☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~January~~April 13, 2022, there were ~~1,616,022~~1,619,298 shares of the Company’s common stock issued and outstanding.

	November 30, 2021			May 31, 2021			February 28, 2022			May 31, 2021
ASSETS

Current Assets
Cash and cash equivalents	$	832,423		$	414,257		$	327,619		$	414,257
Accounts receivable, net		104,502			160,101			60,562			160,101
Inventory		364,610			206,974			312,244			206,974
Prepaid expenses		157,163			52,643
Prepaid franchise fees								204,728			-
Other current assets								320,602			52,643
Total Current Assets		1,458,698			833,975			1,225,755			833,975

Other Assets
Goodwill		5,180,141			5,180,141			5,180,141			5,180,141
Intangible assets, net		1,479,131			1,635,227			1,413,317			1,635,227
Deferred brokerage fees		75,135			79,943			76,292			79,943
Property and equipment, net		518,103			574,308			777,362			574,308
Right of use asset, operating leases, net		1,606,884			1,533,010			1,557,443			1,533,010
Security deposits		40,307			40,307			40,307			40,307
Due from franchisees’		7,640			23,007
Due from franchisees								-			23,007
Deferred equity financing costs		427,699			307,494			453,799			307,494
Total Other Assets		9,335,040			9,373,437			9,498,661			9,373,437

TOTAL ASSETS	$	10,793,738		$	10,207,412		$	10,724,416		$	10,207,412

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable	$	167,380		$	438,466		$	362,524		$	438,466
Accrued expenses		839,361			1,166,433			1,054,301			1,166,433
Current portion of convertible notes payable, net		1,121,334			2,211,097			1,441,853			2,211,097
Related party loan								247,818			-
Notes payable		41,735			82,235			41,735			82,235
Operating lease obligation, current		332,519			307,013			332,519			307,013
Current portion of deferred revenues		30,034			30,034			293,034			30,034
Total Current Liabilities		2,532,363			4,235,278			3,773,784			4,235,278

Operating lease obligation, net of current portion		1,262,098			1,199,748			1,175,474			1,199,748
Non current portion of convertible notes payable, net		620,007			-
Non-current portion of convertible notes payable, net								1,227,332			-
Secured notes payable, net		264,773						257,040			-
Deferred revenues, less current portion		169,913			182,342			188,699			182,342
Total Non-current Liabilities								2,848,545			1,382,090

Total Liabilities		4,849,154			5,617,368			6,622,329			5,617,368

Commitments and Contingencies – Note 7		-			-
Commitments and Contingencies – Note 6								-			-

Stockholders’ Equity
Preferred stock - $0.0001 par value, 1,000,000 shares authorized; 0 shares issued and outstanding		-			-			-			-
Common stock - $0.0001 par value; 36,000,000 shares authorized; 1,616,022 and 1,427,124 shares issued and outstanding as of November 30, 2021, and May 31, 2021, respectively		159			142
Common stock - $0.0001 par value; 36,000,000 shares authorized; 1,616,022 and 1,427,124 shares issued and outstanding as of February 28, 2022, and May 31, 2021, respectively								159			142
Common Stock Issuable		50,625			-			55,625			-
Additional paid-in capital		24,444,130			16,708,762			24,572,691			16,708,762
Accumulated deficit		(18,632,103	)		(12,291,899	)		(20,586,755	)		(12,291,899	)
Total Simplicity Esports and Gaming Company Stockholders’ Equity		5,862,811			4,417,005			4,041,720			4,417,005
Non-Controlling Interest		81,773			173,039			60,367			173,039
Total Stockholders’ Equity		5,944,584			4,590,044			4,102,087			4,590,044

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	10,793,738		$	10,207,412		$	10,724,416		$	10,207,412

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

	November 30, 2021			November 30, 2020			November 30, 2021			November 30, 2020			February 28, 2022			February 28, 2021			February 28, 2022			February 28, 2021
	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Nine Months Ended
	November 30, 2021			November 30, 2020			November 30, 2021			November 30, 2020			February 28, 2022			February 28, 2021			February 28, 2022			February 28, 2021

Revenues
Franchise royalties, fees and other	$	96,953			91,793			159,311			179,076		$	114,317		$	50,042		$	273,628		$	229,118
Company-owned stores sales		681,732			167,791			1,355,233			244,729
Company-owned stores and other														702,531			319,125			2,057,764			563,854
Esports revenue		65,130			36,962			234,111			73,342			71,663			59,312			305,774			132,654

Total Revenues		843,815			296,546			1,748,655			497,147			888,511			428,479			2,637,166			925,626

Cost of Goods Sold		(485,394	)		(113,771	)		(1,092,516	)		(181,416	)		(536,603	)		(186,280	)		(1,629,119	)		(367,697	)

Gross Margin		358,421			182,775			656,139			315,731			351,908			242,199			1,008,047			557,929

Operating Expenses Compensation and related benefits		845,886			366,257			2,149,012			668,825
Professional Fees		129,723			186,898			579,076			260,789
Operating Expenses
Compensation and related benefits														777,992			2,041,922			2,927,004			2,710,747
Professional fees														54,889			175,689			633,965			436,478
General and administrative expenses		432,127			212,631			875,822			454,400			531,349			450,136			1,407,171			904,535
Impairment Expense		-			201,277			-			201,277
Impairment expense														-			11,337			-			212,614

Total Operating Expenses		1,407,736			967,063			3,603,910			1,585,291			1,364,230			2,679,084			4,968,140			4,264,374

Loss from Operations		(1,049,315	)		(784,288	)		(2,947,771	)		(1,269,560	)		(1,012,322	)		(2,436,885	)		(3,960,093	)		(3,706,445	)

Other Income / (Expense)
Gain/(loss) on extinguishment of debt		29,168			15,250			(1,730,801	)		3,115
Other Income (Expense)
Loss (gain) on extinguishment of debt														-			-			(1,730,801	)		3,115
Interest and financing expense		(1,145,794	)		(244,660	)		(1,805,490	)		(398,788	)		(1,003,137	)		(548,595	)		(2,808,627	)		(947,383	)
Interest income		9			5			28			12			2			7			30			19
Other Income		206			-			52,564			-
Foreign exchange (loss)		-			-			-			(19,572	)
Other income														-			-			52,564			-
Foreign loss																	(1,254	)					(20,826	)

Total Other Income / (Expense)		(1,116,411	)		(229,405	)		(3,483,699	)		(415,233	)
Total Other Expense														(1,003,135	)		(549,842	)		(4,486,834	)		(965,075	)

Loss Before Provision for Income Taxes		(2,165,726	)		(1,013,693	)		(6,431,470	)		(1,684,793	)		(2,015,457	)		(2,986,727	)		(8,446,927	)		(4,671,520	)

Provision for Income Taxes		-			-			-			-			-			-			-			-

Net Loss		(2,165,726	)		(1,013,693	)		(6,431,470	)		(1,684,793	)		(2,015,457	)		(2,986,727	)		(8,446,927	)		(4,671,520	)

Net loss attributable to noncontrolling interest		36,429			8,533			91,266			24,419
Net Loss Attributable to Noncontrolling Interest														60,805			59,707			152,071			84,126

Net loss attributable to common shareholders	$	(2,129,297	)	$	(1,005,160	)	$	(6,340,204	)	$	(1,660,374	)
Net Loss Attributable to Common Shareholders													$	(1,954,652	)	$	(2,927,020	)	$	(8,294,856	)	$	(4,587,394	)

Basic and Diluted Net Loss per share	$	(1.39	)	$	(0.84	)	$	(4.15	)	$	(1.42	)	$	(1.21	)	$	(2.23	)	$	(5.33	)	$	(3.89	)

Basic and diluted Weighted Average Number of Common Shares Outstanding		1,527,908			1,192,945			1,526,066			1,166,150
Basic and Diluted Weighted Average Number of Common Shares Outstanding														1,616,022			1,309,631			1,555,722			1,179,925

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~NOVEMBER 30,~~FEBRUARY 28, 2022 and 2021 ~~and 2020~~

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

	November 30, 2021			November 30, 2020			February 28, 2022			February 28, 2021
	For the Six Months Ended						For the Nine Months Ended
	November 30, 2021			November 30, 2020			February 28, 2022			February 28, 2021

Cash flows from operating activities:
Net loss	$	(6,431,470	)	$	(1,684,793	)	$	(8,446,927	)	$	(4,671,520	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense		1,696,395			241,557			2,612,798			731,551
Cash paid in interest								(191,314	)		-
Deferred guaranteed interest		(247,400	)		-			(15,385	)		-
Depreciation expense		165,653			73,249			245,817			151,342
Amortization expense		156,096			133,229			221,910			212,343
Provision for uncollectible accounts		12,943			-
Impairment loss		-			202,586			-			213,923
Lease liability net of leased asset		13,982			2,499			(23,201	)		6,070
Loss on extinguishment of debt		1,730,801			-			1,771,301			3,115
Gain on forgiveness of PPP loan								(40,500	)		-
Stock based compensation		1,218,814			-			1,407,175			1,954,480
Gain on Asset Acquisition		(2,357	)		-
Deferred equity financing costs		(120,205	)		(137,561	)		(146,305	)		(137,561	)
Issuance of shares for services		407,883			1,033,140			407,883			-
Issuance of shares for interest payment		81,508			-			81,508			-
Issuance of shares for inventory		8,703			-
Changes in operating assets and liabilities:
Accounts receivable		55,599			(3,668	)		99,539			29,820
Inventory		(157,636	)		(20,676	)		(96,567	)		(39,839	)
Prepaid expenses		(104,520	)		(15,122	)
Other current assets								(267,959	)		17,272
Prepaid franchise fees								(204,728	)		-
Security deposits								-			(22,000	)
Deferred brokerage fees		4,808			25,884			3,651			42,445
Deferred revenues		(12,429	)		(63,279	)		269,357			(82,368	)
Accounts payable		(271,086	)		110,595			(75,942	)		381,128
Accrued expenses		(327,072	)		(194,223	)		(112,132	)		423,141
Due from franchisees’		15,367			(45,516	)
Due from franchisees								23,007			(31,514	)

Net cash used in operating activities		(2,105,623	)		(342,099	)		(2,477,014	)		(818,172	)

Cash flows from investing activities:
Purchase of property and equipment		(13,302	)		(1,949	)		(352,725	)		(8,949	)

Net cash provided by (used in) investing activities		(13,302	)		(1,949	)
Net cash used in investing activities								(352,725	)		(8,949	)

Cash flows from financing activities:
Repayment of notes payable		(1,324,409	)		(319,477	)		(1,350,816	)		(1,554,641	)
Proceeds from note payable		3,761,500			1,046,756			4,009,318			2,779,524
Proceeds from sale of warrants		100,000			-			100,000			-
Private placement funds received		-			25,000
Distribution of non-controlling interest								(54,800	)		-
Contribution from noncontrolling interest								39,399			14,000

Net cash provided by financing activities		2,537,091			752,279			2,743,101			1,238,883

Net change in cash		418,166			408,231			(86,638	)		411,762

Cash - beginning of period		414,257			160,208			414,257			160,208

Cash - end of period	$	832,423		$	568,439		$	327,619		$	571,970

Supplemental Disclosures of Cash Flow Information:

Cash paid for interest	$	180,950		$	-		$	191,314		$	71,704
Cash paid for income taxes	$	-		$	-		$	-		$	-

Supplemental Non-Cash Investing and Financing Information

Common stock issued for consideration in an acquisition of assets	$	104,850		$	728,544		$	104,850		$	782,544
Common stock issued in connection with notes payable	$	269,539		$	100,000		$	269,539		$	1,179,631
Warrants issued for debt extinguishment	$	2,392,593			-		$	2,392,593			-
Beneficial conversion feature with warrants issued for debt discount	$	3,534,556		$	102,217		$	3,534,556		$	157,438

The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements

Simplicity Esports and Gaming Company (the “Company,” “we,” or “our”), was organized as a blank check company ~~organized~~ under the laws of the State of Delaware on April 17, 2017. The Company was formed under the name I-AM Capital Acquisition Company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). On November 20, 2018, the Company changed its name from I-AM Capital Acquisition Company to Smaaash Entertainment Inc. On January ~~22019,~~2, 2019, the Company changed its name from Smaaash Entertainment Inc. to Simplicity Esports and Gaming Company.

Through our wholly owned subsidiary, Simplicity Esports, LLC, acquired on January 2, 2019, the Company ~~has begun to implement~~implements a unique approach to ensure the ultimate fan friendly esports experience. Our intention is to have gamers involved at the grassroots level and feel a sense of unity as we compete with top class talent. Our management and players are known within the esports community and we ~~plan to~~ use their skills to create a seamless content creation plan helping gamers feel closer to our brand than any other in the industry. Simplicity is an established brand in the ~~Esports~~esports industry with an engaged fan base competing in popular games across different genres, including League of Legends, PUBG, Gears of War, Smite, Guns of Boom, and multiple EA Sports titles. Additionally, the Simplicity stream team encompasses a unique group of casters, influencers, and personalities, all of whom connect to Simplicity’s dedicated fan base. Simplicity also ~~has begun to open~~opens and ~~operate~~operates esports gaming centers that ~~will~~ provide the public an opportunity to experience and enjoy gaming and ~~Esports~~esports in a social setting, regardless of skill or experience.

As of February 28, 2022, we operate 17 corporate-owned retail Simplicity Esports Gaming Centers. Through our wholly owned subsidiary, PLAYlive Nation, Inc. (“PLAYlive”), acquired on July 29, 2019, the Company has a network of franchised ~~Gaming Centers.~~gaming centers. As of ~~November 30, 2021~~February 28, 2022, the ~~company~~Company had 17 12~~company owned stores and~~ 12 franchise locations operating in various states including Arizona, California, Florida, ~~Idaho,~~ Maryland, Ohio, South Carolina, Texas and Washington. PLAYlive offers a video gaming lounge concept to qualified franchisees. PLAYlive currently offers single-unit location franchises, as well as agreements to develop multiple locations. This PLAYlive model is being interlaced with the esports gaming centers mentioned above to create the ultimate gaming center.

The Company’s common stock and warrants are quoted on the OTCQB under the symbols “WINR” and “WINRW,” respectively. The Company has applied for an uplist to the Nasdaq Stock ~~Exchange and currently has an open application, which the Company .~~Exchange. There is no assurance that our listing application will be approved by the Nasdaq Capital Market.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in condensed consolidated financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the condensed consolidated financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended May 31, 2021, as filed with the SEC on August 31, 2021. The interim results for the ~~six~~nine months ended ~~November 30, 2021,~~February 28, 2022, are not necessarily indicative of the results to be expected for the year ending May 31, 2022 or for any future interim periods.

The accompanying condensed consolidated statement of operations for the three and ~~six~~nine months ended ~~November 30, 2020~~February 28, 2021 have been corrected for a reclassification of depreciation expense of $~~46,114~~ 78,093and $~~73,248~~151,342, respectively, to cost of goods sold related to assets utilized in the production of inventory. The Company assessed the materiality of the misstatement quantitatively and qualitatively and has concluded that the correction of the classification error is immaterial to the consolidated ~~financials~~financial statements taken as a whole. As a result of the correction, ~~Cost~~cost of ~~Goods Sold~~goods sold for the three months ended ~~November 30, 2020~~February 28, 2021 increased from $~~67,657~~ 108,187to $~~113,771~~ 186,280with a corresponding decrease of ~~General~~general and administrative expenses, resulting in a decrease to ~~Gross Profit~~gross profit from $~~228,889~~ 320,292to $~~182,775~~242,199. For the ~~six~~nine months ended ~~November 30, 2020, Cost~~February 28, 2021, cost of ~~Goods Sold~~goods sold increased from $~~108,168~~ 216,355to $~~181,416~~ 367,697, with a corresponding decrease of ~~General~~general and administrative expenses, resulting in a decrease to ~~Gross Profit~~gross profit from $~~388,979~~ 709,271to $~~315,731~~557,929. The correction had no impact on ~~Loss~~loss from ~~Operations~~operations and ~~Net~~net loss.

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

The unaudited condensed consolidated financial statements include the operations of the Company and its wholly owned subsidiaries, its 7676%% owned subsidiary ~~Simplicity~~(Simplicity One Brasil ~~Ltd,~~Ltda), its 7979%% owned subsidiaries ~~Simplicity~~(Simplicity Happy Valley, LLC and Simplicity Redmond, ~~LLC,~~LLC), and its 5151%% owned subsidiary ~~Simplicity~~(Simplicity El Paso, ~~LLC.~~LLC).

