Registration No.________No. 333-235837
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FormAmendment No. 3 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
StemGen, Inc.
(Exact name of registrant as specified in its charter)
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Delaware | 6799 | 54-1812385 | ||
(State or other jurisdiction of
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incorporation or organization) | Classification Code Number) |
Identification |
800 Town and Country Blvd.,1 Performance Drive, Suite 300F
Houston,Angleton, Texas 7702477515
(832)-431-3292832-954-7569
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
John David WallsSimon Dawson
Chief Executive Officer
1 Performance Drive, Suite F
Angleton, Texas 77515
Telephone: (832) 431-3292832-954-7569
Facsimile: (832) 431-3001
(Name,(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Robert L. Sonfield, Jr.
Sonfield & Sonfield
2500 Wilcrest Drive,
3rd Floor
Houston, Texas 77042
Telephone: (713)877-8333
Facsimile: (713)877-1547
Email: robert@sonfield.com
As soon as practicable after this Registration Statement becomes effective.
(Approximate date of commencement of proposed sale to the public: As soon as practicable following the effectiveness of this registration statement.public)
If any of the securities being registered on this Form are to be offered in connection withon a delayed or continuous basis pursuant to Rule 415 under the formationSecurities Act of a holding company and there is compliance with General Instruction G,1933, check the following box. ¨[X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨[_]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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| Emerging growth company | [_] | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [_]
CALCULATION OF REGISTRATION FEE
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(1) | We are registering 6,621,600 shares of our common stock, par value $0.001 per share, 5,000,000 issuable on conversion of convertible preferred stock and 1,621,600 shares owned by common shareholders. In the event of stock splits, stock dividends or similar transactions involving the Common Stock, the number of shares being registered hereunder shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). If the adjustment provisions of the convertible notes require the registrant to issue more shares than are being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act, the registrant will file a new registration statement to register those additional shares. The convertible preferred stock is subject to a conversion cap of 4.99% of the total outstanding. Therefore, the holder of the convertible note does not |
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(2) | Offered at the fixed price based on the offering price per share on the date of this prospectus. |
(3) | Pursuant to Rule 457(p), the $813.40 registration fee paid by the registrant with respect to Registration Statement File No. 333-202814, filed March 17, 2015, which was withdrawn by the registrant, is being applied to payment of the $902.46 registration fee with respect to this registration statement. |
(4) | Previously paid. |
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ¨
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ¨
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Share (1) | Proposed Maximum Aggregate Offering Price (1) | Amount of Registration Fee | ||||||||||||
Common Stock | 5,000,000 | $ | 1.40 | $ | 7,000,000 | $ | 813.40 | |||||||||
(1) Estimated solely for the purpose of calculating the registration fee under Rule 457(f) of the Securities Act of 1933, and is based upon the average of the high and low sales prices of the Company’s common stock as reported on the OTCQB Market on March 5, 2015.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Sectionsection 8(a) of the Securities Act of 1933 or until thisthe registration statement shall become effective on such date as the Securities and Exchange Commission,commission, acting pursuant to said Sectionsection 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor doesthese securities and it seekis not soliciting an offer to buy these securities in any jurisdictionstate where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION, DATED JULY 9, 2020 |
Subject to Completion, dated March ___, 2015
PRELIMINARY PROSPECTUS
5,000,0006,621,600 Shares
StemGen, Inc.
of Common Stock
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This prospectus relates solely to salesthe sale or other disposition from time to time of StemGen, Inc. common stock by the selling stockholders named in this prospectus. The selling stockholders may offer and sell6,621,600 shares of our common stock, from time to time in amounts, at pricespar value $0.001 per share, by our stockholders. 5,000,000 shares of our common stock issuable upon conversion of Series A convertible preferred stock issued by the Company January 29, 2019 and on terms that will be determined at the time1,621,600 shares of any such offering. Each of thecommon stock presently outstanding.
The selling stockholders may be deemed an affiliate of ours. See “Prospectus Summary — Selling Stockholders.”
These sales may occur at fixed prices, at market prices prevailing at the time of sale, at prices related to prevailing market price, or at negotiated prices. The distribution of the common stock by the selling stockholders may be effected from time to time through brokerage transactions, block trades, purchases by a broker/dealer as principal and resale by the broker–dealer for its account, privately negotiated transactions and any other method permitted by applicable law. The brokers or dealers through or to whomsell the shares of common stock may be sold may be deemed underwritersdescribed in this prospectus at a fixed price. See “Plan of the shares within the meaning of the Securities Act of 1933, as amended, in which event all brokerage commissions or discounts and other compensation received by those brokers or dealers may be deemed to be underwriting compensation. To the extent required, the names of any underwriters and applicable commissions or discounts and any other requiredDistribution” for more information with respect to any particular sale will be set forth in an accompanying prospectus supplement. See “Plan of Distribution” for a further description ofabout how the selling stockholders may dispose ofsell the common stock covered by this prospectus.
We are not selling any common stock under this prospectus and will not receive any proceeds from the saleshares of common stock being registered pursuant to be offered by the selling stockholders. this prospectus.
We will pay the expenses other than underwriting discountsincurred in registering the shares, including legal and commissions, associated with the saleaccounting fees. See “Plan of shares by the selling stockholders.Distribution.”
OurSales of our common stock is listedare reported on the OTCQBOTC Market Group, Inc.’s OTC Pink tier under the ticker symbol “SGNI”.SGNI. On March 12, 2015,July 9, 2020, the last reported saleclosing quoted price of our common stock was $1.40$0.80 per share.
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Investing in our common stock involves risks.a high degree of risk. See “Risk Factors” beginning on page 4 for a discussion of3 to read about factors that you should consider before buyinginvesting in shares of our common stock.
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You should rely only on the information contained in this prospectus. We have not authorized any dealer, salesperson or other person to provide you with information concerning us, except for the information contained in this prospectus. The information contained in this prospectus is complete and accurate only as of the date on the front cover page of this prospectus, regardless when the time of delivery of this prospectus or the sale of any common stock. This prospectus is not an offer to sell, nor is it a solicitation of an offer to buy, our common stock in any jurisdiction in which the offer or sale is not permitted.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACYDETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR ACCURACY OF THIS PROSPECTUS.COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The Date of this Prospectus is: July __, 2020
Prospectus dated March ___, 2015
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TABLE OF CONTENTS
ABOUT THIS PROSPECTUS | 1 | |||
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PROSPECTUS SUMMARY | ||||
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RISK FACTORS | 3 | |||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS | 9 | |||
USE OF PROCEEDS | ||||
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DILUTION | 10 | |||
MARKET FOR COMMON EQUITY AND RELATED | 10 | |||
DIVIDEND POLICY | 10 | |||
CAPITALIZATION | 10 | |||
DESCRIPTION OF BUSINESS | 11 | |||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF | ||||
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | ||||
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 21 | |||
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 23 | |||
SELLING STOCKHOLDERS | 23 | |||
PLAN OF DISTRIBUTION | 25 | |||
DESCRIPTION OF SECURITIES | 28 | |||
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES | 30 | |||
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES | 30 | |||
LEGAL MATTERS | ||||
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EXPERTS | 30 | |||
INTERESTS OF NAMED EXPERTS AND COUNSEL | 30 | |||
WHERE YOU CAN FIND MORE INFORMATION | ||||
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FINANCIAL STATEMENTS | F-1 |
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We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference.
For investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.
Market and Other Industry Data
Unless otherwise indicated, market data and certain industry forecasts used throughout this prospectus were obtained from various sources, including internal surveys, market research, consultant surveys, publicly available information and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based upon our management’s knowledge of the industry, have not been independently verified. The future performance of the industry and markets in which we operate and intend to operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the sections entitled “Risk Factors” and “Special Note Regarding Forward-looking Statements” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in these publications and reports.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. Under this shelf registration process, the selling stockholders may sell certain shares of our common stock in one or more offerings. When the selling stockholders sell shares of common stock under this shelf registration process, we may provide a prospectus supplement that will contain more specific information about the terms of such offering. The prospectus supplement may add, update or change the information contained or incorporated in this prospectus. The prospectus supplement will supersede this prospectus to the extent it contains information that is different from, or that conflicts with, the information contained or incorporated in this prospectus. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to an offering. You should read and consider all information contained in this prospectus and any accompanying prospectus supplement (and any related free writing prospectus that we may authorize to be provided to you) in making your investment decision.
We have not authorized anyone to provide any information other than that contained in this prospectus or to which we have referred you. We take no responsibility for and can provide no assurance as to the reliability of, any other information that others may give you. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities and are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information we have included in this prospectus is accurate only as of the date of this prospectus and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference.
No offer of these securities will be made in any jurisdiction where the offer is not permitted.
This prospectus incorporates important business and financial information about us from other documents that are not included in or delivered with this prospectus. The registration statement filed with the SEC includes exhibits that provide more details about the matters discussed in this prospectus. You should carefully read this prospectus, the related exhibits filed with the SEC and any prospectus supplement, together with the additional information described below under the headings “Where you can find more information.” The information is available to you without charge upon your request from us at the following address and telephone number:
StemGen, Inc.
Attn: Investor Relations1 Performance Drive, Suite F
2800 Town and Country Blvd., Suite 300Angleton, Texas 77515
Houston, Texas 77024832-954-7569
832-431-3292
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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. Forward-looking statements may include statements that relate to, among other things, our:
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All statements, other than statements of historical fact included in this prospectus, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this prospectus, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.
These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” in this prospectus.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the anticipated future results or financial condition expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include but are not limited to:
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We believe that it is important to communicate our expectations of future performance to our investors. However, events may occur in the future that we are unable to accurately predict, or over which we have no control. We caution you against putting undue reliance on forward-looking statements or projecting any future results based on such statements. When considering our forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this prospectus which provide examples of risks, uncertainties and events that may cause our actual results to differ materially from those contained in any forward-looking statement. Please review the “Risk Factors” included in this prospectus so that you are aware of the various risks associated with the common stock.
All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section and any other cautionary statements that may accompany such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this prospectus.
You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement.
PROSPECTUS SUMMARY
This summary highlights selected information about us and the common stock offering. It is not complete and maycontained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before making your investment decision. We encourage youinvesting in the common stock of StemGen, Inc. (referred to read this prospectus and the documents to which we refer in their entirety before making a decision to invest, including the information set forth under the heading “Risk Factors.” In addition, certain statements contained in this prospectus include forward-looking information that involves many risks and uncertainties, including but not limited to those discussed under “Cautionary Statements Regarding Forward-Looking Statements.” Unless the context clearly indicates otherwise, references in this prospectus toherein as the “Company,” “we,” “us,“our,” “our” or other similar terms mean StemGen, Inc.and “us”). You should carefully read the entire prospectus, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the accompanying financial statements and notes before making an investment decision.
Company Overview
We were incorporated in Delaware in 1992, and in 1996 received all remaining assets of Infotechnology, Inc., a Delaware company, followingunder the completion of Infotech’s Chapter 11 Bankruptcy reorganization, in accordance with an Assignment and Assumption Agreement, dated October 11, 1996, and effective as of June 21, 1996. As a result of a series of transactions during the 1980’s, Infotech, then principally engaged in the information and communications business, acquired equity interests in Comtex News Network, Inc. and Analex Corporation, formerly known as Hadron, Inc. Our business was the maintenance of our equity interest in and note receivable from Comtex and equity interest in Analex.
On September 25, 2006, we exchanged the equity investment in Comtex common stock and the Note Receivable from Comtex of $856,954 for 55,209 shareslaws of the StemGen, Inc. Series A Preferred stock.State of Delaware as D3esports on May 1, 2018. We no longer haveare based in Angleton, TX. D3esports plans to hold monthly time trial format competitions through an equity interesteSports platform that allows professional race car drivers and eSport athletes (gamer enthusiasts) to compete for a real experience in either the common stock of Comtex or the Note from Comtex.
During October 2006, we sold the remaining 21,000 shares of common stock of publicly-held Analex, a defense contractor specializing in systems engineeringrace car and developing innovative technical intelligence solutions in support of U.S. national security. We no longer have an equity interest in Analex.
On December 24, 2012, the Corporation received a nonrefundable deposit of $32,500 under a Letter of Intent (“LOI”) which it entered into on December 11, 2012 with StemGen Inc. a Delaware corporation. Effective February 5, 2013, the Company amended its Certificate of Incorporation.points that can be used to purchase products and services through our partners. As a result of the Amendment,Acquisition, we will continue as a publicly traded company under the Company’s corporate name changed from Amasys Corporation to StemGen, Inc. The existing business operations of D3esports, Inc. will continue as our wholly subsidiary.
On January 29, 2019 (the “Closing Date”), we completed and closed the acquisition (the “Acquisition”) under an Agreement and Plan of Reorganization (the “Reorganization Agreement”), entered into by and among (i) StemGen, Inc.(“StemGen”); (ii) D3esports, Inc., a Wyoming corporation (“D3esports”); and (iii) the shareholders of D3esports (“Sellers”) pursuant to which D3esports became a wholly owned subsidiary of ours. Pursuant to the Reorganization Agreement, we acquired from the Sellers all of the issued and outstanding equity interests of D3esports in exchange for 39,631,587 shares of our common stock, par value $0.001 per share and 7,000,000 shares of Preferred Stock, par value $0.001 per share. As a result of the Acquisition, the Sellers, as the former shareholders of D3esports, became the controlling shareholders of the Company. The Acquisition was accounted for as a reverse merger notwithstanding it is legally a reverse acquisition. For accounting purposes, D3esports is the acquiring entity. Current and comparative consolidated financial statements include the accounts of D3esports since inception (May 1, 2018) and StemGen from the date of acquisition (January 29, 2019) (collectively, the “Company”).
On the 20th day of May 2019 we incorporated StemGen Connect in the State of Texas and issued 1,000,000 shares (50%) of common stock splitto The Learning Partnership.com Trading Limited, 500,000 shares (25%) of common stock to D3esports Corp. and 500,000 shares (25%) of common stock to Dawson Racing, Inc. D3esports Corp. is a wholly owned subsidiary of StemGen, Dawson Racing, Inc. is an affiliate of Simon Dawson, the president and CEO of StemGen.
D3esports is a Virtual to Real company offering global sports an opportunity to participate in virtual competition. D3esports’s focus is professional motorsports because of management’s extensive historical experience and personal relationships and connections in the industry. D3esports offers a time trial format competition through our Microsoft license for eSports athletes to compete to win a season of real racing and enhance their experience of motorsports through a virtual platform with a strong link to a real team and real race cars.
D3esports was effectuated wherefounded in May 2018 and launched at the Dave and Buster Houston flagship store in July 2018. D3esports is building an eSports competition based around Forza 7 Motorsports. D3esports has extensive experience in real motorsports, and recent technological advancements enable virtual motorsports to cross-over to virtual motor sports and attract substantial investment.
D3esports currently sells 3 screen Fanatec-operated Logitech Playseats powered by a custom gamer PC built in-house for all enthusiasts, gamers and eSports athletes to gain the outstanding sharesbest access to win a season of racing. D3esports is also currently positioning and selling sponsorship for naming rights of the Company’schampionship open and showdown series as well as each month-long racing competition.
The Learning Partnership.com Trading Limited is a UK based company engaged in educational leadership, teaching and learner engagement creating a social learning platform division for education, www.DendriteConnect.com. Dendrite Connect empowers students, teachers and parents around the globe to engage in enrichment and collaboration learning environment, programs, challenges, projects and careers. Dendrite Connect enables collaboration between its members through content sharing, chat forums and networks of users and career opportunities tailored to each member as they journey through education.
A joint venture agreement was entered into among the shareholders of StemGen Connect to integrate technologies from the three companies, into a single virtual-to-real motorsports-based Science, Technology, Engineering and Mathematics (STEM) enrichment and collaboration learning environment to drive the launch of an esports competition for school networks and their students. There has been no activity in this joint venture or StemGen Connect as of March 31, 2020.
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Risks Related to Our Business
Investing in our common stock were exchanged at a ratioinvolves substantial risk. You should carefully consider all of one for eighty. The LOI was terminated on August 6, 2013.
Commencing with the private sale of 10,000,000 unregistered shares, May 24, 2014information in this prospectus before investing in our common stock, including the risks related to this offering and receipt of proceeds in the amount of $297,000, we began development ofour common stock, our business with reorganizational matters,and industry, our intellectual property, our financial results, and our need for financing, each as described under the preparation of our business plansection titled “Risk Factors” and the preparation of the financial statements and other information presentedelsewhere in this prospectus.
The Offering
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Common stock outstanding |
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Preferred stock outstanding | 6,000,000 shares of |
Common stock to be outstanding when | 50,429,188 shares |
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RISK FACTORS
You should carefully consider the following risk factors discussedrisks described below and the matters addressed under “Cautionary Statements Regarding Forward-Looking Statements,” together with all the other information presentedincluded in this prospectus includingbefore making an investment decision with regard to our audited consolidated financial statementssecurities. We believe the following discussion identifies the most significant risks and related notes. The risks described below are not the only risks facing us oruncertainties that may materiallycould adversely affect our business. If any of the following risks were actually to occur, our business, results of operations, cash flows, and financial condition could be materially and adversely affected. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, maycould also materially and adversely affect our business. If any of the following risks develop into actual events, our business, financial condition or results of operations, could be materially adversely affectedcash flows, and you may lose all or part of your investment.financial condition in future periods.
Risks Relatedrelated to Our Businessour business and industry
We are a development stage company withhave a history of operating losses and expect to continue to realize losses in the near future. Currently our operations are producing noinadequate revenue to fund all operating costs, and we currently rely on investments by third parties to fund our business. Even when we begin to generate revenues from operations,as our revenue grows, we may not become profitable or be able to sustain profitability.
