2018 are incorporated herein by reference
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contain forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives, and performance that involve risk, uncertainties, and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.
Background of our Company
We currently sell three Screen Fanatec operated Logitech Playseats powered by a custom Gamer PC built in house for all enthusiasts, gamers and eSports athletes to gain the best access to win a season of racing. We also are currently positioning and selling sponsorship for naming rights of the championship open and showdown series as well as each series (month long).
Effective October 22, 2018, D3esports entered into an Esports Service Agreement with Mainline.gg, to build, design, maintain and support to facilitate the D3 Competitive Racing Program, including, the D3 Open Series for time trial submission and D3 Showdown Series for a monthly custom race.
Plan of Operations
Overview . D3esports intends to gain year-round visibility by using Mainline Events to host ongoing virtual racing competitions with the top driver(s) at the end of the season earning the opportunity to compete against professional drivers and a chance to drive a real race car.
Our primary operation is to be the community offering and management of our online competitions in the motorsports arena but not confined to just one sport. We plan to expand to other sports in the future. The unique selling proposition for D3esports is the virtual to real experience. We have agreements with MAINLINE.GG to manage our competition and Microsoft, currently the sole platform of competition to which we also plan to expand into other.
With growing partnerships from component providers in the gaming and eSport space we plan to build and sell professional simulators linking to a points/rewards platform.
Sales and Marketing . Our marketing is through monthly press releases and social media on Facebook and Instagram coupled with our 24/7 time trial competition with online advertising for sponsors. Our school education platform is in place with a performance driving school for first time drivers and linking with course curriculum to drive awareness and education in the virtual to real eSports space and cross over to learning in the class rooms.
Research and Development. We do not currently develop electronic games. We are focused on forming agreements with the best games and virtual racing platforms in the world to optimize the experience but to familiarize the competitor. We are building the ultimate experience to our offering which is a connection to real drivers, engineers our partners technology by hosting eSports tournaments to connect the virtual to real and for the fastest to have the opportunity to passenger or drive a real race car on a real track. Through our partnership and internal research we are moulding our competition to the gamer. (gamer focused). We currently do have contracts for competition management with MAINLINE.GG and licensing agreements with Microsoft to run with Xbox and Forza 7 Motorsport to add to our intellectual properties. Additionally, we are in talks with mobile application developers for ease of competition registration and entry.
Intellectual Property. We currently have two agreements in place to offer the best experience from green to checkered flag. These agreements are with MAINLINE.GG (North American Leaders in eSports competition management) and Microsoft (to have a strong gaming platform bridging the gap between virtual and real motorsport). There shall be more agreements with component supplies for our professional simulator and race team in the future.
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Competition. The business of eSports is highly competitive and rapidly growing. Our ability to compete depends upon many factors within and outside our control, including the timely development and introduction of the racing competition which is based a time-trial format to played 24/7 with the Forza 7 Motorsports, played on Xbox and PC.
As we expand and add more motorsports platforms (partnerships) and sports to D3esports we publish and market, and the related enhancements, functionality, performance, reliability, customer service and support and marketing efforts. Due to the relatively low barriers to entry in the eSports market, we expect additional competition from other emerging companies but we have structured a virtual to real offering which can be added to professional team, Sim Centre and other games companies, we are simply offering a path to promote and enhance the gamers experience to relate to the real world through virtual competition. Many of our existing and potential competitors are substantially larger than us and have significantly greater financial, technical and marketing resources that will compete for available users, developers and talent. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the publishing and promotion of their eSports competitions. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressure will not have a material adverse effect on our business, operating results and financial condition.
Liquidity
We believe we do not have adequate funds to fully execute the D3esports business plan for the next twelve months unless we obtain additional funding. However, should we not raise this capital, we will allocate our funding to first assure that all state, federal and SEC requirements are met.
As of September 30, 2018, we had cash on hand of $0.
We intend to pursue capital through public or private financing, as well as borrowing and other sources in order to finance our business activities. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then our ability to continue our operations may be significantly hindered.
Results of Operations
For the period from inception through September 30, 2018, the Company incurred net losses and had negative cash flow from operations. As of September 30, 2018, the Company has negative working capital.
We continue to rely on outside funding to offset operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurance that we will continue to have such funding available. We will not be able to continue operations without them. We are pursuing alternate sources of financing, but there is no assurance that additional capital will be available to the Company when needed or on acceptable terms.
Period from inception (May 11, 2018) through September 30, 2018
General and Administrative Expenses
We recognized general and administrative expenses of $1,995 for the period from inception through June 30, 2018 as a result of the Company beginning operations.
Net Loss
We incurred a net loss of $1,995 for the period from inception through September 30, 2018 related to general and administrative expenses incurred during the period.
Three months ended September 30, 2018
General and Administrative Expenses
We recognized general and administrative expense of $49,586 the three months ended September 30, 2018 related to the Company beginning operations. General and administrative expense is primarily made up of legal and consulting expense of $18,670, Mainline expense of $10,000 and accounting expenses of $7,500.
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Net Loss
We recognized a net loss of $49,586 for the three months ended September 30, 2018 related to general and administrative expenses discussed above.
Liquidity and Capital Resources
We anticipate needing approximately $425,000 to fund our operations and to effectively execute our business plan over the next eighteen months. Currently available cash is not sufficient to allow us to commence full execution of our business plan. Our business expansion will require significant capital resources that may be funded through the issuance of common stock or of notes payable or other debt arrangements that may affect our existing debt structure. Despite our current financial status, we believe that we may be able to issue additional notes payable or debt instruments in order to start executing our business plan. However, there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital.
As of September 30, 2018, we had no cash on hand. We do not have an adequate amount of cash on hand to fund our future operations.
We have no known demands or commitments, except for the Mainline commitment discussed in the footnotes to our financial statements, and are not aware of any events or uncertainties as of September 30, 2018 that will result in or that are reasonably likely to materially increase or decrease our current liquidity.
Capital Resources
We had no material commitments for capital expenditures as of September 30, 2018. However, should we execute our business plan as anticipated, we would incur substantial capital expenditures and require financing in addition to what is required to fund our present operation.
Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the financial statements are prepared; actual results could differ from our estimates and such differences could be material. We have identified below the critical accounting policies, which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation our financial statements.
New Accounting Pronouncements
For a description of recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial statements, see “Note 3: Significant Accounting Polices: Recently Issued Accounting Pronouncements” in our financial statements elsewhere in this document.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. In accordance with SEC rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the applicable table below are deemed beneficially owned by the holders of such options and warrants and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person. Subject to community property laws, where applicable, the persons or entities named in the tables below have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.
The following table sets forth information with respect to the beneficial ownership of our common stock as of January 29, 2019, by (i) each stockholder known by us to be the beneficial owner of more than 5% of our common stock, voting preferred stock or convertible preferred stock, (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. Other than the Acquisition, to our knowledge, there is no arrangement, including any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result in a change in control of the Company.
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Number of Shares of Capital Stock Beneficially Owned (1) |
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Percentage Ownership (3) |
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Name and Address of Beneficial Owner |
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Common Stock |
Preferred Stock |
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Common Stock |
Preferred Stock |
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Boxcar Transportation Corp (2) 65 East Street House No. 35 Panama City, Panama |
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86,990 |
1,000,000(4) |
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.019% |
100% |
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Simon Dawson 1 Performance Drive, Suite F Angleton, TX 77515 |
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5,166,663 |
-0- |
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11.38% |
-0-% |
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Ian Dawson 1 Performance Drive, Suite F Angleton, TX 77515 |
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5,166,663 |
-0- |
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11.38% |
-0- |
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Recycled Capital(6) 5712 Southwest Fwy. Houston, Texas 77057-7508 |
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1,000,000 |
7,000,000(5) |
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4.99% |
100% |
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John Pritzlaff 622 Cliffgate Lane Castle Rock Colorado 80108 |
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7,500,000 |
-0- |
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16.52% |
-0- |
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Hampton Bay Trading Corp.(7) 2500 Wilcrest Dr., Suite 300 Houston, Texas 77042 |
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4,388,890 |
-0- |
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9.88% |
-0- |
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All executive officers and directors as a group (one person) |
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5,166,663 |
-0- |
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-0-% |
-0-% |
(1) Under Rule 13d-3 under the Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the number of shares is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock outstanding on January 29, 2019.
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(2) The beneficial owner of Boxcar Transportation Corp. is Mert Gungor. In addition to the 86,990 shares of common stock owned, Boxcar Transportation Corp. also owns 1,000,000 shares of the Company’s Series E preferred stock. The outstanding shares of Series E preferred share have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of common stock. As a result, Boxcar Transportation Corp. has not less than 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders.