All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company considers short-term interest-bearing investments with initial maturities of three months or less to be cash equivalents. The Company has 0 cash equivalents as of ~~November 30, 2021~~February 28, 2022 and May 31, 2021.

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. Cash and cash equivalents in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts through ~~November 30, 2021.~~February 28, 2022.

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed consolidated balance sheet.

Revenue and expenses are translated at average rates of exchange prevailing during the ~~year.~~period.

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~As of January 1, 2018, the Company adopted Revenue~~In accordance with ASC 606, Revenues from Contracts with Customers ~~(Topic 606) (“ASC 606”). The new guidance sets forth a new five-step revenue recognition model which replaces~~, the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The Company adopted the standard using the modified retrospective method and the adoption did not have a material impact on the Company’s consolidated financial statements.

~~The~~ Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods and services. Our revenue is derived from the three sources listed below.

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

The Company-owned stores principally generate revenue from retail esports gaming centers. Revenues from Company-owned stores are recognized when the products are delivered, or the service is provided. Company-owned stores are typically in shopping malls with typical retail hours of operations. After hours, the Company also mines for crypto currency using the computer equipment at the company-owned stores. Crypto mining revenue is recognized as the mining occurs,

Franchise revenues consist of royalties, fees and initial license fee income. Franchise royalties are based on six percent of franchise store sales after a minimum level of sales occur and are recognized as sales occur. Any royalty reductions, including waivers or those offered as part of a new store development incentive or as incentive for other behaviors, are recognized at the same time as the related royalty, as they are not separately distinguishable from the full royalty rate. Franchise royalties are billed on a monthly basis.

The Company recognizes initial franchise license fee revenue when the Company has performed substantially all the services required in the franchise agreement. Fees received that do not meet these criteria are recorded as deferred revenues until earned. The pre-opening services provided to franchisees do not contain separate and distinct performance obligations from the franchise right; thus, the fees collected will be amortized on a straight-line basis beginning at the store opening date through the term of the franchise agreement, which is typically 10 years. Franchise license renewal fees, which generally occur every 10 years, are billed before the renewal date. Fees received for future license renewal periods are amortized over the life of the renewal period.

The Company offers various incentive programs for franchisees including royalty incentives, new store opening incentives (i.e., development incentives) and other support initiatives. Royalties and franchise fees sales are reduced to reflect any royalty incentives earned or granted under these programs that are in the form of discounts.

Commissary sales are comprised of gaming equipment and supplies sold to franchised stores and are recognized as revenue upon shipment or delivery of the related products to the franchisees. Payments are generally due within 30 days.

Fees for information services, including software maintenance fees, marketing fees and website maintenance, graphic and promotion fees are recognized as revenue as such services are provided.

Esports is a form of competition using video games. Most commonly, esports takes the form of organized, single player and multiplayer video game tournaments or leagues, particularly between professional players, individually or as teams. Revenues from Esports revenues are recognized when the competition is completed, and prize money is awarded. Revenues earned from team sponsorships, prize winnings, league sponsorships, and from the Company’s share of league revenues are included in esports revenue.

Deferred revenues are classified as current or long-term based on when management estimates the revenues will be recognized.

During the quarter the Company entered into a consulting agreement to provide services to a third party interested in opening a video games related store. The third party paid for such services and the Company has deferred this revenue until its obligations are fulfilled. These operating funds are included in the current portion of deferred revenues on the Balance Sheet.

Deferred costs include commissions paid to brokers related to the sale of specific new franchises which have not met revenue recognition criteria as of ~~November 30, 2021.~~February 28, 2022. These costs are recognized in the same period as the initial franchise fee revenue is recognized.

The Company estimates the allowance for doubtful accounts based on an analysis of specific customers (i.e., franchisees), taking into consideration the age of past due accounts and an assessment of the customer’s ability to pay. Accounts receivable are written off against the allowance when management determines it is probable the receivable is worthless. Customer account balances with invoices dated over 90 days old are considered delinquent and considered in the allowance assessment. The Company performs credit evaluations of its customers and, generally, requires no collateral. As of ~~November 30, 2021,~~February 28, 2022, management has recorded an allowance for doubtful accounts of $~~12,943~~45,901.

Property and equipment and leasehold improvements are recorded at ~~its~~their historical cost. The cost of property and equipment is depreciated over the estimated useful lives, when placed in service (ranging from 3 -5 years), of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if they benefit future periods.

Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. These costs are included in intangible assets on our condensed consolidated balance sheet and amortized on a straight-line basis when placed into service over their estimated useful lives of the costs, which is 2 to 10 years.

The Company periodically reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less that the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill, but we assess our goodwill for impairment at least annually. We have assessed goodwill and qualitative considerations indicated no impairment.

Through PLAYlive, the Company’s wholly owned subsidiary, the Company has entered into franchise agreements with third parties. As of ~~November 30, 2021,~~February 28, 2022, 12 franchise locations were ~~considered to be~~ operational in various states, including Arizona, California, Florida, ~~Idaho,~~ Maryland, Ohio, South Carolina, Texas and Washington.

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

The Company records stock-based payments made to non-employees in accordance with ~~ASU~~FASB’s Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions.

Parties are related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02-Leases (Topic 842), which significantly amends the way companies are required to account for leases. Under the updated leasing guidance, some leases that did not have to be reported previously are now required to be presented as an asset and liability on the balance sheet. In addition, for certain leases, what was previously classified as an operating expense must now be allocated between amortization expense and interest expense. The Company elected to adopt this update early as of January l, 2019 using the modified retrospective transition method and prior periods have not been restated. Upon implementation, the Company recognized an initial operating lease right-of-use asset of $~~110,003~~ ~~and operating lease liability of $107,678. Due to the simplistic nature of the Company’s leases, no retained earnings adjustment was required. See Note 7 for further details.~~

The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net income (loss) - per share is calculated by dividing the Company’s net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per common share is calculated by dividing the Company’s net income or loss available to common stockholders by the diluted weighted average number of common shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. For this calculation potentially dilutive securities consist primarily of warrants, outstanding options and shares into which the company’s convertible notes payable are convertible. When the Company records a loss from operations, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted net loss per common share.

The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the consolidated financial statements and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the consolidated financial statements recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following is summary of recent accounting developments.

The Company periodically reviews new accounting standards that are issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any other new standards that it believes merit further discussion, and the Company expects that none would have a significant impact on its financial statements.

The Company’s unaudited condensed consolidated financial statements have been prepared assuming that itthe Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the unaudited condensed consolidated financial statements, the Company has an accumulated deficit of $~~18,632,103~~20,586,755, aa working capital deficit of $~~1,073,665~~2,548,029 and a net loss of $~~6,431,470~~8,446,927 as of ~~November 30, 2021.~~February 28, 2022. Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report.

The Company has commenced operations and ~~has begun to generate~~generates revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of private debt offerings and/or public equity offerings. While the Company believes in the viability of its strategy and its ability to generate sufficient revenue and to raise additional funds, there can be no assurances to that effect. Should the Company fail to raise additional capital, it may be compelled to reduce the scope of its planned future business activities.

The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan, to generate sufficient revenue and to raise additional funds by way of public and/or private offerings.

The unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. ~~While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other countries and~~Since that time, infections have been reported globally.

~~Because COVID-19 infections have been reported throughout the United States,~~ Previously, certain federal, state and local governmental authorities ~~have~~ issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. ~~Additional, more restrictive proclamations and/or directives may be issued in the future.~~ As a result, all of our corporate and franchised Simplicity ~~Gaming Centers~~gaming centers were closed effective April 1, 2020. We commenced reopening Simplicity ~~Gaming Centers~~gaming centers as of May 1, 2020 and have since reopened 17 corporate and 12 franchised locations. Although our franchise agreements with franchisees of Simplicity ~~Gaming Centers~~gaming centers require a minimum monthly royalty payment to us from the franchisees regardless of whether the franchised Simplicity ~~Gaming Centers~~gaming centers are operating, there is a potential risk that franchisees of Simplicity ~~Gaming Centers~~gaming centers will default in their obligations to pay their minimum monthly royalty payment to us, resulting in either an increase in accounts receivables or a bad debt expense where account receivables are no longer collectible due to a franchisee’s inability to pay the minimum monthly royalty payments owed by the franchisee. Additional and/or more restrictive orders, proclamations and/or directives may be issued in the future.

The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but is anticipated to have a material adverse impact on our business, financial condition and results of operations.

The measures taken to date have negatively impacted the Company’s business during the ~~six~~nine months ended ~~November 30, 2021~~February 28, 2022 and will potentially continue to impact the Company’s business. Management expects that all of its business segments, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time.

The following is a summary of property and equipment—at cost, less accumulated depreciation:

	November 30, 2021			May 31, 2021			February 28, 2022			May 31, 2021

Leasehold improvements	$	110,849			110,849		$	110,849		$	110,849
Property and equipment		865,190			755,741			1,204,613			755,741
Total cost		976,069			866,590			1,315,462			866,590
Less accumulated depreciation		(458,936	)		(292,282	)		(538,100	)		(292,282	)
Net property and equipment	$	518,103			574,308		$	777,362		$	574,308

During the ~~six~~nine months ended ~~November 30,~~February 28, 2022 and 2021, ~~and 2020,~~ the Company recorded depreciation expense of $~~165,653~~ 245,817and $~~73,249~~151,342, ~~respectively~~respectively.

The following table sets forth the intangible assets, including accumulated amortization as of ~~November 30, 2020:~~February 28, 2022:

	November 30, 2021							February 28, 2022
	Remaining			Accumulated		Net Carrying		Remaining				Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value		Useful Life		Cost		Amortization		Value
Non-Competes	4 years	$	1,023,118	$	596,819	$	426,299
Non-competes									4 years	$	1,023,118	$	652,267	$	370,851
Trademarks	Indefinite		866,000		-		866,000		Indefinite		866,000		-		866,000
Customer database	2 years		35,000		24,792		10,208		2 years		35,000		29,167		5,833
Restrictive covenant	2 years		115,000		81,458		33,542		2 years		115,000		95,833		19,167
Customer contracts	10 years		546,000		403,001		142,999		10 years		185,563		34,097		151,466
Internet domain	2 years		3,000		2,917		83		2 years		3,000		3,000		-
		$	2,588,118	$	1,108,987	$	1,479,131			$	2,227,681	$	814,364	$	1,413,317

The following tables set forth the intangible assets, including accumulated amortization as of May 31, 2021:

	May 31, 2021							May 31, 2021
	Remaining			Accumulated		Net Carrying		Remaining				Accumulated		Net Carrying
	Useful Life	Cost		Amortization		Value		Useful Life		Cost		Amortization		Value
Non-Competes	4.50 years	$	1,023,118	$	498,799	$	524,319
Non-competes									4.50 years	$	1,023,118	$	498,799	$	524,319
Trademarks	Indefinite		866,000		-		866,000		Indefinite		866,000		-		866,000
Customer Contracts	10 years		546,000		301,675		244,325
Customer contracts									10 years		546,000		301,675		244,325
Internet domain	2.50 years		3,000		2,417		583		2.50 years		3,000		2,417		583
		$	2,438,118	$	802,891	$	1,635,227			$	2,438,118	$	802,891	$	1,635,227

The following table sets forth the future amortization of the Company’s intangible assets as of ~~November 30, 2021~~February 28, 2022 for the fiscal years ending May 31:

	2022		2023		2024		2025		2026		Thereafter		Total		2022		2023		2024		2025		2026		Thereafter		Total
Non-Competes	$	102,312	$	204,624	$	119,363	$	-	$	-	$	-	$	426,299
Non-competes															$	51,156	$	204,624	$	115,071	$	-	$	-	$	-	$	370,851
Customer contracts		8,105		16,211		16,211		16,211		16,211		70,051		142,999		4,053		16,211		16,211		16,211		16,211		82,569		151,466
Restrictive covenant		28,750		4,792		-		-		-		-		33,542		14,375		4,792		-		-		-		-		19,167
Customer database		8,750		1,458		-		-		-		-		10,208		4,375		1,458		-		-		-		-		5,833
Internet domain		83		-		-		-		-		-		83		-		-		-		-		-		-		-
Total	$	148,000	$	227,085	$	135,574	$	16,211	$	16,211	$	70,051	$	613,131	$	73,959	$	227,085	$	131,282	$	16,211	$	16,211	$	82,569	$	547,317

Amortization expense for the ~~six~~nine months ended ~~November 30,~~February 28, 2022 and 2021 ~~and 2020~~ was $~~148,416~~221,910 and $~~133,229~~212,343, respectively.

On October 7, 2021, the Company’s wholly owned subsidiary, Simplicity Tracy, LLC (“Simplicity Tracy”) entered into an Asset Purchase agreement (“APA”) with an existing franchisee (“Franchisee”), to acquire the Franchisee’s assets in exchange for ~~4,500~~ ~~shares of the Company’s common stock with fair value of $41,850~~ ~~or $9.30~~ per share based on the fair value of assets acquired. Pursuant to ASU 2017-01 and ASC 805, the Company analyzed the APA to determine if the Company acquired a business or acquired assets. As of November 30, 2021 the shares for the acquisition are included in Common Stock Issuable.

On August 27, 2021, the Company entered into a contract with Laila Cavalcanti Loss, a ~~board~~ member of the Company’s Board of Directors, to provide legal services to ~~its subsidiary~~ Simplicity One Brasil, ~~LTDA.~~LTDA, the Company’s 76%-owned subsidiary. The contract calls for monthly payments of $2,500 and monthly equity awards of 250 shares of its common stock. The terms of the contract were retroactive to July 1, 2020 and ~~at November 30, 2021,~~on February 28, 2022, the Company ~~has~~had accrued $~~5,625~~13,125 and 375 shares of stock for ~~the payments of~~payment pursuant to this contract.

On December 10, 2021, the Company entered into a related party transaction with Jed Kaplan, the Company’s Chairman of the Board and a more than 5% shareholder, to provide a loan to the Company to provide additional operating funds for Simplicity One Brasil, LTDA, the Company’s 76%-owned subsidiary. The principal amount of the loan was $247,818. The loan bears interest at a rate of 5% per annum and the entire amount of the principal and accrued interest is due on June 10, 2022. For the quarter ended February 28, 2022, the Company recorded interest expense of $2,716. The loan may be repaid by the Company, without penalty, at any time. Should the Company fail to make the principal payment due, the loan will convert to a 17% equity stake in Simplicity One Brazil, LTDA, of which Jed Kaplan is already a 20% stakeholder.

The Company maintains a portion of its cash balance at a financial services company that is owned by an officer of the Company.

On November 20, 2018, the Company sold to the underwriters (and/or their designees), for $100, an option to purchase up to a total of 250,000~~Units~~ units (which increased to 260,000~~Units~~ units upon the partial exercise of the underwriters’ over-allotment option), exercisable at $11.50per ~~Unit~~unit pre-reverse split (or an aggregate exercise price of $2,990,000) upon the closing of the ~~Initial Public Offering.~~Company’s initial public offering (“IPO”). The ~~Unit Purchase Option~~unit purchase option (“UPO”) may be exercised for cash or on a cashless basis, at the holder’s option, at any time during the period commencing on the later of the first anniversary of the effective date of the registration statement relating to the ~~Initial Public Offering~~IPO and the closing of the Company’s initial Business Combination and terminating on the fifth anniversary of such effectiveness date. The ~~Units~~units issuable upon exercise of ~~this~~the UPO are identical to those offered in the ~~Initial Public Offering,~~IPO, except that the exercise price of the warrants underlying the ~~Units~~units sold to the underwriters is $13.00per share on a pre-reverse split basis.

The Company adopted Topic 842 on January 1, 2019. The Company elected to adopt this standard using the optional modified retrospective transition method and recognized a cumulative-effect adjustment to the consolidated balance sheet on the date of adoption. Comparative periods have not been restated. With the adoption of Topic 842, the Company’s condensed consolidated balance sheet now contains the following line items: Operating lease right-of-use assets, Current portion of operating lease liabilities and Operating lease liabilities, net of current portion.