We are a development stage company, and since inception, we have incurred significant net losses and are not currently receiving meaningful revenue from our operations. We have reported net losses since inception including a net loss fromof $165,582 for the date of inception through Decembernine months ended March 31, 2014.2020. We have not realized adequate revenue in order to support our operations. We expect to continue to incur net losses and negative cash flow from operations, in the near future. The size of theseand we will continue to experience losses will depend, in large part, on whether we developfor at least as long as it takes our business strategy in a profitable manner.company to generate adequate revenue from our Esports virtual to reality gaming systems. To date, we have had noonly limited operating revenues. Because we do not yet have a revenue stream resulting from sales or other operations, thereThere can be no assurance that we will achieve material revenues in the future. Should we achieve a level of revenues that make us profitable, there is no assurance that we can maintain or increase profitability levels in the future.
We have a history of late filings of our periodic reports under the Securities and Exchange Act of 1934.
Due to our limited staff and resources, we have not met the filing deadlines for our periodic reports under the Securities and Exchange Act of 1934 during the most recent five years. If we fail to improve our financial reporting processes, we may be unable to timely report our financial results , investors could lose confidence in our timely reporting of financial results, the trading price of our common shares could decline and our access to the capital markets or other financing sources could become limited.
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There is substantial doubt as to whether we will continue operations. If we discontinue operations, you could lose your investment.
The following factors raise substantial doubt regarding the ability of our business to continue as a going concern: (i) the losses we incurred since our inception; (ii) our lack of significant operating revenues since inception through the date of this prospectus; and (iii) our dependence on the sale of equity or debt securities to continue in operation. We have recently sold 15,000,000 shares of common stock, including the shares registered for sale in this prospectus for a total of $322,000. However, wetherefore expect to incur significant losses in the foreseeable future. OurThe financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. If we are unable to obtain additional financing from outside sources and eventually produce enough revenues, we may be forced to curtail or cease our operations. If this happens, you could lose all or part of your investment.
Our limited operations maylack of any profitable operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.
We do not be sufficient for investorshave any substantial operating history, which makes it impossible to evaluate our business based on historical operations. Our business carries both known and prospects.
We were formed in 1992. Since October 1, 2006 the development ofunknown risks. Therefore, our business has been limited to organizational matters, the preparation of our business plan, and the preparation of the financial statements and other information presented in this Prospectus. We have not yet taken any concrete steps to implement our business plan. Our ability to implement our business plan is entirely dependent on our ability to secure sufficient financing; however, there is no guarantee that we will be successful in this regard. In order to implement our business plan, we anticipate that we will require not less than $425,000 in financing in addition to the $25,000 ($450,000 in total) that we raised through the sale of shares that are being offered for sale by the selling shareholders. We have taken no steps to secure the $425,000 in additional financing that we will need to implement our business plan. Furthermore, even if we successfully execute our business and establish operations, there is no guarantee that there will be a significant market for our services or that we will achieve significant revenues, if any.
We might not succeed in our strategies for acquisitions and dispositions.
From time to time, we may attempt to acquire or invest in additional businesses. We expect to continue to seek acquisition and investment opportunities that we believe will increase long-term shareholder value, but wepast results may not be able to find and purchase businesses at acceptable prices and terms. Acquisitions involve risks and uncertainties, including potential difficulties integrating acquired businesses and personnel; the possible lossindicative of key customers or employees most knowledgeable about the acquired business; implementing and maintaining consistent U.S. public company standards, controls, procedures, policies, and information systems; exposure to unknown liabilities;future results. Although this is true for any business, disruption; and management distraction. Acquisitions, investments, or joint ventures could also leadit is particularly true for us to incur additional debt and related interest expenses, issue additional shares, and become exposed to contingent liabilities, as well asbecause of our lacking any profitable operating history.
Increased competition in our industry can lead to dilution in our earnings per share and reduction in our return on average invested capital.
We also evaluate from time to timepricing pressure, reduced margins or the potential disposition of assets or businesses that may no longer meet our growth, return, or strategic objectives. In selling assets or businesses, we may not get prices or terms as favorable as we anticipated. We could also encounter difficulty in finding buyers on acceptable terms in a timely manner, which could delay our accomplishment of strategic objectives. Expected cost savings from reduced overhead relating to the sold assets may not materialize, and the overhead reductions could temporarily disrupt our other business operations. Any of these outcomes could negatively affect our financial performance.
The forward-looking estimates presented in this prospectus may differ from our actual results.
The forward-looking estimates we have included in this prospectus are based upon a number of assumptions and on information that we believe is reliable as of today. However, these forward-looking estimates and assumptions are inherently subject to significant business and economic uncertainties, many of which are beyond our control. These forward-looking estimates are necessarily speculative in nature, and you should expect that some or all of the assumptions will not materialize. Actual results will vary from the forward-looking estimates and the variations will likely be material and are likely to increase over time. Consequently, the inclusion of these forward-looking estimates in this prospectus should not be regarded as a representation by us or any other person that the forward-looking estimates will actually be achieved. Moreover, we do not intend to update or otherwise revise these forward-looking estimates to reflect events or circumstances after the date of this prospectus to reflect the occurrence of unanticipated events. You, as a holder of the shares, are cautioned not to place undue reliance on the forward-looking estimates.
We may not be able to finance the growthinability of our business, which we expect willproducts and services to achieve market acceptance.
Actions by new or existing competitors, including introduction of competing esports games, promotions, combinations with other products or services, or price-cutting may lower sales or require significant amounts of capital, including the acquisition of equipment, the developmentactions to retain and construction of our distribution and processing facilities.
Our business model is capital-intensive. As a result, we must obtain funds from equity or debt financings to help develop and construct our distribution and processing facilities, to help identify and develop new projects, acquire additional equipment and to help pay the general and administrative costs of operating our business. We may not be able to obtain the needed funds on terms acceptable to us, or at all. Furthermore, because we may rely on debt financing to develop our projects, increases in long-term interest rates could significantly increase our cost of capital. If we are unable to raise additional funds when needed, we could be required to delay the acquisition of equipment or the development and construction of our projects, including our distribution and processing facilities, reduce the scope of projects or abandon or sell some or all of our development projects or default on our contractual commitments in the future, any of which would adversely affect our business, financial condition and results of operations.
Our inability to control the inherent risks of acquiring and integrating businesses in the future could adversely affect our operations.
Our management believes acquisitions could potentially be a key element of our business strategy in the future. We may be required to incur substantial indebtedness to finance future acquisitions and also may issue equity securities in connection with such acquisitions. We may not be able to secure additional capital to fund acquisitions. If we are able to obtain financing, such additional debt service requirements may impose a significant burden on our results of operations and financial condition. The issuance of additional equity securities could result in significant dilution to stockholders. Acquisitions may not perform as expected when the acquisition was made and may be dilutive to our overall operating results. Additional risks we expect to face include:
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If we fail to manage these risks successfully, our business could be harmed.
We may have difficulty managing growth in our business,attract customers which could adversely affect our financial conditionprofitability. Increased competition from existing or new competitors could result in price reductions, increased competition for materials, reduced margins or loss of market share, any of which could materially and results of operations.
Our growth in accordance withadversely affect our business plan, if achieved, will place a significant strain onand our financial, technical, operational and management resources. As we expand our activities through both organic growth and possible acquisitions, there will be additional demands on our financial, technical, operational and management resources. The failure to continue to upgrade our technical, administrative, operating results and financial control systems or the occurrences of unexpected expansion difficulties, including the failure to recruit and retain experienced managers, engineers and other professionals in the oil and natural gas services industry, could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute our business plan.condition.
The following factors could also present difficulties for us:
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The failure to adequately manage these factors could also have a material adverse effect on our business, financial condition and results of operation.
We recently underwent a change in management, and the current management has no experience with our Company.
We underwent a change in management January 20, 2015. The new director and sole executive officer of the Company was not previously an employee of or otherwise involved in the management of the Company. While Mr. Walls has prior business experience, he had no prior experience with the operations of this Company.
One of our stockholders has the ability to significantly influence any matters to be decided by the stockholders, which may prevent or delay a change in control of our company.
Landor Investment Corp., a Panama corporation,Simon Dawson currently owns 1,000,000 sharesapproximately 11.40% of our common stock and 100% of our Series EF preferred stock. As holder of the Series F preferred stock and 10,105,339 shares of common stock. The outstanding shares of Series E preferred stock have the rightSimon Dawson. is entitled, voting separately as a single class, to take action by written consent or vote based ondouble the number of votes equal to twice the number of votesall other voting share resulting in 2/3rds of all outstanding shares of capital stock.votes. As a result, Landorhe could exert considerable influence over the outcome of any corporate matter submitted to our stockholders for approval, including the election of directors and any transaction that might cause a change in control, such as a merger or acquisition. Any stockholders in favor of a matter that is opposed by this stockholderMr. Dawson cannot overrule the vote of Landor Investment Corp.his vote.
John David WallsSimon Dawson is our sole director and officer and the loss of Mr. WallsDawson could adversely affect our business.
Since Mr. WallsDawson is currently our sole director and officer, if he were to die, become disabled, or leave our company, we would be forced to retain individuals to replace him. There is no assurance that we can find suitable persons to replace him if that becomes necessary. We have no “key man”“Key Man” life insurance covering Simon Dawson.
We are susceptible to general economic conditions, natural catastrophic events and public health crises, and a potential downturn in customer demand could adversely affect our operating results in the near future.
Our business is subject to the impact of natural catastrophic events, such as earthquakes, or floods, public health crisis, such as disease outbreaks, epidemics, or pandemics, and all these could result in a decrease or sharp downturn of economies, including our markets and business locations in the current and future periods. The outbreak of the coronavirus (COVID-19) resulted in increased travel restrictions, and shutdown of businesses, which may cause slower recovery of the economy. We may experience impact from quarantines, market downturns and changes in customer behavior related to pandemic fears and impact on our workforce if the virus continues to spread. In addition, one or more of our customers, partners, service providers or suppliers may experience financial distress, delayed or defaults on payment, file for bankruptcy protection, sharp diminishing of business, or suffer disruptions in their business due to the outbreak. The extent to which the coronavirus impacts our results will depend on future developments and reactions throughout the world, which are highly uncertain and will include emerging information concerning the severity of the coronavirus and the actions taken by governments and private businesses to attempt to contain the coronavirus. It is likely to result in a potential material adverse impact on our business, results of operations and financial condition. Wider-spread COVID-19 globally could prolong the deterioration in economic conditions and could negatively impact our short-term ability to grow our revenues. Any decreased collectability of accounts receivable, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.
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Risks related to our common stock
We lack an established trading market for our common stock, and you may be unable to sell your common stock at this time.attractive prices or at all.
There is currently a limited trading market for our common stock reported by the OTC Market Group, Inc. under the symbol “SGNI.” There can be no assurances given that an established public market will be obtained for our common stock or that any public market will last. As a result, we cannot assure you that you will be able to sell your common stock at attractive prices or at all.
The market price for our common stock may be highly volatile.
The market price for our common stock may be highly volatile. A variety of factors may have a significant impact on the market price of our common stock, including:
● | the publication of earnings estimates or other research reports and speculation in the press or investment community; |
● | changes in our industry and competitors; |
● | our financial condition, results of operations and prospects; |
● | any future issuances of our common stock, which may include primary offerings for cash, and the grant or exercise of stock options from time to time; |
● | general market and economic conditions; and |
● | any outbreak or escalation of hostilities, which could cause a recession or downturn in our economy. |
We may be subject to shareholder litigation, thereby diverting our resources that may have a material effect on our profitability and results of operations.
TheAs discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may become the target of similar litigation. Securities litigation will result in substantial costs and liabilities and will divert management’s attention and resources.
Risks Related to our Common Stock
We lack an established trading market for our common stock, and you may be unable to sell your common stock at attractive prices or at all.
There is currently a limited trading market for our common stock in the OTCQB under the symbol SGNI. There can be no assurances given that an established public market will be obtained for our common stock or that any public market will last. As a result, we cannot assure you that you will be able to sell your common stock at attractive prices or at all.
The market price for our common stock may be highly volatile.
The market price for our common stock may be highly volatile. A variety of factors may have a significant impact on the market price of our common stock, including:
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Our future sales of common stock by management and other stockholders may have an adverse effect on the then prevailing market price of our common stock.
In the event a public market for our common stock is sustained in the future, sales of our common stock may be made by holders of our public float or by holders of restricted securities in compliance with the provisions of Rule 144 of the Securities Act of 1933. In general, under Rule 144, a non-affiliated person who has satisfied a six-month holding period in a company registered under the Securities Exchange Act of 1934, as amended, may, sell their restricted common stock without volume limitation, so long as one year has elapsed since January 29, 2019, the issuer is current with all reports under the Exchange Act in order for there to be adequate common public information. Affiliated persons may also sell their common shares held for at least six months, but affiliated persons will be required to meet certain other requirements, including manner of sale, notice requirements and volume limitations. Non-affiliated persons who hold their common shares for at least one year will be able to sell their common stock without the need for there to be current public information in the hands of the public. Future sales of shares of our public float or by restricted common stock made in compliance with Rule 144 may have an adverse effect on the then prevailing market price, if any, of our common stock.
Lack of Independent Directors.
The Sarbanes-Oxley Act of 2002 requires us as a public corporation to have an audit committee composed solely of independent directors. Currently, we have no independent directors and lack an audit committeeAudit Committee of the board of directors. Audit committee communications will have to go directly to board members and addressed with the board of directors. We can provide no assurances that we will be able to attract and maintain independent directors on our board or form an audit committeeAudit Committee in compliance with Sarbanes-Oxley.
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We do not expect to pay cash dividends in the foreseeable future.
We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
As a public company, we are subject to complex legal and accounting requirements that will require us to incur significant expenses and will expose us to risk of non-compliance.
As a public company, we are subject to numerous legal and accounting requirements that do not apply to private companies. The cost of compliance with many of these requirements is material, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our relative inexperience with these requirements may increase the cost of compliance and may also increase the risk that we will fail to comply. Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely basis, loss of market confidence and/or governmental or private actions against us. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis our privately held and larger public competitors.
Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and pose challenges for our management.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.
We will need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms.
The extent to which we sell equity or debt securities as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, the volume of trading in our common stock and the extent to which we are able to secure funds from other sources.
When we elect to raise additional funds or additional funds are required, we may raise such funds from time to time through public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives. Additional equity or debt financing or corporate collaboration and licensing arrangements may not be available on acceptable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing acquisition, licensing, development and commercialization efforts and our ability to generate revenues and achieve or sustain profitability will be substantially harmed.
If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected and we may be unable to continue our operations.
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We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.
Our common stock is subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934 (the “Exchange Act”), commonly referred to as the “penny stock rule.” Section 15(g) sets forth certain requirements for transactions in penny stock, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act. The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. We are subject to the SEC’s penny stock rules.
Since our common stock is deemed to be penny stock, trading in the shares of our common stock is subject to additional sales practice requirements on broker-dealers who sell penny stock to persons other than established customers and accredited investors. “Accredited investors” are persons with assets in excess of $1,000,000 (excluding the value of such person’s primary residence) or annual income exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such security and must have the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt the rules require the delivery, prior to the first transaction of a risk disclosure document, prepared by the SEC, relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealer to trade and/or maintain a market in our common stock and may affect the ability of our stockholders to sell their shares of common stock.
There can be no assurance that our shares of common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock was exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock if the SEC finds that such a restriction would be in the public interest.
We currently qualify as an “emerging growth company” under the Jumpstart of Business Startups Act of 2012, or the JOBS Act, and we cannot be certain that the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
The JOBS Act permits “emerging growth companies” like us, to rely on some of the reduced disclosure requirements that are already available to smaller reporting companies. As long as we qualify as an emerging growth company or a smaller reporting company, we would be permitted to omit the auditor’s attestation on internal control over financial reporting that would otherwise be required by the Sarbanes-Oxley Act, as described above, and are also exempt from the requirement to submit “say-on-pay”, “say-on-pay frequency” and “say-on-parachute” votes to our stockholders and may avail ourselves of reduced executive compensation disclosure that is already available to smaller reporting companies.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will continue to be deemed an emerging growth company until the earliest of (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion (as indexed for inflation); (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common stock under this registration statement; (iii) the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer, ” as defined by the Securities and Exchange Commission, which would generally occur upon our attaining a public float of at least $700 million. Once we lose emerging growth company status, we expect the costs and demands placed upon our management to increase, as we would have to comply with additional disclosure and accounting requirements, particularly if we would also not qualify as a smaller reporting company.
Our common stock is subject to price volatility unrelated to our operations.
The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or ourselves. In addition, the OTCQBOTC is subject to extreme price and volume fluctuations in general. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
Trading inReporting trading of our common stock on the OTCQBOTC Markets is limited and sporadic making it difficult for our shareholders to sell their shares or liquidate their investments.
Trading in our common stock is currently published on the OTCQB Markets.OTC Market Group, Inc.’s OTC Pink Current Information. The trading price of our common stock has been subject to wide fluctuations. Trading prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company'scompany’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management'smanagement’s attention and resources.
While we currently qualify as an “emerging growth company” under the Jumpstart of Business Startups Act of 2012, or the JOBS Act, when we lose that status the costs and demands placed upon our management will increase.
We are deemed an emerging growth company until the earliest of (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion (as indexed for inflation); (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common stock under this registration statement; (iii) the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer, “ as defined by the Securities and Exchange Commission, which would generally occur upon our attaining a public float of at least $700 million. Once we lose emerging growth company status, we expect the costs and demands placed upon our management to increase, as we would have to comply with additional disclosure and accounting requirements, particularly if we would also no qualify as a smaller reporting company.
We are an “emerging growth company” and we cannot be certain that the reduced disclosure requirements applicable to emerging growth companies will make the common stock less attractive to investors.