(3) Our calculation of the percentage of beneficial ownership is based on 45,400,588 shares of common stock 1,000,000 shares of Series E preferred stock and 7,000,000 shares of Series A preferred stock outstanding as of January 29, 2019.
(4) Represents Series E preferred stock
(5) Represents Series A preferred stock, each convertible to 3 shares of common stock. The number of shares of the common stock held as of the date hereof is 4.99% of the total outstanding because. all the convertible preferred stock are subject to a conversion cap of 4.99% of the total outstanding. Therefore, the holder of the preferred stock does not have the “right” to hold more than the amount of the cap as expressed by the Commission’s amicus curiae brief in the case of Mark Levy v. Southbrook International Investments, Ltd . (2 nd Cir. Mar 31, 2001). In addition to these shares, Lead Enterprises, Inc. holds several convertible promissory notes which are convertible into a total of approximately 9,622,466 shares of common stock of the Company, all subject to the 4.99% limitation.
(6) Robert Wilson is the natural person who exercises the sole voting and or dispositive powers with respect to the shares of Recycled Capital Corp.
(7) Robert Sonfield is the natural person who exercises the sole voting and or dispositive powers with respect to the shares of Hampton Bay Trading Corp.
DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS
Prior to the Acquisition, Mr. John David Walls served as director, president, secretary, and treasurer of the Company. Upon the closing of the Acquisition, Mr. Simon Dawson became the sole director, president, treasurer and secretary of the Company.
Upon closing of the Acquisition, our executive officers and directors are:
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NAME |
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AGE |
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POSITION(S) |
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DATE ELECTED OR APPOINTED |
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Simon Dawson |
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37 |
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Director, President, Secretary, and Treasurer |
|
January 29, 2019 |
Moving to Houston in 2007 after being Sales and Marketing Manager at one of the UK leading health and fitness clubs in Cambridge England called Next Generation (David Lloyd Club), Simon was the business development manager for Risi Competixione, the factory that supported Ferrari GT2 race team in North America, seeing multiple championships up to 2011.
Simon Dawson joined his father on the Project Libra Race program, which developed the Radical Ford Eco Boost race engine and it’s first race car in 2012.
This led to his permanent move from North Carolina to Houston to develop a full Radical dealership and track day business, which he runs with his father today.
Over the last six years, Simon and his father have enjoyed great success with Radical Texas selling track day cars, track day experiences and along the way, testing and developing the cars and technologies that will bring them race championships well into the future.
The driving force behind Simon’s passion for motorsports is family, and the dream of making racing an obtainable pastime and sport for all families and inspire the future linking the real and virtual worlds with an investment into eSport for the ultimate experience.
Director Independence
We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.” None of our directors are independent directors under the applicable standards of the SEC and the NASDAQ stock market.
- 9 -
Family Relationships
There are no family relationships among our directors or executive officers. However, Mr. Ian Dawson, a significant shareholder is the father of Mr. Simon Dawson, our sole officer and director.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has been involved in any of the following events during the past ten years:
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● |
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
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● |
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
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being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or |
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● |
being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
Board Committees
The Company currently has not established any committees of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy regarding the consideration of any director candidates recommended by security holders. To date, other than as described above, no security holders have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our board it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.
Audit Committee Financial Expert
We have no separate audit committee currently. The entire Board of Directors oversees our audits and auditing procedures. Neither of our directors is an “audit committee financial expert” within the meaning of Item 407(d)(5) of SEC regulation S-K.
Compensation Committee
We have no separate compensation committee currently. The entire Board of Directors oversees the functions which would be performed by a compensation committee.
Code of Ethics
We have adopted a code of ethics meeting the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely, and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of violations; and provide accountability for adherence to the provisions of the code of ethic.
EXECUTIVE COMPENSATION
No current or prior officer or director has received any remuneration or compensation from the Company in the past three years, nor has any member of the Company’s management been granted any option or stock appreciation right. Accordingly, no tables relating to such items have been included within this Item. None of our employees is subject to a written employment agreement nor has any officer received a cash salary since our founding. The Company has no agreement or understanding, express or implied, with any director, officer or principal stockholder, or their affiliates or associates, regarding compensation in the form of salary, bonuses, stocks, options, warrants or any other form of remuneration, for services performed on behalf of the Company. Nor are there compensatory plans or arrangements, including payments to any officer in relation to resignation, retirement, or other termination of employment, or any change in control of the Company, or a change in the officer’s responsibilities following a change in control of the Company.
- 10 -
Employment Agreements
None of the Company’s executive officers have employment agreements directly with the Company, although they may enter into such agreements in the future.
Director Compensation
We have not compensated our directors, in their capacities as such, since our respective formations.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SEC rules require us to disclose any transaction or currently proposed transactions in which the Company is a participant and in which any related person has or will have a direct or indirect material interest involving the lesser of $120,000 or one percent (1%) of the average of the Company’s total assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s common stock, or an immediate family member of any of those persons.
The descriptions set forth above under the captions “The Acquisition and Related Transactions—Acquisition Agreement,” “Executive Compensation—Employment Agreements” and “Director Compensation” and below under “Description of Securities—Options” are incorporated herein by reference.
We have a policy in place to address related party transactions. The policy outlines standards of review for the approval of transactions with related parties. Accordingly, the Company’s sole director, Mr. Simon Dawson, reviews business proposals and recommends courses of actions that comply with the policy. In cases where a business proposal involves a related party, such a proposal will not be approved.
LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
We are currently not aware of any material pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.
DESCRIPTION OF SECURITIES
General
Our authorized capital stock consists of 100,000,000 shares of common stock, $0.001 par value per share, and 8,000,000 shares of preferred stock, $0.001 par value per share. The following description summarizes the most important terms of our capital stock. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, you should refer to our certificate of incorporation and bylaws, which are included as exhibits to this report and to the provisions of applicable the General Corporation Law of Delaware.
Common Stock
As of the date of this report, there are 45,400,588 shares of our common stock outstanding, held by 103 stockholders of record, and 8,000,000 shares of our preferred stock outstanding. All shares of common stock have equal rights and privileges with respect to (i) one non-cumulative vote for each share held of record on all matters submitted to a vote of the stockholders; (ii) to participate equally and to receive any and all such dividends as may be declared by the board of directors out of funds legally available therefor; and (iii) to participate pro rata in any distribution of assets available for distribution upon liquidation of the Company. Stockholders of the Company have no pre-emptive rights to acquire additional shares of common stock or any other securities. The common stock is not subject to redemption and carries no subscription or conversion rights. All outstanding shares of common stock are fully paid and non-assessable. The Articles of Incorporation may only be amended by a majority vote of the stockholders holding at least a majority of all stock entitled to vote. The vote may be taken by written consent or at a properly called and noticed meeting of the stockholders.
- 11 -
Preferred Stock
Our board of directors designated 1,000,000 shares of Series E preferred stock. The Series E preferred stock has a par value of $0.001 and ranks subordinate to our common stock as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. The outstanding shares of Series E preferred stock have the right to act by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of capital stock. No dividends may be declared or paid on the preferred stock. Therefore, any action that requires a vote of shareholders may be authorized by 2/3rs vote of the Series E preferred stock.
In the event of any liquidation or winding up of the Company or the sale of all or substantially all the assets of the Company, the holders of the Series E preferred stock shall not be entitled to participate in any distributions.
Our board of directors has designated 7,000,000 shares of Series A preferred stock, convertible, at the option of the holder into 3 shares of common stock. The designation limits the number of shares issuable on conversion to the holder not owning more than 4.99% of the number of issued and outstanding shares of our common stock.
Dividend Rights
Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available at the times and in the amounts that our board of directors may determine. Dividends may be declared and paid on our common stock from lawfully available funds as and when determined by our board of directors.
Voting Rights
Except as otherwise required by the General Corporation Law of Delaware and the Series E Preferred Stock, the holders of common stock possess all voting powers for all purposes, including the election of directors. Each share of common stock has one vote on each matter submitted to a vote of our stockholders. The holders of shares of our common stock will vote together with all other shares of capital stock, if any, as a single class on all matters submitted for a vote or consent of stockholders.
Preemptive or Similar Rights
Our common stock is not entitled to preemptive rights and is not subject to conversion or redemption. The rights of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that our board of directors may designate and issue in the future.
Liquidation Rights
Upon our liquidation, dissolution, or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating preferred stock outstanding at that time after payment of liquidation preferences, if any, on any outstanding shares of preferred stock and payment of other claims of creditors.
MARKET PRICE OF AND DIVIDENDS ON THE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our common stock trades in the OTC Pink marketplace under the symbol “SGNI”. The OTC Pink marketplace is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (“OTC”) equity securities. An OTC Pink equity security generally is any equity that is not listed or traded on a national securities exchange.