As of ~~November 30, 2021,~~February 28, 2022, operating lease right-of-use assets and liabilities arising from operating leases was $~~1,581,863~~1,557,443 and $~~1,590,380~~1,507,993, respectively. During the ~~six~~nine months ended ~~November 30,~~February 28, 2022 and 2021, ~~and 2020,~~ the Company recorded operating lease expense of approximately $~~280,613~~ 400,975and $~~31,453~~202,785., respectively.

The following is a schedule showing the future minimum lease payments under operating leases by fiscal years and the present value of the minimum payments as of ~~November 30, 2021.~~February 28, 2022:


2022	$	264,351		$	127,766
2023		498,377			496,354
2024		500,511			495,957
2025		453,795			392,099
2026 and thereafter		225,100			254,493
Total Operating Lease Obligations		1,942,135			1,766,669
Less: Amount representing interest	$	(351,755	)	$	(258,676	)
Present Value of minimum lease payments	$	1,590,380		$	1,507,993

The table below presents outstanding debt instruments as of February 28, 2022, and May 31, 2021:

~~The table below presents outstanding debt instruments as of November 30, 2021, and May 31, 2021~~

February 19, 2021 Labrys 12% Promissory Note and Securities Purchase Agreement

On February 19, 2021, the Company entered into a securities purchase agreement (the “SPA”) dated as of February 19, 2021, with an accredited investor (the “Holder”), pursuant to which the Company issued a 12% promissory note (the “Note”) with a maturity date of February 19, 2022 (the “Maturity Date”), in the principal sum of $1,650,000. In addition, the Company issued 10,000 shares of its common stock to the Holder as a commitment fee pursuant to the SPA. Pursuant to the terms of the Note, the Company agreed to pay to $1,650,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12%12% per annum (provided that the first twelve months of interest shall be guaranteed). The Note carries an original issue discount (“OID”) of $165,000. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $1,485,000 in exchange for the Note. The Company intends to use the proceeds for its operational expenses, the repayment of those certain self-amortization promissory notes previously issued to the Holder on June 18, 2020 and November 23, 2020, and the repayment of certain other existing debt obligations. The Holder may convert the Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Note) at any time at a conversion price equal to $11.50 per share.

The Company may prepay the Note at any time prior to the date that an Event of Default (as defined in the Note) (each an “Event of Default”) occurs at an amount equal to 100% of the Principal Sum then outstanding plus accrued and unpaid interest (no prepayment premium). The Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the Note or SPA.

Upon the Holder’s provision of notice to the Company of the occurrence of any Event of Default, which has not been cured within five (5) calendar days, the Note shall become immediately due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Principal Sum then outstanding plus accrued interest multiplied by ~~125%~~125% (the “Default Amount”). Upon the occurrence of an Event of Default, additional interest will accrue from the date of the Event of Default at the rate equal to the lower of 15% per annum or the highest rate permitted by law.

During the ~~six~~nine months ended ~~November 30, 2021~~February 28, 2022, the Company paid the Holder a total of $~~855,000~~865,000. The Company paid an interim payment due to the Holder in the amount of $225,000 towards the repayment of the balance of the Note in the amount of $90,909, towards the repayment of guaranteed interest in the amount of $109,091 and $25,000 as an amendment fee. In addition, the Company paid $130,000towards the repayment of the balance of the Note in the amount of $58,500and towards the guaranteed interest in the amount of $71,500and in compliance with the renegotiated terms of an interim payment that was due on August 19, 2021 in the amount of $363,000, on September 30, 2021 the Company paid $500,000towards the repayment of principal of the Note. On February 18, 2022, the Company paid $10,000 toward the repayment of principal of the Note and to extend the due date to March 18, 2022. On March 16, 2022, the Company and the Holder agreed to extend the due date to September 15, 2022.

During the quarter ended ~~November 30, 2021,~~February 28, 2022, the Company incurred $~~290,522~~ 264,981of interest expense related to the amortization of the debt discount on the Note. On ~~November 30, 2021~~February 28, 2022, the balance of the Note is $~~635,605~~ 890,586all of which is included in the current portion of convertible notes payable, net of debt ~~discount.~~

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

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

The Company may prepay the March 10 FirstFire Note at any time prior to the date that an Event of Default (as defined in the Note) (each an “Event of Default”) occurs at an amount equal to 100% of the Principal Sum then outstanding plus accrued and unpaid interest (no prepayment premium). The March 10 FirstFire Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the March 10 FirstFire Note or March 10 FirstFire SPA.

The Company is required to make an interim payment to FirstFire in the amount of $123,200, on or before September 10, 2021, towards the repayment of the balance of the March 10 FirstFire Note. On September 17, 2021, the Company issued a common stock purchase warrant for the purchase of 40,000shares of the Company’s common stock to FirstFire as consideration for FirstFire entering into a first amendment to the March 10 FirstFire Note in order to delay an interim payment of OID and interest due under the March 10 FirstFire Note to the maturity date of such note. For the ~~quarter~~nine months ended ~~November 30, 2021,~~February 28, 2022, the Company recorded the fair value of the warrants in the amount of $248,547 and took a related interest expense charge of $248,547.

On October 1, 2021, the Company issued a three-year warrant to purchase 40,000shares of the Company’s common stock at an exercise price of $10.73per share to FirstFire as consideration for FirstFire entering into a second amendment to the March 10 FirstFire Note in order to remove the capital raising ceiling in such note. For the ~~quarter~~nine months ended ~~November 30, 2021,~~February 28, 2022, the Company recorded the fair value of the warrants in the amount of $201,351 and took a related interest expense charge of $201,351.

Upon FirstFire’s provision of notice to the Company of the occurrence of any Event of Default, which has not been cured within five (5) calendar days the March 10 FirstFire Note shall become immediately due and payable and the Company shall pay to FirstFire, in full satisfaction of its obligations hereunder, an amount equal to the Principal Sum then outstanding plus accrued interest multiplied by 125% (the “Default Amount”). Upon the occurrence of an Event of Default, additional interest will accrue from the date of the Event of Default at the rate equal to the lower of 15% per annum or the highest rate permitted by law.

During the ~~six~~nine months ended ~~November 30, 2021,~~February 28, 2022, the Company recognized $~~$131,794~~197,327 of interest expense related to the amortization of debt discount related to the FirstFire Note. On ~~November 30, 2021,~~February 28, 2022, the balance of FirstFire Note, ~~net of the related debt discount,~~ is $~~$485,729~~ 551,262, all of which is included in the current portion of convertible notes payable, net of debt discount.

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

On June 11, 2021, the Company entered into a securities purchase agreement (the “June 11 FirstFire SPA”) dated as of June 10, 2021, with FirstFire Global Opportunities Fund, LLC (“FirstFire”), pursuant to which the Company issued a 12% promissory note (the “June 11 FirstFire Note”) with a maturity date of June 10, 2023 (the “FirstFire Maturity Date”), in the principal sum of $1,266,666. In addition, the Company issued 11,875 shares of its common stock to FirstFire as a commitment fee pursuant to the June 11 FirstFire SPA. Pursuant to the terms of the June 11 FirstFire Note, the Company agreed to pay to $1,266,666 (the “FirstFire Principal Sum”) to FirstFire and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest shall be guaranteed and the remaining 18 months of interest shall be deemed earned in full if any amount is outstanding under the FirstFire Note after 180 days from June 10, 2021). The June 11 FirstFire Note carries an ~~original issue discount (“OID”)~~OID of $126,666. Accordingly, FirstFire paid the purchase price of $1,140,000 in exchange for the FirstFire Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. FirstFire may convert the June 11 FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the June 11 FirstFire Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by FirstFire upon, at the election of FirstFire, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $11.50 per share, as the same may be adjusted as provided in the June 11 FirstFire Note.

The Company may prepay the June 11 FirstFire Note at any time prior to maturity in accordance with the terms of the June 11 FirstFire Note. The June 11 FirstFire Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, and breach of provisions of the June 11 FirstFire Note or the June 11 FirstFire SPA.

Upon the occurrence of any Event of Default (as defined in the June 11 FirstFire Note), which has not been cured within three calendar days, the June 11 FirstFire Note shall become immediately due and payable and the Company shall pay to FirstFire, in full satisfaction of its obligations hereunder, an amount equal to the FirstFire Principal Sum then outstanding plus accrued interest multiplied by 125%.

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

The Company also agreed to prepare and file with the Securities and Exchange Commission a registration statement covering the resale of all shares issued or issuable pursuant to the June 11 FirstFire SPA, including shares issued upon conversion of the June 11 FirstFire Note or exercise of the June 11 FirstFire Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following June 10, 2021 and to have the registration statement declared effective by the SEC within 120 days following June 10, 2021.

The Company recorded the June 11 FirstFire Note in the amount of $1,266,667 and a related debt discount of $1,266,667, interest payable of $76,000 and additional paid in capital of $1,053,999. On September 16, 2021, the Company made an interim payment to the FirstFire Note in the amount of $175,000. During the ~~six months~~quarter ended ~~November 30, 2021,~~February 28, 2022, the Company recorded interest expense of $~~298,448~~240,041, which included $206,518 related to amortization of debt discount and accrued interest in the amount of $33,523. On ~~November 30, 2021,~~February 28, 2022, the balance of the June 11 FirstFire Note ~~net of the related debt discount~~ is $~~123,448~~329,966 all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On June 16, 2021, the Company entered into a securities purchase agreement (the “GS SPA”) dated as of June 10, 2021, with GS Capital Partners, LLC (“GS Capital”), pursuant to which the Company issued a 12% promissory note (the “GS Note”) with a maturity date of June 10, 2023 (the “GS Maturity Date”), in the principal sum of $333,333. In addition, the Company issued 3,125 shares of its common stock to GS as a commitment fee pursuant to the GS SPA. Pursuant to the terms of the GS Note, the Company agreed to pay to $~~300,000~~300,000.00~~.00~~ (the “GS Principal Sum”) to GS and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest shall be guaranteed and the remaining 18 months of interest shall be deemed earned in full if any amount is outstanding under the GS Note after 180 days from June 10, 2021). The GS Note carries an ~~original issue discount (“OID”)~~OID of $33,333. Accordingly, GS paid the purchase price of $~~300,000~~300,000.00~~.00~~ in exchange for the GS Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. GS may convert the GS Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the GS Note; provided however, that the limitation on conversion may be waived (up to ~~9.99%~~9.99%) by GS upon, at the election of GS, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $11.50 per share, as the same may be adjusted as provided in the GS Note.

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

Upon the occurrence of any Event of Default (as defined in the GS Note), which has not been cured within three calendar days, the GS Note shall become immediately due and payable and the Company shall pay to GS, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125%.

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

The Company also agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the GS SPA, including shares issued upon conversion of the GS Note or exercise of the GS Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following June 10, 2021 and to have the registration statement declared effective by the SEC within 120 days following June 10, 2021.

The Company recorded the GS Note in the amount of $333,333 and a related debt discount of $333,333, interest payable of $20,000 and additional paid in capital of $280,000. During the ~~six months~~quarter ended ~~November 30, 2021,~~February 28, 2022, the Company recorded interest expense of $~~76,255~~65,482, which included $56,630 related to amortization of debt discount and accrued interest in the amount of $8,822. On ~~November 30, 2021,~~February 28, 2022, the balance of the GS Note ~~net of the related debt discount~~ is $~~76,255~~ 132,886, all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On August 23, 2021, the Company entered into a securities purchase agreement (the “Jefferson SPA”) dated as of August 23, 2021, with Jefferson Street Capital, LLC (“Jefferson”), pursuant to which the Company issued a 12% promissory note (the “Jefferson Note”) with a maturity date of August 23, 2023 (the “Jefferson Maturity Date”), in the principal sum of $333,333. In addition, the Company issued 3,125 shares of its common stock to Jefferson as a commitment fee pursuant to the Jefferson SPA. Pursuant to the terms of the Jefferson Note, the Company agreed to pay to $~~300,000~~300,000.00~~.00~~ (the “Jefferson Principal Sum”) to Jefferson and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest shall be guaranteed and the remaining 18 months of interest shall be deemed earned in full if any amount is outstanding under the Jefferson Note after 180 days from August 23, 2021). The Jefferson Note carries an ~~original issue discount (“OID”)~~OID of $33,333. Accordingly, Jefferson paid the purchase price of $~~300,000~~300,000.00~~.00~~ in exchange for the Jefferson Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. Jefferson may convert the Jefferson Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Jefferson Note; provided however, that the limitation on conversion may be waived (up to ~~9.99%~~9.99%) by Jefferson upon, at the election of Jefferson, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $11.50 per share, as the same may be adjusted as provided in the Jefferson Note.

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

Upon the occurrence of any Event of Default (as defined in the Jefferson Note), which has not been cured within three calendar days, the Jefferson Note shall become immediately due and payable and the Company shall pay to Jefferson, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125%.

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

The Company also agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the Jefferson SPA, including shares issued upon conversion of the Jefferson Note or exercise of the Jefferson Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following August 23, 2021 and to have the registration statement declared effective by the SEC within 120 days following August 23, 2021.

The Company recorded the Jefferson Note in the amount of $333,333 and a related debt discount of $274,239, interest payable of $20,000 and additional paid in capital of $205,605. During the ~~six months~~quarter ended ~~November 30, 2021,~~February 28, 2022, the Company recorded interest expense of $~~36,277~~48,796. On ~~November 30, 2021,~~February 28, 2022, the balance of the Jefferson Note ~~net of the related debt discount~~ is $~~95,372~~143,382, all of which is included in the long-term portion of convertible notes payable, net of debt discount.

On August 31, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and Lucas Ventures, LLC (“LV SPA”), the Company issued a 12% convertible promissory note (“the LV Note”) in the principal amount of $200,000with an effective date of September 2, 2021, guaranteed interest of $12,000 and a maturity date of September 2, 2023. In addition, the Company issued 3,749shares of its common stock to LV as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 187,400shares of the Company’s common stock). Accordingly, Lucas Ventures Capital paid the purchase price of $~~200,000~~200,000.00~~.00~~ in exchange for the LV Note.

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

Upon the occurrence of any Event of Default (as defined in the LV Note), which has not been cured within three calendar days, the LV Note shall become immediately due and payable and the Company shall pay to LV, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by ~~125~~%125%.

Pursuant to the terms of the LV SPA, the Company also issued to LV a three-year warrant to purchase 187,480 shares of the Company’s common stock at an exercise price equal to (i) ~~110%~~110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

The Company also agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the LV SPA, including shares issued upon conversion of the LV Note or exercise of the LV Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following September 2, 2021 and to have the registration statement declared effective by the SEC within 120 days following September 2, 2021.

The Company recorded the LV Note in the amount of $200,000and a related debt discount of $200,000, additional paid in capital of $158,999and guaranteed interest of $12,000. During the quarter ended ~~November 30, 2021,~~February 28, 2022, the Company recorded interest expense of $~~24,384~~34,230. On ~~November 30, 2021,~~February 28, 2022, the balance of the LV Note ~~net of the related debt discount~~ is $~~24,384~~ 58,614all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On August 31, 2021, the Company and LGH Investments, LLC, (“LGH”) issued a 12% convertible promissory note (“LGH Note”) in the principal amount of $200,000 effective September 2, 2021 with a maturity date of September 2, 2023.

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

Upon the occurrence of any Event of Default (as defined in the LGH Note), which has not been cured within three calendar days, the LGH Note shall become immediately due and payable and the Company shall pay to LGH, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125%.

The Company recorded the LGH Note in the amount of $200,000, interest payable of $12,000along with total debt discount of $38,500, ~~related debt discount (“OID”)~~OID of $20,000and origination fees of $6,500. During the quarter ended February 28,2022, the Company recorded interest expense of $~~4,800~~13,718. On ~~November 30, 2021,~~February 28, 2022, the balance of the LGH Note ~~net of the related debt discount~~ is $~~166,299~~ 180,071, all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On September 28, 2021, the Company entered into a securities purchase agreement (the “Ionic SPA”) dated as of September 28, 2021, with Ionic Ventures, LLC (“Ionic”), pursuant to which the Company issued a 12% promissory note (the “Ionic Note”) with a maturity date of September 28, 2023~~(the~~ (the “Ionic Maturity Date”), in the principal sum of $1,555,555.56 with guaranteed interest of $93,333.34. In addition, the Company issued 14,584shares of its common stock to Ionic as a commitment fee pursuant to the Ionic SPA. Pursuant to the terms of the Ionic Note, the Company agreed to pay to $1,400,000.00 (the “Ionic Principal Sum”) to Ionic and to pay interest on the principal balance at the rate of ~~12%~~12% per annum (provided that the first six months of interest shall be guaranteed and the remaining 18 months of interest shall be deemed earned in full if any amount is outstanding under the Ionic Note after 180 days from September 28, 2021). The Ionic Note carries an ~~original issue discount (“OID”)~~OID of $155,555.56. Accordingly, Ionic paid the purchase price of $~~1,400,000~~1,400,000.00~~.00~~ in exchange for the Ionic Note. The Company intends to use the proceeds for working capital. Ionic may convert the Ionic Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Ionic Note; provided however, that the limitation on conversion may be waived (up to ~~9.99%~~9.99%) by Ionic upon, at the election of Ionic, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $11.50per share, as the same may be adjusted as provided in the Ionic Note.