The JOBS Act permits “emerging growth companies” like us, upon becoming a publicly-reporting company, to rely on some of the reduced disclosure requirements that are already available to smaller reporting companies. As long as we qualify as an emerging growth company or a smaller reporting company, we would be permitted to omit the auditor’s attestation on internal control over financial reporting that would otherwise be required by the Sarbanes-Oxley Act, as described above, and are also exempt from the requirement to submit “say-on-pay”, “say-on-pay frequency” and “say-on-parachute” votes to our stockholders and may avail ourselves of reduced executive compensation disclosure that is already available to smaller reporting companies.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will cease to be an emerging growth company at such time as described in the risk factor immediately above. Until such time, however, we cannot predict if investors will find the common stock less attractive because we may rely on these exemptions. If some investors find the common stock less attractive as a result, there may be a less active trading market for the common stock and our stock price may be more volatile and could cause our stock price to decline.
Trading in our common stock on the OTC Markets is limited and sporadic making it difficult for our shareholders to sell their common stock or liquidate their investments.
Trading in our common stock is currently published on the OTC Markets. The trading priceissuance of our common stock has been subject to wide fluctuations. Trading pricesthe selling stockholders may cause substantial dilution to our existing stockholders and the sale of the shares of common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.
The sale of sharesacquired by the selling stockholders may compete with proposed sales by our existing stockholders and could cause the price of our common stock to decline.
We are registering for sale 5,000,000 shares.6,621,600 shares issued and to be issued to the selling stockholders. It is anticipated that shares registered in this offering will be sold over a period of up to approximately twelve months from the date of this prospectus. The number of shares ultimately offered for sale by the selling stockholders under this prospectus dependsis dependent upon the number of shares the selling stockholders elects to sell from time to time. Depending upon market liquidity at the time. Salestime, sales of shares of our common stock issued upon conversion of the sharespromissory note may cause the trading price of our common stock to decline.
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The selling stockholders may sell all, some or none of our shares that it holds or comes to hold upon conversion of the promissory note. Sales by the selling stockholders of shares acquired upon conversion of the promissory note and sold under the registration statement, of which this prospectus is a part, willmay result in competitiondilution to the interests of other holders of our common stock. The sale of a substantial number of shares of our common stock by the selling stockholders in this offering, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
The selling stockholders paid less thanCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the then-prevailing market pricemeaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, that relate to future events or to our future operations or financial performance, including, without limitation, in the sections captioned “Description of Business ,” “Risk Factors ,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations ,” and elsewhere. Any and all statements contained in this prospectus that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this prospectus may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our common stock.future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.
The shares offered for saleforward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the accuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation:
● | Market acceptance of our products and services; |
● | Competition from existing products or new products that may emerge; |
● | The implementation of our business model and strategic plans for our business and our products; |
● | Estimates of our future revenue, expenses, capital requirements and our need for financing; |
● | Our financial performance; |
● | Current and future government regulations; |
● | Developments relating to our competitors; and |
● | Other risks and uncertainties, including those listed under the section titled “Risk Factors .” |
Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this prospectus were purchased for $0.005 per share which is significantly less thanto reflect any new information or future events or circumstances or otherwise, except as required by law.
Readers should read this prospectus in conjunction with the recent trading price ofdiscussion under the caption “Risk Factors ,” our common stock. The selling stockholders have a financial incentive to sell the shares immediately to realize the profit equal to the difference between the discounted purchase pricestatements and the market price. If the shares are sold, the price of our common stock could decrease. If our stock price decreases, the selling stockholders may have a further incentive to sell their shares. These sales may have a further adverse impact on our stock price.
We are registering 5,000,000 shares for sale under the registration statement of whichrelated notes thereto in this prospectus, is a part. The sales of such shares could depressand other documents which we may file from time to time with the market price of our common stock.SEC.
We are registering 5,000,000 shares under the registration statement of which this prospectus is a part. The 5,000,000 shares represent approximately 33% of our shares of common stock outstanding. The sale of these shares into the public market could depress the market price of our common stock.- 9 -
USE OF PROCEEDS
The selling stockholders will receive all of the netproceeds from the sale of their shares offered by them under this prospectus. We will not receive any proceeds from the sale of the shares offered hereby. We will not receive any proceeds from this offering.sold by the selling stockholders.
In connection with this offering, we will incur certain issuance costs, consisting of various registration, printing and professional services fees. We will expense these costs as incurred.DILUTION
DILUTION
The sale of 5,000,000 shares of our common stock willissuable upon conversion of the promissory note may have a dilutive impact on our shareholders. As a result, our net loss per share could increase in future periods and the market price of our common stock could decline.
After giving effect to the sale in this offering of 1,621,600 shares of outstanding common stock and issuance on conversion and sale of 5,000,000 shares, of common stock at a price of $0.005 per share, our pro forma as adjusted net tangible book value as of DecemberMarch 31, 20142020 would have been approximately $(57,292)$(1,031,381), or $(0.00)$(0.02) per share of common stock. This represents an immediate increaseno change in pro forma as adjusted net tangible book value of $0.01 per share to our existing stockholders and an immediate dilution of $0.01new shareholders. It represents a $0.02 decrease in tangible book value per share to our new shareholders.stockholders.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERSTOCKHOLDERS MATTERS
Public Market for common stock
OurTrading of our common stock currently tradesbegan reported on OTC Markets, the “Over the Counter” Bulletin Board (“OTC”)OTC Pink tier under the trading symbol “SGNI”. The following table sets forth, for“AMAS” on a very limited basis. On March 6, 2013 the periods indicated,trading symbol changed to SGNI. On May 26, 2016 the prices oftrading symbol changed to SGNIE. On August 25, 2016 the common stock in thetrading symbol changed to SGNI where it continues to trade on a very limited basis. Any over-the-counter market as reported and summarized by OTC Markets Group, Inc. These quotations representreflect inter-dealer quotations,prices, without adjustment for retail markup, markdown,mark-up, mark-down or commission and may not necessarily represent actual transactions.
Holders
As of July 9, 2020 , there were 134 stockholders of record of the common stock.
DIVIDEND POLICY
We have never declared nor paid any cash dividends on our capital stock. We do not intend to pay cash dividends on our common stock for the foreseeable future, and currently intend to retain any future earnings to fund our operations and the development and growth of our business. Any future determination to declare and pay dividends will be made at the discretion of our board of directors and will depend on various factors, including applicable laws, our results of operations, our financial condition, our capital requirements, general business conditions, our future prospects and other factors that our board of directors may deem relevant. Investors should not purchase our common stock with the expectation of receiving cash dividends.
CAPITALIZATION
We are authorized to issue 100,000,000 shares of common stock, with a par value of $0.001 per share. The closing price of our common stock on July 9, 2020 as reported by OTC Markets Group, Inc., was $0.80 There were 45,429,188 shares of common stock issued and outstanding as of July 9, 2020 . All shares of common stock have one vote per share on all matters including election of directors, without provision for cumulative voting. The common stock is an absencenot redeemable and has no conversion or preemptive rights. The common stock currently outstanding is validly issued, fully paid and non-assessable. In the event of an established trading marketliquidation of the Company, the holders of common stock will share equally in any balance of the Company’s assets available for distribution to them after satisfaction of creditors and preferred shareholders, if any. The holders of the Company’s common are entitled to equal dividends and distributions per share with respect to the common stock when, as and if, declared by the Board of Directors from funds legally available.
Our Articles of Incorporation, our Bylaws, and the applicable statutes of the state of Delaware contain a more complete description of the rights and liabilities of holders of our securities.
During the year ended June 30, 2019, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the market is limited, sporadic and highly volatile, which may affectissuance of any other class of securities or the prices listed below.modification thereof.
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Fiscal Year Ended June 30, 2014 |
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Quarter ended June 30, 2014 |
| $ | 11.00 |
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| $ | 2.50 |
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Quarter ended March 31, 2014 |
| $ | 7.00 |
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| $ | 5.00 |
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Quarter ended December 31, 2013 |
| $ | 5.50 |
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| $ | 4.50 |
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Quarter ended September 30, 2013 |
| $ | 6.00 |
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| $ | 5.00 |
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Fiscal Year Ended June 30, 2013 |
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Quarter ended June 30, 2013 |
| $ | 6.75 |
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| $ | 5.00 |
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Quarter ended March 31, 2013 |
| $ | 7.60 |
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| $ | 1.20 |
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Quarter ended December 31, 2012 |
| $ | 4.00 |
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| $ | 0.80 |
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Quarter ended September 30, 2012 |
| $ | 4.00 |
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| $ | 2.80 |
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Holders- 10 -
Preferred Stock
We had approximately 96 record holdersare authorized to issue 8,000,000 shares of our common stock aspreferred stock.
The Series A Convertible Preferred Stock has a par value of March 12, 2015, according to the books of our transfer agent. The number of our stockholders of record excludes any estimate by us of$0.001 and the number of beneficial ownersshares constituting such class 6,000,000. As of shares held in street name,March 31, 2020, the accuracy of which cannot be guaranteed.
Dividends
There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends. The Delaware Business Corporations Act, however, does prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FORWARD LOOKING STATEMENTS
Caution Regarding Forward-Looking Information
All statements contained in this Form S-1, other than statements of historical facts, that address future activities, events or developments are forward-looking statements, including, but not limited to, statements containing the words “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” and similar expressions . All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new acquisitions, products, services, developments or industry rankings; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results will conform to the expectations and predictions of management is subject to a number of risks and uncertainties that may cause actual results to differ materially.
Consequently, all of the forward-looking statements made in this Form S-1 are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. Readers are cautioned not to place undue reliance on such forward-looking statements as they speak only of the Company’s views as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The following discussion and analysis should be read in connection with the Company’s financial statements and related notes thereto, as included in this report.
Overview
We were incorporated in Delaware in 1992, and in 1996 received all remaining assets of Infotechnology, Inc., a Delaware company, following the completion of Infotech’s Chapter 11 Bankruptcy reorganization, in accordance with an Assignment and Assumption Agreement, dated October 11, 1996, and effective as of June 21, 1996. As a result of a series of transactions during the 1980’s, Infotech, then principally engaged in the information and communications business, acquired equity interests in Comtex News Network, Inc. and Analex Corporation, formerly known as Hadron, Inc. Our business was the maintenance of our equity interest in and note receivable from Comtex and equity interest in Analex.
On September 25, 2006, we exchanged the equity investment in Comtex common stock and the Note Receivable from Comtex of $856,954 for 55,209has 6,000,000 shares of the StemGen, Inc.Series A Convertible Preferred Stock issued and outstanding. The Series A Convertible Preferred Stock has priority in liquidation and has a liquidation preference of $1 per share. The Series A Preferred stock. We no longer have an equity interest in either the common stock of Comtex or the Note from Comtex.
During October 2006, we sold the remaining 21,000Stock is convertible into shares of common stock of publicly-held Analex, a defense contractor specializing in systems engineering and developing innovative technical intelligence solutions in support of U.S. national security. We no longer have an equity interest in Analex.
On December 24, 2012,at the Corporation received a nonrefundable deposit of $32,500 under a Letter of Intent (“LOI”) which it entered into on December 11, 2012 with StemGen Inc. a Delaware corporation. Effective February 5, 2013, the Company amended its Certificate of Incorporation. As a resultoption of the Amendment,holder at a rate of three shares of common stock for each share of Series A Convertible Preferred Stock. The Series A Convertible Preferred Stockholders are not entitled to receive dividends and have no voting rights and are not redeemable.
The Company has also authorized 1,000,000 shares of Series E Preferred Stock issued and outstanding. The Series E Preferred Stock has a par value of $0.000001 and ranks junior to all the Company’s corporate name changed from Amasys Corporationcommon and other preferred stock. There are no dividends on the Series E Preferred Stock and there is no participation in liquidation, dissolution or winding-up distribution of the assets of the Company. The shares of outstanding Series E Preferred Stock have no voting rights because the voting rights of the Series F preferred stock are superior to StemGen, Inc.the rights of the Series E Preferred Stock.
The Company has authorized 1,000,000 shares of Series F Preferred Stock. The Series F Preferred Stock has a par value of $0.000001 per share and a reverseranks junior to all of the Company’s common and other preferred stock. There are no dividends on the Series F Preferred Stock and there is no participation in liquidation, dissolution or winding-up distribution of the assets of the Company. The shares of outstanding Series F Preferred Stock shall have the right to vote based on the number of votes equal to twice the number of votes of all outstanding shares of capital stock split was effectuated where allsuch that the holders of the outstanding shares of Series F Preferred Stock shall always constitute sixty-six and two thirds (66 2/3) of the Company’s common stock were exchanged at a ratiovoting rights of one for eighty.the Company. The LOI was terminated on August 6, 2013.voting rights of the Series F Preferred Stock are superior to the rights of the Series E Preferred Stock.
Commencing with the private saleNon-Cumulative Voting
Neither holders of 10,000,000 unregistered shares May 24, 2014 and receipt of proceeds in the amount of $297,000, we began development of our business with reorganizational matters,common nor preferred stock have cumulative voting rights, which means that the preparationholders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our business plan and the preparation of the financial statements and other information presented in this prospectus.directors.
Going Concern
We have not attained profitable operations and are dependent upon obtaining financing to continue to pursue our business plan or to undertake any extensive explorationexpansion of our current business activities. For these reasons our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern.
Accounting and Audit PlanOff Balance Sheet Arrangements
We intend to continue to have our outside consultant assist us in the preparation of our quarterly and annual financial statements and have these financial statements reviewed or audited by our independent auditor.
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 2 of the notes to our historical financial statements. We have identified and disclosed accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require the application of significant judgment by management.
DESCRIPTION OF BUSINESS
Overview
We have established a fiscal year end of June 30.
We were incorporated in Delaware in 1992 and on the 29th day of January 2019, acquired D3esports Corp., a Wyoming wholly-owned operating subsidiary and our primary business.
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We were incorporated under the laws of the State of Delaware, August 18, 1992. Prior to the Acquisition (as defined below), we were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934). As a result of the Acquisition, we have ceased to be a “shell company” and will continue as a publicly traded company under the name StemGen, Inc. The existing business operations of D3esports, Inc. will continue as our wholly subsidiary.
On January 29, 2019 (the “Closing Date”), we completed and closed the acquisition (the “Acquisition”) under an Agreement and Plan of Reorganization (the “Reorganization Agreement”), entered into by and among by and among (i) StemGen, Inc.(“StemGen”); (ii) D3esports, Inc., a Wyoming corporation (“D3esports”); (ii) and the shareholders of D3esports (“Sellers”) pursuant to which D3esports became a wholly owned subsidiary of ours. Pursuant to the Reorganization Agreement, we acquired from the Sellers all the issued and outstanding equity interests of D3esports in exchange for 39,631,587 shares of our common stock, par value $0.001 per share and 6,000,000 shares of Series A Preferred Stock, par value $0.001 per share. As a result of the Acquisition, the Sellers, as the former shareholders of D3esports, became the controlling shareholders of the Company. The Acquisition was accounted for as a reverse merger notwithstanding it is legally a reverse acquisition. For accounting purposes, D3esports is the acquiring entity. Current and comparative consolidated financial statements include the accounts of D3esports since inception (May 1, 2018) and StemGen from the date of acquisition (January 29, 2019) (collectively, the “Company”).
D3esports is a Virtual to Real company offering global sports an opportunity to participate in virtual competition. D3esports’s focus is professional motorsports because of management’s extensive historical experience and personal relationships and connections in the space. D3esports offers a time trial format competition through our Microsoft license for eSports athletes to compete to win a season of real racing and enhance their experience of motorsports through a virtual platform with a strong link to a real team and real race cars. D3esports was founded in May 2018 and launched at the Dave and Buster Houston flagship store in July 2018. D3esports is building an eSports competition based around Forza 7 Motorsports. D3esports has extensive experience in real motorsports, and recent technological advancements enable virtual motorsports to cross-over to virtual motor sports and attract substantial investment. D3esports currently sells 3 screen Fanatec-operated Logitech Playseats powered by a custom gamer PC built in-house for all enthusiasts, gamers and eSports athletes to gain the best access to win a season of racing. D3esports is also currently positioning and selling sponsorship for naming rights of the championship open and showdown series as well as each month long racing competition.
We have generated limited revenues to date and our activities have been primarily limited to developing our business plan and research and development of products. We will not have the necessary capital to fully develop or execute our business plan until we are able to secure additional financing. There can be no assurance that such financing will be available on suitable terms. We need to raise additional funds in order to implement our business plan. Our current cash on hand is insufficient to commercialize our products or fully develop our business strategy. If we are unable to raise adequate additional funds or if those funds are not available on terms that are acceptable to us, we will not be able to execute our business plan and we may cease operations.
Plan of Operation
D3esports has built a Virtual Championship enabling gamers to compete at three different levels. There shall be 2 elimination rounds at each of the 3 levels of competition to which all shall be streamed through the Dawson Racing Twitch.TV Channel. The winner of each race shall represent their brand on the virtual car to the next real race and their name and company shall be on the car.
Employees
Our sole employee is Simon Dawson, our president, treasurer, secretary and sole director. Mr. Dawson is not employed under a written employment agreement. See, Directors, Executive Officers and Corporate Governance.
Smaller Reporting Company
We are currently a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. While we are a “smaller reporting company” the disclosure we will be required to provide in our filings with the SEC will be less than it would be if we were not considered a “smaller reporting company.” Specifically,” “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports.
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Intellectual Property
There shall be agreements with component supplies for our professional simulator and race team in the future.
Legal Proceedings
We are not subject to any pending or threatened litigation.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contain forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives, and performance that involve risk, uncertainties, and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.
Background of our Company
We currently sell three Screen Fanatec operated Logitech Playseats powered by a custom Gamer PC built in house for all enthusiasts, gamers and eSports athletes to gain the best access to win a season of racing. We also are currently positioning and selling sponsorship for naming rights of the championship open and showdown series as well as each series (month long).