- 12 -
Ownership of Capital Stock
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Number of Shares of Capital Stock
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Percentage
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Common Stock |
Preferred Stock |
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Common Stock |
Preferred Stock |
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Name and Address of Beneficial Owner |
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Before
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After
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Before
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After
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Before
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After
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Before
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After
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Public Stockholders(5) |
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14,083,927 |
14,083,927 |
1,000,000 |
1,000,000 |
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31.02% |
.019% |
100%(3) |
100%(3) |
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Simon Dawson 1 Performance Drive, Suite F Angleton, TX 77515 |
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-0- |
5,166,663 |
-0- |
-0- |
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0% |
11.38% |
0% |
0% |
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Ian Dawson 1 Performance Drive, Suite F Angleton, TX 77515 |
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-0- |
5,166,663 |
-0- |
-0- |
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0% |
11.38% |
0% |
0% |
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Recycled Capital 5712 Southwest Fwy. Houston, Texas 77057-7508 |
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-0- |
1,000,000 |
-0- |
7,000,000(4) |
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0% |
4.99% |
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100%(4) |
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John Pritzlaff 622 Cliffgate Lane Castle Rock Colorado 80108 |
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-0- |
7,500,000 |
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-0- |
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0% |
16.28% |
0% |
0% |
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Five additional Stockholders, each less that 4% |
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-0- |
5,900,000 |
-0- |
-0- |
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-0- |
12.96% |
-0- |
-0- |
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Hampton Bay Trading Corp. 2500 Wilcrest Dr., Suite 300 Houston, Texas 77042 |
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-0- |
4,388,890 |
-0- |
-0- |
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0% |
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9.88% |
0%0% |
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Jennifer Abney 2500 Wilcrest Dr., Suite 300 Houston, Texas 77042 |
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-0- |
2,194,445 |
-0- |
-0- |
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0% |
4.94% |
0% |
0% |
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All executive officers and directors as a group (one person) |
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-0- |
5,166,663 |
-0- |
-0- |
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(1) |
Under Rule 13d-3 under the Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the number of shares is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock outstanding on January 29, 2019. |
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(2) |
Our calculation of the percentage of beneficial ownership is based on 45,400,588 shares of common stock 1,000,000 shares of Series E preferred stock an 7.000.000 shares of Series A preferred stock outstanding as of January 29, 2019. |
- 13 -
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(3) |
Represents Series E preferred stock. The outstanding shares of Series E preferred share have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of common stock. As a result, Boxcar Transportation Corp. has not less than 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders. |
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(4) |
Represents Series A preferred stock, each convertible to 3 shares of common stock. The number of shares of the common stock held as of the date hereof is 4.99% of the total outstanding because. all the convertible preferred stock are subject to a conversion cap of 4.99% of the total outstanding. Therefore, the holder of the preferred stock does not have the “right” to hold more than the amount of the cap as expressed by the Commission’s amicus curiae brief in the case of Mark Levy v. Southbrook International Investments, Ltd . (2 nd Cir. Mar 31, 2001). In addition to these shares, Lead Enterprises, Inc. holds several convertible promissory notes which are convertible into a total of approximately 9,622,466 shares of common stock of the Company, all subject to the 4.0% limitation. |
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(5) |
Includes 86,990 common shares and 1,000,000 Series E preferred shares owned before and after closing by Boxcar Transportation Corp, 65 East Street House No. 35, Panama City, Panama. See note (3) for description of Series E preferred stock |
There is no “public market” for shares of common stock of the Company. Although the Company’s shares are quoted on the OTC Pink marketplace, the Company is aware of only a few transactions that have taken place in the previous five years. In any event, no assurance can be given that any market for the Company’s common stock will develop or be maintained.
Stockholders of Record
As of the date of this report there were approximately 103 stockholders of record of our common stock.
Warrants
There are currently no outstanding warrants.
Options
There are currently no outstanding options.
Penny Stock Regulations
The ability of an individual shareholder to trade their shares in a particular state may be subject to various rules and regulations of that state. Several states require that an issuer’s securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, the Company has no plans to register its securities in any particular state. Further, most likely the Company’s shares will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the “penny stock” rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The SEC generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the SEC; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the issuer’s net tangible assets; or exempted from the definition by the SEC. If the Company’s shares are deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements on broker- dealers who sell penny stocks to persons other than established customers and accredited investors, generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker- dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in the Company’s Common stock and may affect the ability of shareholders to sell their shares.
- 14 -
Dividends
The Company has not declared any cash dividends with respect to its common stock and does not intend to declare dividends in the foreseeable future. There are no material restrictions limiting, or that are likely to limit, the Company’s ability to pay dividends on its common stock in the future.
Securities authorized for issuance under equity compensation plans .
None; not applicable
Purchase of Equity Securities by the Issuer and Affiliated Purchasers.
None.
Transfer Agent and Registrar
American Stock Transfer & Trust Company, LLC will continue as our Transfer Agent and Registrar for our common stock. Its mailing address is 6201 15 th Ave, Brooklyn, New York 11219 and their phone number is 718.921.8124.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and our Articles of Incorporation allow us to indemnify our officers and directors from certain liabilities and our By-Laws state that we shall indemnify every present or former director or officer of ours or one of our subsidiaries (each an “Indemnitee”).
Our By-Laws provide for indemnification for liability, including expenses incurred in connection with a claim of liability arising from having been an officer or director of the Company for any action alleged to have been taken or omitted by any such person acting as an officer or director, not involving gross negligence or willful misconduct by such person.
Other than discussed above, none of our By-Laws, or Articles of Incorporation includes any specific indemnification provisions for our officers or directors against liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company 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.
Item 3.02 Unregistered Sales of Equity Securities
Shares Issued in Connection with the Acquisition
On January 29, 2019, pursuant to the terms of the Acquisition, all shares of D3esports were exchanged for 31,316,661 newly-issued shares of common stock and 7,000,000 shares of preferred stock of the Company to Sellers and persons who rendered valuable services to StemGen in the past. This transaction was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as not involving any public offering. None of the shares were sold through an underwriter and accordingly, there were no discounts or commissions involved.
Sales of Unregistered Securities of StemGen
There have been no sales of unregistered securities during the last three years. This Item does not give effect to the Acquisition on January 29, 2019, in which each share of D3esports stock outstanding at the time of the Acquisition was exchanged for shares of our common and preferred stock at the applicable exchange rate described next preceding section.
Item 5.06 Change in Shell Company Status
Prior to the closing of the Acquisition, the Company was a “shell company” as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. As described above in Item 2.01, which is incorporated herein by reference into this Item 5.06, the Company ceased being a shell company upon the completion of the Acquisition on January 29, 2019.
- 15 -
Item 9.01 Financial Statements and Exhibits
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(a) |
Financial statements of business acquired. |
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In accordance with Item 9.01(a), D3esports’s audited financial statements as of and for the period ended June 30, 2018 and unaudited financial statements as of, and for the three months ended September 30, 2018, and the accompanying notes, are included in this Report as exhibits 99.2 and 99.3 respectively. |
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(b) |
Pro forma financial information. |
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In accordance with Item 9.01(c), the following unaudited pro forma condensed financial statements is included in this Report as exhibit 99.4 |
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(c) |
Exhibits |
The agreements included or incorporated by reference as exhibits to this Current Report on Form 8-K are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:
● should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
● have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
● may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
● were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual facts as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Current Report on Form 8-K and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
- 16 -
(d) Exhibits:
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Exhibit No. |
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Exhibit Description |
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2.1* |
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Agreement and Plan of Reorganization dated December 13, 2018 for the acquisition of D3esports Corp. |
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3.1** |
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Amended and Restated Certificate of Incorporation of Amasys Corporation, October 11, 1996 . |
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3.2** |
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Certificate of Amendment changing corporate name to Stemgen, Inc. filed January 23, 2013 . |
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3.3**** |
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3.4**** |
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3.5** |
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10.1**** |
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99.1*** |
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99.2**** |
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99.3**** |
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99.4**** |
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*Incorporated by reference to our Form 8-K exhibit 2.1 filed with the SEC December 19, 2018
**Incorporated by reference to our Form S-1 exhibits 3.1(a),3.1(b) and 3.2 filed with the SEC March 17, 2015.
***Incorporated by reference to our Form 10-K filed with the SEC November 2, 2018
****Filed herewith
- 17 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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StemGen, Inc. |
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Date: January 31, 2019 |
/s/ Simon Dawson |
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Simon Dawson |
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President, Chief Executive Officer, Chief Financial Officer and Treasurer (Principal Financial Officer) |
EXHIBIT INDEX
Incorporated by reference to Item 9.01(d) above
- 18 -
Exhibit 3.4
- 1 -
Exhibit 10.1
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
ESPORTS
AGREEMENT
BETWEEN
D3 ESPORTS
AND
MAINLINE.GG
This Esports Service Agreement (“Agreement”) is entered into on November 1, 2018 (the “Effective Date”), by and between Mainline.GG, with its principal place of business at 1336 Brittmoore Rd., Houston, TX 77043 (“Mainline.GG”) and D3esports, Inc., an incorporated company, with its principal place of business at 1 Performance Drive, Angleton, TX 77515 (“D3 Esports”).
This Agreement incorporates any future SOWs and SLAs for the duration of the Agreement. This Agreement also serves to update and replace any former agreements, partnerships, or signed documents between the parties prior to this Agreement.
- 1 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
WHEREAS, D3 Esports wishes to engage Mainline.GG under this Agreement to build, design, maintain, and support d3.mainline.gg.
NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. General Terms . Mainline.GG will build a web application (d3.mainline.gg) that will facilitate the D3 Open Series (further detail located in Exhibit A: D3 Competitive Racing Details ), a monthly online time trial submission competition. This includes, but is not limited to, registration of players, set up and creation of matches, and the management and execution of online events. Account registration will be free, and in order to register for an account, we will be securing: First Name / Last Name, Email Address, and Date of Birth. All events and submissions will be free to enter with a Mainline.GG account. The first iteration of the site launched July 27, 2018. The second iteration of the site (being defined in Exhibit A: D3 Competitive Racing Details ) will launch January 25, 2018. Press releases, announcements, and marketing will target this date as the launch date. After its launch, users will be able to register for the site 24 hours a day, 365 days a year.
2. Mainline.GG Responsibilities . Mainline.GG will be responsible for the following during each contract year of the term of this agreement:
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A. |
D3 Esports will receive a fully-functional, licensed, online esports platform/web application that D3 can confidently share with their consumers; |
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B. |
The web application which will be the sole responsibility of Mainline.GG to host, operate, and maintain according to the terms and conditions of this Agreement; |
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C. |
Web application uptime of 95% outside of scheduled maintenance and updates; |
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D. |
A Mainline.GG Community Manager to be assigned to the D3 Esports account for assistance in moderating, policing, building a user base, and creating and fostering the community; this Manager will also assist with reporting, customer service, and general inquiries; |
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E. |
D3esports.com will house a sponsorship screen to which D3 Esports can point potential advertisers and/or sponsors to aid in the sales process |
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a. |
Mainline.GG will be responsible for creating and posting a mockup of the second iteration of the site on this sponsorship screen |
- 2 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
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b. |
This screen is only required to remain relevant until the second iteration of the site goes live; at this point, D3 Esports will be able to use the live site as a sales vehicle |
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c. |
Mainline.GG agrees to host d3esports.com and d3.mainline.gg as part of ongoing monthly payments |
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F. |
Availability for larger advertising meetings and/or custom requests or questions regarding d3.mainline.gg and Mainline.GG capabilities; |
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a. |
Following, Mainline.GG will provide a dedicated sponsorship page on d3esports.com linked from the menu and the home page that details sponsorship opportunities |
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b. |
It is the responsibility of D3 Esports to provide the text for this page; however, Mainline.GG will be responsible for an unofficial screenshot showing sponsorship space until the second iteration of the d3.mainline.gg site is live |
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G. |
Introduction to current Mainline.GG advertisers where it is seen as a mutually beneficial partnership opportunity; |
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H. |
Direct links to d3esports.com and dawsonracing.com will be accessible from d3.mainline.gg. |
3. Mutual Responsibilities . D3 Esports and Mainline.GG will both be responsible for the following during each contract year of the term of this agreement:
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A. |
Both parties shall be responsible for all user data, email data, ad profile data, user usage data, cookie data and/or pixel data – including any user registration data through Mainline.GG’s affiliation with D3 – shall be mutually owned and controlled by Mainline.GG and D3 Esports; |
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B. |
Mainline.GG does not assume any risks associated with the user data, user interaction, or results of user interaction on the D3 Esports web application; |
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C. |
Mainline.GG and D3 will work together to land new business in the form of advertisers and strategic partners; |
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D. |
Mainline.GG will have the right to use D3 branding in marketing efforts to engage users on social media sites (e.g. Facebook, Twitter) and to target users with digital ad buys (e.g. Google AdWords); |
- 3 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
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E. |
Mainline.GG will be considered the “Official Esports Partner of D3 Esports and Dawson Racing” with exclusivity; |
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F. |
Both D3 and Mainline.GG will label the web application as the “Official Esports Platform of D3 Esports and Dawson Racing.” |
4. D3 Esports Responsibilities . During each contract year of the term of this agreement:
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A. |
D3 will sell advertising inventory on the D3/Mainline.GG web application in the form of title sponsorships, product placement, and linked sponsorships; |
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B. |
Revenue sharing terms and conditions apply (see below) |
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C. |
D3-related prizes for esports events and tournament champions, e.g. gear, experiences, memorabilia, merchandise |
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D. |
ALL PROMOTION, USER SOLICITATION, PRIZES, REWARDS, MARKETING, AND ANY OTHER EFFORT TO GET USERS TO REGISTER AND SUBMIT TIMES TO THE SITE IS SOLELY THE RESPONSIBILITY OF D3 ESPORTS. Mainline.GG agrees to help in good faith; however, the burden of responsibility lies with D3 Esports; |
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E. |
This includes full marketing support via all current social media channels, eblasts to current contact lists, and promotional marketing collateral to ensure the success of the esports experience; |
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F. |
Monthly social media mentions recognizing d3.mainline.gg as the Official Esports Platform for D3 Esports and Dawson Racing promoting current esports events; |
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G. |
Mainline.GG personnel presence at all D3 Esports events for entertaining sponsors and securing new business; |
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H. |
Mainline.GG will work with D3 to form creative marketing plans to support the esports initiative that are shareable to social media platforms; |
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I. |
D3 to send (daily or weekly) emails/news blasts to existing contact lists announcing tournaments, events, live events, and general esports updates; |
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J. |
Banner ads and links on the D3 website directing fans to the D3/Mainline.GG web application; |
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K. |
Introduction to current D3 advertisers and sponsors where it is seen as a mutually beneficial partnership opportunity. |
- 4 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
5. Revenue Sharing . The Parties agree to share the net revenue of all monetization and sponsorship dollars collected associated with D3 Esports. The split for all sponsorships and advertising sold will remain at 100% D3 Esports / 0% Mainline.GG until the launch of the second iteration of d3.mainline.gg on January 25, 2018. Following, the distribution of all sponsorships and advertising sold in connection with this Agreement will be 85% D3 Esports / 15% Mainline.GG. All sales, rates, and values of sponsorships must be mutually approved Mainline.GG and D3 Esports, whose consent may not be unreasonably withheld. Any revenue-generating products and services created by Mainline.GG to be used on d3.mainline.gg are subject to D3’s prior approval.
6. U. The Term of this Agreement shall begin on the Effective Date and end on May 14, 2020. During the term of this agreement, D3 Esports will share in all benefits afforded to Mainline.GG by Microsoft Corporation as outlined in the previously-approved Forza Tournament License Agreement.
7. Fees and Payment . D3 Esports will pay to Mainline.GG Sixty Thousand Dollars ($60,000.00) as a one-time onboarding cost for the creation and customization of d3.mainline.gg. D3 Esports will also pay to Mainline.GG Ten Thousand Dollars ($10,000.00) monthly for the term of the Agreement. The total monthly fee covers ongoing service, maintenance, management, and server costs for the web application, as well as community management work as covered under Mainline.GG Responsibilities above. All fees are exclusive of taxes (including without limitation, sales and use, excise, franchise, withholding, value-added, consumption, and similar taxes and all customs, duties, or other governmental impositions, but excluding taxes imposed on Mainline.GG’s income). D3 Esports will pay all invoices within thirty (30) days of invoice date. If D3 Esports fails to pay any amounts when due, then Mainline.GG may, without limiting its other available remedies, (i) assess interest at the rate of six percent (6%) per month (or the maximum rate permitted by applicable law, whichever is less) for overdue amounts, (ii) invoice D3 Esports for Mainline.GG’s reasonable attorneys’ fees incurred in collecting payments, and/or (iii) suspend performance of the Services upon three (3) days’ notice.