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

Upon the occurrence of any Event of Default (as defined in the Ionic Note), which has not been cured within three calendar days, the Ionic Note shall become immediately due and payable and the Company shall pay to Ionic, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125%.

Pursuant to the terms of the Ionic SPA, the Company also issued to Ionic a three-year warrant to purchase 729,167 shares of the Company’s common stock at an exercise price equal to (i) ~~110%~~110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

The Company also agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the Ionic SPA, including shares issued upon conversion of the Ionic Note or exercise of the Ionic Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 90 days following September 28, 2021 and to have the registration statement declared effective by the SEC within 120 days following September 28, 2021.

The Company recorded the Ionic Note in the amount of $1,555,555and a related debt discount of $1,555,555, and additional paid in capital of $1,306,665 and guaranteed interest of $93,333. During the quarter ended February 28, 2022, the Company recorded interest expense of $~~134,246~~248,165. On ~~November 30, 2021,~~February 28, 2022, the balance of the LV Note ~~net of the related debt discount~~ is $~~134,246~~ 382,410, all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On November 15, 2021, the Company entered into a 10% secured promissory note with an accredited investor (“Secured Note One”) in the amount of $262,500 for the purpose of acquiring computers for ~~company~~Company owned store operations. The Secured Note One has a perfected security interest in 50 personal computers the Company will use in its operations. In addition, the Company issued 30,000 commitment warrants for the purchase of the Company’s common stock at an exercise price of $10.73 per share. The Secured Note One requires 60 monthly payments of principal and interest in the amount of $5,577.

The Company recorded the Secured Note One in the amount of $262,500along with ~~original issue discount (“OID”)~~an OID of $12,500. Accordingly, the investor paid $250,000in exchange for the Secured Note One. ~~On November 30, 2021,~~For the quarter ended February 28, 2022, the Company paid interest in the amount of $6,478 and on February 28, 2022, the balance of the Secured Note One ~~net of the related debt discount~~ is $~~165,483~~160,650 all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On November 18, 2021, the Company entered into a 10% secured promissory note accredited with an accredited investor (“Secured Note Two”) in the amount of $157,500 for the purpose of acquiring computers for ~~company~~Company owned store operations. The Secured Note Two has a perfected security interest in 30 personal computers the Company will use in its operations. In addition, the Company issued 18,000 commitment warrants for the purchase of the Company’s common s stock at an exercise price of $10.73 per share. The Secured Note Two requires 60 monthly payments of principal and interest in the amount of $3,346.

The Company recorded the Secured Note Two in the amount of $157,500 along with ~~original issue discount (“OID”)~~an OID of $7,500. Accordingly, the investor paid $150,000 in exchange for the Secured Note Two. ~~On November 30, 2021,~~For the quarter ended February 28, 2022, the Company paid interest in the amount of $3,887 and on February 28, 2022, the balance of the Secured Note Two ~~net of the related debt discount~~ is $~~99,290~~96,390, all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On December 10, 2021, the Company entered into a related party transaction with Jed Kaplan, the Company’s Chairman of the Board and a more than 5% shareholder to provide a loan to the Company to provide additional operating funds for Simplicity One Brasil, LTDA, the Company’s 76%-owned subsidiary. The principal amount of the loan was $247,818. The loan bears interest at a rate of 5% per annum and the entire amount of the principal and accrued interest is due on June 10, 2022. The loan may be repaid by the Company, without penalty, at any time. Should the Company fail to make the principal payment due, the loan will convert to a 17% equity stake in Simplicity One Brazil, LTDA, of which Jed Kaplan is already a 20% stakeholder.

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of ~~November 30, 2021,~~February 28, 2022, there were0 shares of preferred stock issued or outstanding.

On August 17, 2020, the Company amended its certificate of incorporation to increase the total number of authorized shares of the Company’s common stock from 20,000,000 to 36,000,000. Holders of the shares of the Company’s common stock are entitled to one vote for each share. ~~At November 30, 2021~~On February 28, 2022 and May 31, 2021, there were 1,616,022, and 1,427,124shares of common stock issued and outstanding, respectively.

~~The~~During the nine months ended February 28, 2022, the Company sold warrants to a private investor and issued warrants related to the convertible notes payable that were issued during the ~~six~~nine months ended ~~November 30, 2021.~~February 28, 2022.

The Company is currently in negotiations with advisors related to the acquisition of the Ionic Note Payable and will be required to issue warrants to the advisors on this deal. As of February 28, 2022, these warrants have not been issued.

A summary of the status of the Company’s outstanding stock warrants as of ~~November 30, 2021~~February 28, 2022 is as follows:

	Number of Shares		Average Exercise Price		Number of Shares		Average Exercise Price
Outstanding – May 31, 2020		789,063	$	83.01		789,063	$	83.01

Granted during the year ended May 31, 2021		17,063	$	20.66		17,063	$	20.66
Outstanding – May 31, 2021		806,126	$	10.38		806,126	$	10.38
Activity during the six months ended November 30, 2021:
Activity during the nine months ended February 28, 2022:
Warrants granted related to debt		2,315,897	$	11.05		2,315,897	$	11.05
Warrants sold to a private investor		100,000	$	20.00		100,000	$	20.00
Warrants outstanding – November 30, 2021		3,222,023	$	29.05
Warrants outstanding – February 28, 2022						3,222,023	$	29.05

Firstfire Global Opportunities Fund, LLC Securities Purchase Agreement and 12% Convertible Promissory Note

On ~~December 10,~~March 21, 2022, Simplicity Esports and Gaming Company (the “Company”) entered into a securities purchase agreement (the “Firstfire Global SPA”), dated as of March 21, 2022, with Firstfire Global Opportunities Fund, LLC, LLC (“Firstfire Global”), pursuant to which the Company issued a 12% promissory convertible note (the “Firstfire Global Note”) with a maturity date of September 21, 2022(the “Firstfire Global Maturity Date”), in the principal sum of $110,000. In addition, the Company issued 935 shares of its common stock to Firstfire Global as a commitment fee pursuant to the Firstfire Global SPA. Pursuant to the terms of the Firstfire Global Note, the Company agreed to pay to Firstfire Global $110,000 and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest ($6,600) shall be guaranteed and the remaining six months of interest shall be deemed earned in full as of the issue date thereof. The Firstfire Global Note carries an OID of $10,000. Accordingly, Firstfire Global paid the purchase price of $100,000 in exchange for the Firstfire Global Note. The Company intends to use the proceeds for working capital. Firstfire Global may convert the Firstfire Global Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Firstfire Global Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by Firstfire Global upon, at the election of Firstfire Global, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $1.00 per share, as the same may be adjusted as provided in the Firstfire Global Note.

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

Upon the occurrence of any Event of Default (as defined in the Firstfire Global Note), which has not been cured within the time prescribed in the Firstfire Global Note, it shall become immediately due and payable and the Company shall pay to Firstfire Global, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125%.

Pursuant to the terms of the Firstfire Global SPA, on March 21, 2022, the Company also issued to Firstfire Global a three-year warrant (the “Firstfire Global Warrant”) to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.00.

Pursuant to the terms of the Firstfire Global SPA, on March 21, 2022, the Company also entered into a registration rights agreement, dated March 21, 2022, by and between the Company and Firstfire Global (the “Firstfire Global Registration Rights Agreement”). Pursuant to the terms of the Firstfire Global Registration Rights Agreement, the Company agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the Firstfire Global SPA, including shares issued upon conversion of the Firstfire Global Note or upon exercise of the Firstfire Global Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 30 days following March 21, 2022 and to have the registration statement declared effective by the SEC within 60 days following March 21, 2022.

The Firstfire Global Registration Rights Agreement contains customary indemnification provisions.

GS Capital Partners, LLC Securities Purchase Agreement and 12% Convertible Promissory Note

On March 21, 2022, the Company entered into a ~~related party transaction~~securities purchase agreement (the “GS Capital SPA”), dated as of March 21, 2022, with ~~Jed Kaplan,~~GS Capital Partners, LLC (“GS Capital”), pursuant to which the ~~Chairman~~Company issued a 12% promissory convertible note (the “GS Capital Note”) with a maturity date ofSeptember 21, 2022 (the “GS Capital Maturity Date”), in the principal sum of $82,500. In addition, the Company issued 703 shares of its common stock to GS Capital as a commitment fee pursuant to the GS Capital SPA. Pursuant to the terms of the GS Capital Note, the Company agreed to pay to GS Capital $82,500 and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest ($4,950) shall be guaranteed and the remaining six months of interest shall be deemed earned in full as of the issue date thereof. The GS Capital Note carries an OID of $7,500. Accordingly, GS Capital paid the purchase price of $75,000.00 in exchange for the GS Capital Note. The Company intends to use the proceeds for working capital. GS Capital may convert the GS Capital Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the GS Capital Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by GS Capital upon, at the election of GS Capital, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $1.00 per share, as the same may be adjusted as provided in the GS Capital Note.

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

Upon the occurrence of any Event of Default (as defined in the GS Capital Note), which has not been cured within the time prescribed in the GS Capital Note, it shall become immediately due and payable and the Company shall pay to GS Capital, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125%.

Pursuant to the terms of the GS Capital SPA, on March 21, 2022, the Company also issued to GS Capital a three-year warrant (the “GS Capital Warrant”) to purchase 37,500 shares of the Company’s common stock at an exercise price of $1.00.

Pursuant to the terms of the GS Capital SPA, on March 21, 2022, the Company also entered into a registration rights agreement, dated March 21, 2022, by and between the Company and GS Capital (the “GS Capital Registration Rights Agreement”). Pursuant to the terms of the GS Capital Registration Rights Agreement, the Company agreed to prepare and file with the SEC a ~~more than~~ registration statement covering the resale of all shares issued or issuable pursuant to the GS Capital SPA, including shares issued upon conversion of the GS Capital Note or upon exercise of the GS Capital Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 30 days following March 21, 2022 and to have the registration statement declared effective by the SEC within 60 days following March 21, 2022.

The GS Capital Registration Rights Agreement contains customary indemnification provisions.

Ionic Ventures, LLC Securities Purchase Agreement and 12% Convertible Promissory Note

On March 21, 2022, the Company entered into a securities purchase agreement (the “Ionic SPA”), dated as of March 21, 2022, with Ionic Ventures, LLC (“Ionic”), pursuant to which the Company issued a 12% ~~shareholder.~~promissory convertible note (the “Ionic Note”) with a maturity date of September 21, 2022 (the “Ionic Maturity Date”), in the principal sum of $110,000. In addition, the Company issued 935 shares of its common stock to Ionic as a commitment fee pursuant to the Ionic SPA. Pursuant to the terms of the Ionic Note, the Company agreed to pay to Ionic $110,000 and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest ($6,600) shall be guaranteed and the remaining six months of interest shall be deemed earned in full as of the Issue Date thereof. The ~~loan was~~Ionic Note carries an OID of $10,000. Accordingly, Ionic paid the purchase price of $100,000 in exchange for $the Ionic Note. The Company intends to use the proceeds for working capital. Ionic may convert the Ionic Note into the Company’s common stock (subject to the beneficial ownership limitations of ~~247,818~~4.99% in the Ionic Note; provided however, that the limitation on conversion may be waived (up to 9.99~~, bearing interest~~%) by Ionic upon, at the election of Ionic, not less than 61 days’ prior notice to the Company) at any time at a ~~rate~~conversion price equal to $1.00 per share, as the same may be adjusted as provided in the Ionic Note.

%Upon the occurrence of any Event of Default (as defined in the Ionic Note), which has not been cured within the time prescribed in the Ionic Note, it shall become immediately due and payable and the Company shall pay to Ionic, in full satisfaction of its obligations hereunder, an amount equal to the principal ~~is due~~amount then outstanding plus accrued interest multiplied by 125%.

Pursuant to the terms of the Ionic SPA, on March 21, 2022, the Company also issued to Ionic a ~~June 10, 2022~~three-year warrant (the “Ionic Warrant”) to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.00.

Pursuant to the terms of the Ionic SPA, on March 21, 2022, the Company also entered into a registration rights agreement, dated March 21, 2022, by and between the Company and Ionic (the “Ionic Registration Rights Agreement”). Pursuant to the terms of the Ionic Registration Rights Agreement, the Company agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the Ionic SPA, including shares issued upon conversion of the Ionic Note or upon exercise of the Ionic Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 30 days following March 21, 2022 and to have the registration statement declared effective by the SEC within 60 days following March 21, 2022.

The ~~loan may be repaid~~Ionic Registration Rights Agreement contains customary indemnification provisions.

As previously disclosed in the Company’s Current Report on Form 8-K filed by the Company ~~without penalty,~~on February 24, 2021 with the SEC, on February 19, 2021, the Company and Labrys Fund, LP (“Labrys”) entered a securities purchase agreement (the “Labrys SPA”), pursuant to which the Company issued a 12% promissory note (the “Labrys Note”) with a maturity date of February 19, 2022 in the principal sum of $1,650,000. As of March 16, 2022, the Company and Labrys entered into Amendment #2 (the “Labrys Amendment”) to the Labrys SPA and the Labrys Note, as amended. Pursuant to the terms of the Labrys Amendment, the maturity date of the Labrys Note was extended to the earlier of (i) September 15, 2022, and (ii) the date that the Company’s common stock is listed on the Nasdaq Stock Market or the New York Stock Exchange. In addition, the Labrys Note was amended to provide that Labrys has the right, at any ~~time. Should~~time on or following the date that an event of default occurs under the Labrys Note, as amended, to convert all or any portion of the then outstanding and unpaid principal and interest into common stock, subject to a 4.99% equity blocker. In the Labrys Amendment, the parties also agreed that the Company ~~fail~~has already received cash proceeds in excess of the $2,000,000 minimum threshold referenced in the Labrys Note. Pursuant to ~~make~~ the ~~principal payment due,~~terms of the ~~loan will convert~~Labrys Amendment, Labrys waived its rights to ~~a 17% equity stake in our subsidiary, Simplicity One Brazil,~~receive any portion of ~~which Jed Kaplan is already a 20% stakeholder.~~the next $750,000 of cash proceeds received by the Company to the extent that such amounts are received by the Company between March 15, 2022 and April 9, 2022.

Except as set forth in the Labrys Amendment, the Labrys Note, as amended, remains in full force and effect.

As previously disclosed in the Company’s Current Report on Form 8-K filed by the Company on September 7, 2021 with the SEC, on August 31, 2021, the Company issued to Lucas Ventures, LLC (“Lucas Ventures”) a 12% promissory note (the “Lucas Ventures Note”) with a maturity date of August 31, 2023, in the principal amount of $200,000. As of March 16, 2022, the Company and Lucas Ventures entered into an Amendment and Waiver Pursuant to Convertible Promissory Note (the “Lucas Ventures Amendment”). Pursuant to the terms of the Lucas Ventures Amendment, the parties agreed that the FirstFire Note, FirstFire Warrant, GS Capital Note, GS Capital Warrant, Ionic Note, Ionic Warrant, Jefferson Street Note, and Jefferson Street Warrant would not be deemed a “Dilutive Issuance” as provided in the Lucas Ventures Note. In addition, pursuant to the terms of the Lucas Ventures Amendment, the conversion price of the Lucas Ventures Note was decreased from $11.50 per share to $1.00 per share; provided, however, that upon failure to make any payment under the Lucas Ventures Note, as amended, the conversion price will be $0.50 per share, as the same may be adjusted as provided in the Lucas Ventures Note, as amended. Pursuant to the terms of the Lucas Ventures Amendment, the parties also agreed that Lucas Ventures may not convert the Lucas Ventures Note, as amended, prior to September 15, 2022.