Plan of Operations
Overview. Our plan for 2020 is to marketing and promote our D3esports Championship which will be a live timing and scoring board to which the fastest 3 times at the close of each month shall be invited to enter in a race that will be shown on our media channels at the beginning of 2020 and the top three then shall be invited to Houston to drive a real race car which will be our Radical RXC. The top three will win a Professional Simulator. The cost for this component of our plan is in the range of $500,000.
The Plan for 2020 from January to the end of the year is to carry on with the live scoring board for the D3esports Championship which will be offered on a global stage. There shall be education channels set up for competitors to access video to assist car set up and driving from professionals to have the best opportunity to achieve their fastest time. The cost for this component of our plan is in the range of $1,200,000 at the rate of $100,000 monthly.
The 2020 virtual calendar, which shall be driven from the Forza 7 game and currently has over 10 million registered users, has yet to be announced. The car shall have a standard set up to start and final rules and regulation shall also be announced based on our plan to reach out to STEM accredited Schools in North America to enter and allow a resource for schools and pupils as a team to set up the their car and best driving styles. As in 2019 there shall be an annual race for the fastest times to race and win a chance to visit Houston and drive the actual car driven virtually on the D3esports Championship. The partnering professional team shall then run the best of the 3 in a season of racing in our Radical SR3 RSX 1500cc. The stop three shall also win a professional simulator.
Our primary operation is to be the community offering and management of our online competitions in the motorsports arena but not confined to just one sport. We plan to expand to other sports in the future. The unique selling proposition for D3esports is the virtual to real experience.
With growing partnerships from component providers in the gaming and eSport space we plan to build and sell professional simulators linking to a points/rewards platform.
Sales and Marketing. Our marketing is through monthly press releases and social media on Facebook and Instagram coupled with our 24/7 time trial competition with online advertising for sponsors. Our school education platform is in place with a performance driving school for first time drivers and linking with course curriculum to drive awareness and education in the virtual to real eSports space and cross over to learning in the class rooms.
Research and Development. We do not currently develop electronic games. We are focused on forming agreements with the best games and virtual racing platforms in the world to optimize the experience but to familiarize the competitor. We are building the ultimate experience to our offering which is a connection to real drivers, engineers our partners technology by hosting eSports tournaments to connect the virtual to real and for the fastest to have the opportunity to passenger or drive a real race car on a real track. Through our partnership and internal research, we are molding our competition to the gamer. (gamer focused).
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Intellectual Property. We currently have an agreement in place to offer the best experience from green to checkered flag. The agreement is with Microsoft (to have a strong gaming platform bridging the gap between virtual and real motorsport). There shall be more agreements with component supplies for our professional simulator and race team in the future.
Competition. The business of eSports is highly competitive and rapidly growing. Our ability to compete depends upon many factors within and outside our control, including the timely development and introduction of the racing competition which is based a time-trial format to played 24/7 with the Forza 7 Motorsports, played on Xbox and PC.
As we expand and add more motorsports platforms (partnerships) and sports to D3esports we publish and market, and the related enhancements, functionality, performance, reliability, customer service and support and marketing efforts. Due to the relatively low barriers to entry in the eSports market, we expect additional competition from other emerging companies but we have structured a virtual to real offering which can be added to professional team, Sim Centre and other games companies, we are simply offering a path to promote and enhance the gamers experience to relate to the real world through virtual competition. Many of our existing and potential competitors are substantially larger than us and have significantly greater financial, technical and marketing resources that will compete for available users, developers and talent. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the publishing and promotion of their eSports competitions. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressure will not have a material adverse effect on our business, operating results and financial condition.
Liquidity
We believe we do not have adequate funds to fully execute the D3esports business plan for the next twelve months unless we obtain additional funding. If we do not obtain additional capital, we may be unable to continue operations for the next 12 months. However, when we raise additional capital, we will allocate our funding to first assure that all state, federal and SEC requirements are met.
As of March 31, 2020, we had cash on hand of $11,739. Our cash on hand is sufficient to fund our planned operations for less than one month. The company has negative working capital of $1,413,988 as of March 31, 2020. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee that we will be able to obtain funds when we need them or that funds will be available on terms that are acceptable to the Company.
We intend to pursue capital through public or private financing, as well as borrowing and other sources in order to finance our business activities. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then our ability to continue our operations may be significantly hindered.
Results of Operations
For the period from inception through March 31, 2020, the Company incurred net losses and had negative cash flow from operations. As of March 31, 2020, the Company has negative working capital.
We continue to rely on outside funding to offset operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurance that we will continue to have such funding available. We will not be able to continue operations without them. We are pursuing alternate sources of financing, but there is no assurance that additional capital will be available to the Company when needed or on acceptable terms.
Nine months ended March 31, 2020 and 2019
SixRevenue
We recognized revenue in the amount of $1,750 for the nine months ended DecemberMarch 31, 20142020 compared to revenue of $12,058 during the sixcomparable period of 2019.
Cost of Revenue
We recognized cost of revenues in the amount of $3,725 for the nine months ended DecemberMarch 31, 2013.2020 compared to $4,191 for the comparable period of 2019.
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General and Administrative Expenses
We recognized general and administrative expenses in the amount of $92,372 and $15,245$38,992 for the sixnine months ended DecemberMarch 31, 2014 and 2013, respectively.2020 compared to $155,372 for the comparable period of 2019. The increase was due to higher professional fees.prior year expense included certain start-up expenses of the Company which were non-recurring.
Interest Expense
Interest
We incurred interest expense decreased from $33,958of $105,600 for the sixnine months ended DecemberMarch 31, 20132020 compared to $0$19,820 for the six months ended December 31, 2014. The decreasecomparable period of 2019 and is a result of having no outstanding debt for the period ended December 31, 2014. Interest expense for the six months ended December 31, 2013 included amortization of discountprimarily related to statutory interest on convertible notes payable inpayable.
Loss on fair value of derivative
We recognized a loss on fair value of derivative of $17,182 for the amountnine months ended March 31, 2020 based on the valuation of $23,094,the derivatives compared to $0 in$119,192 for the current year.comparable period of 2019.
Net Loss
We incurred a net loss of $92,372$168,582 for the sixnine months ended DecemberMarch 31, 2014 as2020 compared to $49,203a loss of $306,517 for the comparable period of 2013.2019 related to the items discussed above.
Three months ended March 31, 2020 and 2019
Revenue
We recognized no revenue for the three months ended March 31, 2020 compared to revenue of $2,058 during the comparable period of 2019.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $3,148 for the three months ended March 31, 2020 compared to $51,459 for the comparable period of 2019. The prior year expense included certain start-up expenses of the Company which were not recurring.
Interest Expense
We incurred interest expense of $35,200 for the three months ended March 31, 2020 primarily related to statutory interest on convertible notes payable.
Loss on fair value of derivative
We recognized a loss on fair value of derivative of $5,717 for the three months ended March 31, 2020 based on the valuation of the derivatives.
Net Loss
We incurred a net loss $52,703 for the three months ended March 31, 2020 compared to a loss of $195,913 for the comparable period of 2019 related to the items discussed above.
Fiscal year ended June 30, 2019 compared to the period from inception (May 1, 2018) through June 30, 2018
Revenue and Cost of Revenue
For the year ended June 30, 2019, we recognized revenue of $22,058 and associated costs of revenue of $8,510 as a result of commencing operations after the reverse acquisition. There was no revenue or cost of revenue in the comparable period of 2018.
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General and Administrative Expenses
We recognized general and administrative expenses of $196,734 and $1,995 for the year ended June 30, 2019 and the period from inception (May 1, 2018) through June 30, 2018, respectively. The increase in general and administrative expense was primarily the result of increased consulting, legal and accounting expenses as a result of commencing operations.
Amortization
We recognized amortization of $60,000 during the year ended June 30, 2019 related to amortization of website development costs.
Interest Expense
We recognized interest expense $57,401 for the year ended June 30, 2019. The increase in interest expense was the result of debt assumed in the reverse acquisition.
Change in Fair Value of Derivative Instruments
Change in fair value of derivative instruments was a loss of $124,923 for the year ended June 30, 2019 as a result of the change in market value of derivatives acquired in the reverse acquisition.
Net Loss
We incurred a net loss of $425,510 for the year ended June 30, 2019 as compared to a net loss of $1,995 for the period from inception (May 1, 2018) through June 30, 2018. The increase in the net loss was primarily the result of the increased professional fees discussed above.
Three months ended December 31, 2014 compared to the three months ended December 31, 2013.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $54,705 and $1,825 for the three months ended December 31, 2014 and ended 2013, respectively. The increase is due to professional fees incurred in the quarter ended December 31, 2014.
Interest Expense
Interest expense decreased from $17,095 for the three months ended December 31, 2013 to $0 for the six months ended December 31, 2014. This is a result of there being no outstanding debt during the period ended December 31, 2014.
Net Loss
We incurred a net loss of $54,705 for the three months ended December 31, 2014 as compared to $18,920 for the comparable period of 2013. The increase in the net loss was primarily the result of the increased general and administrative expense, noted above.interest expense and change in fair value of derivative instruments.
Year ended June 30, 2014 compared to the year ended June 30, 2013.Liquidity and Capital Resources
General and Administrative Expenses
We recognized generalanticipate needing approximately $425,000 to fund our operations and administrative expenses into effectively execute our business plan over the amount of $51,183 and $60,202 for the twelve months ended June 30, 2014 and 2013, respectively. The decrease was primarily a result of lower professional fees.
Interest Expense
Interest expense decreased from $60,717 for the twelve months ended June 30, 2013next eighteen months. Currently available cash is not sufficient to $39,617 for the twelve months ended June 30, 2014. The decrease is attributableallow us to the retirement of debt during the twelve months ended June 30, 2014.
Other Income
During the twelve months ended June 30, 2014, we recognized a gain of $107,220 due to the forgiveness of debt associated with our related party notes. In the prior year, we had recognized a gain of $32,500 due to the forfeit of a nonrefundable deposit.
Net Income (Loss)
We reported a net income of $16,420 for the twelve months ended June 30, 2014 as compared to $88,419 for the comparable period of 2013. The increase in the net gain was mainly due to the recognition of the gain we recognized on the forgiveness of debt.
SELLING STOCKHOLDERS
The selling stockholders may from time to time offer and sell any or all of the sharescommence full execution of our common stock set forth below pursuant to this prospectus. When we refer to “selling stockholders” in this prospectus, we meanbusiness plan. Our business expansion will require significant capital resources that may be funded through the persons listed in the table below, and the pledgees, donees, transferees, assignees, successors and others who later come to hold any of the selling stockholders’ interests in shares of our common stock other than through a public sale.
The following table sets forth, as of the date of this prospectus, the names of the selling stockholders for whom we are registering shares for resale to the public, and the number of sharesissuance of common stock or of notes payable or other debt arrangements that the selling stockholders may offer pursuant to this prospectus.
This prospectus relates to the possible resale by certain ofaffect our stockholders of up to 5,000,000 shares ofexisting debt structure. Despite our common stock. We have agreed to register the resale of such shares of common stock pursuant to that certain Stock Purchase Agreement, dated as of March 6, 2015 by and among us and all of the holders of our common stock prior to our initial public offering.
Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she, or it possesses sole or shared voting or investment power of that security, including options that are currently exercisable or exercisable within 60 days of the date of this prospectus. Except as indicated by the footnotes below,current financial status, we believe based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown that they beneficially own, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose.
Based on the information provided to us by the selling stockholders as of the date of this prospectus, assuming that the selling stockholders sell all of the shares of our common stock being registered hereunder and do not acquire any additional shares, the selling stockholders will not own any shares of our common stock after the completion of any offering of the shares being registered hereunder.
We cannot advise you as to whether the selling stockholders will in fact sell any or all of such shares of common stock. In addition, the selling stockholders may sell, transfer or otherwise dispose of, at any time and from time to time, the shares of our common stock in transactions exempt from the registration requirements of the Securities Act after the date of this prospectus.
Our calculation of the percentage of beneficial ownership is based on 15,183,927 shares of common stock outstanding as of March 12, 2015.
The description of our relationships with the selling stockholders and their affiliates set forth in “Item 13. Certain Relationships and Related Transactions, and Director Independence” in our Annual Report on Form 10-K is incorporated by reference herein.
Name and address of Selling Stockholder | Number of Shares Beneficially Owned Before the Offering | Percentage Beneficially Owned Before the Offering | Percentage Beneficially Owned to be Sold in the Offering | Number of Shares Beneficially Owned After the Offering | Percentage Beneficially Owned After the Offering | |||||||||||||||
Vista View Ventures, Inc. 3960 Howard Hughes Parkway Las Vegas, NV 89169(1) | 1,100,000 | 7.24 | % | 7.24 | % | -0- | -0- | |||||||||||||
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Montego Blue Enterprises Corporation 111 Bazile Daigle Road Lake Charles, LA 70607(2) | 400,000 | 2.63 | % | 2.63 | % | -0- | -0- | |||||||||||||
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The Jaxon Group Corp. 1740 N. Tallowood Drive Lake Charles, LA 70605(3) | 1,200,000 | 7.90 | % | 7.90 | % | -0- | -0- | |||||||||||||
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Groupers Investment Ltd. 3076 Sir Francis Drake Highway Road Town, Tortola, British Virgin Islands(4) | 1,100,000 | 7.24 | % | 7.24 | % | -0- | -0- | |||||||||||||
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TOTAL | 5,000,000 | 32.92 | % | 32.92 | % | -0- | -0- | |||||||||||||
(1) Thomas J. Cloud, President of Vista View Ventures, Inc.we may be deemedable to issue additional notes payable or debt instruments in order to start executing our business plan. However, there can be no assurance that we will be able to raise money in this fashion and have voting and dispositive control over the shares of our common stock held by Vista View Ventures, Inc.not entered into any agreements that would obligate a third party to provide us with capital.
(2) Monika Federowicz, President of Montego Blue Enterprises Corporation may be deemed to have voting and dispositive control over the shares of our common stock held by Montego Blue Enterprises Corporation.
(3) John Morrissey, President of The Jaxon Group Corp. may be deemed to have voting and dispositive control over the shares of our common stock held by The Jaxon Group Corp.
(4) Geoffrey Long, Authorized Agent of Groupers Investment Ltd. may be deemed to have voting and dispositive control over the shares of our common stock held by Groupers Investment Ltd.
(5) Thomas Morrissey, President of THM Consulting Corp. may be deemed to have voting and dispositive control over the shares of our common stock held by THM Consulting Corp.
DESCRIPTION OF CAPITAL STOCK
General
Our authorized capital stock consists of 20,000,000 shares of common stock, $0.01 par value per share, and 1,000,000 shares of preferred stock, $0.01 par value per share. The following description summarizes the most important terms of our capital stock. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, you should refer to our certificate of incorporation and bylaws, which are included as exhibits to the registration statement of which this prospectus forms a part, and to the provisions of applicable Delaware law.
Common Stock
As of March 12, 2015, there were 15,183,927 shares31, 2020, we had cash on hand of $11,739. Our cash on hand is sufficient to fund our common stock outstanding, held by 96 stockholdersplanned operations for less than one month. The company has negative working capital of record, and 1,000,000 shares$1,413,988 as of our preferred stock outstanding.
Dividend Rights
SubjectMarch 31, 2020. We do not expect to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available at the times andachieve positive cash flow from operating activities in the amounts that our board of directors may determine. Dividends may be declared and paid on our common stock from lawfully available funds as and when determined by our board of directors.
Voting Rights
Except as otherwise required by the General Corporation Law of Delaware and the Series E Preferred Stock, the holders of common stock possess all voting powers for all purposes, including the election of directors. Each share of common stock has one vote on each matter submittednear future. We will require additional cash in order to a vote of our stockholders. The holders of shares of our common stock will vote together with all other shares of capital stock, if any, as a single class on all matters submitted for a vote or consent of stockholders.
Preemptive or Similar Rights
Our common stock is not entitled to preemptive rights and is not subject to conversion or redemption. The rights of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that our board of directors may designate and issue in the future.
Liquidation Rights
Upon our liquidation, dissolution, or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating preferred stock outstanding at that time after payment of liquidation preferences, if any, on any outstanding shares of preferred stock and payment of other claims of creditors.
Registration Rights
In connection with the issuance of the shares to the selling stockholders we entered into a registration rights agreement with the investors, in which we agreed to deliver to this prospectus and to (i) file a registration statement within 129 days after the Date of the Registration Rights Agreement enabling the investors to publicly sell the shares of common stock purchased pursuant to the Stock Purchase Agreement, (ii) (a) use our reasonable best efforts to cause the registration statement to become effective within as promptly as reasonably practicable after the filing thereof.
Preferred Stock
Our board of directors designated 1,000,000 shares of Series E preferred stock. The Series E preferred stock has a par value of $0.01 and ranks subordinate to our common stock as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. The outstanding shares of Series E preferred stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of capital stock. No dividends may be declared or paid on the preferred stock.
In the event of any liquidation or winding up of the Company or the sale of all or substantially all of the assets of the Company, the holders of the preferred stock shall not be entitled to participate in any distributions.
Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws
We are governed by the Delaware General Corporation Law (referred to as the “DGCL”). Our certificate of incorporation and bylaws do not permit cumulative voting in the election of directors. Cumulative voting allows a stockholder to vote a portion or all of the stockholder’s shares for one or more candidates for seats on the board of directors. Without cumulative voting, a minority stockholder may not be able to gain as many seats on our board of directors as the stockholder would be able to gain if cumulative voting were permitted. The absence of cumulative voting makes it more difficult for a minority stockholder to gain a seat on our board of directors to influence our board’s decision regarding a takeover or otherwise.