8. Warranties .
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a. |
General. Each party represents and warrants that: (a) it is an organization duly organized, validly existing and in good standing under the laws of the state in which it is incorporated or registered; (b) it has all requisite power and authority to execute this Agreement and to perform its obligations hereunder; (c) the execution, delivery, and performance of this Agreement has been duly authorized and this Agreement is a valid and binding agreement enforceable in accordance with its terms; and (d) it will perform its obligations under this Agreement in a manner that complies with all applicable laws. |
- 5 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
|
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b. |
Services. Mainline.GG warrants to D3 Esports that Mainline.GG will perform Services in a professional manner by qualified personnel and in a manner consistent with industry standards. D3 Esports’ sole and exclusive remedy for Mainline.GG’s breach of the foregoing warranty shall be to provide Mainline.GG with a written description of such breach within thirty (30) days from the date of performance of the nonconforming Service, in which case Mainline.GG shall, at its expense, re-perform such Services. If no written rejection is given to Mainline.GG by Customer within such thirty (30) days, Service shall be deemed to conform to the warranty. For the avoidance of doubt, this Section 8 does not limit Mainline.GG’s obligations or D3 Esports’ rights under any SLA. |
Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION EIGHT (8), MAINLINE.GG MAKES NO OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO ANY OTHER MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE SERVICES, AND MAINLINE.GG HEREBY EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR NEED, ACCURACY, NON-INFRINGEMENT OF THIRD PARTY RIGHTS AND TITLE, AND ANY WARRANTIES THAT MAY ARISE FROM COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE OF TRADE
9. Confidential Information .
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a. |
Definition . For purposes of this Agreement, “Confidential Information” means all information of a party (the “Disclosing Party”) that is disclosed or made available to the other party (the “Receiving Party”) in connection with this Agreement that is marked or otherwise clearly identified as confidential, and or that the Receiving Party knows or reasonably should know, based on the circumstances of disclosure, to be confidential, including, without limitation, any and all information or proprietary materials (in every form and media) that have been or are hereafter disclosed and that are not generally known in the relevant trade or industry of the Receiving Party. Confidential Information does not include information that the Receiving Party can demonstrate: (1) was publicly available at the time it was communicated to the Receiving Party; (2) became publicly available subsequent to the time it was communicated to the Receiving Party through no fault of the Receiving Party; (3) was in the Receiving Party’s possession free of any obligation of confidence at the time it was communicated to the Receiving Party; or (4) was rightfully communicated to the Receiving Party free of any obligation of confidence subsequent to the time it was communicated. |
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b. |
Obligation . The Receiving Party shall hold the Disclosing Party’s Confidential Information in strict confidence and shall treat such Confidential Information with the |
- 6 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
|
|
|
same degree of care that it uses to protect its own Confidential Information, but with not less than reasonable care. The Receiving Party shall only use the Disclosing Party’s Confidential Information as required to accomplish the intent of this Agreement or the MSA. Notwithstanding the above, the Receiving Party shall not be in violation of this Section 9(b) with regard to a disclosure to the extent (i) required by applicable disclosure laws or regulations, or (ii) in response to a valid order by a court or other governmental body, in which case the Receiving Party must provide the Disclosing Party with prior written notice of such disclosure sufficient to permit the Disclosing Party to seek a protective order or other confidential treatment of such information, and must cooperate in any attempt to seek such protective order or other confidential treatment. |
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c. |
Return of Materials . Upon termination or expiration of the Agreement, or upon written request of the Disclosing Party, the Receiving Party shall promptly return to the Disclosing Party all documents and other tangible materials representing the Disclosing Party’s Confidential Information and all copies thereof. |
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d. |
Data . Mainline.GG may use data and content that is processed through and/or stored by the Platform in order to modify and improve its own products and services. |
10. Indemnity . D3 ESPORTS AGREES TO INDEMNIFY AND HOLD HARMLESS MAINLINE.GG, FROM AND AGAINST ALL CLAIMS, ACTIONS, LIABILITIES, DAMAGES, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES) ARISING OR RESULTING FROM (I) ANY USE OR MISUSE OF MAINLINE.GG’S DELIVERABLES AND THE SERVICES PROVIDED PURSUANT TO THIS AGREEMENT (UNLESS SUCH CLAIMS, ACTIONS, LIABILITIES, DAMAGES, COSTS AND EXPENSES ARISE FROM NEGLIGENCE OF MAINLINE.GG), (II) D3 ESPORTS-PROVIDED MATERIALS OR MAINLINE.GG’S USE THEREOF IN ACCORDANCE WITH THIS AGREEMENT, (III) MAINLINE.GG’S COMPLIANCE WITH ANY SPECIFICATIONS OR DIRECTIONS PROVIDED BY OR ON BEHALF OF D3 ESPORTS; OR (IV) ANY ALLEGATION OF FACTS THAT, IF TRUE, WOULD CONSTITUTE D3 ESPORTS’ BREACH OF ANY OF ITS REPRESENTATIONS, WARRANTIES, COVENANTS OR OBLIGATIONS UNDER THIS AGREEMENT, EXCEPT TO THE EXTENT SUCH CLAIM IS FINALLY DETERMINED TO HAVE RESULTED FROM MAINLINE.GG’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
11. Assignment . This Agreement will inure to the benefit of and be binding upon the successors and permitted assigns of the parties. Each party may, without the consent of the other, assign this Agreement in the event of the sale of all or substantially all of the assets or business of such party to which this Agreement relates, including by merger, acquisition, or
- 7 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
similar change in control, or operation of law. In other circumstances, consent of the other party shall be required, and such consent shall not be unreasonably withheld.
12. Non-Exclusivity . Nothing in this Agreement will restrict or limit Mainline.GG from performing any consulting, implementation, integration, development, training, maintenance, support or other services on behalf of itself or any other entity in any industry, and Mainline.GG may enter into agreements with other companies for the provision of services at any time.
13. Independent Contractors . In all matters relating to this Agreement, Mainline.GG and D3 Esports will act as independent contractors and nothing in this Agreement shall be construed as creating a partnership, joint venture or employer-employee relationship. Neither party will represent that it has any authority to assume or create any obligation, expressed or implied, on behalf of the other party, or to represent the other party as agent, partner, employee, or in any other capacity. Neither Mainline.GG nor D3 Esports shall become liable or bound by any representation, act, or omission whatsoever of the other party.
14. Cumulative Remedies, Waiver and Severability . All rights and remedies, whether conferred hereunder, or by any other instrument or law, unless otherwise expressly stated, will be cumulative and may be exercised singularly or concurrently. The failure of any party to enforce any of the provisions hereof will not be construed to be a waiver of the right of such party thereafter to enforce such provisions. If one or more provisions in this Agreement are ruled entirely or partly invalid or unenforceable by any court or governmental authority of competent jurisdiction, then the validity and enforceability of all provisions not ruled to be invalid or unenforceable shall remain unaffected.
15. Notices . All notices and other legal or formal communications which are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be deemed to have been duly given: (i) on the date of delivery if delivered by hand or by confirmed facsimile; (ii) upon the fifth day after such notice is deposited in the United States mail, if mailed by registered or certified mail, postage prepaid, return receipt requested, or (iii) upon the date of the courier’s verification of delivery at the specified address if sent by a nationally-recognized overnight express courier. Written notices shall be provided to the applicable party at the address first written above, or such address as may be otherwise provided in writing by a party hereunder.
16. Governing Law & Venue . This Agreement will be governed by the laws of the United States of America and the State of Texas, without reference to its conflict of laws principles or any other principles that would result in the application of a different body of law. Both Parties irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or
- 8 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
proceeding arising out of this Agreement or the transactions contemplated hereby in the United States District Court for the State of Texas or the state courts of Harris County, Texas and hereby irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in such court has been brought in an inconvenient forum.
17. Force Majeure . Mainline.GG shall be excused from performance under this Agreement for any period to the extent that it is prevented from performing any obligation, in whole or in part, as a result of causes beyond its reasonable control and without its negligent or willful misconduct, including without limitation, acts of God, natural disasters, war or other hostilities, terrorist attacks, labor disputes, civil disturbances, governmental acts, orders or regulations, third party non-performance, or failures or fluctuations in electrical power, heat, light, air conditioning or telecommunications equipment.
18. Headings . The section headings set forth in this Agreement are for the convenience of the parties, and in no way define, limit, or describe the scope or intent of this Agreement. Such headings are to be given no legal effect.
19. Limitation of Liability . EXCEPT FOR DAMAGES CAUSED BY A BREACH OF SECTION NINE (9) OF THIS AGREEMENT, IN NO EVENT, TO THE MAXIMUM EXTENT PERMITTED UNDER APPLICABLE LAW, WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, SPECIAL, EXEMPLARY, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT LIMITATION LOSS OF PROFITS AND COST OF COVER) ARISING FROM OR RELATING TO THIS AGREEMENT, EVEN IF SUCH PARTY KNEW OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF, OR COULD REASONABLY HAVE PREVENTED, SUCH DAMAGES. IN NO EVENT SHALL MAINLINE.GG’S TOTAL LIABILITY ARISING FROM OR RELATING TO THIS AGREEMENT, WHETHER SUCH DAMAGES ARE BASED ON TORT, CONTRACT, OR ANY OTHER LEGAL THEORY, EXCEED THE AMOUNT OF FEES PAID BY CUSTOMER TO MAINLINE.GG UNDER THE STATEMENT OF WORK PURSUANT TO WHICH THE CLAIM AROSE DURING THE TWELVE (12) MONTHS PRECEDING THE CAUSE OF ACTION.
20. Counterparts . This Agreement may be executed in counterparts, each of which will be considered an original, but all of which together will constitute the same instrument.
21. Subcontracting . Mainline.GG may subcontract portions of the Services; provided, however, that it shall require any such subcontractor to adhere to the obligations imposed upon Mainline.GG with respect to the Services; and provided, further, however, that Mainline.GG shall remain fully liable to D3 Esports for any services subcontracted.
- 9 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
22. Integration; Order of Precedence; Amendment . This Agreement constitutes the entire agreement between the parties, and supersedes all other prior or contemporaneous communications between the parties (whether written or oral, and including terms of purchase orders) relating to the subject matter of the Agreement. The Agreement may be modified or amended solely in a writing signed by both parties.
- 10 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
In Witness Whereof, the parties have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.
- 11 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
EXHIBIT A
D3 Competitive Racing Details
The D3 Open Series
Platform: The D3 Open Series will allow for time trial submission from any platform; final monthly Showdown races will be officially held on Xbox (see “D3 Showdown Series” for more information).
D3 Esports will host month-long time trials (“the D3 Open Series”) beginning on the first of the calendar month and ending on the last day of the calendar month.
During the D3 Open Series, time trial results will be submitted by end users with an included screenshot to verify submitted times; users can submit as many lap times as they desire.
The system will take users’ top five best times and display them alongside their names on a leaderboard.
At the end of each month, D3 Esports will take the top X number of players on the leaderboard from that calendar month (with X being defined as no more than 12 leaderboard positions) for the D3 Showdown Series.
Time trials will be available for submission 24 hours a day, 365 days a year.
All time trial submissions and follow-up D3 Showdown Series championship races will be held on a predetermined track, with the same track being used for the entirety of the given month.
Players must comply with a D3 standard rule set for Forza; this rule set will be publicly available on d3.mainline.gg.
The D3 Showdown Series
The D3 Showdown Series will be a custom race held once a month to determine a monthly champion.
The competitors of the D3 Showdown Series will be selected from the top X number of finishers on the monthly D3 Open Series leaderboard.
- 12 -
Mainline.GG, LLC
1336 Brittmoore Rd.
Houston, TX 77043
Until further amendments are made, the D3 Showdown Series will be organized manually; however, winners of each Showdown Series will be displayed on the website, creating historical record of champions.
A Mainline.GG Community Manager will assist in running the monthly Showdown Series event through Discord.
- 13 -
Exhibit 99.2
D3ESPORTS CORP.
Financial Statements
June 30, 2018
Table of Contents
|
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Page |
|
|
|
|
Independent Auditors’ Report |
1 |
|
|
|
|
Balance Sheet |
2 |
|
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|
|
Statement of Operations |
3 |
|
|
|
|
Statement of Stockholders’ Equity |
4 |
|
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|
|
Statement of Cash Flows |
5 |
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|
|
Notes to Financial Statements |
6-8 |
- 1 -
D3ESPORTS CORP.
BALANCE SHEET
JUNE 30, 2018
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
20,025 |
|
|
Total current assets |
|
|
20,025 |
|
|
|
|
|
|
|
|
Property and Equipment |
|
|
|
|
|
Vehicles – race cars |
|
|
387,450 |
|
|
Website design |
|
|
60,000 |
|
|
|
|
|
447,450 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
467,475 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accounts payable |
|
$ |
20,000 |
|
|
Total current liabilities |
|
|
20,000 |
|
|
|
|
|
|
|
|
Commitments |
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
Class A Preferred Stock, par value $.001, unlimited shares authorized, 1,000,000 shares issued and outstanding, liquidation preference of $1,000,000 |
|
|
1,000 |
|
|
Common Stock , par value $.001, unlimited shares authorized, 4,706,508 shares issued and outstanding |
|
|
4,707 |
|
|
Additional Paid in Capital |
|
|
443,763 |
|
|
Accumulated deficit |
|
|
(1,995 |
) |
|
Total Stockholder’s Equity |
|
|
447,475 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
467,475 |
|
The accompanying notes are an integral part of the financial statements
- 2 -
D3ESPORTS CORP.
STATEMENT OF OPERATIONS
From Inception (MAY 1, 2018) through June 30, 2018
|
|
|
2018 |
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
$ |
1,995 |
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(1,995 |
) |
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,995 |
) |
The accompanying notes are an integral part of the financial statements
- 3 -
D3ESPORTS CORP.
STATEMENT OF STOCKHOLDERS’ EQUITY
From Inception (MAY 1, 2018) through JUNE 30, 2018
The accompanying notes are an integral part of the financial statements
- 4 -
D3ESPORTS CORP.
STATEMENT OF CASH FLOWS
From Inception (MAY 1, 2018) through June 30, 2018
|
|
|
2018 |
|
|
|
|
|
|
|
|
|
Cash flow from operating activities: |
|
|
|
|
|
Net loss |
|
$ |
(1,995 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
Founders shares issued for expenses |
|
|
1,995 |
|
|
Net cash used in operating activities |
|
|
— |
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Website design |
|
|
(40,000 |
) |
|
Net cash used in investing activities |
|
|
(40,000 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Proceeds from issuance of common stock |
|
|
60,025 |
|
|
Net cash provided by financing activities |
|
|
60,025 |
|
|
|
|
|
|
|
|
Net change in cash |
|
|
20,025 |
|
|
|
|
|
|
|
|
Cash and equivalents, beginning of period |
|
|
— |
|
|
|
|
|
|
|
|
Cash and equivalents, end of period |
|
$ |
20,025 |
|
|
|
|
|
|
|
|
Schedule of non-cash investing and financing activities: |
|
|
|
|
|
Contribution of race cars for common stock |
|
$ |
387,450 |
|
|
Accounts payable for website design |
|
$ |
20,000 |
|
The accompanying notes are an integral part of the financial statements
- 5 -
D3ESPORTS CORP.
NOTES TO FINANCIAL STATEMENTS
From Inception (MAY 1, 2018) through JUNE 30, 2018
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business – D3esports Corp., (a Wyoming Corporation, “the Company”) was formed on May 1, 2018 and is based in Angleton, TX. The Company plans to hold monthly time trial format competitions through an eSports platform that allows professional race car drivers and eSport athletes (gamer enthusiasts) to compete for a real experience in a race car and points that can be used to purchase products and services through our partners and
The financial statements are presented in accordance with United States generally accepted accounting principles.
Cash and Cash Equivalents – The Company considers all highly liquid debt instruments with an original maturity of three months or less at the date of purchase to be cash equivalents.
Property and Equipment – Property and equipment consists of vehicles and website design. The vehicles are three race cars which were contributed as capital at the inception of the Company and recorded at their estimated fair value. Due to the nature of race cars, there is no depreciation expense being recorded as race cars appreciate over time.
Website design consists primarily of the cost of a contract with Mainline, an Esports provider, for the design of an esports website and platform for the Company. The contract cost will be amortized on a straight line basis over the life of the contract which is two years, beginning in July 2018.
Improvements or betterments of a permanent nature are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The cost of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal. Gains or losses resulting from property disposals are credited or charged to operations in the year of disposal.
Income Taxes
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain 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. Management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the financial statements.
- 6 -
D3ESPORTS CORP.
NOTES TO FINANCIAL STATEMENTS
From Inception (MAY 1, 2018) through JUNE 30, 2018
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements – In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date to periods beginning after December 15, 2018. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016. In December 2016, the FASB further issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, to increase stakeholders’ awareness of the proposals and to expedite improvements to ASU 2014-09. The Company plans to adopt the standard using the modified retrospective approach. After assessing the new standard, the Company expects that there will be no material impacts to our revenue recognition procedures, except for information compilation for the new required disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases. This guidance requires an entity to recognize lease liabilities and a right-of-use asset for all leases on the balance sheet and to disclose key information about the entity’s leasing arrangements. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2019, with earlier adoption permitted. ASU 2016-02 must be adopted using a modified retrospective approach for all leases existing at, or entered into after the date of initial adoption, with an option to elect to use certain transition relief. The Company is evaluating the impact of this new standard on its financial position, results of operations, cash flows and related disclosures.
Going Concern
The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is dependent upon its ability to generate revenues or raise the necessary capital to further implement its business plan and ultimately achieve profitable operations. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations. Accordingly, there is substantial doubt as to our ability to continue as a going concern. However, management believes that actions presently being taken provide the opportunity for the Company to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 2 – COMMITMENTS
The contract with Mainline includes a monthly charge for on-going service and maintenance of the website/gaming platform. The payments are $10,000 per month beginning in September 2018. The contract expires April 30, 2020. Future payments are as follows: $100,000 for the year ending June 30, 2019 and $100,000 for the year ending June 30, 2020.
- 8 -
D3ESPORTS CORP.
NOTES TO FINANCIAL STATEMENTS
From Inception (MAY 1, 2018) through JUNE 30, 2018
NOTE 3 – EQUITY
The Class A Preferred Stock has a par value of $.001 and the number of shares constituting such class shall be unlimited. As of June 30, 2018, the Company has 1,000,000 share of Class A Preferred Stock issued and outstanding. The Class A Preferred Stock has priority in liquidation and has a liquidation preference of $1 per share. The Class A Preferred Stock holders are not entitled to receive dividends and have no voting rights. The Class A Preferred Stock is redeemable by the Company at any time at $1 per share.
The Company has also authorized 1,000,000 shares of Class E Preferred Stock. The Class E Preferred Stock has a par value of $.001 and ranks junior to all the Company’s common and other preferred stock. There are no dividends on the Class E Preferred Stock and there is no participation in liquidation, dissolution or winding-up distribution of the assets of the Company. The shares of outstanding Class E Preferred Stock shall have the right to vote based on the number of votes equal to twice the number of votes of all outstanding shares of capital stock such that the holders of the outstanding shares of Class E Preferred Stock shall always constitute sixty-six and two thirds of the voting rights of the Company. As of June 30, 2018, there are no Class E Preferred Shares outstanding.
NOTE 4 – INCOME TAXES
The deferred tax asset as of June 30, 2018 was approximately $400, offset by a valuation allowance of the same amount resulting in a deferred tax asset of June 30, 2018 of $0. There is no income tax provision for the period from inception (May 1, 2018) through June 30, 2018 due to the change in the valuation allowance. The difference between the effective rate and the statutory rate is the result of the change in the valuation allowance. At June 30, 2018 the Company had an unused net operating loss carry over approximating $2,000 that is potentially available to offset future taxable income, it expires beginning 2028.
NOTE 5 – RELATED PARTY
The Company has been provided warehouse, office space and other organizational expenses by its chief executive officer, Simon Dawson, for founders’ shares, at a minimal cost of $1,995.
NOTE 6 – SUBSEQUENT EVENTS
Management as evaluated subsequent events through November 20, 2018, the date the financial statements were available to be issued.
As of August 30, 2018 the Company issued 1,061,496 shares of common stock for consulting and legal services.
The Company has entered into an agreement to be acquired by a StemGen, Inc. a publicly traded company. The target date for this acquisition is December 31, 2018.
- 8 -
Exhibit 99.3
D3ESPORTS CORP.
BALANCE SHEETS
(Unaudited)
|
|
|
September 30,
|
|
June 30,
|
|
||
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
— |
|
$ |
20,025 |
|
|
Total current assets |
|
|
— |
|
|
20,025 |
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment |
|
|
|
|
|
|
|
|
Vehicles – race cars |
|
|
387,450 |
|
|
387,450 |
|
|
Website design |
|
|
60,000 |
|
|
60,000 |
|
|
|
|
|
447,450 |
|
|
447,450 |
|
|
Less accumulated depreciation |
|
|
(5,000 |
) |
|
— |
|
|
|
|
|
442,450 |
|
|
447,450 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
442,450 |
|
$ |
467,475 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
11,391 |
|
$ |
20,000 |
|
|
Advance from shareholder |
|
|
14,500 |
|
|
— |
|
|
Total current liabilities |
|
|
25,891 |
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
Commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
Class A Preferred Stock, par value $.001, unlimited shares authorized, 1,000,000 shares issued and outstanding, liquidation preference of $1,000,000 |
|
|
1,000 |
|
|
1,000 |
|
|
Common Stock , par value $.001, unlimited shares authorized, 5,769,004 and 4,706,508 shares issued and outstanding at September 30, 2018 and June 30, 2018, respectively |
|
|
5,769 |
|
|
4,707 |
|
|
Additional Paid in Capital |
|
|
461,371 |
|
|
443,763 |
|
|
Accumulated deficit |
|
|
(51,581 |
) |
|
(1,995 |
) |
|
Total Stockholder’s Equity |
|
|
416,559 |
|
|
447,475 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
442,450 |
|
$ |
467,475 |
|
The accompanying notes are an integral part of the financial statements
- 3 -
D3ESPORTS CORP.
STATEMENT OF OPERATIONS
For the three month period ending September 30, 2018 (Unaudited)
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
$ |
49,586 |
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(49,586 |
) |
|
|
|
|
|
|
|
Net loss |
|
$ |
(49,586 |
) |
The accompanying notes are an integral part of the financial statements
- 4 -
D3ESPORTS CORP.
STATEMENT OF STOCKHOLDERS’ EQUITY
For the three month period ending September 30, 2018 (Unaudited)
|
|
Class A
|
|
Common Stock |
|
|
|
Accumulated |
|
|
|
|||||||||
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
APIC |
|
Deficit |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
|
1,000,000 |
|
$ |
1,000 |
|
4,706,508 |
|
$ |
4,707 |
|
$ |
443,763 |
|
$ |
(1,995 |
) |
$ |
447,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services |
— |
|
|
— |
|
1,061,496 |
|
|
1,061 |
|
|
17,609 |
|
|
— |
|
|
18,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(49,586 |
) |
|
(49,856 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
|
1,000,000 |
|
$ |
1,000 |
|
5,768,004 |
|
$ |
5,769 |
|
$ |
461,371 |
|
$ |
(51,581 |
) |
$ |
416,559 |
|
The accompanying notes are an integral part of the financial statements
- 5 -
D3ESPORTS CORP.
STATEMENT OF CASH FLOWS
For the three month period ending September 30.2018 (Unaudited)
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities: |
|
|
|
|
|
Net loss |
|
$ |
(49,586 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
Depreciation |
|
|
5,000 |
|
|
Shares issued for services |
|
|
18,670 |
|
|
Decrease in accounts payable |
|
|
(8,609 |
) |
|
Net cash used in operating activities |
|
|
(34,525 |
) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Website design |
|
|
— |
|
|
Net cash used in investing activities |
|
|
— |
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Advances from shareholder |
|
|
14,500 |
|
|
Net cash provided by financing activities |
|
|
14,500 |
|
|
|
|
|
|
|
|
Net change in cash |
|
|
(20,025 |
) |
|
|
|
|
|
|
|
Cash and equivalents, beginning of period |
|
|
20,025 |
|
|
|
|
|
|
|
|
Cash and equivalents, end of period |
|
$ |
— |
|
The accompanying notes are an integral part of the financial statements
- 6 -
D3ESPORTS CORP.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018 (Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business – D3esports Corp., (a Wyoming Corporation, “the Company”) was formed on May 1, 2018 and is based in Angleton, TX. The Company plans to hold monthly time trial format competitions through an eSports platform that allows professional race car drivers and eSport athletes (gamer enthusiasts) to compete for a real experience in a race car and points that can be used to purchase products and services through our partners and
The financial statements are presented in accordance with United States generally accepted accounting principles.
Cash and Cash Equivalents – The Company considers all highly liquid debt instruments with an original maturity of three months or less at the date of purchase to be cash equivalents.
Property and Equipment – Property and equipment consists of vehicles and website design. The vehicles are three race cars which were contributed as capital at the inception of the Company and recorded at their estimated fair value. Due to the nature of race cars, there is no depreciation expense being recorded as race cars appreciate over time.
Website design consists primarily of the cost of a contract with Mainline, an Esports provider, for the design of an esports website and platform for the Company. The contract cost will be amortized on a straight line basis over the life of the contract which is two years, beginning in August 2018.
Improvements or betterments of a permanent nature are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The cost of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal. Gains or losses resulting from property disposals are credited or charged to operations in the year of disposal.
Income Taxes
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain 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. Management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the financial statements.
- 7 -
D3ESPORTS CORP.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018 (Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements – In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date to periods beginning after December 15, 2018. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016. In December 2016, the FASB further issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, to increase stakeholders’ awareness of the proposals and to expedite improvements to ASU 2014-09. The Company plans to adopt the standard using the modified retrospective approach. After assessing the new standard, the Company expects that there will be no material impacts to our revenue recognition procedures, except for information compilation for the new required disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases. This guidance requires an entity to recognize lease liabilities and a right-of-use asset for all leases on the balance sheet and to disclose key information about the entity’s leasing arrangements. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2019, with earlier adoption permitted. ASU 2016-02 must be adopted using a modified retrospective approach for all leases existing at, or entered into after the date of initial adoption, with an option to elect to use certain transition relief. The Company is evaluating the impact of this new standard on its financial position, results of operations, cash flows and related disclosures.
Going Concern
The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is dependent upon its ability to generate revenues or raise the necessary capital to further implement its business plan and ultimately achieve profitable operations. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations. Accordingly, there is substantial doubt as to our ability to continue as a going concern. However, management believes that actions presently being taken provide the opportunity for the Company to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 2 – COMMITMENTS
The contract with Mainline includes a monthly charge for on-going service and maintenance of the website/gaming platform. The payments are $10,000 per month beginning in September 2018. The contract expires April 30, 2020. Future payments are as follows: $100,000 for the year ending June 30, 2019 and $100,000 for the year ending June 30, 2020.
- 8 -
D3ESPORTS CORP.
NOTES TO FINANCIAL STATEMENTS
September 30, 2018 (Unaudited)
NOTE 3 – EQUITY
The Class A Preferred Stock has a par value of $.001 and the number of shares constituting such class shall be unlimited. As of June 30, 2018, the Company has 1,000,000 share of Class A Preferred Stock issued and outstanding. The Class A Preferred Stock has priority in liquidation and has a liquidation preference of $1 per share. The Class A Preferred Stock holders are not entitled to receive dividends and have no voting rights. The Class A Preferred Stock is redeemable by the Company at any time at $1 per share.
The Company has also authorized 1,000,000 shares of Class E Preferred Stock. The Class E Preferred Stock has a par value of $.001 and ranks junior to all the Company’s common and other preferred stock. There are no dividends on the Class E Preferred Stock and there is no participation in liquidation, dissolution or winding-up distribution of the assets of the Company. The shares of outstanding Class E Preferred Stock shall have the right to vote based on the number of votes equal to twice the number of votes of all outstanding shares of capital stock such that the holders of the outstanding shares of Class E Preferred Stock shall always constitute sixty-six and two thirds of the voting rights of the Company. As of June 30, 2018, there are no Class E Preferred Shares outstanding.
During the three months ended September 30, 2018, the Company issued 1,061,496 shares of common stock for legal and consulting services valued at $18,670.
NOTE 4 – RELATED PARTY
The Company has been provided warehouse, office space and other organizational expenses by its chief executive officer, Simon Dawson, for which $5,000 was paid during the three month period ending September 30, 2018.
The Company received $14,500 in advances from a shareholder during the three months ended September 30, 2018. The advances bear no interest and have no repayment terms.
NOTE 5 – SUBSEQUENT EVENTS
Management as evaluated subsequent events through December 10, 2018, the date the financial statements were available to be issued.
The Company has entered into an agreement to be acquired by a StemGen, Inc. a publicly traded company. The target date for this acquisition is December 31, 2018.
- 9 -
Exhibit 99.4
INDEX TO UNAUDITED STEMGEN, INC.
PRO FORMA CONDENSED FINANCIAL STATEMENTS
|
Introduction |
2 |
|
|
|
|
Unaudited Pro Forma Condensed Balance Sheet as of September 30, 2018 |
3 |
|
|
|
|
Unaudited Pro Forma Condensed Statement of Operations for the three months ended September 30, 2018 |
4 |
|
|
|
|
Unaudited Pro Forma Condensed Statement of Operations for the year ended June 30, 2018 |
5 |
|
|
|
|
Notes to Unaudited Pro Forma Financial Information |
6 |
UNAUDITED STEMGEN, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Introduction
At the effective time of the merger (the “Merger”) of D3esports Corp. (“D3”), with and into StemGen, Inc. (“StemGen”), with StemGen surviving the Merger, each issued and outstanding share of common and preferred stock of D3 will be converted into common and preferred shares of StemGen in accordance with the terms of the Agreement and Plan of Reorganization between StemGen and D3.
The unaudited pro forma condensed balance sheet gives effect to the Merger as if it had occurred on September 30, 2018; the unaudited pro forma condensed statements of operations give effect to the Merger as if it had occurred on July 1, 2018 for the statement for the three months ended September 30, 2018 and as of May 1, 2018 (inception) for the statement for the year ended June 30, 2018. The unaudited pro forma condensed consolidated balance sheet and condensed consolidated statements of operations should be read in conjunction with (i) StemGen’s Annual Report on Form 10-K for the year ended June 30, 2018, as filed with the Securities and Exchange Commission (the “SEC”) on November 2, 2018, (ii) StemGen’s Quarterly Report on Form 10-Q for the three months ended September 30, 2018, as filed with the SEC on December 10, 2018, (iii) D3’s audited financial statements for the period from inception (May 1, 2018) through June 30, 2018 included elsewhere in this report, and (iv) D3’s unaudited quarterly financial statements for the three months ended September 30, 2018 included elsewhere in this report.
The unaudited pro forma condensed financial statements are for illustrative purposes only and are not necessarily indicative of the financial results that would have occurred if the Merger had been consummated on the dates indicated, nor are they necessarily indicative of the financial position or results of operations in the future. The pro forma adjustments, as described in the accompanying notes, are based upon available information and certain assumptions that are believed to be reasonable as of September 30, 2018.
- 2 -
StemGen, Inc.
Unaudited Pro Forma Condensed Balance Sheet
as of September 30, 2018
- 3 -
StemGen, Inc.
Unaudited Pro Forma Condensed Statement of Operations
For the Three Months Ended September 30, 2018
|
|
|
D3
|
|
Pro Forma
|
|
|
Pro Forma
|
|
||
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
|
$ |
49,586 |
|
9,750 |
|
(b) |
$ |
59,336 |
|
|
LOSS FROM OPERATIONS |
|
|
(49,586 |
) |
(9,750 |
) |
|
|
(59,336 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
— |
|
(20,322 |
) |
|
|
(20,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(49,586 |
) |
$ (30,072 |
) |
|
$ |
(79,658 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE – Basic and diluted |
|
$ |
.01 |
|
|
|
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – Basic and diluted |
|
|
5,769,001 |
|
39,631,587 |
|
(c) |
|
45,400,588 |
|
- 4 -
StemGen, Inc.
Unaudited Pro Forma Condensed Statement of Operations
For the Year Ended June 30, 2018
|
|
|
D3
|
|
Pro Forma
|
|
|
Pro Forma
|
|
||
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
|
$ |
1,995 |
|
5,387 |
|
(b) |
$ |
7,382 |
|
|
LOSS FROM OPERATIONS |
|
|
(1,995 |
) |
(5,387 |
) |
|
|
(7,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
— |
|
(15,262 |
) |
|
|
(15,262 |
) |
|
Gain on extinguishment of convertible debt |
|
|
— |
|
21,668 |
|
|
|
21,668 |
|
|
Net income |
|
$ |
(1,995 |
) |
$ 1,019 |
|
|
$ |
(976 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE – Basic and diluted |
|
|
|
|
|
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – Basic and diluted |
|
|
4,706,508 |
|
40,694,080 |
|
(c) |
|
45,400,588 |
|
- 5 -
StemGen, Inc.
Notes to Unaudited Pro Forma Financial Information
The unaudited pro forma condensed financial statements are for illustrative purposes only and are not necessarily indicative of the financial results that would have occurred if the Merger had been consummated on the dates indicated, nor are they necessarily indicative of the financial position or results of operations in the future. The pro forma adjustments, as described in the accompanying notes, are based upon available information and certain assumptions that are believed to be reasonable as of September 30, 2018.
Pro Forma Adjustments
Following is a description of the pro forma adjustments made to the historical financial statements of StemGen:
(a) Represents the acquisition of D3 assets and liabilities through the issuance of 39,631,587 shares of common stock and 7,000,000 shares of Series A Preferred Stock. The Merger is accounted for as a reverse acquisition with D3 being the continuing entity.
(b) Represents the results of operations of StemGen which will be included in the results of operations of D3 after the Merger.
(c) Pro forma weighted average number of common shares outstanding has been adjusted to reflect the issuance of 39,631,587 shares of common stock in the Merger.
- 6 -