Except as set forth in the Lucas Ventures Amendment, the Lucas Ventures Note remains in full force and effect.

As previously disclosed in the Company’s Current Report on Form 8-K filed by the Company on September 7, 2021 with the SEC, on August 31, 2021, the Company issued to LGH Investments, LLC (“LGH”) a 12% promissory note (the “LGH Note”) with a maturity date of August 31, 2023, in the principal amount of $200,000. As of March 16, 2022, the Company and LGH entered into an Amendment and Waiver Pursuant to Convertible Promissory Note (the “LGH Amendment”). Pursuant to the terms of the LGH Amendment, the parties agreed that the FirstFire Note, FirstFire Warrant, GS Capital Note, GS Capital Warrant, Ionic Note, Ionic Warrant, Jefferson Street Note, and Jefferson Street Warrant would not be deemed a “Dilutive Issuance” as provided in the LGH Note. In addition, pursuant to the terms of the LGH Amendment, the conversion price of the LGH Note was decreased from $11.50 per share to $1.00 per share; provided, however, that upon failure to make any payment under the LGH Note, as amended, the conversion price will be $0.50 per share, as the same may be adjusted as provided in the LGH Note, as amended. Pursuant to the terms of the LGH Amendment, the parties also agreed that LGH may not convert the LGH Note, as amended, prior to September 15, 2022.

Except as set forth in the LGH Amendment, the LGH Note remains in full force and effect.

Jefferson Street Capital LLC Securities Purchase Agreement and 12% Convertible Promissory Note

On April 1, 2022, the Company entered into a securities purchase agreement (the “Jefferson SPA”), dated as of April 1, 2022, with Jefferson Street Capital LLC (“Jefferson”), pursuant to which the Company issued a 12% promissory convertible note (the “Jefferson Note”) with a maturity date of October 1, 2022 (the “Jefferson Maturity Date”), in the principal sum of $82,500. In addition, the Company issued 703 shares of its common stock to Jefferson as a commitment fee pursuant to the Jefferson SPA. Pursuant to the terms of the Jefferson Note, the Company agreed to pay to Jefferson $82,500 and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest ($4,950) shall be guaranteed and the remaining six months of interest shall be deemed earned in full as of the issue date thereof). The Jefferson Note carries an original issue discount of $7,500. Accordingly, Jefferson paid the purchase price of $75,000 in exchange for the Jefferson Note. The Company intends to use the proceeds for working capital. Jefferson may convert the Jefferson Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Jefferson Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by Jefferson upon, at the election of Jefferson, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $1.00 per share, as the same may be adjusted as provided in the Jefferson Note.

Upon the occurrence of any Event of Default (as defined in the Jefferson Note), which has not been cured within the time prescribed in the Jefferson Note, it shall become immediately due and payable and the Company shall pay to Jefferson, in full satisfaction of its obligations hereunder, an amount equal to the principal amount then outstanding plus accrued interest multiplied by 125%.

Pursuant to the terms of the Jefferson SPA, on April 1, 2022, the Company also issued to Jefferson a three-year warrant (the “Jefferson Warrant”) to purchase 37,500 shares of the Company’s common stock at an exercise price of $1.00.

Pursuant to the terms of the Jefferson SPA, on April 1, 2022, the Company also entered into a registration rights agreement, dated as of April 1, 2022, by and between the Company and Jefferson (the “Jefferson Registration Rights Agreement”). Pursuant to the terms of the Jefferson Registration Rights Agreement, the Company agreed to prepare and file with the SEC a registration statement covering the resale of all shares issued or issuable pursuant to the Jefferson SPA, including shares issued upon conversion of the Jefferson Note or upon exercise of the Jefferson Warrant. The Company agreed to use its commercially reasonable efforts to have the registration statement filed with the SEC within 30 days following April 1, 2022 and to have the registration statement declared effective by the SEC within 60 days following April 1, 2022.

The Jefferson Registration Rights Agreement contains customary indemnification provisions.

On April 8, 2022, the Company entered into an agreement to issue 20,000 shares of its common stock in partial payment for services to a vendor.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Simplicity Esports and Gaming Company and its subsidiaries. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report and with the audited condensed consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”).

This Quarterly Report includes “forward-looking statements” ~~within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)~~ that are not historical fact, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors sections of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2021, as filed with the SEC, as the same may be updated from time to time, including in this Quarterly Report. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Esports is the competitive playing of video games by amateur and professional teams for cash prizes. Esports typically takes the form of organized, multiplayer video games that include real-time strategy, fighting, first-person shooter, and multiplayer online battle arena games. As of July 7, 2021, the three largest selling esports games are Dota 2®, League of Legends® (both multiplayer online battle arena games) and Counter Strike: Global Offensive® (a first-person shooter game). Other popular games include SMITE®, StarCraft II®, Call of Duty®¸ Heroes of the Storm®, Hearthstone® and Fortnite®. Most major professional esports events and a wide range of amateur esports events are broadcast live via streaming services including twitch.tv, azubu.tv, ustream.tv and youtube.com. Esports also includes games which can be played, primarily by amateurs, in multiplayer competitions on the Sony PlayStation®, Microsoft Xbox® and WII Nintendo® systems.

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

According to Newzoo, a global leader in esports, games and mobile intelligence, the total global esports audience was 500 million in 2019, with an anticipated 27.5 million American gamers, and such global audience is expected to reach 646 million by 2023. In addition, according to Newzoo, esports produced $950 million in 2019 revenue and was projected to reach $1.1 billion in 2020 and $1.6 billion in 2023. Esports enthusiasts, which are people who watch professional esports content at least once a month, made up 201.2 million of the 2018 total, up from 143.2 million in 2017. With a compound annual growth rate (“CAGR”) (2017-2022) of +15.7%, this number is expected to reach almost 297 million in 2022. The global average revenue per esports enthusiast, which includes not only gaming revenue, but also sponsorships advertising and all other esports related revenues, is projected to be $5.45 in 2019, up +8.9% from $5.00 in 2018. The number of occasional esports viewers, (people who watch professional esports content less than once a month), is expected to reach 252.6 million in 2019, up from 221.6 million in 2018, and is projected to grow with a CAGR of +12.6% to surpass 347 million in 2022. The number of people who are aware of esports worldwide was expected to reach 1.8 billion in 2019, up from 1.6 billion in 2018. According to Newtech Mag, China and the U.S. have the largest populations of esports fans, with Brazil ranking first in Latin America, which is the fastest growing gaming market, and third globally, with 20 million fans. The increasing prominence of esports as a mainstream entertainment industry is driving the growth in awareness in most regions. Audience and awareness growth in the emerging regions of Latin America, Middle East and Africa, Southeast Asia, and Rest of Asia is largely driven by improving IT infrastructure and urbanization. We believe the rise of new franchises, such as Player Unknown’s Battlegrounds® or PubG®, is an important global growth factor as the influx of millennials should continue to drive the growth of the esports industry’s audience and in turn, the esports gaming industry.

We are a global esports organization, with an established brand, that is capitalizing on the growth in esports through three business units, Simplicity One Brasil Ltda (“Simplicity One”), Simplicity Esports, LLC (“Simplicity Esports LLC”) and PLAYlive Nation, Inc. (“PLAYlive”).

We have acquired a database of over 400,000 paying esports gaming center customers in the acquisition of ~~PLAYlive Nation.~~PLAYlive. We directly promote our online Simplicity Esports tournaments to this database of over 400,000 existing customers via text messages. If we can convert merely 1% of these existing customers from the PLAYlive ~~Nation~~ database to play in paid entry online Simplicity Esports tournaments, this may be a profitable business unit resulting in approximately $1,000,000 in annual revenues. Management also intends to sell sponsorship and marketing activations for these online tournaments that would create additional revenue.

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

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

~~Since January 2020, through~~Through Simplicity One, our 76% owned subsidiary, ~~Simplicity One,~~ we ~~own and~~ manage Flamengo ~~ESports,~~eSports, one of the leading Brazilian League of Legends® ~~teams.~~teams competing in the top tier league CBLoL. CBLoL was the most talked about esports league in the world, on Twitter for the first half of 2021, with Call of Duty League and Overwatch League ranking second and third, respectively. Flamengo ~~ESports~~eSports was established in 2017 as the Esports division of Clube de Regatas do Flamengo, a successful Brazilian sports organization, with over 4030 million followers across social media accounts, known for its world-famous soccer team. Flamengo ~~ESports’~~eSports’ League of Legends® team won the CBLoL Championship in September 2019, which qualified the team to compete at the 2019 League of Legends® World Championship in Europe as one of 24 teams from 13 different regions around the world. Flamengo Esports @flaesports was ranked as the 9^thsixth most tweeted about ~~sports~~esports organization in the world, ~~in 2020.~~ahead of Team Liquid and Cloud 9 ranking seventh and tenth, respectively, for the first half of 2021.

WeThrough Simplicity Esports LLC and PLAYlive, our wholly owned subsidiaries, we own and operate corporate and franchise esports gaming centers ~~through our wholly owned subsidiaries Simplicity Esports LLC and PLAYlive,~~ throughout the U.S., giving casual gamers the opportunity to play in a social setting with other members of the gaming community. In addition, aspiring and established professional gamers have an opportunity to compete in local and national esports tournaments held in our gaming centers for prizes, notoriety, and potential contracts to play for one of our professional esports teams. In this business unit, revenue is generated from franchise royalties, the sale of game time, memberships, tournament entry fees, birthday party events, corporate party events, concessions and gaming-related merchandise.

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

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

Creating content that engages fans, sponsors and developers, while promoting our brand is one of our primary goals. Out talented team will continue to produce unique in-depth content which showcases aspects of esports for fans. We seek to reach a broad demographic encompassing the casual, amateur and professional gaming community. Our philosophy is to enhance our footprint for both endemic and non-endemic partnerships. We believe we possess a deep perception of our markets and understand the new age of branding while maintaining authenticity to the gaming community that comprises our fanbase.

As of ~~November 30, 2021 through our subsidiary entities,~~February 28, 2022, we ~~currently~~ operate 17 corporate-owned retail Simplicity Esports Gaming ~~Centers,~~ ~~Furthermore, we~~Centers. We have engaged a national tenant representation real estate broker to assist in the strategic planning and negotiations for our future Simplicity Esports Gaming Center locations. We contemplate that new Simplicity Esports Gaming Centers will be funded by us as well as a combination of tenant improvement allowances from landlords and sponsorships. The Company intends to continue the expansion of its corporate owned esports gaming center footprint through the buildout of new esports gaming centers. The disruptions in commercial real estate caused by COVID-19 lockdowns have allowed the Company to strengthen its existing relationships with national landlords by signing new locations with percentage rent leases. ~~The~~We expect that future locations will range between 2,000 and 4,000 square feet and be primarily located inside of shopping malls.

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

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

We began implementing a franchise roll-up strategy in July 2020 as a result of the disruption caused by COVID-19 related stay at home orders, and the disruption it caused to the commercial real estate market. The reduction in revenues for some franchisees because of stay-at-home orders, and government mandates to remain closed created significant accrued rent payments due to landlords. We have been able to come to terms with many franchisees to acquire the assets of their gaming centers and make them corporate owned. We have simultaneously negotiated new leases with some of the largest national mall chains, including Simon Property Group and Brookfield Asset Management, and are in the process of negotiating additional locations with other landlords. The new leases involve significant reductions in or elimination of fixed rent and the addition of percentage of revenues rent terms.

The Simplicity Esports LLC stream team encompasses over 30 commentators (commonly known as “casters”), influencers and personalities who connect to a dedicated fan base. Our electric group of live personalities represent our organization to the fullest with their own unique style. We are proud to support and present a diverse group of gamers as we engage fans across a multiple of esports genres. Our Twitch affiliation has enabled our stream team influences to reach a broad fan base. Additionally, we have created several niches within the streaming community which has enabled us to engage fans within certain titles on a 24/7 basis. Our notoriety in the industry is evidenced by our audience that views millions of minutes of Simplicity Esports’ content monthly, via various social media outlets including YouTube, Twitter and Twitch. Through Simplicity Esports LLC, we have begun to implement a unique approach to ensure the ultimate fan friendly esports experience. Our intention is to have gamers involved at the grassroots level and feel a sense of unity as we compete with top class talent. Our management and players are known within the esports community, and we plan to use their skills to create a seamless content creation plan helping gamers feel closer to our brand than any other in the industry.

For the three months ended ~~November 30,~~February 28, 2022 and 2021, ~~and 2020,~~ we generated revenues of ~~$843,815~~$888,511 and ~~$296,546~~$428,479, respectively, and reported net losses of ~~$2,165,726~~$2,015,457 and ~~1,013,693,~~2,986,727, respectively.

For the ~~six~~nine months ended ~~November 30,~~February 28, 2022 and 2021, ~~and 2020,~~ we generated revenues of ~~$1,748,655~~$2,637,166 and ~~$497,147,~~$925,626, respectively, and reported net losses of ~~$6,431,470~~$8,446,927 and ~~$1,684,793, respectively,~~$4,671,520, respectively. For the nine months ended February 28, 2022 and 2021, we had cash flow used in operating activities of ~~$2,105,623~~$2,477,014 and ~~$342,098,~~$818,173, respectively. As of ~~November 30, 2021,~~February 28, 2022, we had an accumulated deficit of ~~$18,632,103.~~

There is substantial doubt regarding our ability to continue as a going concern as a result of our historical recurring losses and negative cash flows from operations as well as our dependence on private equity and financings.

Summary of Statement of Operations for the Three and ~~Six~~Nine Months Ended ~~November 30, 2021~~February 28, 2022 and 2020:

For the three and ~~six~~nine months ended ~~November 30,~~February 28, 2022 and 2021, revenues consisted of the following:

									For the Three Months Ended				For the Nine Months Ended
	For the Three Months Ended				For the Six Months Ended				February 28,				February 28,
	November 30, 2021 and 2020				November 30, 2021 and 2020				2022		2021		2022		2021
Revenues
Franchise royalties, fees and other	$	96,953	$	91,793	$	159,311	$	179,076	$	114,317	$	50,042	$	273,628	$	229,118
Other revenue				-				-
Company-owned stores sales		681,732		167,791		1,355,233		244,729
Company-owned stores and other										702,531		319,125		2,057,764		563,854
Esports revenue		65,130		36,962		234,111		73,342		71,663		59,312		305,774		132,654

Total Revenues	$	843,815	$	296,546	$	1,748,655	$	497,147	$	888,511	$	428,479	$	2,637,166	$	925,626

For the three months ended ~~November 30, 2021,~~February 28, 2022, our revenues increased by ~~$547,269,~~$460,032, as compared to the three months ended ~~November 30, 2020.~~February 28, 2021. For the ~~six~~nine months ended ~~November 30, 2020,~~February 28, 2022, our revenues increased by ~~$1,251,508,~~$1,711,540, as compared to the ~~six~~nine months ended ~~November 30, 2020.~~February 28, 2021. These increases were primarily due to the increase in both the number of ~~company~~Company owned stores and the increase in operating hours as ~~the COVID 19~~COVID-19 restrictions changed during the period, coupled with increased tournament prize winnings in our ~~Esports~~esports revenue.

Cost of goods sold for the three months ended ~~November 30,~~February 28, 2022 and 2021 was $536,603 and ~~2020 was $485,394 and $113,771,~~$186,281, respectively, representing an increase of ~~$371,623~~$350,322 primarily due to increased revenues. Cost of goods sold for the ~~six~~nine months ended ~~November 30,~~February 28, 2022 and 2021 was $1,629,119 and ~~2020 was $1,092,5164 and $181,416,~~$367,697, respectively, representing an increase of ~~$911,100~~$1,261,422 primarily due to increased revenues, coupled with higher inventory write off costs on higher inventory ~~balances.~~balances and increased depreciation expense related to the increase in the number of Company owned stores.

Compensation and related benefits for the three months ended ~~November 30,~~February 28, 2022 and 2021 was $777,992 and ~~2020 was $845,886 and $366,257, an increase~~$2,041,922, respectively, representing a decrease of ~~$479,629.~~$1,263,930. Compensation and related benefits for the ~~six~~nine months ended ~~November 30,~~February 28, 2022 and 2021 was $2,927,004 and ~~2020 was $2,149,012 and $668,825,~~$2,710,747, respectively, representing an increase of ~~$1,480,187.~~$216,257. Compensation and related benefits consist of salaries and stock-based compensation, health benefits and related payroll taxes. The increase iswas primarily due to the increase in the number of employees and higher stock-based compensation.

Professional fees for the three months ended ~~November 30,~~February 28, 2022 and 2021 was $54,889 and ~~2020 was $129,723 and $186,898~~$175,689, respectively, representing a decrease of ~~$57,175.~~$120,800. The decline in expenses iswas primarily due to reduced consulting fees in the quarter. Professional fees for the ~~six~~nine months ended ~~November 30,~~February 28, 2022 and 2021 was $633,965 and ~~2020 was $579,076 and $260,789~~$436,478, respectively, representing an increase of ~~$318,287.~~$197,487. Professional fees consist of costs for audits, accountants, attorneys, consultants and the costs for other experts. The increase is primarily due to the increase in accounting and audit fees as well as legal expenses related to the increase in debt.

General and administrative expenses for the three months ended ~~November 30, 2021~~February 28, 2022 was ~~$432,127~~$531,349, as compared to ~~$212,631~~$450,136 for the three months ended ~~November 30, 2020,~~February 28, 2021, representing an increase of ~~$219,496.~~$81,213. General and administrative expenses for the ~~six~~nine months ended ~~November 30, 2021~~February 28, 2022 was ~~$875,822~~$1,407,171, as compared to ~~$454,400~~$904,536 for the ~~six~~nine months ended ~~November 30, 2020,~~February 28, 2021, representing an increase of ~~$421,422.~~$502,635. The increase iswas primarily due to the increase in the number of ~~company~~Company owned stores and the associated expenses (rent, utilities, computer expenses, insurance) to maintain the ~~stores.~~

stores, coupled with increased amortization expense on higher intangible asset values.

For the three months ended ~~November 30, 2021,~~February 28, 2022, loss from operations amounted to ~~$1,049,315~~$1,012,322, as compared to ~~$784,288~~$2,436,886 for the three months ended ~~November 30, 2020, an increase~~February 28, 2021, representing a decrease of ~~$265,027~~$1,424,564. For the ~~six~~nine months ended ~~November 30, 2021,~~February 28, 2022, loss from operations amounted to ~~$2,947,771~~$3,960,093, as compared to ~~$1,269,560~~$3,706,446 for the ~~six~~nine months ended ~~November 30, 2020,~~February 28, 2021, representing an increase of ~~$1,678,211.~~$253,647.

For the three months ended ~~November 30, 2021,~~February 28, 2022, other expense amounted to ~~$1,116,411~~$1,003,135, as compared to ~~$229,405~~$549,842 for the three months ended ~~November 30, 2020,~~February 28, 2021, representing an increase of ~~$887,006.~~$453,293. The increase in other expenses was primarily attributable to an increase in interest expense of ~~$901,134~~$454,542 related to an increase in debt and the amortization of debt discount.

For the ~~six~~nine months ended ~~November 30, 2021,~~February 28, 2022, other expense amounted to ~~$3,483,699~~$4,486,834, as compared to ~~$415,233~~$965,075 for the ~~six~~nine months ended ~~November 30, 2020,~~February 28, 2021, representing an increase of ~~$3,068,466.~~$3,521,769. The increase in other expenses was primarily attributable to an increase in interest expense of ~~$1,406,702~~$1,861,244 related to an increase in debt and the amortization of debt discount, coupled with an increase in debt forgiveness expense of $1,733,916.

Net loss for the three months ended ~~November 30, 2021~~February 28, 2022 was ~~$2,165,726~~$2,015,457, as compared to a net loss of ~~$1,013,693~~$2,986,728 for the three months ended ~~November 30, 2020, an increase~~February 28, 2021, representing a decrease of ~~$1,152,033.~~$971,271. Net loss for the ~~six~~nine months ended ~~November 30, 2021~~February 28, 2022 was ~~$6,431,470~~$8,446,927, as compared to ~~$1,684,793~~$4,671,521 for the ~~six~~nine months ended ~~November 30, 2020,~~February 28, 2021, representing an increase of ~~$4,746,677.~~$3,775,406.

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had cash of ~~$832,423~~$327,619 and $414,257 as of ~~November 30, 2021,~~February 28, 2022, and May 31, 2021, respectively.

Our primary uses of cash have been for salaries, fees paid to third parties for professional services, computer and internet expenses, and general and administrative expenses. We have received funds from licensing fees, from Company-owned stores sales, and from various financing activities such as from the sale of our common shares and from debt financings. The following trends are reasonably likely to result in changes in our liquidity over the near to long term:

Since inception, we have raised proceeds from the sale of common shares and from debt to fund our operations.

The following table shows a summary of our cash flows for the ~~six~~nine months ended ~~November 30, 2021~~February 28, 2022 and ~~2020.~~2021.

	Six Months Ended November 30,						Nine Months Ended February 28,
	2021			2020			2022			2021
Net cash used in operating activities	$	(2,105,623	)	$	(342,098	)	$	(2,477,014	)	$	(818,173	)
Net cash provided by (used in) investing activities		(13,302	)		(1,949	)
Net cash used in investing activities								(352,725	)		(8,949	)
Net cash provided by financing activities	$	2,537,091		$	752,279			2,743,101			1,238,883
Net increase (decrease) in cash	$	418,166		$	408,231
Net (decrease) increase in cash							$	(86,638	)	$	411,762
Cash - beginning of the period	$	414,257		$	160,208		$	414,257		$	160,208
Cash - end of the period	$	832,423		$	568,439		$	327,619		$	571,969

Net cash flow used in operating activities for the ~~six~~nine months ended ~~November 30, 2021~~February 28, 2022 of $2,477,014 primarily reflected a net loss of ~~$6,431,470,~~$8,446,927, which was then adjusted for the add-back (deduction) of non-cash items, primarily consisting of depreciation of ~~$165,563,~~$245,817, amortization expense of ~~$156,096,~~$221,910 stock-based compensation expense of ~~$1,218,814,~~$1,407,175, non-cash interest expense related to debt of ~~$1,696,395,~~$2,612,798 an increase in deferred equity financing costs of $146,305, debt forgiveness expense of ~~$1,730,801~~$1,771,301 an increase in common stock issued for services rendered of $407,883, and changes in operating assets and liabilities, consisting primarily of ana decrease in accounts payable of ~~$271,086,~~$75,942, a decrease in accrued expenses of ~~$327,072,~~$112,132, an increase in prepaids of $267,959, an increase in prepaid franchise fees of $204,728, an increase in inventory of ~~$157,636,~~$96,567 and an increase in ~~other assets~~deferred revenue of ~~$104,520~~$269,357 offset by a decrease in accounts receivable of ~~$55,559.~~$99,539.

Net cash used in investing activities was ~~$13,302~~$352,725 for the ~~six~~nine months ended ~~November 30, 2021~~February 28, 2022, as compared net cash used in investing activities of ~~$1,949~~$8,949 for the ~~six~~nine months ended ~~November 30, 2020.~~February 28, 2021. During the ~~six~~nine months ended ~~November 30, 2021,~~February 28, 2022, cash used for the ~~purchase of~~ property and equipment increased ~~$11,353~~$343,776 compared to the ~~six~~nine months ended ~~November 30, 2020.~~February 28, 2021.

Net cash provided by financing activities was ~~$2,537,091~~$2,743,101 for the ~~six~~nine months ended ~~November 30, 2021~~February 28, 2022, as compared to ~~$752,279~~$1,238,883 for the ~~six~~nine months ended ~~November 30, 2020.~~February 28, 2021. During the ~~six~~nine months ended ~~November 30, 2021,~~February 28, 2022, we received net cash from notes payable of ~~$3,761,500~~$4,009,318 and cash from the sale of warrants of $100,000, offset by the repayment of notes payable of ~~$1,324,409.~~$1,350,816 coupled with a net decrease of $14,801 related to the Company’s minority interest positions.

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

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

The Company’s unaudited consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the unaudited condensed consolidated financial statements, the Company has an accumulated deficit of ~~$18,632,103,~~$20,586,755, a working capital deficit of ~~$1,073,665~~$2,548,029 and a net loss of ~~$6,431,470 at November 30, 2021.~~$8,446,927 on February 28, 2022. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the ~~of the~~ date that the unaudited financial statements are issued.

The Company has commenced operations and ~~has begun to generate~~generates revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

In December ~~2020~~2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. ~~While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other countries and~~Since that time, infections have been reported globally.

~~Because COVID-19 infections have been reported throughout the United States,~~ Previously, certain federal, state and local governmental authorities ~~have~~ issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. ~~Additional, more restrictive proclamations and/or directives may be issued in the future.~~ As a result, all of our corporate and franchised Simplicity ~~Gaming Centers~~gaming centers were closed effective April 1, 2020. We commenced reopening Simplicity ~~Gaming Centers~~gaming centers as of May 1, 2020 and have since reopened 17 corporate and 12 franchised ~~Simplicity Gaming Centers as of November 30, 2021.~~locations. Although our franchise agreements with franchisees of Simplicity ~~Gaming Centers~~gaming centers require a minimum monthly royalty payment to us from the franchisees regardless of whether the franchised Simplicity ~~Gaming Centers~~gaming centers are operating, there is a potential risk that franchisees of Simplicity ~~Gaming Centers~~gaming centers will default in their obligations to pay their minimum monthly royalty payment to us, resulting in either an increase in accounts receivables or a bad debt expense where account receivables are no longer collectible due to a franchisee’s inability to pay the minimum monthly royalty payments owed by the franchisee. Additional and/or more restrictive orders, proclamations and/or directives may be issued in the future.

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

We have long-term operating lease obligations and deferred revenues related to franchise fees to be recognized over the term of franchise agreements with our franchises, generally ~~ten~~10 years. We will begin to recognize deferred franchise fee revenue at the time a franchise commences operations.

The Company is party to operating leases at its corporate office and at each of its ~~company~~Company owned store locations which have various terms and payments.

On February 19, 2021, the Company entered into a securities purchase agreement (the “SPA”) dated as of February 19, 2021, with an accredited investor (the “Holder”), pursuant to which the Company issued a 12% promissory note (the “Note”) with a maturity date of February 19, 2022 (the “Maturity Date”), in the principal sum of $1,650,000. In addition, the Company issued 10,000 shares of its common stock to the Holder as a commitment fee pursuant to the SPA. Pursuant to the terms of the Note, the Company agreed to pay to $1,650,000 (the “Principal Sum”) to the Holder and to pay interest on the principal balance at the rate of 12% per annum (provided that the first twelve months of interest shall be guaranteed). The Note carries an original issue discount (“OID”) of $165,000. Accordingly, on the Closing Date (as defined in the SPA), the Holder paid the purchase price of $1,485,000 in exchange for the Note. The Company intends to use the proceeds for its operational expenses, the repayment of those certain self-amortization promissory notes previously issued to the Holder on June 18, 2020 and November 23, 2020, and the repayment of certain other existing debt obligations. The Holder may convert the Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Note) at any time at a conversion price equal to $11.50 per share.

Upon the Holder’s provision of notice to the Company of the occurrence of any Event of Default, which has not been cured within five (5) calendar days, the Note shall become immediately due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Principal Sum then outstanding plus accrued interest multiplied by 125% (the “Default Amount”). Upon the occurrence of an Event of Default, additional interest will accrue from the date of the Event of Default at the rate equal to the lower of 15% per annum or the highest rate permitted by law.

During the ~~six~~nine months ended ~~November 30, 2021~~February 28, 2022 the Company paid the Holder a total of ~~$855,000.~~$865,000. The Company paid an interim payment due to the Holder in the amount of $225,000 towards the repayment of the balance of the Note in the amount of $90,909, towards the repayment of guaranteed interest in the amount of $109,091 and $25,000 as an amendment fee. In addition, the Company paid $130,000 towards the repayment of the balance of the Note in the amount of $58,500 and towards the guaranteed interest in the amount of $71,500 and in compliance with the renegotiated terms of an interim payment that was due on August 19, 2021 in the amount of $363,000, on September 30, 2021 the Company paid $500,000 towards the repayment of principal of the Note. On February 18, 2022 the Company paid $10,000 towards the repayment of principal of the Note and to extend the due date to March 18, 2022.

During the quarter ended ~~November 30, 2021,~~February 28, 2022, the Company incurred ~~$290,522~~$264,981 of interest expense related to the amortization of the debt discount on the Note. On ~~November 30, 2021~~February 28, 2022 the balance of the Note is ~~$635,605~~$890,586 all of which is included in the current portion of convertible notes payable, net of debt ~~discount.~~

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

The Company is required to make an interim payment to FirstFire in the amount of $123,200, on or before September 10, 2021, towards the repayment of the balance of the March 10 FirstFire Note. On September 17, 2021, the Company issued a common stock purchase warrant for the purchase of 40,000 shares of the Company’s common stock to FirstFire ~~Global Opportunities Fund, LLC (“FirstFire”)~~ as consideration for FirstFire entering into a first amendment to the March 10 FirstFire Note in order to delay an interim payment of OID and interest due under the March 10 FirstFire Note to the maturity date of such note. For the ~~quarter~~nine months ended ~~November 30, 2021,~~n February 28, 2022, the Company recorded the fair value of the warrants in the amount of $248,547 and took a related interest expense charge of $248,547.

On October 1, 2021, the Company issued a three-year warrant to purchase 40,000 shares of the Company’s common stock at an exercise price of $10.73 per share to FirstFire as consideration for FirstFire entering into a second amendment to the March 10 FirstFire Note in order to remove the capital raising ceiling in such note. For the ~~quarter~~nine months r ended ~~November 30, 2021,~~February 28, 2022, the Company recorded the fair value of the warrants in the amount of $201,351 and took a related interest expense charge of $201,351.

During the ~~six~~nine months ended ~~November 30, 2021,~~February 28, 2022, the Company recognized ~~$131,794~~$197,327 of interest expense related to the amortization of debt discount related to the FirstFire Note. On ~~November 30, 2021,~~February 28, 2022, the balance of FirstFire Note ~~net of the related debt discount,~~ is ~~$485,729~~$551,262, all of which is included in the current portion of convertible notes payable, net of debt discount.

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

On June 11, 2021, the Company entered into a securities purchase agreement (the “June 11 FirstFire SPA”) dated as of June 10, 2021, with FirstFire Global Opportunities Fund, LLC (“FirstFire”), pursuant to which the Company issued a 12% promissory note (the “June 11 FirstFire Note”) with a maturity date of June 10, 2023 (the “FirstFire Maturity Date”), in the principal sum of $1,266,666. In addition, the Company issued 11,875 shares of its common stock to FirstFire as a commitment fee pursuant to the June 11 FirstFire SPA. Pursuant to the terms of the June 11 FirstFire Note, the Company agreed to pay to $1,266,666 (the “FirstFire Principal Sum”) to FirstFire and to pay interest on the principal balance at the rate of 12% per annum (provided that the first ~~six~~nine months of interest shall be guaranteed and the remaining 18 months of interest shall be deemed earned in full if any amount is outstanding under the FirstFire Note after 180 days from June 10, 2021). The June 11 FirstFire Note carries an original issue discount (“OID”) of $126,666. Accordingly, FirstFire paid the purchase price of $1,140,000 in exchange for the FirstFire Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. FirstFire may convert the June 11 FirstFire Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the June 11 FirstFire Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by FirstFire upon, at the election of FirstFire, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $11.50 per share, as the same may be adjusted as provided in the June 11 FirstFire Note.

The Company recorded the June 11 FirstFire Note in the amount of $1,266,667 and a related debt discount of $1,266,667, interest payable of $76,000 and additional paid in capital of $1,053,999. On September 16, 2021, the Company made an interim payment to the FirstFire Note in the amount of $175,000. During the ~~six months~~quarter ended ~~November 30, 2021,~~February 28, 2022, the Company recorded interest expense of ~~$298,448.~~$240,041, which included $206,518 related to amortization of debt discount and accrued interest in the amount of $33,523. On ~~November 30, 2021,~~February 28, 2022, the balance of the June 11 FirstFire Note ~~net of the related debt discount~~ is ~~$123,448~~$329,966, all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On June 16, 2021, the Company entered into a securities purchase agreement (the “GS SPA”) dated as of June 10, 2021, with GS Capital Partners, LLC (“GS Capital”), pursuant to which the Company issued a 12% promissory note (the “GS Note”) with a maturity date of June 10, 2023 (the “GS Maturity Date”), in the principal sum of $333,333. In addition, the Company issued 3,125 shares of its common stock to GS as a commitment fee pursuant to the GS SPA. Pursuant to the terms of the GS Note, the Company agreed to pay to $300,000.00 (the “GS Principal Sum”) to GS and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest shall be guaranteed and the remaining 18 months of interest shall be deemed earned in full if any amount is outstanding under the GS Note after 180 days from June 10, 2021). The GS Note carries an original issue discount (“OID”) of $33,333. Accordingly, GS paid the purchase price of $300,000.00 in exchange for the GS Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. GS may convert the GS Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the GS Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by GS upon, at the election of GS, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $11.50 per share, as the same may be adjusted as provided in the GS Note.

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

The Company recorded the GS Note in the amount of $333,333 and a related debt discount of $333,333, interest payable of $20,000 and additional paid in capital of $280,000. During the ~~six months~~quarter ended ~~November 30, 2021~~February 28, 2022, the Company recorded interest expense of ~~$76,255.~~$65,482, which included $56,630 related to amortization of debt discount and accrued interest in the amount of $8,822. On ~~November 30, 2021,~~February 28, 2022, the balance of the GS Note ~~net of the related debt discount~~ is ~~$76,255~~$132,886, all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On August 23, 2021, the Company entered into a securities purchase agreement (the “Jefferson SPA”) dated as of August 23, 2021, with Jefferson Street Capital, LLC (“Jefferson”), pursuant to which the Company issued a 12% promissory note (the “Jefferson Note”) with a maturity date of August 23, 2023 (the “Jefferson Maturity Date”), in the principal sum of $333,333. In addition, the Company issued 3,125 shares of its common stock to Jefferson as a commitment fee pursuant to the Jefferson SPA. Pursuant to the terms of the Jefferson Note, the Company agreed to pay to $300,000.00 (the “Jefferson Principal Sum”) to Jefferson and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest shall be guaranteed and the remaining 18 months of interest shall be deemed earned in full if any amount is outstanding under the Jefferson Note after 180 days from August 23, 2021). The Jefferson Note carries an original issue discount (“OID”) of $33,333. Accordingly, Jefferson paid the purchase price of $300,000.00 in exchange for the Jefferson Note. The Company intends to use the proceeds for working capital and to pay off an existing promissory note issued by the Company in favor of Maxim. Jefferson may convert the Jefferson Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Jefferson Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by Jefferson upon, at the election of Jefferson, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $11.50 per share, as the same may be adjusted as provided in the Jefferson Note.

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

The Company recorded the Jefferson Note in the amount of $333,333 and a related debt discount of $274,239, interest payable of $20,000 and additional paid in capital of $205,605. During the ~~six months~~quarter ended ~~November 30, 2021,~~February 28, 2022, the Company recorded interest expense of ~~$36,277.~~$48,796. On ~~November 30, 2021,~~February 28, 2022, the balance of the Jefferson Note ~~net of the related debt discount~~ is ~~$95,372~~$143,382, all of which is included in the long-term portion of convertible notes payable, net of debt discount.

On August 31, 2021, pursuant to the terms of that certain Securities Purchase Agreement between the Company and Lucas Ventures, LLC (“LV SPA”), the Company issued a 12% convertible promissory note (“the LV Note”) in the principal amount of $200,000 with an effective date of September 2, 2021, guaranteed interest of $12,000 and a maturity date of September 2, 2023. In addition, the Company issued 3,749 shares of its common stock to LV as a commitment fee pursuant to the Securities Purchase Agreement. Furthermore, the Company issued a common stock purchase warrant for the purchase of 187,400 shares of the Company’s common ~~stock. ).~~stock). Accordingly, LVLucas Ventures Capital paid the purchase price of $200,000.00 in exchange for the LV Note.

Pursuant to the terms of the LV SPA, the Company also issued to LV a three-year warrant to purchase 187,480 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

The Company recorded the LV Note in the amount of $200,000 and a related debt discount of $200,000, additional paid in capital of $158,999 and guaranteed interest of $12,000. During the ~~quarter,~~nine months ended February 28, 2022, the Company recorded interest expense of ~~$24,384.~~$49,042. On ~~November 30, 2021,~~February 28, 2022, the balance of the LV Note ~~net of the related debt discount~~ is ~~$24,384~~$49,041 all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On August 31, 2021 the Company and LGH Investments, LLC, (“LGH”) issued a 12% convertible promissory note (“LGH Note”) in the principal amount of $200,000 effective September 2, 2021 with a maturity date of September 2, 2023.

The Company recorded the LGH Note in the amount of $200,000, interest payable of $12,000 along with total debt discount of ~~$38,500,~~$ 38,500, related debt discount (“OID”) of $20,000 and origination fees of $6,500. During the quarter ended February 28,2022, the Company recorded interest expense of ~~$4,800.~~$13,718. On ~~November 30, 2021,~~February 28, 2022, the balance of the LGH Note ~~net of the related debt discount~~ is ~~$166,299~~$180,071, all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On September 28, 2021, the Company entered into a securities purchase agreement (the “Ionic SPA”) dated as of September 28, 2021, with Ionic Ventures, LLC (“Ionic”), pursuant to which the Company issued a 12% promissory note (the “Ionic Note”) with a maturity date of September 28, 2023 (the “Ionic Maturity Date”), in the principal sum of $1,555,555.56 ~~and~~with guaranteed interest of $93,333.34. In addition, the Company issued 14,584 shares of its common stock to Ionic as a commitment fee pursuant to the Ionic SPA. Pursuant to the terms of the Ionic Note, the Company agreed to pay to $1,400,000.00 (the “Ionic Principal Sum”) to Ionic and to pay interest on the principal balance at the rate of 12% per annum (provided that the first six months of interest shall be guaranteed and the remaining 18 months of interest shall be deemed earned in full if any amount is outstanding under the Ionic Note after 180 days from September 28, 2021). The Ionic Note carries an original issue discount (“OID”) of $155,555.56. Accordingly, Ionic paid the purchase price of $1,400,000.00 in exchange for the Ionic Note. The Company intends to use the proceeds for working capital. Ionic may convert the Ionic Note into the Company’s common stock (subject to the beneficial ownership limitations of 4.99% in the Ionic Note; provided however, that the limitation on conversion may be waived (up to 9.99%) by Ionic upon, at the election of Ionic, not less than 61 days’ prior notice to the Company) at any time at a conversion price equal to $11.50 per share, as the same may be adjusted as provided in the Ionic Note.

Pursuant to the terms of the Ionic SPA, the Company also issued to Ionic a three-year warrant to purchase 729,167 shares of the Company’s common stock at an exercise price equal to (i) 110% of the per share offering price of the offering made in connection with any uplisting of the Company’s common stock; or (ii) prior to the determination of the per share offering price of the offering made in connection with any uplisting of the common stock and following such time if the uplisting contemplated in clause (i) is not completed by November 1, 2021, $10.73.

The Company recorded the Ionic Note in the amount of $1,555,555 and a related debt discount of $1,555,555, and additional paid in capital of $1,306,665 and guaranteed interest of $93,333. During the ~~quarter,~~nine months ended February 28, 2022, the Company recorded interest expense of ~~$134,246.~~$326,027. On ~~November 30, 2021,~~February 28, 2022, the balance of the LV Note ~~net of the related debt discount~~ is ~~$134,246~~$326,026 all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

The Company recorded the Secured Note One in the amount of $262,500 along with original issue discount (“OID”) of $12,500. Accordingly, the investor paid $250,000 in exchange for the Secured Note One. ~~On November 30, 2021,~~For the nine months ended February 28, 2022, the Company paid interest in the amount of $6,478 and on February 28, 2022 the balance of the Secured Note One ~~net of the related debt discount~~ is ~~$165,483~~$160,650 all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

The Company recorded the Secured Note Two in the amount of $157,500 along with original issue discount (“OID”) of $7,500. Accordingly, the investor paid $150,000 in exchange for the Secured Note Two. ~~On November 30, 2021,~~For the nine months ended February 28, 2022 the Company paid interest in the amount of $3,887 and on February 28, 2022 the balance of the Secured Note Two ~~net of the related debt discount~~ is ~~$99,290~~$96,390 all of which is included in the long-term portion of convertible notes payable, net of related debt discount.

On December 10, 2021, the Company entered into a related party transaction with Jed Kaplan, the Chairman of the Company and a more than 5% shareholder to provide a loan to the Company to provide additional operating funds for the subsidiary Simplicity One Brasil, LTDA. The principal amount of the loan was for $247,818, bearing interest at a rate of 5% and the entire amount of the principal is due on June 10, 2022. The loan may be repaid by the Company, without penalty, at any time. Should the Company fail to make the principal payment due, the loan will convert to a 17% equity stake in our subsidiary, Simplicity One Brazil, LTDA of which Jed Kaplan is already a 20% stakeholder.

The board and shareholders of the Company approved of the Simplicity Esports and Gaming Company 2020 Omnibus Incentive Plan (the “2020 ~~Plan��~~Plan”) on April 22, 2020 and June 23, 2020, respectively. The 2020 Plan provides for various stock-based incentive awards, including incentive and nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units, and other equity-based or cash-based awards.

As of January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The Company adopted the standard using the modified retrospective method and the adoption did not have a material impact on the Company’s consolidated financial statements.

The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods and services. Our revenue is derived from the three sources listed below.

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

Fees for information services, including software maintenance fees, marketing fees and website maintenance, graphic and promotion fees are recognized as revenue as such services are provided.

Deferred revenues are classified as current or long-term based on when management estimates the revenues will be recognized.

The Company receives payments from franchisees in advance of all performance obligations having been met, including but not limited to franchise locations being opened. As certain conditions agreed to in these franchise agreements are performed, revenues are recognized. During the quarter the Company entered into a consulting agreement to provide services to a third party interested in opening a video games related store. The third party paid for such services and the Company has deferred this revenue until its obligations are fulfilled. These operating funds are included in the current portion of deferred revenues on the Balance Sheet.

The Company estimates the allowance for doubtful accounts based on an analysis of specific customers (i.e., franchisees), taking into consideration the age of past due accounts and an assessment of the customer’s ability to pay. Accounts receivable are written off against the allowance when management determines it is probable the receivable is worthless. Customer account balances with invoices dated over 90 days old are considered delinquent and considered in the allowance assessment. The Company performs credit evaluations of its customers and, generally, requires no collateral. ~~As of November 30, 2021, management has recorded an allowance for doubtful accounts of $12,943.~~

Property and equipment and leasehold improvements are recorded at its historical cost. The cost of property and equipment is depreciated over the estimated useful lives, when placed in service (ranging from 3 -5 years), of the related assets utilizing the straight-line method of depreciation. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Ordinary repairs and maintenance are expensed when incurred and major repairs will be capitalized and expensed if they benefit future periods.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~November 30, 2021.~~February 28, 2022. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of ~~November 30, 2021.~~February 28, 2022.

~~There~~Except as set forth herein, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company has engaged a consultant to perform an independent review of its internal control over financial reporting. Based on this review, the Company has added a contractor with experience in SEC reporting to assist in the preparation and review of its SEC filings. In addition, the Company is in the process of hiring additional help for the accounting function.

The Company expects to implement changes to its internal control over financial reporting to enhance the evaluation of accounting transactions and its financial reporting process over the next year. The Company is in the process of hiring additional resources, either in the form of an independent ~~council~~contractor or as consultants to help identify processes that will strengthen our internal controls.

As a smaller reporting company, the Company is not required to disclose material changes to the risk factors that were contained in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2021 (the “2021 10-K”). However, in light of the recent coronavirus (COVID-19) pandemic, set forth below is a risk factor relating to COVID-19. Other than as set forth below, as of the filing date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors faced by the Company from those previously disclosed in the 2021 10-K.

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

~~Because COVID-19 infections have been reported throughout the United States,~~ Previously, certain federal, state and local governmental authorities ~~have~~ issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. ~~Additional, more restrictive proclamations and/or directives may be issued in the future.~~ As a result, all of our corporate and franchised Simplicity ~~Gaming Centers~~gaming centers were closed effective April 1, 2020. We commenced reopening Simplicity ~~Gaming Centers~~gaming centers as of May 1, 2020 and have since reopened 17 corporate and 12 franchised ~~Simplicity Gaming Centers as of November 30, 2021.~~locations. Although our franchise agreements with franchisees of Simplicity ~~Gaming Centers~~gaming centers require a minimum monthly royalty payment to us from the franchisees regardless of whether the franchised Simplicity ~~Gaming Centers~~gaming centers are operating, there is a potential risk that franchisees of Simplicity ~~Gaming Centers~~gaming centers will default in their obligations to pay their minimum monthly royalty payment to us, resulting in either an increase in accounts receivables or a bad debt expense where account receivables are no longer collectible due to a franchisee’s inability to pay the minimum monthly royalty payments owed by the franchisee. ~~We have experienced a decrease~~Additional and/or more restrictive orders, proclamations and/or directives may be issued in ~~our account receivables, net of~~ the ~~allowance by $55,599 from the year ended May 31, 2021.~~future.

The measures taken to date adversely impacted the Company’s business for the fiscal quarters ended February 28, 2022, November 30, 2021, August 31, 2021 and the fiscal year ended May 31, 2021 and will potentially continue to impact the Company’s business. Management expects that all of its business segments, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time.

The Company did not sell any equity securities during the period covered by this Quarterly Report that were not registered under the Securities Act, except as previously disclosed in our Current Reports on Form 8-K.

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 thereunto duly authorized.

Delaware		82-1231127
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

7000 W. Palmetto Park Road, Suite 505 Boca Raton, FL		33433
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		N/A		N/A

		Page
PART I — FINANCIAL INFORMATION		3

Item 1.	Financial Statements:	3

	Condensed Consolidated Balance Sheets – ~~November 30, 2020~~February 28, 2022 (unaudited) and May 31, ~~2020~~2021	3

	Condensed Consolidated Statement of Operations – Three and ~~Six~~Nine Months Ended ~~November 30,~~February 28, 2022 and 2021 ~~and 2020~~ (unaudited)	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity – ~~Six~~Nine Months Ended ~~November 30,~~February 28, 2022 and 2021 ~~and 2020~~ (unaudited)	5

	Condensed Consolidated Statement of Cash Flows - ~~Six~~Nine Months Ended ~~November 30,~~February 28, 2022 and 2021 ~~and 2020~~ (unaudited)	6

	Notes to Condensed Consolidated ~~financial statements (unaudited)~~Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2330

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3849

Item 4.	Controls and Procedures	3849

PART II — OTHER INFORMATION		3950

Item 1.	Legal Proceedings	3950

Item 1A.	Risk Factors	3950

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3950

Item 3.	Defaults Upon Senior Securities	3950

Item 4.	Mine Safety Disclosures	3950

Item 5.	Other Information	3950

Item 6.	Exhibits	4051

Signatures		4153

	Shares		Amount		Capital			Interest			Issuable			Deficit			Equity
	Common Stock				Additional Paid-In			Non- Controlling			Common Stock			Accumulated			Total Stockholders’
	Shares		Amount		Capital			Interest			Issuable			Deficit			Equity
Balance - May 31, 2021		1,427,124	$	142	$	16,708,762		$	173,039		$	-		$	(12,291,899	)	$	4,590,044
Shares issued in connection with issuance and amendments of notes payable		38,125		4		4,136,895			-			-			-			4,136,899
Shares issued to directors, officers and employees as compensation		-		-		-			-			838,250			-			838,250
Shares issued for contracted services		21,346		2		224,875			-			12,525			-			237,402
Sale of warrants		-		-		100,000			-			-			-			100,000
Shares issued in connection with franchise acquisitions		6,000		1		62,999			-			-			-			63,000
Net loss attributable to noncontrolling interest		-		-		-			(54,837	)		-			-			(54,837	)
Net Loss		-		-		-			-			-			(4,210,907	)		(4,210,907	)
Balance - August 31, 2021		1,492,595	$	149	$	21,233,531		$	118,202			850,775		$	(16,502,806	)	$	5,699,851
Shares issued in connection with issuance and amendments of notes payable		18,333		1		1,817,563			-			-			-			1,817,564
Shares issued for contracted services		20,438		1		174,230			-			(3,750	)		-			170,481
Shares issued to directors, officers and employees as compensation		84,656		8		852,085			-			(838,250	)		-			13,843
Stock options issued		-		-		366,721			-			-			-			366,721
Shares issued in connection with franchise acquisitions		-		-		-			-			41,850			-			41,850
Net loss attributable to noncontrolling interest		-		-		-			(36,429	)		-			-			(36,429	)
Net Loss		-		-		-			-			-			(2,129,297	)		(2,129,297	)
Balance - November 30, 2021		1,616,022	$	159	$	24,444,130		$	81,773			50,625		$	(18,632,103	)	$	5,944,584
Cash distribution from minority interest		-		-		(54,800	)		-			-			-			(54,800	)
Stock based compensation		-		-		183,361			-			5,000			-			188,361
Non controlling interest of investment in subsidiary		-		-		-			39,399			-			-			39,399
Net loss attributable to noncontrolling interest		-		-		-			(60,805	)		-			-			(60,805	)
Net Loss		-		-		-			-			-			(1,954,652	)		(1,954,652	)
Balance -February 28, 2022		1,616,022	$	159	$	24,572,691		$	60,367			55,625		$	(20,586,755	)	$	4,102,087

Balance - May 31, 2020		998,622	$	100	$	11,132,103		$	(21,487	)		-		$	(6,195,044	)	$	4,915,672
Shares issued for cash		2,976		-		25,000			-			-			-			25,000
Shares issued in connection with issuance and amendments of notes payable		23,030		2		202,215			-			-			-			202,217
Shares issued for contracted services		6,597		1		68,777			-			-			-			68,778
Shares issued to directors, officers and employees as compensation		116,175		12		819,297			-			-			-			819,309
Shares issued in connection with franchise acquisition		18,750		2		164,998			-			-			-			165,000
Non-controlling interest of original investment in subsidiaries		-		-		-			240,000			-			-			240,000
Net loss attributable to noncontrolling interest		-		-		-			(15,866	)		-			-			(15,866	)
Net Loss															(655,214	)		(655,214	)
Balance - August 31, 2020		1,166,150	$	117	$	12,412,390		$	202,647			-		$	(6,850,258	)	$	5,764,896
Shares issued in connection with franchise acquisition		37,941		4		413,540			-			-			-			413,544
Shares issued to directors, officers and employees as compensation		9,844		1		119,632			-			-			-			119,633
Shares issued for contracted services		2,813		-		25,420			-			-			-			25,420
Rounding related to reverse split		628				-			-			-			-			-
Warrants issued in connection with debt		-		-		157,438			-			-			-			157,438
Net loss attributable to noncontrolling interest		-		-		-			(8,554	)		-			-			(8,554	)
Net Loss		-		-		-			-			-			(1,005,160	)		(1,005,160	)
Balance - November 30, 2020		1,217,376	$	122	$	13,128,420		$	194,093			-		$	(7,855,418	)	$	5,467,217
Balance		1,217,376	$	122	$	13,128,420		$	194,093			-		$	(7,855,418	)	$	5,467,217
Shares issued to directors, officers and employees as compensation		108,641		11		1,545,457			-			-			-			1,545,468
Shares issued for contracted services		5,000		-		80,000			-			-			-			80,000
Shares issued in connection with debt		10,000		1		141,605			-			-			-			141,606
Beneficial conversion feature related to convertible debt		-		-		904,505			-			-			-			904,505
Contribution from noncontrolling interest		-		-		-			14,000			-			-			14,000
Net loss attributable to noncontrolling interest		-		-		-			(59,707	)		-			-			(59,707	)
Net Loss		-		-		-			-			-			(2,927,020	)		(2,927,020	)
Balance February 28, 2021		1,341,017	$	134	$	15,799,987		$	148,386			-		$	(10,782,438	)	$	5,166,069
Balance		1,341,017	$	134	$	15,799,987		$	148,386			-		$	(10,782,438	)	$	5,166,069


	Common Stock				Additional Paid-In		Non-Controlling			Common Stock			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Interest			Issuable			Deficit			Equity
Balance - May 31, 2021		1,427,124	$	142	$	16,708,762	$	173,039		$	-		$	(12,291,899	)	$	4,590,044
Shares issued for cash
Shares issued for cash, shares
Shares issued in connection with issuance and amendments of notes payable		38,125		4		4,136,895		-			-			-			4,136,899
Shares issued to directors, officers and employees as compensation		-		-		-		-			838,250			-			838,250
Shares issued for contracted services		21,346		2		224,875		-			12,525			-			237,402
Sale of warrants		-		-		100,000		-			-			-			100,000
Shares issued in connection with franchise acquisitions		6,000		1		62,999		-			-			-			63,000
Non-controlling interest of original investment in subsidiaries
Rounding related to reverse split
Rounding related to reverse split, shares
Warrants issued in connection with debt
Stock Options issued
Warrants issued in connection with amendments of notes payable											-
Net loss attributable to noncontrolling interest		-		-		-		(54,837	)		-			-			(54,837	)
Net Loss		-		-		-		-			-			(4,210,907	)		(4,210,907	)
Balance - August 31, 2021		1,492,595	$	149	$	21,233,531	$	118,202			850,775		$	(16,502,806	)	$	5,699,851
Shares issued in connection with issuance and amendments of notes payable		18,333		1		1,817,563		-			-			-			1,817,564
Shares issued for contracted services		20,438		1		174,230		-			(3,750	)		-			170,481
Shares issued to directors, officers and employees as compensation		84,656		8		852,085		-			(838,250	)		-			13,843
Stock Options issued		-		-		366,721		-			-			-			366,721
Shares issued in connection with franchise acquisitions		-		-		-		-			41,850			-			41,850
Net loss attributable to noncontrolling interest		-		-		-		(36,429	)		-			-			(36,429	)
Net Loss		-		-		-		-			-			(2,129,297	)		(2,129,297	)
Balance - November 30, 2021		1,616,022	$	159	$	24,444,130	$	81,773			50,625		$	(18,632,103	)	$	5,944,584

Balance - May 31, 2020		998,622	$	100	$	11,132,103	$	(21,487	)		-		$	(6,195,044	)	$	4,915,672
Shares issued for cash		2,976		-		25,000		-						-			25,000
Shares issued in connection with issuance and amendments of notes payable		23,030		2		202,215		-			-			-			202,217
Shares issued for contracted services		6,597		1		68,777		-			-			-			68,778
Shares issued to directors, officers and employees as compensation		116,175		12		819,297		-			-			-			819,309
Shares issued in connection with franchise acquisition		18,750		2		164,998					-			-			165,000
Non-controlling interest of original investment in subsidiaries		-		-		-		240,000			-			-			240,000
Net loss attributable to noncontrolling interest		-		-		-		(15,866	)		-			-			(15,866	)
Net Loss														(655,214	)		(655,214	)
Balance - August 31, 2020		1,166,150	$	117	$	12,412,390	$	202,647			-		$	(6,850,258	)	$	5,764,896
Shares issued in connection with franchise acquisition		37,941		4		413,540		-			-			-			413,544
Shares issued to directors, officers and employees as compensation		9,844		1		119,632		-			-			-			119,633
Shares issued for contracted services		2,813		-		25,420		-			-			-			25,420
Rounding related to reverse split		628				-		-			-			-			-
Warrants issued in connection with debt		-		-		157,438		-			-			-			157,438
Net loss attributable to noncontrolling interest		-		-		-		(8,554	)		-			-			(8,554	)
Net Loss		-		-		-		-			-			(1,005,160	)		(1,005,160	)
Balance - November 30, 2020		1,217,376	$	122	$	13,128,420	$	194,093			-		$	(7,855,418	)	$	5,467,217
Balance		1,217,376	$	122	$	13,128,420	$	194,093					$	(7,855,418	)	$	5,467,217

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

	February 28, 2022			May 31, 2021
Convertible promissory notes	$	5,164,480		$	3,157,970
Secured notes		403,592			-
Related party note payable		247,818			-
Related debt discount		(2,641,847	)		(947,873	)

Total promissory notes, net	$	3,215,778		$	2,211,097

Current portion of promissory notes, net	$	1,689,671		$	2,211,097

	●	An increase in working capital requirements to finance our current ~~business,~~business;

	●	Addition of administrative and sales personnel as the business ~~grows, and~~grows;

	●	~~The cost~~An increase in the costs of being a public company;

	●	~~Marketing~~Increased marketing expense for building our brand; and

	●	~~Capital~~Increased capital requirements for the development of additional store locations.

Exhibit Number		Description

10.1		Securities Purchase Agreement, dated ~~as of September 28, 2021,~~March 21, 2022, by and between the ~~registrant~~Company and Ionic Ventures, LLC (incorporated by reference to Exhibit ~~10.1~~10.88 to pre-effective amendment No. 9 to the registrant’s ~~Current Report~~registration statement on Form ~~8-K~~S-1 (File No. 333-237634) filed bywith the ~~registrant~~SEC on ~~October 1, 2021)~~April 7, 2022).

10.2		Convertible Promissory Note, dated ~~as of September 28, 2021, issued~~March 21, 2022, by the ~~registrant~~Company in favor of Ionic Ventures, LLC (incorporated by reference to Exhibit ~~10.2~~10.89 to pre-effective amendment No. 9 to the registrant’s ~~Current Report~~registration statement on Form ~~8-K~~S-1 (File No. 333-237634) filed bywith the ~~registrant~~SEC on ~~October 1, 2021)~~April 7, 2022).

10.3		Common Stock Purchase Warrant, dated as of ~~September 28, 2021~~March 21, 2022, to Ionic Ventures, LLC (incorporated by reference to Exhibit ~~10.3~~10.90 to pre-effective amendment No. 9 to the registrant’s ~~Current Report~~registration statement on Form ~~8-K~~S-1 (File No. 333-237634) filed bywith the ~~registrant~~SEC on ~~October 1, 2021)~~April 7, 2022).

10.4		Registration Rights Agreement, dated ~~as of September 28, 2021,~~March 21, 2022, by and between the ~~registrant~~Company and Ionic Ventures, LLC (incorporated by reference to Exhibit ~~10.4~~10.91 to pre-effective amendment No. 9 to the registrant’s ~~Current Report~~registration statement on Form ~~8-K~~S-1 (File No. 333-237634) filed bywith the ~~registrant~~SEC on ~~October 1, 2021)~~April 7, 2022).

10.5		~~Common Stock~~Securities Purchase ~~Warrant,~~Agreement, dated ~~as of June 11, 2021, to~~March 21, 2022, by and between the Company and FirstFire Global Opportunities Fund LLC (incorporated by reference to Exhibit ~~10.64~~10.92 to pre-effective amendment No. 9 to the registrant’s ~~Registration Statement~~registration statement on Form S-1 (File No. ~~333-259993)~~333-237634) filed with the SEC on ~~October 1, 2021)~~April 7, 2022).

10.6		~~Common Stock Purchase Warrant,~~Convertible Promissory Note, dated asMarch 21, 2022 by the Company in favor of ~~June 16, 2021, to GS Capital Partners, LLC~~FirstFire Global Opportunities Fund (incorporated by reference to Exhibit ~~10.67~~10.93 to pre-effective amendment No. 9 to the registrant’s ~~Registration Statement~~registration statement on Form S-1 (File No. ~~333-259993)~~333-237634) filed with the SEC on ~~October 1, 2021)~~April 7, 2022).

10.7		~~Amendment No. 1~~Common Stock Purchase Warrant, dated as of March 21, 2022, to ~~Convertible Promissory Note, dated September 17, 2021, between the Company and~~ FirstFire Global Opportunities Fund LLC (incorporated by reference to Exhibit ~~10.80~~10.94 to ~~Amendment~~pre-effective amendment No. 79 to the registrant’s ~~Registration Statement~~registration statement on Form S-1 (File No. 333-237634) filed with the SEC on ~~October 12, 2021)~~April 7, 2022).

10.8		~~Common Stock Purchase Warrant,~~Registration Rights Agreement, dated ~~as of September 17, 2021, to~~March 21, 2022, by and between the Company and FirstFire Global Opportunities Fund LLC (incorporated by reference to Exhibit ~~10.81~~10.95 to pre-effective amendment No. 9 to the registrant’s ~~Registration Statement~~registration statement on Form S-1 (File No. ~~333-259993)~~333-237634) filed with the SEC on ~~October 1, 2021)~~April 7, 2022).

10.9		~~Amendment No. 2 to Convertible Promissory Note,~~Securities Purchase Agreement, dated ~~October 1, 2021,~~March 21, 2022, by and between the Company and ~~FirstFire Global Opportunities Fund~~GS Capital Partners, LLC (incorporated by reference to Exhibit ~~10.82~~10.96 to pre-effective amendment No. 9 to the registrant’s ~~Registration Statement~~registration statement on Form S-1 (File No. ~~333-259993)~~333-237634) filed with the SEC on ~~October 1, 2021)~~April 7, 2022).

10.10		~~Common Stock Purchase Warrant,~~Convertible Promissory Note, dated asMarch 21, 2022 by the Company in favor of ~~October 1, 2021, to FirstFire Global Opportunities Fund~~GS Capital Partners, LLC (incorporated by reference to Exhibit ~~10.83~~10.97 to pre-effective amendment No. 9 to the registrant’s ~~Registration Statement~~registration statement on Form S-1 (File No. ~~333-259993)~~333-237634) filed with the SEC on ~~October 1, 2021)~~April 7, 2022).

10.11		~~Amendment No. 1 to~~ Common Stock Purchase Warrant, dated as of ~~September 9, 2021, between the Company and FirstFire Global Opportunities Fund~~March 21, 2022, to GS Capital Partners, LLC (incorporated by reference to Exhibit ~~10.84~~10.98 to pre-effective amendment No. 9 to the registrant’s ~~Registration Statement~~registration statement on Form S-1 (File No. ~~333-259993)~~333-237634) filed with the SEC on ~~October 1, 2021)~~April 7, 2022).

10.12		~~Amendment No. 1 to Common Stock Purchase Warrant,~~Registration Rights Agreement, dated ~~as of September 9, 2021,~~March 21, 2022, by and between the Company and GS Capital Partners, LLC (incorporated by reference to Exhibit ~~10.85~~10.99 to pre-effective amendment No. 9 to the registrant’s ~~Registration Statement~~registration statement on Form S-1 (File No. ~~333-259993)~~333-237634) filed with the SEC on ~~October 1, 2021)~~April 7, 2022).

10.13		Amendment No. 12 to ~~Common Stock~~Promissory Note and Securities Purchase ~~Warrant,~~Agreement dated ~~as of September 9, 2021,~~March 16, 2022, by and between the Company and ~~Jefferson Street Capital, LLC~~Labrys Fund, LP (incorporated by reference to Exhibit ~~10.86~~10.100 to pre-effective amendment No. 9 to the registrant’s ~~Registration Statement~~registration statement on Form S-1 (File No. ~~333-259993)~~333-237634) filed with the SEC on ~~October 1, 2021)~~April 7, 2022).

10.14		Amendment and Waiver Pursuant to Convertible Promissory Note dated March 16, 2022, by and between the Company and LGH Investments, LLC (incorporated by reference to Exhibit 10.101 to pre-effective amendment No. 19 to ~~Common Stock Purchase Warrant,~~the registrant’s registration statement on Form S-1 (File No. 333-237634) filed with the SEC on April 7, 2022).

10.15		Amendment and Waiver Pursuant to Convertible Promissory Note dated ~~as of September 9, 2021,~~March 16, 2022, by and between the Company and Lucas Ventures, LLC (incorporated by reference to Exhibit ~~10.87~~10.102 to pre-effective amendment No. 9 to the registrant’s ~~Registration Statement~~registration statement on Form S-1 (File No. ~~333-259993)~~333-237634) filed with the SEC on ~~October 1, 2021)~~April 7, 2022).

31.1*		Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

31.2*		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

32.1*
32.1**		Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

32.2**		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)

	SIMPLICITY ESPORTS AND GAMING COMPANY

Dated: ~~January~~April 14, 2022	By:	/s/ Nancy Hennessey
	Name:	Nancy Hennessey
	Title:	Chief Financial Officer (principal financial officer and principal accounting officer)