Delaware Anti-Takeover Statute
We are governed by Section 203 of the DGCL which impose additional requirements regarding mergers and other business combinations.
The provisions of the DGCL could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, might also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions might also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders might otherwise deem to be in their best interests.
Limitations of Liability and Indemnification
Our certificate of incorporation and bylaws provide that we will indemnify our directors and officers, and other agents, to the fullest extent permitted by the DGCL, which prohibits our certificate of incorporation from limiting the liability of our directors for the following:
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If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended. Our certificate of incorporation will not eliminate a director’s duty of care and, in appropriate circumstances, equitable remedies, such as injunctive or other forms of non-monetary relief, remain available under Delaware law. This provision also does not affect a director’s responsibilities under any other laws, such as the federal securities laws or other state or federal laws. Under our bylaws, we will also be empowered to purchase insurance on behalf of any person whom we are required or permitted to indemnify.
In addition to the indemnification required in our certificate of incorporation and bylaws, we may enter into indemnification agreements with our current director and executive officer. These agreements may provide for the indemnification of such persons for all reasonable expenses and liabilities, including attorneys’ fees, judgments, fines, and settlement amounts, incurred in connection with any action or proceeding brought against them by reason of the fact that they are or were serving in such capacity. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We may also maintain directors’ and officers’ liability insurance.
The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
Listing
Trading of our common stock is reported on the OTCQB Market under the symbol “SGNI.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.
DESCRIPTION OF BUSINESS
Our Company
We were incorporated in Delaware in 1992, and in 1996 acquired all the assets of Infotechnology, Inc., a Delaware corporation, following the completion of Infotech’s Chapter 11 Bankruptcy reorganization. As a result of a series of transactions during the 1980’s,implement our business was the maintenance of our equity interest in and note receivable from Comtex News Network, Inc. and equity interest in Analex Corporation. Beginning September 25, 2006 and concluding October 1, 2006 we disposed of all our assets and terminated business operations.
Development of our business
After disposing of our assets, October 1, 2006, until the private sale of 10,000,000 unregistered shares, May 27, 2014, we were actively seeking candidates for a business combination. As a result we may have been considered a “blank check” company as defined in Section 3(a)(51) of the Securities Exchange Act of 1934, because we were vigorously searching for an appropriate acquisition candidate. We identified an acquisition target and entered into a letter of intent on December 24, 2012 for a business combination. However the transaction did not go forward and the letter of intent was terminated August 6, 2013.
Commencing with the private sale of 10,000,000 unregistered shares, May 24, 2014, and receipt of proceeds in the amount of $297,000 we began organic development as a business accelerator, developing potentially profitable ideas and offering supportive environments for entrepreneurs within the confines of a public company focused on building partnerships with clients to develop ideas or products in the areas of technology, eye tracking technology, imaging technologies, 3D printing, cloud databases, and leap motion technology.
The Industry
The formal concept of business incubation began in the USA in 1959 when Joseph Mancuso opened the Batavia Industrial Center in a Batavia, New York, warehouse. (Stone, Mary (2008-04-24). “Mancuso, inventor of business incubator, dies”. Rochester Business Journal. Retrieved 2008-04-24). The 1980s commenced the incubator growth in the United States and was facilitated with the creation of the National Business Incubator Association. During this time small business incubators became a preferred vehicle for providing assistance to new companies. A focus was to help homegrown entrepreneurs instead of attracting overseas companies. According to the National Business Incubation Association states as of October 2012, there were over 1,250 incubators in the United States, up from only 12 in 1980. NBIA estimates that there are about 7,000 business incubators worldwide. The incubation model has been adapted to meet a variety of needs, from fostering commercialization of university technologies to increasing employment in economically distressed communities to serving as an investment vehicle.
Cambridge, Mass.-based consulting firm New Markets Advisors says that a “significant” portion of Fortune 500 companies--including Procter & Gamble, IBM, Walgreens and The Hershey Company--likely have some sort of incubator cooking in at least one business unit.
Stephen Wunker, managing director of New Markets Advisors, said: “Given the pace of change that threatens established businesses, incubators are becoming more and more important to create growth options.” “For many organizations, having an internal incubator is like an insurance policy--if the market moves, the companies are ready to change directions or grow new business quickly.”
More than half of all business incubation programs are “mixed-use” projects; that is, they work with clients from a variety of industries. Technology incubators account for 39% of incubation programs. (2006 State of the Business Incubation Industry).
The NBIA describes one example of a specialized type of incubator is a bioincubator. Bioincubators specialize in supporting life science-based startup companies. Entrepreneurs with feasible projects in life sciences are selected and admitted for these programs.
Business strategy
We intend to help 30 to 40 new early-stage companies and startups per year and plan to capitalize 10 to 20 percent of them. We intend to provide:
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Client Selection Process.
We will not serve any and all companies. Entrepreneurs who wish to enter our business accelerator program must apply for admission. We will evaluate proposals from universities and other outsiders--so long as the entities are focused on new initiatives involving our target ideas and products.
We have developed an application process to become a candidate for our business technology accelerator based on the following elements:
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The final selection process will be limited to applicants who are able to demonstrate the following characteristics:
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Our ability to grow and expand our business is dependent on our ability to secure sufficient financing.plan. There is no guarantee that we will be successful. able to obtain funds when we need them or that funds will be available on terms that are acceptable to the Company.
We anticipatehave no known demands or commitments and are not aware of any events or uncertainties as of March 31, 2020 that will result in or that are reasonably likely to materially increase or decrease our current liquidity.
Capital Resources
We had no material commitments for capital expenditures as of March 31, 2020. However, should we willexecute our business plan as anticipated, we would incur substantial capital expenditures and require not less than $425,000 in financing in addition to what is required to fund our present operation.
Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the $25,000 we receivedCompany does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the financial statements are prepared; actual results could differ from the recent sale of unregistered common stock.our estimates and such differences could be material. We have no assurancesidentified below the critical accounting policies, which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the availabilitypresentation of additional financing that we willour financial position, results of operations and cash flows. Due to the need to implementmake estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our business.critical accounting policies and how they are applied in the preparation our financial statements.
In their audit report dated October 14, 2014; our auditors have expressed an opinion that substantial doubt exists about our ability to continue as an ongoing business.New Accounting Pronouncements
Recent Developments
Common Stock Offering
On March 11, 2015, we issued 5,000,000 unregistered sharesFor a description of common stock representing 33%recent accounting standards, including the expected dates of our outstanding common stock at such time, on a fully diluted basis.
Preferred Stock Offering
On June 27, 2014, our board of directors designated 1,000,000 shares of Series E preferred stock. The Series E preferred stock has a par value of $0. 01adoption and ranks subordinate to our common stock as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. See “Description of Capital Stock—Preferred Stock.”
General Corporate Information
StemGen, Inc. is a Delaware corporation. Our principal offices are located at 800 Town and Country Blvd., Suite 300, Houston, Texas 77024. We can be reached at (832) 431-3292 and our website address is www.StemGen.net. Information containedestimated effects, if any, on our website does not constitute part of this prospectus.financial statements, see “Note 1: Significant Accounting Polices: Recently Issued Accounting Pronouncements” in our financial statements from March 31, 2020 and June 30, 2019.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors, Executive OfficersThe following table sets forth information on our executive officers and Other Key Employeesdirectors as of the filing of the registration statement of which this prospectus is a part. The terms of service for each of our directors expires at our next annual meeting of stockholders or until their successors are duly elected and qualified. Simon Dawson may be characterized as a promoter and control person.
Name and Address |
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| President, Secretary, Treasurer, Chief Executive Officer, |
John David Walls has been ourThe sole director and chief executive officernamed above has held his office since January 20, 201529, 2019 and will serve until the next annual meeting of the stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders'stockholders’ meeting. Officers will hold their positions at the pleasure of the board of directors.
Set forth below is the description of the backgrounds of our directors, executive officers and other key employees.
Simon Dawson Biographical Information –John David Walls
John David Walls, age 57, brings 30During 2007, Mr. Dawson moved to Houston from his position as sales and marketing manager for Next Generation (David Lloyd Club), a prominent health and fitness club in Cambridge England, Beginning in 2017 Simon was the business development manager for Risi Competizione, the factory that supported Ferrari GT2 race team in North America, winning many championships up to 2011.
Simon Dawson joined his father on the Project Libra Race program, which developed the Radical Ford Eco Boost race engine and its first race car in 2012.
This led to his permanent move from North Carolina to Houston to develop a full Radical dealership and track day business, which he runs with his father today.
Over the last six years, Simon and his father have enjoyed great success with Radical Texas selling track day cars, track day experiences and along the way, testing and developing the cars and technologies that will bring them race championships well into the future.
The driving force behind Simon’s passion for motorsports is family, and the dream of managementmaking racing an obtainable pastime and banking expertise tosport for all families and inspire the Company. From 2004 until 2014, he served as Chief Financial Officer of a private manufacturingfuture linking the real and tool company in Forney, Texas. Mr. Walls holds a bachelor of business administration in finance and real estate from Baylor University. He also attended Southwestern Graduate School of Banking at Southern Methodist University.virtual worlds with an investment into eSport for the ultimate experience.
Mr. Walls does not have a written employment or other compensatory agreement with the Company. He is being paid $10,000 per month for his services to the Company.- 17 -
Family Relationships
There are no family relationships among our directors or executive officers. However, Mr. Ian Dawson, a significant shareholder, is the father of Mr. Simon Dawson, our sole officer and director.
Director Independence
At this time, we are not subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.” None of our directors are independent directors under the applicable standards of the SEC and the NASDAQ stock market.
Involvement in Certain Legal Proceedings
During the past ten (10) years, none of our directors, persons nominated to become directors, executive officers, promoters or control persons was involved in any of the legal proceedings listen in Item 401(f) of Regulation S-K.
Arrangements with directors and executive officers
There are no arrangements or understandings between our sole executive officer and director and any other person pursuant to which he is to be selected as an executive officer or director.
Significant Employees and Consultants
We have no employees, other than our President, John David Walls.Simon Dawson.
Code of Ethics
We have adopted a code of ethics that applies to our executive officers and employees.
Corporate Governance
Our business, property and affairs are managed by, or under the direction of, our board, in accordance with the Delaware Business Corporations ActGeneral Corporation Law and our bylaws. Members of the board are kept informed of our business through discussions with the Chief Executive Officer and other key members of management, by reviewing materials provided to them by management.
We continue to review our corporate governance policies and practices by comparing our policies and practices with those suggested by various groups or authorities active in evaluating or setting best practices for corporate governance of public companies. Based on this review, we have adopted, and will continue to adopt, changes that the board believes are the appropriate corporate governance policies and practices for our Company. We have adopted changes and will continue to adopt changes, as appropriate, to comply with the Sarbanes-Oxley Act of 2002 and subsequent rule changes made by the SEC and any applicable securities exchange.
DirectorQualificationsand Diversity
The board seeks independent directors who represent a diversity of backgrounds and experiences that will enhance the quality of the board’s deliberations and decisions. Candidates shall have substantial experience with one or more publicly traded companies or shall have achieved a high level of distinction in their chosen fields. The board is particularly interested in maintaining a mix that includes individuals who are active or retired executive officers and senior executives, particularly those with experience in the finance and capital market industries.
In evaluating nominations to the board of directors, our board also looks for certain personal attributes, such as integrity, ability and willingness to apply sound and independent business judgment, comprehensive understanding of a director’s role in corporate governance, availability for meetings and consultation on Company matters, and the willingness to assume and carry out fiduciary responsibilities. Qualified candidates for membership on the board will be considered without regard to race, color, religion, sex, ancestry, national origin or disability.
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Under the National Association of Securities Dealers Automated Quotations definition, an “independent director” means a person other than an officer or employee of the Company or its subsidiaries or any other individuals having a relationship that, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of the director. The board’s discretion in determining director independence is not completely unfettered. Further, under the NASDAQ definition, an independent director is a person who (1) is not currently (or whose immediate family members are not currently), and has not been over the past three years (or whose immediate family members have not been over the past three years), employed by the company; (2) has not (or whose immediate family members have not) been paid more than $120,000 during the current or past three fiscal years; (3) has not (or whose immediately family has not) been a partner in or controlling shareholder or executive officer of an organization which the company made, or from which the company received, payments in excess of the greater of $200,000 or 5% of that organizations consolidated gross revenues, in any of the most recent three fiscal years; (4) has not (or whose immediate family members have not), over the past three years been employed as an executive officer of a company in which an executive officer of the Company has served on that company’s compensation committee; or (5) is not currently (or whose immediate family members are not currently), and has not been over the past three years (or whose immediate family members have not been over the past three years) a partner of our outside auditor.
At the present time, weWe have no independent directors.directors as of the date of this prospectus.
Lack of Committees
We do not presently have a separately designated audit committee, compensation committee, nominating committee, executive committee or any other committees of our board of directors. As such, the sole director acts in those capacities. We believe that committees of the board are not necessary at this time given thatbecause we are in the explorationdevelopment stage.
The term “Financial Expert” is defined under the Sarbanes-Oxley Act of 2002, as amended, as a person who has the following attributes: an understanding of generally accepted accounting principles and financial statements; has the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the company’s financial statements, or experience actively supervising one or more persons engaged in such activities; an understanding of internal controls and procedures for financial reporting; and an understanding of audit committee functions.
Mr. WallsDawson does not qualify as an “audit committee financial expert.” We believe that the cost related to retaining such a financial expert at this time is prohibitive, given our current operating and financial condition. Further, because we are in the development stage of our business operations, we believe that the services of an audit committee financial expert are not necessary at this time.
The Company may in the future create an audit committee to consist of one or more independent directors. In the event an audit committee is established, of which there can be no assurances given, its first responsibility would be to adopt a written charter. Such charter would be expected to include, among other things:
| being directly responsible for the appointment, compensation and oversight of our independent auditor, which shall report directly to the audit committee, including resolution of disagreements between management and the auditors regarding financial reporting for the purpose of preparing or issuing an audit report or related work; | |
| annually reviewing and reassessing the adequacy of the | |
| reviewing the annual audited financial statements with our management and the independent auditors and the adequacy of our internal accounting controls; | |
| reviewing analyses prepared by our management and independent auditors concerning significant financial reporting issues and judgments made in connection with the preparation of our financial statements; | |
| reviewing the independence of the independent auditors; |
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| reviewing our auditing and accounting principles and practices with the independent auditors and reviewing major changes to our auditing and accounting principles and practices as suggested by the independent auditor or its management; | |
| reviewing all related party transactions on an ongoing basis for potential conflict of interest situations; and | |
| all responsibilities given to the audit committee by virtue of the Sarbanes-Oxley Act of 2002, which was signed into law by President George W. Bush on July 30, 2002. |
Risk Oversight
Enterprise risks are identified and prioritized by management and each prioritized risk is assigned to the board for oversight. These risks include, without limitation, the following:
| Risks and exposures associated with strategic, financial and execution risks and other current matters that may present material risk to our operations, plans, prospects or reputation. | |
| Risks and exposures associated with financial matters, particularly financial reporting, tax, accounting, disclosure, internal control over financial reporting, financial policies, investment guidelines and credit and liquidity matters. | |
| Risks and exposures relating to corporate governance; and management and director succession planning. | |
| Risks and exposures associated with leadership assessment, and compensation programs and arrangements, including incentive plans. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent of our common stock to file reports of ownership and change in ownership with the Securities and Exchange Commission and the exchange on which the common stock is listed for trading. Executive officers, directors and more than ten percent stockholders are required by regulations promulgated under the Exchange Act to furnish us with copies of all Section 16(a) reports filed. Based solely on our review of copies of the Section 16(a) reports filed for the fiscal year ended July 31, 2013,June 30, 2019, we believe that our executive officers, directors and ten percent stockholders complied with all reporting requirements applicable to them.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company for the fiscal years of 2013 and 2014.
Summary Compensation Table
The table below summarizes all compensation awards to, earned by, or paid to our named executive officer for all service rendered in all capacities to us for the fiscal years ended June 30, 2014 and 2013.2019.
SUMMARY COMPENSATION TABLE
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Outstanding Equity Awards at the End of the Fiscal Year
OUTSTANDING EQUITY AWARDS AT June,JUNE 30, 20142019
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares of Stock That Have Not Vested (#) | Market Value of Shares of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: market or Payout Value of Unearned Shares or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||||
Simon Dawson(1) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
John David Walls(2) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Robert | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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| Simon Dawson was elected director, president and CEO January 29, 2019 | |||||||||||||||||||||||||||||||||||
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Stock Option Grants of Plan Based Awards
There were no awardsWe have not granted pursuantany stock options to a plan during 2014.
Outstanding Equity Awardsour executive officers as of June 30, 2014March 31, 2020.
There were no outstanding unvested equity awards at fiscal year end December 31, 2014.Employment Agreements
Stock Vested From Inception Through June 30, 2014
None of the namedour executive officers had options to exercise or stock awardsis subject to vesting during 2014.employment agreements, but we may enter into such agreements with them in the future. We have no plans providing for the payment of any retirement benefits.
Potential Payments Upon Termination or ChangeSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of, with respect to the beneficial ownership of shares of the Company’s common stock by (i) each person known to us who owns beneficially more than 5% of the outstanding shares of the Company’s common stock, (ii) each of our Directors, (iii) each of our Executive Officers, and (iv) all of our Executive Officers and Directors as a group. Unless otherwise indicated, each stockholder has sole voting and investment power with respect to the shares shown. As of July 9, 2020 , there were 45,429,188 shares of the Company’s common stock issued and outstanding.
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|
| Number of Shares of Capital Stock |
| Percentage | ||
Name and Address of Beneficial Owner |
| Common Stock | Preferred Stock |
| Common Stock | Preferred Stock |
Simon Dawson(2) 1 Performance Drive, Suite F Angleton, TX 77515 |
| 5,166,663 | 1,000,000 |
| 11.37% | 100% |
|
|
|
|
|
|
|
Ian Dawson 1 Performance Drive, Suite F Angleton, TX 77515 |
| 5,166,663 | -0- |
| 11.37% | -0-% |
|
|
|
|
|
|
|
Recycled Capital(4) 5712 Southwest Fwy. Houston, Texas 77057-7508 |
| 950,000 | 6,000,000(4) |
| 4.99% | 100% |
|
|
|
|
|
|
|
John Pritzlaff 622 Cliffgate Lane Castle Rock, Colorado 80108 |
| 7,500,000 | -0- |
| 16.51% | -0-% |
|
|
|
|
|
|
|
Hampton Bay Trading Corp.(5) 2500 Wilcrest Dr., Suite 300 Houston, Texas 77042 |
| 4,388,890 | -0- |
| 9.66% | -0-% |
|
|
|
|
|
|
|
Landor Investment Corp. (6) Calle 65 Esta, San Francisco, Local No. 35 Panama City, Panama |
| 10,105,339 | 1,000,000 |
| 22.24% | 100% |
|
|
|
|
|
|
|
All executive officers and directors as a group (one person) |
| 5,166,663 | -0- |
| 11.37% | -0-% |
__________
(1) | Under Rule 13d-3 under the Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the number of shares is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock outstanding on July 9, 2020 . |
(2) | In addition to the 5,166,663 shares of common stock owned, Simon Dawson also owns 1,000,000 shares of the Company’s Series F preferred stock. The outstanding shares of Series F preferred stock supersede and are superior to the Series E Preferred stock and have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of common stock. As a result, Simon Dawson has not less than 2/3rds of the voting power of all shareholders at any time corporate action requires a vote of shareholders and is not entitled to participate in distributions of assets upon liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary. |
(3) | Our calculation of the percentage of beneficial ownership is based on 45,429,188 shares of common stock, 6,000,000 shares of Series A preferred stock, 1,000,000 shares of Series E preferred stock and 1,000,000 shares of Series F preferred stock outstanding as of July 9, 2020 . |
(4) | The number of shares of the common stock beneficially held by Recycled Capital as of July 9, 2020 is 4.99% of the total outstanding because the 6,000,000 shares of convertible preferred stock are subject to a conversion cap of 4.99% of the total outstanding. Therefore, the holder of the convertible preferred does not have the “right” to hold more than the amount of the cap as expressed by the Commission’s amicus curiae brief in the case of Mark Levy v. Southbrook International Investments, Ltd . (2nd Cir. Mar 31, 2001). However, 6,000,000 preferred shares are convertible into a total of 18,000,000 of common stock of the Company covered by this registration statement. The natural person who exercises the sole voting and or dispositive powers with respect to the shares owned by Recycled Capital is Robert Wilson. |
- 22 -
(5) | The natural person who exercises the sole voting and or dispositive powers with respect to the shares owned by Hampton Bay Trading Corp is Robert Sonfield. |
(6) | In addition to common stock, Landor Investment Corp. owns 1,000,000 shares of series E preferred stock. The Series E preferred stock has a par value of $0.000001, does not vote because of the superior voting rights of the Series E Preferred Stock, ranks subordinate to the Company’s common stock and Series F Preferred Stock and is not entitled to participate in distributions of assets upon liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary. |
Changes in Control
During the period from inception through June 30, 2014, none of the named executive officers had a right to receive payments upon termination other than accrued and unpaid salary and benefits through the date of termination and none of the named executive officers had a right to receive a paymentThere are currently no arrangements which would result in connection with a change in control of the company.
Employment Agreements
Presently, we have no written employment agreements.
Compensation Policies and Practices as they Relate to Risk Management
We reviewed and analyzed our compensation arrangements and determined that our compensation plans do not pose an unreasonable risk to the Company.
Compensation of Directors
Directors were reimbursed for reasonable out of pocket expenses incurred in attending meetings of the Board and other reasonable expenses related to the performance of their duties as a director.
In 2014, the Board commenced a compensation program for board members whereby each non-employee director and ex-officio Board member is entitled to an annual fee in cash, payable quarterly in arrears, as long as the director attends the meetings during each quarter. The Board is exploring additional equity compensation for our non-employee directors in consideration of services rendered.
Audit Committee
The Company does not have an audit committee. The members of the Board perform the functions of an audit committee. The functions of the audit committee are to review the Company’s internal controls, accounting policies and financial reporting practices; to review the financial statements, the arrangements for and scope of the independent audit, as well as the results of the audit engagement; to review the services and fees of the independent auditors, including pre-approval of non-audit services and the auditors’ independence; and to recommend the engagement of the independent auditors to serve the following year in examining the accounts of the Company.
We are not a listed issuer under SEC rules and are therefore not required to comply with the director independence requirements of any securities exchange. For this reason, while we adopted corporate governance committee guidelines, a nominating committee charter, a compensation committee charter and an executive committee charter, all functions of a corporate governance committee, nominating committee, audit committee, executive committee and compensation committee were, and continue to be performed by our entire Board.
Corporate Governance and Limitations on Directors’ and Officers’ Liability
We have also adopted a code of business ethics, confidential information policy, executive committee and board of directors attendance policy as well as compensation policy for the Board.
Our directors and officers may be indemnified as provided by the general corporation law of Delaware, as amended.
Under the Delaware law, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company’s articles of incorporation which is not the case with our articles of incorporation. Excepted from that immunity are:
(1) a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest;
(2) a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful);
(3) a transaction from which the director derived an improper personal profit; and
(4) willful misconduct.
Our articles of incorporation provide that we will indemnify our directors, officers, employees and agents to the fullest extent required by the Delaware statute, and shall indemnify such individuals to the extent permitted by statute. We may purchase and maintain liability insurance, or make other arrangements for such obligations or otherwise, to the extent permitted by the Delaware law. We have not entered into indemnification agreements with each of our directors and officers.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
Since July 1, 201The Company has been provided warehouse, office space and other organizational expenses by its chief executive officer, Simon Dawson, for which $9,500 and $5,000 was paid during the nine month periods ended March 31, 2020 and 2019, respectively.
As of March 31, 2020 and June 30, 2019, the Company has not$118,267 and $102,257, respectively, in advances from a shareholder. The advances bear no interest and have no repayment terms.
During the nine months ended March 31, 2020, the Company received an advance of $5,000 from Dawson Racing, a company owned by our CEO. The advance bears no interest and has no repayment terms.
The Company has been a partyprovided warehouse and office space by an entity owned by Simon Dawson for which $6,000 was paid during the year ended June 30, 2019. Subsequent to any transactionJune 30, 2019, the Company paid this entity $6,000 for warehouse and office space.
The Company paid its chief executive officer, Simon Dawson, $10,000 during the year ended June 30, 2019 for compensation.
During the year ended June 30, 2019, the Company paid $10,000 to Dawson Racing, an entity owned by Simon and Ian Dawson, for sponsorship branding at Daytona Michelin Tire Test.
During 2018, in whichconjunction with the amount involved exceed or will exceed $120,000formation of D3esports, Simon and Ian Dawson were issued 998 and 997 shares, respectively, of common stock valued at $1 per share in which anyexchange for services.
In conjunction with the reverse merger, the Company issued 1,000,000 shares of Series F Preferred Stock to the Simon Dawson in exchange for services. The shares were valued at $1 based on the estimated market value of the person who serves as our director and executive officer or with any beneficial ownersshares.
During the year ended June 30, 2019, a shareholder of more than 5%the Company transferred 50,000 shares of our common stock or entities affiliated with them, had or willto an attorney to pay $50,000 in legal fees on behalf of the Company. The payment was recorded as an increase in additional paid-in capital.
As of June 30, 2019, the Company has $102,257 in advances from a shareholder. The advances bear no interest and have a direct or indirect material interest, except as described below:no repayment terms.
|
| |
|
|
Director Independence
Quotations forTrading of the Company’s common stock are entered on the Over-the-Counter Bulletin Board inter-dealer quotation system andreported by the OTC Markets, which does not have director independence requirements. For purposes of determining director independence, the Company applied the definitions set out in NASDAQ Rule 4200(a)(15). Under NASDAQ Rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. As a result, the Company does not have any independent directors. Our sole director, John David Walls,Simon Dawson, is also the Company’s principal executive officer.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTSELLING STOCKHOLDERS
When we refer to “Selling Stockholders” in this prospectus, we mean those persons listed in the table below, and the pledgees, donees, permitted transferees, assignees, successors, and others who later come to hold any of the Selling Stockholder’s interests in shares of our common stock other than through a public sale.
- 23 -
The following table sets forth certain information as of March 12, 2015 with respectthe date of this prospectus the name of each Selling Stockholders for whom we have registered shares of common stock for resale to the beneficial ownershippublic and the number of shares of common stock by (i)that each person knownSelling Stockholders may offer pursuant to us to be a beneficial owner of more than 5% of the outstanding shares of common stock, (ii) each of the Company’s directors, (iii) each of the Company’s executive officers and (iv) all executive officers and directors as a group.
| Shares of Capital Stock | Percentage Ownership | |||||||||||||||
Name and Address of Beneficial Owner (1) | Number of Shares of Common Stock | Number of Shares of Preferred Stock | Shares of Common Stock | Shares of Preferred Stock | ||||||||||||
Landor Investment Corp., Calle 65 Esta San Francisco, Local No. 35 Panama City, Panama (2) | 10,105,339 | 1,000,000 | 65.86 | % | 100 | % | ||||||||||
| ||||||||||||||||
Vista View Ventures, Inc. 3960 Howard Hughes Parkway Las Vegas, NV 89169 (3) | 1,100,000 | -0- | 7.24 | % | -0- | |||||||||||
| ||||||||||||||||
The Jaxon Group Corp. 1740 N. Tallowood Drive Lake Charles, LA 70605 (4) | 1,200,000 | -0- | 7.90 | % | -0- | |||||||||||
| ||||||||||||||||
Groupers Investment Ltd. 3076 Sir Francis Drake Highway Road Town, Tortola, British Virgin Islands (5) | 1,100,000 | -0- | 7.24 | % | -0- | |||||||||||
| ||||||||||||||||
THM Consulting Corp. 2629 Lorraine Lane Lake Charles, LA 70605 (6) | 1,200,000 | -0- | 7.90 | % | -0- | |||||||||||
| ||||||||||||||||
John David Walls Director and Chief Executive Officer 800 Town and Country Blvd., Suite 300, Houston, Texas 77024 | -0- | -0- | -0- | -0- | % | |||||||||||
| ||||||||||||||||
All Executive Officers and Directors (1 person) | -0- | -0- | -0- | -0- | % | |||||||||||
(1)this prospectus. Beneficial ownership is determined in accordance with theSEC rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares subject to options, warrants and convertible securities held by that person that are currently exercisableincludes voting or exercisable within 60 days of March 12, 2015 are deemed outstanding. Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnotes to this table, each shareholder named in the table has sole voting and investment power with respect to the sharessecurities. The information set forth opposite such shareholder’s name.
(2) Landor Investment Corp. also holds 1,000,000below is based on information known to us. The common stock being offered by the Selling Stockholders consists of a total of 6,621,600 shares of the common stock including 5,000,000 shares underlying Series E Preferred Stock ofA convertible preferred stock and 1,621,600 shares held by selling stockholders.
Beneficial ownership is determined in accordance with SEC rules and includes voting or investment power with respect to the Company. The holders ofsecurities. However, the Series E Preferred Stock shall have the right to consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of capital stock suchconvertible note provides that the holders of outstanding shares of Series E Preferred Stock shall always constitute sixty six and two thirds ofSelling Stockholders may not convert if the voting rights of the Corporation.
(3) Thomas J. Cloud, President of Vista View Ventures, Inc. may be deemed to have voting and dispositive control over the sharesconversion would cause a holder’s beneficial ownership of our common stock held by Vista View Ventures, Inc.
(4) John Morrissey, Presidentto exceed 4.99% of The Jaxon Group Corp. may be deemed to have voting and dispositive control over the outstanding shares of our common stock held by The Jaxon Group Corp.
(5) Geoffrey Long, Authorized Agentstock. Therefore, although they are included in the table below, the number of Groupers Investment Ltd. may be deemed to have voting and dispositive control over the shares of our common stock held by Groupers Investment Ltd.
(6) Thomas Morrissey, President of THM Consulting Corp. may be deemed to have voting and dispositive control over the shares of our common stock held by THM Consulting Corp.
PLAN OF DISTRIBUTION
The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock for some listed persons may include shares that may not be purchased during a given 60-day period used for purpose of determining beneficial ownership.
Except for relationships noted in the Selling Stockholders table, none of the Selling Stockholders has, or interests in shareswithin the past three years has had, any position, office or material relationship with us or any of common stock received after the dateour predecessors or affiliates.
Selling Stockholders |
| Shares beneficially owned prior to offering (2) |
| Percentage of outstanding shares beneficially owned before this offering (3) |
| Number of shares being registered/ offered and sold in this offering (4) |
| Number of shares beneficially owned post offering (5) |
| Percentage of outstanding shares beneficially owned post offering (6) |
Recycled Capital Corp. (1) |
| 950,000 |
| 4.99% |
| 5,000,000 |
| 6,450,000 |
| 4.99%(7) |
Ian Dawson |
| 5,166,663 |
| 11.37% |
| 400,000 |
| 4,766,663 |
| 9.45% |
John Pritzlaff |
| 7,500,000 |
| 16.51% |
| 300,000 |
| 7,200,000 |
| 14.28% |
Ian P. Cloud |
| 1,666,666 |
| 3.67% |
| 300,000 |
| 1,366,666 |
| 2.71% |
Derek Sisson |
| 1,666,667 |
| 3.67% |
| 200,000 |
| 1,466,667 |
| 2.91% |
David Matlock |
| 1,666,667 |
| 3.67% |
| 200,000 |
| 1,466,667 |
| 2.91% |
John David Walls |
| 650,000 |
| 1.43% |
| 150,000 |
| 500,000 |
| 0.99% |
Sydney Jim |
| 250,000 |
| 0.55% |
| 50,000 |
| 200,000 |
| 0.40% |
Paul Kirklin |
| 50,000 |
| 0.11% |
| 50,000 |
| -0- |
| -0- |
Brian Heino |
| 10,000 |
| 0.02% |
| 10,000 |
| -0- |
| -0- |
Mariah Peterson |
| 500 |
| <0.01% |
| 500 |
| -0- |
| -0- |
Howard L. Ecker |
| 10,000 |
| 0.02% |
| 10,000 |
| -0- |
| -0- |
Brigith Yesenya Sierra Cano |
| 100 |
| <0.01% |
| 100 |
| -0- |
| -0- |
Daniel Rodin |
| 1,000 |
| <0.01% |
| 1,000 |
| -0- |
| -0- |
__________
(1) | Robert Wilson is the natural person who exercises the sole voting and or dispositive powers with respect to the shares offered by Recycled Capital. |
(2) | The number of shares of the common stock beneficially held by Recycled Capital as of July 9, 2020 is 4.99% of the total outstanding because the 6,000,000 shares of convertible preferred stock are subject to a conversion cap of 4.99% of the total outstanding. Therefore, the holder of the convertible preferred does not have the “right” to hold more than the amount of the cap as expressed by the Commission’s amicus curiae brief in the case of Mark Levy v. Southbrook International Investments, Ltd . (2nd Cir. Mar 31, 2001). However, 6,000,000 preferred shares are convertible into a total of 18,000,000 of common stock of the Company covered by this registration statement. |
(3) | The numbers in the column reflect the total number of shares of the common stock beneficially owned by the Selling Stockholders as a percentage of the number of shares outstanding based on the calculation described in footnote 2 immediately above. |
(4) | This registration statement covers the total number of shares being registered issuable upon conversion of the preferred stock owned by Recycled Capital. Pursuant to Rule 416 under the Securities Act, this registration statement shall also cover any additional shares of common stock which become issuable by reason of any increase in stock split, stock dividend, anti-dilution provisions or similar transaction effected without the receipt of consideration which results in an increase in the number of the outstanding shares of common stock of the registrant. |
- 24 -
(5) | This column assumes all the shares being registered hereunder are sold. Therefore, because of the conversion cap, the amount beneficially owned by such person, in accordance with Rule 13d-3, is 4.99% without the number of shares being registered hereunder. |
(6) | Based on 50,429,188 shares of common stock issued and outstanding after the issuance of 5,000,000 shares of common stock underlying the convertible preferred stock. |
(7) | The number of shares of the common stock beneficially held by Recycled Capital as of July 9, 2020 is 4.99% of the total outstanding because the 6,000,000 shares of convertible preferred stock are subject to a conversion cap of 4.99% of the total outstanding. Therefore, the holder of the convertible preferred does not have the “right” to hold more than the amount of the cap as expressed by the Commission’s amicus curiae brief in the case of Mark Levy v. Southbrook International Investments, Ltd . (2nd Cir. Mar 31, 2001). However, 6,000,000 preferred shares are convertible into a total of 18,000,000 of common stock of the Company covered by this registration statement. |
PLAN OF DISTRIBUTION
Each selling stockholders and any of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer,their pledgees, assignees and successors-in-interest may, from time to time, sell transfer or otherwise dispose of any or all of their shares of common stock on the over-the-counter market or interests in shares of common stock on any other stock exchange, market or trading facility on which the shares are traded, or in private transactions. These dispositionssales may only be at fixed prices, at prevailing market prices atprice per share . The distribution of the time of sale, at prices relatedshares by the selling stockholders is not currently subject to any underwriting agreement. Each selling stockholders must use a broker-dealer which is registered in the prevailing market price, at varying prices determined atstate in which the time of sale, or at negotiated prices.
The selling stockholders seeks to sell their shares. Selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:selling shares:
| ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; | |
| block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; | |
| purchases by a | |
|
| |
● | an exchange distribution in accordance with the | |
| privately negotiated | |
| settlement of short sales | |
|
| |
| broker-dealers may agree with the selling stockholders to sell a specified number of | |
| a combination of any | |
| any other method permitted |
The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
- 25 - |
In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The aggregatetotal proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering.
The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.
The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling stockholders will be subject to the prospectus delivery requirements of the Securities Act unless an exemption therefrom is available.
To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective fixed purchase prices and fixed public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.
In order toTo comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
There can be no assurance that any selling shareholder will sell any or all of the shares of common stock registered pursuant to the shelf registration statement, of which this prospectus forms a part.
We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.
We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.
We will pay all expenses of the registration of the shares of common stock, pursuant to the registration rights agreement, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws and the selling stockholders’ expenses; provided, however, that a selling shareholder will pay all underwriting discounts and selling commissions, if any.
We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or (2) the date on which the shares may be sold pursuant to Rule 144 ofunder the Securities Act without regard to any volume limitation requirements under Rule 144 of the Securities Act.
LEGAL MATTERS- 26 -
Penny Stock Rules
Certain legal mattersBroker-dealer practices in connection with transactions in penny stocks are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than US $5.00. Penny stock rules require a broker- dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Our shares may in the future be subject to such penny stock rules in which care our stockholders would, in all likelihood, as a result of the penny stock rules, find it difficult to sell their securities.
The Company has not engaged any FINRA member firms to participate in the distribution of securities, except to the extent that certain broker dealers described below shall be selling shareholders in connection with certain warrants and underlying shares of Common Stock received in their capacity as placement agents for earlier private offerings. Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. Each selling stockholders does not expect these commissions and discounts relating to its sales of shares to exceed what are customary in the types of transactions involved. The registration statement of which this prospectus forms a part includes the shares of common stock underlying the warrants held by these firms and certain associated persons listed below. The SEC has indicated that it is their position that any broker-dealer firm that is a selling stockholders is deemed an underwriter and therefore these firms may be deemed an underwriter with respect to the securities being sold by them.
We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and its affiliates. In addition, we will make copies of this prospectus available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act.
In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to these broker- dealers or other financial institutions of shares offered by this prospectus, which shares these broker-dealers or other financial institutions may resell pursuant to this prospectus (as supplemented or amended to reflect these transactions).
The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with these sales. In this event, any commissions received by these broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each selling stockholders has informed us that it does not have any agreement or understanding, directly or indirectly, with any person to distribute the common stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed seven percent (7%).
We are required to pay certain fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act.
Because selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, it will be subject to the prospectus delivery requirements of the Securities Act. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the shares by the selling stockholders.
- 27 -
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the shares may not simultaneously engage in market making activities with respect to our common stock for a period of two business days prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of our common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale.
Regulation M
We have advised the each selling stockholders that while it is engaged in a distribution of the shares included in this prospectus it is required to comply with Regulation M promulgated under the Securities Exchange Act of 1934, as amended.
During such time as it may be engaged in a distribution of any of the shares, we are registering by this registration statement, the selling stockholders is required to comply with Regulation M. In general, Regulation M precludes any selling security holder, any affiliated purchasers and any broker-dealer or other person who participates in a distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any security which is the subject of the distribution until the entire distribution is complete. Regulation M defines a “distribution” as an offering of securities that is distinguished from ordinary trading activities by the magnitude of the offering and the presence of special selling efforts and selling methods. Regulation M also defines a “distribution participant” as an underwriter, prospective underwriter, broker, dealer, or other person who has agreed to participate or who is participating in a distribution.
Regulation M under the Exchange Act prohibits, with certain exceptions, participants in a distribution from bidding for or purchasing, for an account in which the participant has a beneficial interest, any of the securities that are the subject of the distribution. Regulation M also governs bids and purchases made in order to stabilize the price of a security in connection with a distribution of the security. We have informed The selling stockholders that the anti-manipulation provisions of Regulation M may apply to the sales of their shares offered by this prospectus, and we have also advised The selling stockholders of the requirements for delivery of this prospectus in connection with any sales of the common stock offered by this prospectus.
DESCRIPTION OF SECURITIES
This prospectus covers 6,621,600 shares of our common stock offered by the selling stockholders. The following description of our common stock is only a summary. You should also refer to our certificate of incorporation and bylaws, which have been included as exhibits to the registration statement of which this prospectus forms a part.
Authorized and Outstanding Capital Stock
Our authorized capital stock currently consists of 108,000,000 shares of capital stock, of which 100,000,000 are shares of common stock, par value $0.001 per share, 6,000,000 shares of preferred stock, par value $0.001 per share and 2,000,000 shares of preferred stock, par value $.000001 per share.
As of July 9, 2020 , we had 45,429,188 shares of common stock held of record by approximately 134 shareholders of record, 6,000,000 shares of Series A convertible preferred stock held by one shareholder of record, 1,000,000 shares of Series E preferred stock held by one shareholder of record and 1,000,000 shares of Series F preferred stock held by one shareholder of record.
Delaware Anti-Takeover Law and Charter and Bylaws Provisions
Delaware General Corporation Law sections 78.378 to 78.3793 provide state regulation over the acquisition of a controlling interest in certain Delaware corporations unless the articles of incorporation or bylaws of the corporation provide that the provisions of these sections do not apply. The statute creates several restrictions on the ability of a person or entity to acquire control of a Delaware company by setting down certain rules of conduct and voting restrictions in any acquisition attempt, among other things. The statute is limited to corporations that are organized in the state of Delaware and that have 200 or more shareholders, at least 100 of whom are shareholders of record and residents of the State of Delaware; and do business in the State of Delaware directly or through an affiliated corporation. Because of these conditions, the statute does not apply to our Company.
- 28 -
Common Stock
The holders of our common stock are entitled to one vote per share. In addition, the holders of our common stock will be entitled to receive ratably dividends, if any, declared by our board of directors out of legally available funds; however, the current policy of our board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding up, the holders of our common stock are entitled to share ratably in all assets that are legally available for distribution. The holders of our common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be designated solely by action of our board of directors and issued in the future.
Preferred Stock
Our board of directors are authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time to time up to 8,000,000 shares of preferred stock in one or more series. Each series of preferred stock will have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.
The issuance in the future of a newly designated class or series of preferred shares may have the effect of diluting the earnings per share and book value per share, as well as the stock ownership and voting rights, of the currently outstanding shares of our capital stock. The effect on your common stock ownership depends on the terms of the designation of the preferred stock outstanding.
Series A convertible preferred stock
Each share of Series A convertible stock is convertible into three shares of common stock, are not entitled to vote, dividends and do not participate in distributions in liquidation.
Series E Preferred Stock
Holders of Series E preferred stock are not entitled to vote because the Series F Preferred Stock have preempted any and all rights of the Series E preferred stock. The shares are not convertible into any other class of securities, are not entitled to dividends and do not participate in distributions in liquidation.
Series F Preferred Stock
So long as any shares of Series F preferred stock remain outstanding, the holders are entitled, voting separately as a single class, to vote double the number of all other voting share resulting in 2/3rds of all votes. The Series F preferred shares have no other economic value. The shares are not convertible into any other class of securities, are not entitled to dividends and do not participate in distributions in liquidation. The Series F preferred shares supersede, prime, and set aside the Series E preferred shares.
Convertible Promissory Note
As of March 31, 2020, we had outstanding $563,203 principal amount and accrued interest of $394,229 of unsecured convertible promissory notes. The notes are convertible at the holders’ option at any time at conversion rates of between $0.05 and $0.41 per share.
Transfer Agent
Our transfer agent is American Stock Transfer & Trust Company, 6201 15th Avenue, Brooklyn, NY 11219, 800-937-5449.
OTC Market Group, Inc.’s OTC tier Quotation
Trading of our common stock is reported on the OTC Market Group, Inc.’s OTC tier under the trading symbol “SGNI.”
Warrants
As of the date of this prospectus we have no outstanding warrants.
- 29 -
Dividends
We have never declared or paid any cash dividends on shares of our capital stock. We currently intend to retain earnings, if any, to fund the development and growth of our business and do not anticipate paying cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, cash needs and growth plans.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation provide that it will indemnify its officers and directors to the full extent permitted by Delaware state law. Our bylaws provide that we will indemnify and hold harmless our officers and directors for any liability including reasonable costs of defense arising out of any act or omission taken on our behalf, to the full extent allowed by Delaware law, if the officer or director acted in good faith and in a manner the officer or director reasonably believed to be in, or not opposed to, the best interests of the corporation.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed upon for us by Sonfield & Sonfield, counsel to the Company.Houston, Texas.
EXPERTS
The consolidated financial statements of StemGen, Inc. as of June 30, 2014our company included in this prospectus and June 30, 2013,in the registration statement have been included herein in reliance upon the reports of ANTON & CHIA,audited by PWR CPA, LLP, an independent registered public accounting firm,accountant, to the extent and for the periods set forth in their report appearing elsewhere herein and uponin the registration statement, and are included in reliance on such report, given the authority of said firm as expertsan expert in accountingauditing and auditing.accounting.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SECSecurities and Exchange Commission a registration statement on Form S-1 with respect tounder the Securities Act for the common stock being offered byin this prospectus.offering. This prospectus does not contain all of the information found in the registration statement and the exhibits and schedule that were filed with the registration statement. For further information regardingwith respect to us and theour common stock, offered bywe refer you to the registration statement and the exhibits and schedule that were filed with the registration statement. Statements contained in this prospectus please reviewabout the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration statement including its exhibits. Theand the exhibits and schedules that were filed with the registration statement including the exhibits, may be inspected and copiedwithout charge at the public reference facilitiesPublic Reference Room maintained by the SECSecurities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. CopiesDC 20549, and copies of this material can alsoall or any part of the registration statement may be obtained from the public reference sectionSecurities and Exchange Commission upon payment of the SECprescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at prescribed rates, or accessed at the SEC’s1-800-SEC-0330. The Securities and Exchange Commission maintains a website at www.sec.gov. Please call the SEC at 1-800-SEC-0330 for furtherthat contains reports, proxy and information on its public reference room.
The SEC’s proxy rulesstatements, and regulations do not, nor do the rules of any stock exchange, require us to send an annual report to security holders or to holders of American depository receipts. We are subject to the Exchange Act’s periodic reporting requirements, including the requirement toother information regarding registrants that file current, annual and quarterly reportselectronically with the SEC. The address of the website is www.sec.gov.
We file periodic reports under the Exchange Act, including annual, quarterly and special reports, we file will contain financialand other information that has been auditedwith the Securities and reported on, with an opinion by an independent certifiedExchange Commission. These periodic reports and other information are available for inspection and copying at the regional offices, public accounting firm.reference facilities and website of the Securities and Exchange Commission referred to above.
- 30 -
FINANCIAL STATEMENTS
We have not authorized anyone to give any information or make any representation about the mergers, us, KMP, KMR or EPB that is different from, or in addition to, that contained in this prospectus or in any of the materials that have been incorporated by reference. Therefore, if any one distributes this type of information, you should not rely on it. If you are in a jurisdiction where the solicitation of proxies is unlawful, or you are a person to whom it is unlawful to direct these types of activities, then the solicitation presented in this prospectus does not extend to you. The information contained in this prospectus speaks only as of its date, or in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies.STEMGEN, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
FINANCIAL STATEMENTS
STEMGEN, INC.
BALANCE SHEETS
(UNAUDITED)
| December 31, 2014 | June 30, 2014 | |||||||
ASSETS | (audited) | |||||||
CURRENT ASSETS | ||||||||
Cash | $ | — | $ | 80 | ||||
Total current assets | — | 80 | ||||||
TOTAL ASSETS | $ | — | $ | 80 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 82,292 | $ | — | ||||
Total current liabilities | 82,292 | — | ||||||
TOTAL LIABILITIES | 82,292 | — | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Preferred stock, $0.01 stated value; 1,000,000 shares authorized; 1,000,000 and 0 shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively | 10,000 | — | ||||||
Common stock, $0.01 par value; 20,000,000 shares authorized; 10,183,927 shares issued and outstanding at December 31, 2014 and June 30, 2014 | 101,839 | 101,839 | ||||||
Additional paid-in capital | 722,783 | 722,783 | ||||||
Accumulated deficit | (916,914 | ) |
| (824,542 | ) | |||
Total stockholders’ equity (deficit) | (82,292 | ) |
| 80 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | — | $ | 80 | ||||
|
| March 31, |
| June 30, |
| ||
ASSETS |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 11,739 |
| $ | 2,751 |
|
Total current assets |
|
| 11,739 |
|
| 2,751 |
|
|
|
|
|
|
|
|
|
Property and Equipment |
|
|
|
|
|
|
|
Vehicles – race cars |
|
| 387,450 |
|
| 387,450 |
|
Website design |
|
| — |
|
| 60,000 |
|
|
|
| 387,450 |
|
| 447,450 |
|
Less accumulated depreciation and amortization |
|
| (4,843 | ) |
| (60,000 | ) |
|
|
| 382,607 |
|
| 387,450 |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 394,346 |
| $ | 390,201 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable |
| $ | 183,741 |
| $ | 180,988 |
|
Deferred revenue |
|
| 19,192 |
|
| — |
|
Advance from shareholder |
|
| 118,267 |
|
| 102,257 |
|
Advance from related party |
|
| 5,000 |
|
| — |
|
Accrued interest payable |
|
| 394,229 |
|
| 288,629 |
|
Convertible notes payable |
|
| 563,203 |
|
| 563,203 |
|
Derivative liability |
|
| 142,095 |
|
| 124,923 |
|
Total current liabilities |
|
| 1,425,727 |
|
| 1,260,000 |
|
|
|
|
|
|
|
|
|
Commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
Preferred Stock; 8,000,000 shares authorized |
|
| — |
|
| — |
|
Series A Convertible Preferred Stock, par value $0.001; 6,000,000 shares issued and outstanding at March 31, 2020 and June 30, 2019; liquidation preference of $6,000,000 |
|
| 6,000 |
|
| 6,000 |
|
Series E Preferred Stock; par value $0.000001; 1,000,000 shares issued and outstanding at March 31, 2020 and June 30, 2019 |
|
| 1 |
|
| 1 |
|
Series F Preferred Stock; par value $0.000001; 1,000,000 shares issued and outstanding at March 31, 2020 and June 30, 2019 |
|
| 1 |
|
| 1 |
|
Common Stock; par value $0.001; 100,000,000 shares authorized, 45,429,188 and 45,429,188 shares issued and outstanding at March 31, 2020 and June 30, 2019, respectively |
|
| 45,429 |
|
| 45,422 |
|
Additional paid-in capital |
|
| (486,725 | ) |
| (493,718 | ) |
Accumulated deficit |
|
| (596,087 | ) |
| (427,505 | ) |
Total stockholders’ deficit |
|
| (1,031,381 | ) |
| (869,799 | ) |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| $ | 394,346 |
| $ | 390,201 |
|
The accompanyaccompanying notes are an integral part of these unaudited financial statements.statements
STEMGEN, INC.
STATEMENTSCONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)For the Three Months and Nine Months Ended March 31, 2020 and 2019
(Unaudited)
| Six months ended December 31, | Three months ended December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
OPERATING EXPENSES | ||||||||||||||||
General and administrative expenses | 92,372 | 15,245 | 54,705 | 1,825 | ||||||||||||
LOSS FROM OPERATIONS | (92,372 | ) |
| (15,245 | ) |
| (54,705 | ) |
| (1,825 | ) | |||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Interest expense | — | (33,958 | ) |
| — | (17,095 | ) | |||||||||
NET LOSS |
| $ | (92,372 | ) |
| (49,203 | ) |
| (54,705 | ) |
| (18,920 | ) | |||
NET LOSS PER COMMON SHARE – Basic and diluted |
| $ | (0.01 | ) |
| (0.27 | ) |
| $ | (0.01 | ) |
| $ | (0.10 | ) | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – Basic and diluted | 10,183,927 | 183,927 | 10,183,927 | 183,927 | ||||||||||||
| Nine Months Ended |
| Three Months Ended |
| ||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue | $ | 1,750 |
| $ | 12,058 |
| $ | — |
| $ | 2,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
| 3,725 |
|
| 4,191 |
|
| 3,725 |
|
| — |
|
Depreciation |
| 4,843 |
|
| 20,000 |
|
| 4,843 |
|
| 7,500 |
|
General and administrative expenses |
| 38,992 |
|
| 155,372 |
|
| 3,218 |
|
| 51,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
| (45,810 | ) |
| (167,505 | ) |
| (11,786 | ) |
| (56,901 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
| (105,600 | ) |
| (19,820 | ) |
| (35,200 | ) |
| (19,820 | ) |
Loss on fair value of derivative liability |
| (17,172 | ) |
| (119,192 | ) |
| (5,717 | ) |
| (119,192 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | $ | (168,582 | ) | $ | (306,517 | ) | $ | (52,703 | ) | $ | (195,913 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – basic and diluted | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.00 | ) | $ | (0.01 | ) |
Weighted average number of common shares outstanding – basic and diluted |
| 45,427,933 |
|
| 14,239,912 |
|
| 45,429,188 |
|
| 32,644,328 |
|
The accompanyaccompanying notes are an integral part of these unaudited financial statements.statements
STEMGEN, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)For the Three Months and Nine Months Ended March 31, 2020 and 2019
(Unaudited)
| Series E Preferred Stock | Common Stock | Additional Paid In | Accumulated | Total Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
BALANCE, June 30, 2014 (Audited) | — | $ | — | 10,183,927 | $ | 101,839 | $ | 722,783 | $ | (824,542 | ) |
| $ | 80 | ||||||||||||||
Issuance of preferred stock for services | 1,000,000 | 10,000 | — | — | — | — | 10,000 | |||||||||||||||||||||
Net Loss | — | — | — | — | — | (92,372 | ) |
| (92,372 | ) | ||||||||||||||||||
BALANCE, December 31, 2014 | 1,000,000 | $ | 10,000 | 10,183,927 | $ | 101,839 | $ | 722,783 | $ | (916,914 | ) |
| $ | (82,292 | ) | |||||||||||||
| Series A |
| Series E |
| Series F |
| Common Stock |
| Additional |
| Accumulated |
|
|
| |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, | 6,000,000 |
| $ | 6,000 |
| 1,000,000 |
| $ | 1 |
| 1,000,000 |
| $ | 1 |
| 45,422,118 |
| $ | 45,422 |
| $ | (493,718 | ) | $ | (427,505 | ) | $ | (869,799 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| 7,000 |
|
| 7 |
|
| 6,993 |
|
| — |
|
| 7,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (54,112 | ) |
| (54,112 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, | 6,000,000 |
| $ | 6,000 |
| 1,000,000 |
| $ | 1 |
| 1,000,000 |
| $ | 1 |
| 45,429,188 |
| $ | 45,429 |
| $ | (486,725 | ) | $ | (481,617 | ) | $ | (916,911 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (61,767 | ) |
| (61,767 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, | 6,000,000 |
| $ | 6,000 |
| 1,000,000 |
| $ | 1 |
| 1,000,000 |
| $ | 1 |
| 45,429,188 |
| $ | 45,429 |
| $ | (486,725 | ) | $ | (543,384 | ) | $ | (978,678 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (52,703 | ) |
| (52,703 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, | 6,000,000 |
| $ | 6,000 |
| 1,000,000 |
| $ | 1 |
| 1,000,000 |
| $ | 1 |
| 45,429,188 |
| $ | 45,429 |
| $ | (486,725 | ) | $ | (596,087 | ) | $ | (1,031,381 | ) |
| Series A |
| Series E |
| Series F |
| Common Stock |
| Additional |
| Accumulated |
|
|
| |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, | 1,000,000 |
| $ | 1,000 |
| — |
| $ | — |
| 1,000,000 |
| $ | 1 |
| 8,875,134 |
| $ | 8,876 |
| $ | 439,593 |
| $ | (1,995 | ) | $ | 447,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| 1,062,493 |
|
| 1,062 |
|
| 17,608 |
|
| — |
|
| 18,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (49,586 | ) |
| (49,586 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, | 1,000,000 |
| $ | 1,000 |
| — |
| $ | — |
| 1,000,000 |
| $ | 1 |
| 9,937,627 |
| $ | 9,938 |
| $ | 457,201 |
| $ | (51,581 | ) | $ | 416,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (61,018 | ) |
| (61,018 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, | 1,000,000 |
| $ | 1,000 |
| — |
| $ | — |
| 1,000,000 |
| $ | 1 |
| 9,937,627 |
| $ | 9,938 |
| $ | 457,201 |
| $ | (112,599 | ) | $ | 355,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for cash | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| 21,600 |
|
| 22 |
|
| 21,578 |
|
| — |
|
| 21,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of Stemgen (reverse merger) | 6,000,000 |
|
| 6,000 |
| 1,000,000 |
|
| 1 |
| — |
|
| — |
| 35,462,961 |
|
| 35,463 |
|
| (1,023,498 | ) |
| — |
|
| (982,034 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of shares | (1,000,000 | ) |
| (1,000 | ) | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| 1,000 |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (195,913 | ) |
| (195,913 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance | 6,000,000 |
| $ | 6,000 |
| 1,000,000 |
| $ | 1 |
| 1,000,000 |
| $ | 1 |
| 45,422,188 |
| $ | 45,422 |
| $ | (543,718 | ) | $ | (308,512 | ) | $ | (800,806 | ) |
The accompanyaccompanying notes are an integral part of these unaudited financial statements.statements
STEMGEN, INC.
STATEMENTSCONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)For the Nine Months Ended March 31, 2020 and 2019
(Unaudited)
| Six months ended December 31, | ||||||||
| 2014 | 2013 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (92,372 | ) | $ | (49,203 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Series E preferred stock issued for services | 10,000 | — | ||||||
Amortization of discount on convertible note payable | — | 23,094 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts payable and accrued liabilities | 82,292 | 3,055 | ||||||
Accrued interest payable to related party | — | 10,864 | ||||||
NET CASH USED IN OPERATING ACTIVITIES | (80 | ) | (12,190 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from notes payable | — | 12,500 | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | — | 12,500 | ||||||
NET INCREASE (DECREASE) IN CASH | (80 | ) | 310 | |||||
CASH, at the beginning of the period | 80 | 840 | ||||||
CASH, at the end of the period | $ | — | $ | 1,150 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | — | $ | — | ||||
Taxes | $ | — | $ | — | ||||
Noncash investing and financing transactions | ||||||||
Issuance of Series E preferred stock for services | $ | 10,000 | $ | — | ||||
|
| Nine Months Ended |
| ||||
|
| March 31, |
| March 31, |
| ||
|
|
|
|
|
|
|
|
Cash flow from operating activities: |
|
|
|
|
|
|
|
Net loss |
| $ | (168,582 | ) | $ | (306,517 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
Depreciation |
|
| 4,843 |
|
| 20,000 |
|
Amortization of discount on convertible note payable |
|
| — |
|
| 458 |
|
Common stock issued for services |
|
| — |
|
| 18,670 |
|
Preferred stock issued for services |
|
| — |
|
| 1 |
|
Change in fair value of derivative liability |
|
| 17,172 |
|
| 119,192 |
|
Change in accrued interest payable |
|
| 105,600 |
|
| 19,362 |
|
Change in other assets |
|
| — |
|
| (5,019 | ) |
Change in deferred revenue |
|
| 19,192 |
|
| 10,500 |
|
Change in accounts payable and accrued liabilities |
|
| 2,753 |
|
| 58,972 |
|
Net cash used in operating activities |
|
| (19,022 | ) |
| (64,381 | ) |
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from sale of common stock |
|
| 7,000 |
|
| 21,600 |
|
Proceeds from advances from shareholder |
|
| 21,010 |
|
| 37,000 |
|
Net cash provided by financing activities |
|
| 28,010 |
|
| 58,600 |
|
|
|
|
|
|
|
|
|
Net change in cash |
|
| 8,988 |
|
| (5,781 | ) |
|
|
|
|
|
|
|
|
Cash and equivalents, beginning of period |
|
| 2,751 |
|
| 20,025 |
|
|
|
|
|
|
|
|
|
Cash and equivalents, end of period |
| $ | 11,739 |
| $ | 14,244 |
|
The accompanyaccompanying notes are an integral part of these unaudited financial statements.statements
STEMGEN, INC.
NOTES TO THE UNAUDITEDCONSOLIDATED FINANCIAL STATEMENTS
DECEMBERMarch 31, 20142020
(Unaudited)
Note 1. General Organization and BusinessNOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
StemGen, Inc (the “Company”) wasNature of Business – We were incorporated in Delaware in 1992, and in 1996 received all remaining assets of Infotechnology, Inc. (“Infotech”), a Delaware company, followingunder the completion of Infotech’s Chapter 11 Bankruptcy reorganization, in accordance with an Assignment and Assumption Agreement, dated October 11, 1996, and effective as of June 21, 1996. As a result of a series of transactions during the 1980’s, Infotech, then principally engaged in the information and communications business, acquired equity interests in Comtex News Network, Inc. (“Comtex”) and Analex Corporation (“Analex”), formerly known as Hadron, Inc. Our business was the maintenance of our equity interest in and note receivable from Comtex and equity interest in Analex.
On September 25, 2006, we exchanged the equity investment in Comtex common stock and the Note Receivable from Comtex of $856,954, for 55,209 shareslaws of the StemGen Series A Preferred stock.State of Delaware as D3esports on May 1, 2018. We no longer haveare based in Angleton, TX. D3esports plans to hold monthly time trial format competitions through an equity interesteSports platform that allows professional race car drivers and eSport athletes (gamer enthusiasts) to compete for a real experience in either the common stock of Comtex or the Note from Comtex.
During October 2006, we sold the remaining 21,000 shares of common stock of publicly held Analex, a defense contractor specializing in systems engineeringrace car and developing innovative technical intelligence solutions in support of U.S. national security. We no longer have an equity interest in Analex.
On December 24, 2012, the Corporation received a nonrefundable deposit of $32,500 under a Letter of Intent (“LOI”) which it entered into on December 11, 2012 with StemGen Inc. a Nevada corporation. Effective February 5, 2013, the Company amended its Certificate of Incorporation.points that can be used to purchase products and services through our partners. As a result of the Amendment, the Company’s corporate name changed from Amasys Corporation to StemGen, Inc. and a reverse stock split was effectuated where all the outstanding shares of the Company’s common stock were exchanged at a ratio of one for eighty. The LOI was terminated on August 6, 2013.
SinceAcquisition, we redeemed and converted all of our outstanding Series A Preferred Stock at the end of September 2006, starting October 1, 2006 we have not conducted any business operations.
On June 27, 2014, the board of directors designated 1,000,000 shares of Series E preferred stock. The Series E preferred stock has a par value of $0.01 and ranks subordinate to the Company’s common stock as to distributions of assets upon liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary. The outstanding shares of Series E preferred stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of capital stock. On the same date, the Company issued 1,000,000 shares of Series E Preferred stock to Landor Investment Corp. (“Landor”) in exchange for services valued at $10,000. On the date of the transaction, Landor held 99.2% of our common stock.
Note 2. Going Concern
The accompanying unaudited financial statements have been prepared assuming that the Company will continue as a going concern.publicly traded company under the name StemGen, Inc. The existing business operations of D3esports, Inc. will continue as our wholly subsidiary.
On January 29, 2019 (the “Closing Date”), we completed and closed the acquisition (the “Acquisition”) under an Agreement and Plan of Reorganization (the “Reorganization Agreement”), entered into by and among (i) StemGen, Inc. (“StemGen”); (ii) D3esports, Inc., a Wyoming corporation (“D3esports”); and (iii) the shareholders of D3esports (“Sellers”) pursuant to which D3esports became a wholly owned subsidiary of ours. Pursuant to the Reorganization Agreement, we acquired from the Sellers all of the issued and outstanding equity interests of D3esports in exchange for 39,631,587 shares of our common stock, par value $0.001 per share and 7,000,000 shares of Preferred Stock, par value $0.001 per share. As a result of the Acquisition, the Sellers, as the former shareholders of D3esports, became the controlling shareholders of the Company. The Acquisition was accounted for as a reverse merger notwithstanding it is legally a reverse acquisition. For accounting purposes, D3esports is the six months ended December 31, 2014,acquiring entity. Current and comparative consolidated financial statements include the Company had a net lossaccounts of $92,372. AsD3esports since inception (May 1, 2018) and StemGen from the date of December 31, 2014,acquisition (January 29, 2019) (collectively, the Company had negative working capital“Company”).
On the 20th day of $82,292. Management does not anticipate having positive cash flow from operationsMay 2019 we incorporated StemGen Connect in the near future.
These factors raiseState of Texas and issued 1,000,000 shares (50%) of common stock to The Learning Partnership.com Trading Limited, 500,000 shares (25%) of common stock to D3esports Corp. and 500,000 shares (25%) of common stock to Dawson Racing, Inc. D3esports Corp. is a substantial doubt aboutwholly owned subsidiary of StemGen, Dawson Racing, Inc. is an affiliate of Simon Dawson, the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverabilitypresident and classificationCEO of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.StemGen.
The Company does not haveLearning Partnership.com Trading Limited is a UK based company engaged in educational leadership, teaching and learner engagement creating a social learning platform division for education, www.DendriteConnect.com. Dendrite Connect empowers students, teachers and parents around the resources at this timeglobe to repayengage in enrichment and collaboration learning environment, programs, challenges, projects and careers. Dendrite Connect enables collaboration between its creditmembers through content sharing, chat forums and debt obligations, make any payments in the formnetworks of dividendsusers and career opportunities tailored to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.
Management has plans to address the Company’s financial situationeach member as follows:they journey through education.
InA joint venture agreement was entered into among the near term, management plansshareholders of StemGen Connect to continueintegrate technologies from the three companies, into a single virtual-to-real motorsports-based Science, Technology, Engineering and Mathematics (STEM) enrichment and collaboration learning environment to focus on raisingdrive the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations.launch of an esports competition for school networks and their students. There ishas been no assurance, however, that lenders will continue to advance capital to the Companyactivity in this joint venture or that the new business operations will be profitable. The possibilityStemGen Connect as of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.September 30, 2019.
InPrinciples of Consolidation. The consolidated financial statements include the long term, management believes that the Company’s projectsaccounts of StemGen, and initiatives will be successfulits wholly owned subsidiaries. All significant inter-company transactions and will provide cash flow to the Company, which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.balances have been eliminated.
Note 3. Summary of Significant Accounting Policies
Interim Financial Statements
– The accompanying unaudited 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 with the instructions to Form 10-Q and Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements for the fiscal year ended June 30, 20142019 and notes thereto and other pertinent information contained in our Form 10-K the Company has filed with the Securities and Exchange Commission (the “SEC”).
The results of operations for the six month periodnine months ended DecemberMarch 31, 20142020 are not necessarily indicative of the results to be expected for the full fiscal year ending June 30, 2015.2020.
Use of Estimates
– The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect thecertain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuerevenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the financial statements.
Cash and Cash Equivalents
For the purpose of the financial statements, cash equivalents include – The Company considers all highly liquid investmentsdebt instruments with an original maturity of three months or less. Cashless at the date of purchase to be cash equivalents.
Property and Equipment – Property and equipment consists of vehicles and website design. The vehicles are three race cars which were contributed as capital at the inception of the Company and recorded at their estimated fair value.
Website design consisted primarily of the cost of a contract with Mainline, an Esports provider, for the design of an esports website and platform for the Company. The Company has terminated its association with Mainline and the website was taken down effective October 2019, therefore, the contract cost of $60,000 had been fully amortized during the year ended June 30, 2019.
Improvements or betterments of a permanent nature are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The cost of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal. Gains or losses resulting from property disposals are credited or charged to operations in the year of disposal.
Revenue Recognition – In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016, and December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, respectively. The core principle of this new revenue recognition guidance is that a company will recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance defines a five-step process to achieve this core principle. The new guidance also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash equivalents were $0flows arising from contracts with customers. The new guidance provides for two transition methods, a full retrospective approach and $80 at December 31, 2014 and June 30, 2014, respectively.a modified retrospective approach.
Deferred Income TaxesOn January 29, 2019, the Company adopted ASC Topic 606 using the modified retrospective method with no impact to the opening retained earnings and Valuation Allowancedetermined there were no changes required to its reported revenues as a result of the adoption. An analysis of contracts with customers under the new revenue recognition standard was consistent with the Company’s current revenue recognition model, whereby revenue is recognized primarily on the date products are delivered to the customer or services are provided. Payments for products or services which have been received prior to the Company fulfilling its performance obligations are deferred until those obligations are satisfied. Costs related to deferred revenue are included in other assets until the revenue is recognized.
Income Taxes – The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740 Income Taxes740-10-25”). Under the asset and liability method of ASC 740,740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statementsstatement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. TheUnder ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of June 30, 2014 or December 31, 2014.
Revenue Recognition
The Company follows ASC 605, Revenue Recognition recognizing revenue when persuasive evidence of an arrangement exists, product delivery has occurred or the services have been rendered, the price is fixed or determinable and collectability is reasonably assured.
Share-based Expense
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Share-based expense for the six months ended December 31, 2014 and 2013 was $10,000 and $0, respectively.
Earnings (Loss) per Common Share
– The Company computes basic and diluted earnings per common share amounts in accordance with ASC Topic 260, Earnings per Share. The basic earnings (loss) per common share are calculated by dividing the Company’s net income available to common shareholders by the weighted average number of common shares outstanding during the year. The diluted earnings (loss) per common share are calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as of the first of the year for any potentially dilutive debt or equity. There are no dilutive shares outstanding for any periods reported.
FinancialDerivative Instruments– Our debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.
Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For bifurcated conversion options that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model. This model requires assumptions related to the remaining term of the instrument and risk-free rates of return, our current Common Stock price and expected dividend yield, and the expected volatility of our Common Stock price over the life of the option.
Recently Issued Accounting Pronouncements – In February 2016, the FASB issued ASU 2016-02, Leases. This guidance requires an entity to recognize lease liabilities and a right-of-use asset for all leases on the balance sheet and to disclose key information about the entity’s leasing arrangements. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2020, with earlier adoption permitted. ASU 2016-02 must be adopted using a modified retrospective approach for all leases existing at, or entered into after the date of initial adoption, with an option to elect to use certain transition relief. The Company is evaluating the impact of this new standard on its financial position, results of operations, cash flows and related disclosures.
NOTE 2 – GOING CONCERN
The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the nine months ended March 31, 2020, the Company had a net loss of $168,582. As of March 31, 2020, the Company had negative working capital of $1,413,988. Management does not anticipate having positive cash flow from operations in the near future.
These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
The Company currently does not have the resources needed to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.
Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to continue to focus on increasing revenues and raising the funds necessary to fully implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.
In the long term, management believes the Company’s projects and initiatives will be successful and will provide cash flow which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.
NOTE 3 – COMMITMENTS
From time to time, we may be involved in litigation in the ordinary course of business. To our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or any of our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
NOTE 4 – EQUITY
During the nine months ended March 31, 2020, the Company issued 7,000 shares of common stock and received cash proceeds of $7,000.
During the nine months ended March 31, 2019, the Company issued 1,062,493 shares of common stock for legal and consulting services valued at $18,670.
NOTE 5 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable consisted of the following at March 31, 2020:
