Simplicity Esports and Gaming Company

WINR

US82887P2092

Internet Services

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2023	Simplicity Esports and Gaming Company announced that it has received $0.06425 million in funding from 1800 Diagonal Lending, LLC	CI
2023	Simplicity Esports and Gaming Company Reports Earnings Results for the Third Quarter and Nine Months Ended February 28, 2023	CI

SIMPLICITY ESPORTS & GAMING CO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

March 10, 2023 at 04:42 pm IST

References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Simplicity Esports and Gaming Company and its consolidated
subsidiaries. The following discussion should be read in conjunction with the
unaudited consolidated financial statements and the notes thereto included in
this Quarterly Report and with the audited consolidated financial statements
included in our Annual Report on Form 10-K for the fiscal year ended May 31,
2022, as filed with the Securities and Exchange Commission (the "SEC").

Special Note Regarding Forward-Looking Statements





This Quarterly Report includes "forward-looking statements" that are not
historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements,
other than statements of historical fact included in this Quarterly Report
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors sections of the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 2022, as filed with the SEC, as the same may be updated from time
to time, including in this Quarterly Report. The Company's securities filings
can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except
as expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.



Overview



We are an esports organization, that is capitalizing on the growth in esports
through two business units: PLAYlive Nation, Inc. ("PLAYlive") and Simplicity
One Brasil Ltda ("Simplicity One"). During the first quarter of the fiscal year
ending May 31, 2023, in an effort to focus on business operations that were
currently profitable, the Company sold its League of Legends franchise asset,
and exited business operations in Brazil. Funding the Brazilian business
operations created a monthly cash burn of approximately $45,000. The Company
sold the franchise asset to Brazilian esports organization Los Grandes for total
consideration of 1,920,000 Brazilian Reais (approximately $392,000 as of June
10, 2022, the closing date of the sale) to be paid in five equal quarterly


installments.



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Our Gaming Centers


As of November 30, 2022 and March 8, 2023, our operations consisted of six and
six locations, respectively, throughout the U.S., giving casual gamers the
opportunity to play in a social setting with other members of the gaming
community, with no corporate owned locations as of November 30, 2022. Management
is exploring strategic alternatives, including merger and acquisition
opportunities, and is focused on high margin, lower capital expenditure business
strategies in the esports gaming industry, specifically focused on software
development and software as a service for the family entertainment industry.



In addition, aspiring and established professional gamers have an opportunity to
compete in local and national esports tournaments held in our gaming centers for
prizes, notoriety, and potential contracts to play for one of our professional
esports teams. In this business unit, revenue is generated from franchise
royalties, the sale of game time, memberships, tournament entry fees, birthday
party events, corporate party events, concessions and gaming-related
merchandise.



Optimally, the esports gaming centers of Simplicity Esports LLC ("Simplicity
Esports Gaming Centers") measure between 2,000 and 4,000 square feet, with
dozens of gaming stations. The Simplicity Esports Gaming Centers feature cutting
edge technology, futuristic aesthetic décor and dynamic high-speed gaming
equipment. We believe our brick-and-click strategy will present attractive
opportunities for sponsors and advertisers to connect with our audience,
creating an intriguing monetization opportunity for sponsors and advertisers.



Corporate Gaming Centers


As of November 30, 2022, all Company-owned store have been sold or closed.
Management is exploring strategic alternatives, including merger and acquisition
opportunities, and is focused on high margin, lower capital expenditure business
strategies in the esports gaming and entertainment industry.


44






Franchised Gaming Centers



As of November 30, 2022 and March 8, 2023, we had six and six franchised
locations, respectively. Due to interest from potential franchisees, in 2019 we
launched a franchising program to accelerate the expansion of our planned
nationwide footprint. We sell specific franchise territories, through our wholly
owned subsidiary PLAYlive, and assist with the establishment and buildout of
esports gaming centers to potential business owners that desire to use our
branding, infrastructure and process to open and operate gaming centers. We
currently operate six fully constructed franchise esports gaming centers.
Franchise revenue is generated from the sale of franchise territories, supplying
furniture, equipment and merchandise to the franchisees for buildout of their
centers, a gross sales royalty fee and a national marketing fee. We license the
use of our branding, assist in identifying and negotiating commercial locations,
assist in overseeing the buildout and development, provide access to proprietary
software for point of sale, inventory management, employee training and other HR
functions. Franchisees also have an opportunity to participate in our national
esports tournament events. Once an esports gaming center is opened, we provide
operational guidance, support and use of branding elements in exchange for a
monthly royalty fee calculated as 6% of gross sales. Prior to selling a
franchise, among other things, the Company is required to provide a potential
franchisee with a franchise disclosure document. We do not currently have an
active franchise disclosure document.



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COVID-19



As a result of COVID-19, all of our corporate and franchised Simplicity Esports
Gaming Centers were closed effective April 1, 2020. We commenced reopening
Simplicity Esports Gaming Centers on May 1, 2020, and subsequently reopened the
majority of its Simplicity Gaming Centers. Subsequently, the Company closed 12
of its 17 corporate owned esports gaming center locations. As of November 30,
2022, our operations consisted of six franchisee owned locations. Although our
franchise agreements with franchisees of Simplicity Esports Gaming Centers
require a minimum monthly royalty payment to us from the franchisees regardless
of whether the franchised Simplicity Esports Gaming Centers are operating, a
limited number of the franchisees of Simplicity Esports Gaming Centers have
defaulted on their obligations to pay their minimum monthly royalty payment to
us. This has resulted in either an increase in accounts receivables or a bad
debt expense where account receivables are no longer collectible due to
franchisee's inability to pay the minimum monthly royalty payments owed by the
franchisee. As of November 30, 2022, we recorded an allowance for doubtful
accounts of approximately $71,708 and have written off $29,829, partly in
conjunction with taking back certain franchises and converting them to company
owned stores. Notwithstanding our efforts to support franchisees and still
collect on receivables, it is unclear exactly how much of the increase in
accounts receivables is attributable to the impact of COVID-19. Beginning in
July 2020, we have waived the minimum monthly royalty payment obligations and
are instead billing the franchisees a true-up of 6% of gross sales without a
minimum. We continue to assess possible similar accommodations to the
franchisees in light of the impact of COVID-19. Additionally, the disruptions in
commercial real estate caused by COVID-19 lockdowns have allowed the Company to
strengthen its existing relationships with national landlords by signing new
locations with percentage rent leases.



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



The measures taken to date adversely impacted the Company's business during the
quarter ended November 30, 2022 and will potentially continue to impact the
Company's business. Management observes that all business segments continue to
be impacted by reduced foot traffic that began as a result of COVID-19 lockdowns
and has continued as consumer habits have changed.



Our Financial Position



For the three months ended November 30, 2022 and 2021, we generated revenues of
$175,317 and $843,815, respectively, and reported net income (loss) attributable
to common shareholders of $5,551,711 and $(2,129,297), respectively.



For the six months ended November 30, 2022 and 2021, we generated revenues of
$519,430 and $1,748,655, respectively, reported net income (loss) attributable
to common shareholders of $1,394,601 and $(6,340,204), respectively, and had
cash flow used in operating activities of $517,598 and $2,105,623, respectively.
As of November 30, 2022, we had an accumulated deficit of $28,443,843.

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





Results of Operations

The following table summarizes our operating results for the three and six months ended November 30, 2022 and 2021:





                                        For the Three Months Ended          For the Six Months Ended
                                               November 30,                       November 30,
                                           2022              2021             2022             2021


Franchise revenue, fees and other     $       32,975     $     96,953     $     70,955     $    159,311
Company-owned stores sales                   141,220          681,732


   443,836        1,355,233
Esports revenue                                1,122           65,130            4,639          234,111
Total Revenues                               175,317          843,815          519,430        1,784,655


Less: Cost of goods sold                     (73,448 )       (485,394 )       (167,896 )     (1,092,516 )
Gross margin                                 101,869          358,421          351,534          656,139
Operating expenses                         1,151,217        1,407,736        4,862,771        3,603,910
Other income (expense)                     6,594,583       (1,116,411 )      5,971,624       (3,483,699 )
Net (income) loss attributable to
non-controlling interest              $        6,476     $     36,429     $    (65,786 )   $     91,266
Net income (loss) attributable to
common shareholders                   $    5,551,711     $ (2,129,297 )   $


 1,394,601     $ (6,340,204 )



46

Summary of Statement of Operations for the Three and Six Months Ended November 30, 2022 and 2021:





Revenue



For the three months ended November 30, 2022, our revenues decreased by
$668,498, as compared to the three months ended November 30, 2021. For the six
months ended November 30, 2021, our revenues decreased by $1,229,225, as
compared to the six months ended November 30, 2021. These decreases were
primarily due to the decrease in both the number of company-owned stores and
franchised locations.



Cost of Goods Sold



Cost of goods sold for the three months ended November 30, 2022, and 2021 was
$73,448 and $485,394, respectively, representing a decrease of $411,946
primarily due to decreased revenues. Cost of goods sold for the six months ended
November 30, 2022, and 2021 was $167,896 and $1,902,516, respectively,
representing a decrease of $924,620 primarily due to decreased revenues.



Operating Expenses

Compensation and related benefits





Compensation and related benefits for the three months ended November 30, 2022,
and 2021 was $230,099 and $845,886, respectively, representing a decrease of
$615,787. Compensation and related benefits for the six months ended November
30, 2022, and 2021 was $793,540 and $2,149,012, respectively, representing a
decrease of $1,355,472. Compensation and related benefits consist of salaries
and stock-based compensation, health benefits and related payroll taxes. The
decrease is primarily due to the decrease in the number of employees and lower
stock-based compensation expense.



Professional fees



Professional fees for the three months ended November 30, 2022, and 2021 was
$197,385 and $129,723, respectively, representing an increase of $67,662. The
increase in expenses is primarily due to increased accounting fees in the
current period related to the annual audit. Professional fees for the six months
ended November 30, 2022, and 2021 was $276,756 and $579,076, respectively,
representing a decrease of $302,320. Professional fees consist of costs for
audits, accountants, attorneys, consultants and the costs for other experts. The
decrease is primarily due to the decrease in legal expenses related to issuance
of debt instruments during the prior period.

General and Administrative Expenses


General and administrative expenses for the three months ended November 30,
2022, was $260,328 as compared to $432,127 for the three months ended November
30, 2021, representing a decrease of $171,799. General and administrative
expenses for the six months ended November 30, 2022, was $533,754 as compared to
$875,822 for the six months ended November 30, 2021, representing a decrease of
$342,068. The decrease is primarily due to the decrease in the number of
company-owned stores and the associated expenses (rent, utilities, computer
expenses, insurance) to maintain the stores.



Loss from Operations


For the three months ended November 30, 2022, loss from operations amounted to
$1,049,348 as compared to $1,049,315 for the three months ended November 30,
2021, representing an increase of $33. For the six months ended November 30,
2022, loss from operations amounted to $4,511,237 as compared to $2,947,771 for
the six months ended November 30, 2021, representing an increase of $1,563,466.


47






Other Expense



For the three months ended November 30, 2022, other income amounted to
$6,594,583 as compared to other loss of $1,116,411 for the three months ended
November 30, 2021, representing an increase of $7,710,994. The increase in other
income and expenses was primarily attributable to the recognition of a change in
the derivative liability $7,389,820 and a gain on the disposition of certain
assets of $154,348, both without comparable activity in the prior period. These
were offset by a loss on the extinguishment of debt of $223,924 during the three
months ended November 30, 2022 as compared to a gain of $29,168 during the prior
quarter as well as interest expense of $720,714 during the three months ended
November 30, 2022, compared to $1,145,794 during the prior period.



For the six months ended November 30, 2022, other income amounted to $5,971,624
as compared to other expense of $3,483,699 for the six months ended November 30,
2021, representing an increase of $9,455,323. The increase in other income and
expenses was primarily attributable to the recognition of a change in the
derivative liability $7,389,820 and a gain on the disposition of certain assets
of $395,272, both without comparable activity in the prior period. These were
offset by a loss on the extinguishment of debt of $275,498 during the six months
ended November 30, 2022 as compared to a loss of $1,730,801 during the prior
period as well as interest expense of $1,567,831 during the six months ended
November 30, 2022, compared to $1,805,490 during the prior period.



Net Income (Loss)


Net income for the three months ended November 30, 2022, was $5,545,235 as
compared to a net loss of $2,165,726 for the three months ended November 30,
2021, representing an improvement of $7,710,961. Net income for the six months
ended November 30, 2022, was $1,460,387 as compared to a net loss of $6,431,470
for the six months ended November 30, 2021, representing an improvement of
$7,891,857.

Liquidity and Capital Resources


As of November 30, 2022, we had cash of $64,074, which is available for use by
us to cover the Company's costs. In addition, as of November 30, 2022, we had
accrued expenses of $1,848,701.



For the six months ended November 30, 2022, cash used in operating activities
amounted to $517,598 primarily resulting from a net income of $1,460,387; non
cash interest expense of $1,440,139, representing a decrease of $256,256 over
the prior period; impairment losses of $3,261,186 with no comparable activity in
the prior period; a loss on the extinguishment of debt of $275,498, representing
a decrease of $1,455,303 from the prior period; and stock-based compensation
expense of $165,179, representing a decrease of $1,053,635 from the prior
period. These adjustments were offset by a change in the derivative liability of
$7,389,820 with no comparable activity in the prior period and a $395,272 gain
on the disposition of certain assets, representing an increase of $392,915 over
the prior period. Changes in our operating liabilities and assets provided


cash
of $553,851.

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





Going Concern



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



As reflected in the unaudited consolidated financial statements, as of November
30, 2022, the Company had an accumulated deficit of $28,443,843, a working
capital deficit of $10,106,601, net income attributable to the common
shareholders of $5,551,711 for the three months ended November 30, 2022, and net
income attributable to common shareholders of $1,394,601 for the six months
ended November 30, 2022. These factors raise substantial doubt about the
Company's ability to continue as a going concern within one year from the of the
date that the unaudited financial statements are issued.


48


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



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



As a result of COVID-19, all of our corporate and franchised Simplicity Esports
Gaming Centers were closed effective April 1, 2020. We commenced reopening
Simplicity Esports Gaming Centers on May 1, 2020, and subsequently reopened a
majority of its Simplicity Gaming Centers. Subsequently, the Company closed 12
of its 17 corporate-owned esports gaming center locations. As of November 30,
2022, our operations consisted of six franchisee owned locations. Although our
franchise agreements with franchisees of Simplicity Esports Gaming Centers
require a minimum monthly royalty payment to us from the franchisees regardless
of whether the franchised Simplicity Esports Gaming Centers are operating, a
limited number of the franchisees of Simplicity Esports Gaming Centers have
defaulted on their obligations to pay their minimum monthly royalty payment to
us. Beginning in July 2020, we have waived the minimum monthly royalty payment
obligations and are instead billing the franchisees a true-up of 6% of gross
sales without a minimum. We continue to assess possible similar accommodations
to the franchisees in light of the impact of COVID-19. The franchisees' defaults
have resulted in either an increase in accounts receivables or a bad debt
expense where account receivables are no longer collectible due to franchisee's
inability to pay the minimum monthly royalty payments owed by the franchisee. As
of November 30, 2022, we recorded an allowance for doubtful accounts of
approximately $71,708 and have written off $29,829, partly in conjunction with
taking back certain franchises and converting them to company owned stores.
Notwithstanding our efforts to support franchisees and still collect on
receivables, it is unclear exactly how much of the increase in accounts
receivables is attributable to the impact of COVID-19. Additionally, the
disruptions in commercial real estate caused by COVID-19 lockdowns have allowed
the Company to strengthen its existing relationships with national landlords by
signing new locations with percentage rent leases.



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



The measures taken to date adversely impacted the Company's business during the
quarter ended November 30, 2022, and will potentially continue to impact the
Company's business. Management observes that all business segments continue to
be impacted by reduced foot traffic that began as a result of COVID-19 lockdowns
and has continued as consumer habits have changed.

Off-balance sheet financing arrangements





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


49






Contractual obligations

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





Operating Leases


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

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





Debt Obligations



                                       Convertible         Secured
                                        Promissory        Promissory        Related         Short-Term
                                          Notes             Notes         Party Debt       Note Payable
Principal Balance as of May 31,
2022                                  $    5,361,347     $    206,772     $   247,818     $       41,735
Carrying Value as of May 31, 2022          3,093,395           69,636


  247,818             41,375
Principal
Borrowings                                   280,500                -               -                  -
Repayments                                         -           (6,922 )      (247,818 )                -
Conversions                                 (207,396 )              -               -                  -
Totals                                $       73,105     $     (6,922 )   $  (247,818 )   $            -
Unamortized Debt Issuance Costs,
Beneficial Conversion Feature, and
Warrant Discount
Beginning Balance                     $   (2,267,952 )   $   (137,136 )   $         -     $            -
Additions                                   (490,569 )              -               -                  -
Accretion                                  1,423,184           12,955               -                  -
Ending Balance                        $   (1,335,337 )   $   (124,181 )   $         -     $            -

Principal Balance as of November
30, 2022                              $    5,434,452     $    199,850     $         -     $       41,735
Carrying Value as of November 30,
2022                                       4,099,115           75,669               -             41,735
Less Short-Term Portion                    2,893,538                -


        -             41,735
Long Term Portion                     $    1,205,577     $     75,669     $         -     $            -

Scheduled principal maturities of the Company's outstanding debt over the next five fiscal years is as follows:





Fiscal year ended May 31,
          2023              $ 1,207,639
          2024                4,328,584
          2025                   45,307
          2026                   50,051
          2027                   44,456
       Thereafter                     -
                            $ 5,676,037



50

Convertible Promissory Notes

February 19, 2021 Labrys 12% Convertible Promissory Note





On February 19, 2021, the Company entered into a securities purchase agreement
(the "Labrys SPA") with Labrys Fund LP ("Labrys"), an accredited investor,
pursuant to which the Company issued a 12% convertible promissory note (the
"Labrys Note") with a maturity date of February 19, 2022 (the "Labrys Maturity
Date"), in the principal sum of $1,650,000. The terms and conditions of the
Labrys Note, as amended, are outlined in the Company's Annual Report as filed on
Form 10-K on September 27, 2022.



On July 16, 2022, the Company and Labrys entered into a second amendment (the
"Second Labrys Amendment") to the Labrys SPA and the Labrys Note, as amended.
Pursuant to the terms of the Second Labrys Amendment, the maturity date of the
Labrys Note was extended to December 31, 2023.



Upon the issuance of the March 2022 FirstFire Note, March 2022 GS Note, and
March 2022 Ionic Note described below, the conversion price of the Labrys Note
was reduced from $11.50 per share to $1.00 per share. Upon the issuance of the
July 2022 FirstFire Note, July 2022 GS Note, July 2022 Ionic Note, and July 2022
Jefferson Note described below, the conversion price of the Labrys Note was
further reduced from $1.00 per share to $0.10 per share. Upon the issuance of
the September 2022 FirstFire Note, September 2022 Ionic Note, and September 2022
Jefferson Note described below, the conversion price of the Labrys Note was
further reduced from $0.10 per share to $0.02 per share.



During the quarter and six months ended November 30, 2022, the Company did not
make any payments to Labrys. During the quarter and six months ended November
30, 2022, the Company recognized $23,277 and $56,949, respectively, in interest
expense associated with the Labrys Note recorded as accrued interest payable.

As of November 30, 2022, the carrying value and face value of the Labrys Note was $890,591 as the debt discount was fully accreted by that date.

March 2021 FirstFire Global 12% Convertible Promissory Note





On March 10, 2021, the Company, entered into a securities purchase agreement
(the "March 2021 FirstFire SPA") with FirstFire Global Opportunities Fund, LLC,
a Delaware limited liability company (the "FirstFire"), pursuant to which the
Company issued a 12% convertible promissory note ("March 2021 FirstFire Note")
with a maturity date of March 10, 2022, in the principal sum of $560,000. The
terms and conditions of the March 2021 FirstFire Note, as amended, are outlined
in the Company's Annual Report as filed on Form 10-K on September 27, 2022.



Upon the issuance of the March 2022 FirstFire Note, March 2022 GS Note, and
March 2022 Ionic Note described below, the conversion price of the March 2021
FirstFire Note was reduced from $11.50 per share to $1.00 per share. Upon the
issuance of the July 2022 FirstFire Note, July 2022 GS Note, July 2022 Ionic
Note, and July 2022 Jefferson Note described below, the conversion price of the
March 2021 FirstFire Note was further reduced from $1.00 per share to $0.10 per
share. Upon the issuance of the September 2022 FirstFire Note, September 2022
Ionic Note, and September 2022 Jefferson Note described below, the conversion
price of the March 2022 FirstFire Note was further reduced from $0.10 per share
to $0.02 per share.



Concurrent with the adjustment to the conversion price of certain of the
Company's convertible promissory notes in September 2022 and pursuant to the
Company's Sequencing Policy, the Company recognized a derivative liability
associated with the shares of Common Stock underlying the March 2021 FirstFire
Note and associated accrued interest (see Note 10 - Derivative Liability) as
well as an additional debt discount of $294,227.



During the three months ended August 31, 2022, FirstFire converted $9,500 of the
outstanding principal balance of the March 2021 FirstFire Note at an adjusted
conversion price of $0.10 per share. At conversion, the Company issued 95,000
shares of common stock to FirstFire at a fair market value of $0.13 per share
and recognized a loss on debt extinguishment of $2,850.

On various dates during the three months ended November 30, 2022, FirstFire converted $19,120 of the outstanding principal balance of the March 2021 FirstFire Note at an adjusted conversion price of $0.02 per share. As a result of these conversions, the Company issued 956,000 shares of common stock to FirstFire at fair market values ranging from $0.037 to $0.162 per share and recognized a total loss on debt extinguishment of $47,906 (See Note 9 - Stockholders' Equity).





During the quarter and six months ended November 30, 2022, the Company
recognized $35,332 and $50,317, respectively, in interest expense associated
with the March 2021 FirstFire Note recorded as accrued interest payable and
$127,407 and $127,407, respectively, in accretion expense related to the new
debt discount associated with the derivative liability.


51

As of November 30, 2022, the carrying value and face value of the March 2021 FirstFire Note was $137,640, net of $343,740 in unaccreted debt discount.

June 2021 FirstFire Global 12% Convertible Promissory Note


On June 11, 2021, the Company entered into a securities purchase agreement (the
"June 2021 FirstFire SPA") with FirstFire, pursuant to which the Company issued
(i) a 12% convertible promissory note (the "June 2021 FirstFire Note") in the
principal sum of $1,266,666 (the "June 2021 FirstFire Principal Sum"), (ii)
11,875 shares of its common stock as a commitment fee ("June 2021 FirstFire
Commitment Shares"), and (iii) a three-year warrant ("June 2021 FirstFire
Warrant") to purchase 593,750 shares of the Company's common stock at an
exercise price of $10.73, subject to certain adjustments.

The following are the material terms of the June 2021 FirstFire SPA and June 2021 FirstFire Note:





  ? The June 2021 FirstFire Note matures on June 10, 2023 (the "June 2021
    FirstFire Maturity Date").

? At its election, FirstFire may convert the June 2021 FirstFire Note into the

Company's common stock, subject to the beneficial ownership limitations of

4.99% in the June 2021 FirstFire Note; provided however, that the limitation

on conversion may be waived up to 9.99%, (the "Beneficial Ownership

Limitations") at any time at a conversion price equal to $11.50 per share,

subject to certain adjustments.

? The Company agree to pay interest on the June 2021 Principal Sum at the rate

of 12% per annum provided that the first six months of interest shall be

guaranteed, and the remaining 18 months of interest shall be deemed earned in

full if any amount is outstanding under the June 2021 FirstFire Note after 180

days from June 10, 2021.

? The June 2021 FirstFire Note carries an original issue discount of $126,666

("June 2021 FirstFire OID").

? The Company may prepay the June 2021 FirstFire Note at any time prior to

maturity in accordance with the terms of the June 2021 FirstFire Note (the

"Standard Prepayment Terms").

? The June 2021 FirstFire Note contains customary events of default relating to,

among other things, payment defaults, breach of representations and

warranties, and breach of provisions of the June 2021 FirstFire Note or the

June 2021 FirstFire SPA. Upon the occurrence of any event of default (as

defined in the June 2021 FirstFire Note) which has not been cured within the

period stipulated by the June 2021 FirstFire Note, the June 2021 FirstFire

Note shall become immediately due and payable and the Company shall pay to

FirstFire, in full satisfaction of its obligations hereunder, an amount equal

to the June 2021 FirstFire Principal Sum then outstanding plus accrued

interest multiplied by 125% (the "Standard Default Terms").

? Pursuant to the June 2021 FirstFire SPA, the June 2021 FirstFire Commitment

Shares and the shares underlying the June 2021 FirstFire Note and June 2021


    FirstFire Warrant carry standard registration rights.




Upon issuance of the June 2021 FirstFire Note, the Company received net proceeds
of $1,140,000. Upon issuance of the June 2021 FirstFire Commitment Shares, the
June 2021 FirstFire Note, and the June 2021 First Fire Warrant, the Company
allocated the $1,140,000 in net proceeds received between the fair market value
of the June 2021 FirstFire Commitment Shares, the beneficial conversion feature
of the June 2021 FirstFire Note, and the June 2021 FirstFire Warrant.



Upon the issuance of the March 2022 FirstFire Note, March 2022 GS Note, and
March 2022 Ionic Note described below, the conversion price of the June 2021
FirstFire Note was reduced from $11.50 per share to $1.00 per share. Upon the
issuance of the July 2022 FirstFire Note, July 2022 GS Note, July 2022 Ionic
Note, and July 2022 Jefferson Note described below, the conversion price of the
June 2021 FirstFire Note was further reduced from $1.00 per share to $0.10 per
share. Upon the issuance of the September 2022 FirstFire Note, September 2022
Ionic Note, and September 2022 Jefferson Note described below, the conversion
price of the June 2021 FirstFire Note was further reduced from $0.10 per share
to $0.02 per share.



During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $136,085 and $273,664, respectively, which was related to
the accretion of the debt discount.


52

As of November 30, 2022, the carrying value of the June 2021 FirstFire Note was $804,544, net of $287,123 in unaccreted debt discount.

June 2021 GS Capital Securities 12% Convertible Promissory Note


On June 16, 2021, the Company entered into a securities purchase agreement (the
"June 2021 GS SPA") with GS Capital Partners, LLC ("GS"), pursuant to which the
Company issued (i) a 12% convertible promissory note (the "June 2021 GS Note")
in the principal sum of $333,333 (the "June 2021 GS Principal Sum"), (ii) 3,125
shares of its common stock as a commitment fee ("June 2021 GS Commitment
Shares"), and (iii) a three-year warrant ("June 2021 GS Warrant") to purchase
156,250 shares of the Company's common stock at an exercise price of $10.73,
subject to certain adjustments.

The following are the material terms of the June 2021 GS SPA and June 2021 GS Note:

? The June 2021 GS Note matures on June 10, 2023 (the "June 2021 GS Maturity

Date").

? At its election, GS may convert the June 2021 GS Note into the Company's

common stock, subject to the Beneficial Ownership Limitations, at any time at

a conversion price equal to $11.50 per share, subject to certain adjustments.

? The Company agrees to pay interest on the June 2021 GS Principal Sum at the

rate of 12% per annum provided that the first six months of interest shall be

guaranteed, and the remaining 18 months of interest shall be deemed earned in

full if any amount is outstanding under the June 2021 GS Note after 180 days

from June 10, 2021.

? The June 2021 GS Note carries an original issue discount of $33,333 ("June

2021 GS OID").

? The June 2021 GS Note contains the Standard Prepayment Terms and Standard

Default Terms.

? Pursuant to the June 2021 GS SPA, the June 2021 GS Commitment Shares and the


    shares underlying the June 2021 GS Note and June 2021 GS Warrant carry
    standard registration rights.




Upon issuance of the June 2021 GS Note, the Company received net proceeds of
$300,000. Upon issuance of the June 2021 GS Commitment Shares, the June 2021 GS
Note, and the June 2021 GS Warrant, the Company allocated the $300,000 in net
proceeds received between the fair market value of the June 2021 GS Commitment
Shares, the beneficial conversion feature of the June 2021 GS Note, and the

June
2021 GS Warrant.


Upon the issuance of the March 2022 FirstFire Note, March 2022 GS Note, and
March 2022 Ionic Note described below, the conversion price of the June 2021 GS
Note was reduced from $11.50 per share to $1.00 per share. Upon the issuance of
the July 2022 FirstFire Note, July 2022 GS Note, July 2022 Ionic Note, and July
2022 Jefferson Note described below, the conversion price of the June 2021 GS
Note was further reduced from $1.00 per share to $0.10 per share. Upon the
issuance of the September 2022 FirstFire Note, September 2022 Ionic Note, and
September 2022 Jefferson Note described below, the conversion price of the June
2021 GS Note was further reduced from $0.10 per share to $0.02 per share.



During the three months ended August 31, 2022, GS converted $53,000 of the
outstanding principal balance the June 2021 GS Note and $6,935 in associated
accrued interest at an adjusted conversion price of $0.10 per share. At
conversion, the Company issued 599,350 shares of common stock to GS at a fair
market value of $0.19 per share and recognized a loss on debt extinguishment of
$53,942.



During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $26,671 and $184,884, respectively, related to the accretion
of the debt discount.

As of November 30, 2022, the carrying value of the June 2021 GS Note was $169,507, net of $60,492 in unaccreted debt discount.

August 2021 Jefferson Street Capital 12% Convertible Promissory Note





On August 23, 2021, the Company entered into a securities purchase agreement
(the "August 2021 Jefferson SPA") with Jefferson Street Capital, LLC
("Jefferson"), pursuant to which the Company issued (i) a 12% convertible
promissory note (the "August 2021 Jefferson Note") in the principal sum of
$333,333 (the "August 2021 Jefferson Principal Sum"), (ii) 3,125 shares of its
common stock as a commitment fee ("August 2021 Jefferson Commitment Shares"),
and (iii) a three-year warrant ("August 2021 Jefferson Warrant") to purchase
156,250 shares of the Company's common stock at an exercise price of $10.73,
subject to certain adjustments.


53

The following are the material terms of the august 2021 Jefferson SPA and August 2021 Jefferson Note:

? The August 2021 Jefferson Note matures on August 23, 2023 (the "August 2021

Jefferson Maturity Date").

? At its election, Jefferson may convert the August 2021 Jefferson Note into the

Company's common stock, subject to the Beneficial Ownership Limitations, at

any time at a conversion price equal to $11.50 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the August 2021 Jefferson Principal Sum

at the rate of 12% per annum provided that the first six months of interest

shall be guaranteed, and the remaining 18 months of interest shall be deemed

earned in full if any amount is outstanding under the August 2021 Jefferson

Note after 180 days from August 23, 2021.

? The August 2021 Jefferson Note carries an original issue discount of $33,333

("August 2021 Jefferson OID").

? The August 2021 Jefferson Note contains the Standard Prepayment Terms and

Standard Default Terms.

? Pursuant to the August 2021 Jefferson SPA, the August 2021 Jefferson

Commitment Shares underlying and the shares underlying the August 2021

Jefferson Note and August 2021 Jefferson Warrant carry standard registration


    rights.




Upon issuance of the August 2021 Jefferson Note, the Company received net
proceeds of $300,000. Upon issuance of the August 2021 Jefferson Commitment
Shares, the August 2021 Jefferson Note, and the August 2021 Jefferson Warrant,
the Company allocated the $300,000 in net proceeds received between the fair
market value of the August 2021 Jefferson Commitment Shares, the beneficial
conversion feature of the August 2021 Jefferson Note, and the August 2021
Jefferson Warrant.



Upon the issuance of the March 2022 FirstFire Note, March 2022 GS Note, and
March 2022 Ionic Note described below, the conversion price of the August 2021
Jefferson Note was reduced from $11.50 per share to $1.00 per share. Upon the
issuance of the July 2022 FirstFire Note, July 2022 GS Note, July 2022 Ionic
Note, and July 2022 Jefferson Note described below, the conversion price of the
August 2021 Jefferson Note was further reduced from $1.00 per share to $0.10 per
share. Upon the issuance of the September 2022 FirstFire Note, September 2022
Ionic Note, and September 2022 Jefferson Note described below, the conversion
price of the August 2021 Jefferson Note was further reduced from $0.10 per


share
to $0.02 per share.


During the three months ended August 31, 2022, Jefferson converted $10,000 of
the outstanding principal balance the August 2021 Jefferson Note and $1,000 in
associated fees at an adjusted conversion price of $0.10 per share. At
conversion, the Company issued 110,000 shares of common stock to Jefferson at a
fair market value of $0.075 per share and recognized a gain on debt
extinguishment of $2,750.



On various dates during the three months ended November 30, 2022, Jefferson
converted $13,400 of the outstanding principal balance the August 2021 Jefferson
Note and $3,000 in associated fees at an adjusted conversion price of $0.02 per
share. As a result of these conversions, the Company issued 820,000 shares of
common stock to Jefferson at fair market values ranging from $0.036 to $0.162
per share and recognized a loss on debt extinguishment of $34,255 (See Note


9 -
Stockholders' Equity).



During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $45,244 and $92,184 respectively, related to the accretion
of the debt discount.

As of November 30, 2022, the carrying value of the August 2021 Jefferson Note was $195,725, net of $114,208 in unaccreted debt discount.

August 2021 Lucas Ventures Capital 12% Convertible Note





On August 31, 2021, the Company entered into a securities purchase agreement
(the "August 2021 Lucas SPA") with Lucas Ventures, LLC ("Lucas"), pursuant to
which the Company issued (i) a 12% convertible promissory note (the "August 2021
Lucas Note") in the principal sum of $200,000 (the "August 2021 Lucas Principal
Sum"), (ii) 3,749 shares of its common stock as a commitment fee ("August 2021
Lucas Commitment Shares"), and (iii) a three-year warrant ("August 2021 Lucas
Warrant") to purchase 187,400 shares of the Company's common stock at an
exercise price of $10.22, subject to certain adjustments.


54

The following are the material terms of the August 2021 Lucas SPA and August 2021 Lucas Note:

? The August 2021 Lucas Note matures on August 31, 2023 (the "August 2021 Lucas

Maturity Date").

? At its election, Lucas may convert the August 2021 Lucas Note into the

Company's common stock, subject to the Beneficial Ownership Limitations, at

any time at a conversion price equal to $11.50 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the August 2021 Lucas Principal Sum at

the rate of 12% per annum provided that the first six months of interest shall

be guaranteed, and the remaining 18 months of interest shall be deemed earned

in full if any amount is outstanding under the August 2021 Lucas Note after

180 days from August 31, 2021.

? The August 2021 Lucas Note carries an original issue discount of $20,000

("August 2021 Lucas OID").

? The August 2021 Lucas Note contains the Standard Prepayment Terms and Standard

Default Terms.

? Pursuant to the August 2021 Lucas SPA, the August 2021 Lucas Commitment Shares

underlying and the shares underlying the August 2021 Lucas Note and August


    2021 Lucas Warrant carry standard registration rights.




Upon issuance of the August 2021 Lucas Note, the Company received net proceeds
of $180,000. Upon issuance of the August 2021 Lucas Commitment Shares, the
August 2021 Lucas Note, and the August 2021 Lucas Warrant, the Company allocated
the $180,000 in net proceeds received between the fair market value of the
August 2021 Lucas Commitment Shares, the beneficial conversion feature of the
August 2021 Lucas Note, and the August 2021 Lucas Warrant.



On March 16, 2022, the Company and Lucas Ventures entered into an Amendment and
Waiver Pursuant to Convertible Promissory Note (the "Lucas Amendment"). Pursuant
to the terms of the Lucas Amendment, the parties agreed that the conversion
price of the August 2021 Lucas Note was decreased from $11.50 per share to $1.00
per share and that Lucas may not convert the August 2021 Lucas Note, as amended,
prior to September 15, 2022.



On July 13, 2022, the Company and Lucas Ventures entered into an Amendment and
Waiver Pursuant to Convertible Promissory Note (the "Second Lucas Amendment").
Pursuant to the terms of the Second Lucas Amendment, the parties agreed to
extend the maturity date of the August 2021 Lucas Note to December 31, 2023.



During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $24,932 and $50,137, respectively, related to the accretion
of the debt discount.



As of November 30, 2022, the carrying value of the August 2021 Lucas Note was
$124,931, net of $75,069 in unaccreted net debt discount comprised of the new
debt premium associated with the derivative liability and the original debt
discount.

August 2021 LGH Investments, LLC 12% Convertible Promissory Note





On August 31, 2021, the Company and LGH Investments, LLC, ("LGH") entered into a
securities purchase agreement (the "August 2021 LGH SPA") pursuant to which the
Company issued a 12% convertible promissory note (the "August 2021 LGH Note") in
the principal sum of $200,000 (the "August 2021 LGH Principal Sum").


55

The following are the material terms of the August 2021 LGH SPA and August 2021 LGH Note:

? The August 2021 LGH Note matures on August 31, 2023 (the "August 2021 LGH

Maturity Date").

? At its election, LGH may convert the August 2021 LGH Note into the Company's

common stock, subject to the Beneficial Ownership Limitations, at any time at

a conversion price equal to $11.50 per share, subject to certain adjustments.

? The Company agrees to pay interest on the August 2021 LGH Principal Sum at the

rate of 12% per annum provided that the first six months of interest shall be

guaranteed, and the remaining 18 months of interest shall be deemed earned in

full if any amount is outstanding under the August 2021 LGH Note after 180

days from August 31, 2021.

? The August 2021 LGH Note carries an original issue discount of $20,000

("August 2021 LGH OID").

? The August 2021 LGH Note contains the Standard Prepayment Terms and Standard

Default Terms.

? Pursuant to the August 2021 LGH SPA, the shares underlying the August 2021 LGH


    Note carry standard registration rights.




Upon issuance of the August 2021 LGH Note, the Company received net proceeds of
$180,000. Upon issuance of the August 2021 LGH, the Company recorded a total
debt discount of $26,500 that includes the LGH OID and the $6,500 paid as fees
associated with the issuance of the loan and is accreted over the term of the
August 2021 LGH Note.



As of March 16, 2022, the Company and LGH entered into an Amendment and Waiver
Pursuant to Convertible Promissory Note (the "LGH Amendment"). Pursuant to the
terms of the LGH Amendment, the parties agreed that the conversion price of the
August 2021 LGH Note was decreased from $11.50 per share to $1.00 per share and
that LGH may not convert the LGH Note, as amended, prior to September 15, 2022.

On July 13, 2022, the Company and LGH entered into an Amendment and Waiver Pursuant to Convertible Promissory Note (the "Second LGH Amendment"). Pursuant to the terms of the Second LGH Amendment, the parties agreed to extend the maturity date of the August 2021 LGH Note to December 31, 2023.





During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $3,303 and $6,643, respectively, related to the accretion of
the debt discount.

As of November 30, 2022, the carrying value of the August 2021 LGH Note was $190,053, net of $9,947 in unaccreted debt discount.

September 2021 Ionic Ventures, LLC 12% Convertible Promissory Note





On September 28, 2021, the Company entered into a securities purchase agreement
(the "September 2021 Ionic SPA") with Ionic Ventures, LLC ("Ionic"), pursuant to
which the Company issued (i) a 12% convertible promissory note (the "September
2021 Ionic Note") in the principal sum of $1,555,556 (the "September 2021 Ionic
Principal Sum"), (ii) 14,584 shares of its common stock as a commitment fee
("September 2021 Ionic Commitment Shares"), and (iii) a three-year warrant
("September 2021 Ionic Warrant") to purchase 729,167 shares of the Company's
common stock at an exercise price of $10.73, subject to certain adjustments.

The following are the material terms of the September 2021 Ionic SPA and September 2021 Ionic Note:

? The September 2021 Ionic Note matures on September 28, 2023 (the "September

2021 Ionic Maturity Date").

? At its election, Ionic may convert the September 2021 Ionic Note into the

Company's common stock, subject to the Beneficial Ownership Limitations, at

any time at a conversion price equal to $11.50 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the September 2021 Ionic Principal Sum

at the rate of 12% per annum provided that the first six months of interest

shall be guaranteed, and the remaining 18 months of interest shall be deemed

earned in full if any amount is outstanding under the September 2021 Ionic

Note after 180 days from September 28, 2021.

? The September 2021 Ionic Note carries an original issue discount of $155,556

("September 2021 Ionic OID").

? The September 2021 Ionic Note contains the Standard Prepayment Terms and

Standard Default Terms.

? Pursuant to the September 2021 Ionic SPA, the September 2021 Ionic Commitment

Shares underlying and the shares underlying the September 2021 Ionic Note and

September 2021 Ionic Warrant carry standard registration rights.




Upon issuance of the September 2021 Ionic Note, the Company received net
proceeds of $1,400,000. Upon issuance of the September 2021 Ionic Commitment
Shares, the September 2021 Ionic Note, and the September 2021 Ionic Warrant, the
Company allocated the $1,400,000 in net proceeds received between the fair
market value of the September 2021 Ionic Commitment Shares, the beneficial
conversion feature of the September 2021 Ionic Note, and the September 2021


Ionic Warrant.


56


Upon the issuance of the March 2022 FirstFire Note, March 2022 GS Note, and
March 2022 Ionic Note described below, the conversion price of the September
2021 Ionic Note was reduced from $11.50 per share to $1.00 per share. Upon the
issuance of the July 2022 FirstFire Note, July 2022 GS Note, July 2022 Ionic
Note, and July 2022 Jefferson Note described below, the conversion price of the
September 2021 Ionic Note was further reduced from $1.00 per share to $0.10 per
share. Upon the issuance of the September 2022 FirstFire Note, September 2022
Ionic Note, and September 2022 Jefferson Note described below, the conversion
price of the September 2021 Ionic Note was further reduced from $0.10 per share
to $0.02 per share.



During the fiscal year ended May 31, 2022, Ionic converted $87,800 of the
outstanding principal balance due under the September 2021 Ionic Note at an
adjusted conversion price of $1.00 per share. At conversion, the Company issued
87,800 shares of common stock to Ionic at a fair market value of $2.61 per share
and recognized a loss on debt extinguishment of $141,358.



During the three months ended August 31, 2022, Ionic converted $6,776 of the
outstanding principal balance due under the September 2021 Ionic Note at an
adjusted conversion price of $0.10 per share. At conversion, the Company issued
67,755 shares of common stock to Ionic at a fair market value of $0.13 per share
and recognized a loss on debt extinguishment of $2,033.



Additionally, during the three months ended August 31, 2021, Ionic converted
$15,000 of the outstanding principal balance due under the September 2021 Ionic
Note at an adjusted conversion price of $0.10 per share. At conversion, the
Company became obligated to issue 150,000 shares of common stock to Ionic at a
fair market value of $0.075 per share and recognized a gain on debt
extinguishment of $4,500. Upon conversion, these shares are classified as common
stock to be issued, and subsequently, on September 2, 2022, the Company
completed the issuance of the shares (See Note 9 - Stockholders' Equity).



On various dates during the three months ended November 30, 2022, Ionic
converted $80,600 of the outstanding principal balance due under the September
2021 Ionic Note at an adjusted conversion price of $0.02 per share. At
conversion, the Company issued 4,030,000 shares of common stock to Ionic at fair
market values ranging from $0.022 to $0.162 per share and recognized a loss on
debt extinguishment of $141,762 (See Note 9 - Stockholders' Equity).

During the quarter and six months ended November 30, 2022, the Company recorded interest expense of $107,932 and $410,437, respectively, related to the accretion of the debt discount.

As of November 30, 2022, the carrying value of the September 2021 Ionic Note was $798,654, net of $566,727 in unaccreted debt discount.

March 2022 FirstFire Global 12% Convertible Promissory Note


On March 21, 2022, the Company entered into a securities purchase agreement (the
"March 2022 FirstFire SPA") with FirstFire, pursuant to which the Company issued
(i) a 12% convertible promissory note (the "March 2022 FirstFire Note") in the
principal sum of $110,000 (the "March 2022 FirstFire Principal Sum"), (ii) 935
shares of its common stock as a commitment fee ("March 2022 FirstFire Commitment
Shares"), and (iii) a three-year warrant ("March 2022 FirstFire Warrant") to
purchase 50,000 shares of the Company's common stock at an exercise price of
$1.00, subject to certain adjustments.

The following are the material terms of the March 2022 FirstFire SPA and March 2022 FirstFire Note:

? The March 2022 FirstFire Note matures on September 21, 2022 (the "March 2022

FirstFire Maturity Date").

? At its election, FirstFire may convert the March 2022 FirstFire Note into the

Company's common stock. subject to the Beneficial Ownership Limitations, at

any time at a conversion price equal to $1.00 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the March 2022 FirstFire Principal Sum

at the rate of 12% per annum provided that the first six months of interest

shall be guaranteed.

? The March 2022 FirstFire Note carries an original issue discount of $10,000

("March 2022 FirstFire OID").

? The March 2022 FirstFire Note contains the Standard Prepayment Terms and

Standard Default Terms.

? Pursuant to the March 2022 FirstFire SPA, the March 2022 FirstFire Commitment

Shares and the shares underlying the March 2022 FirstFire Note and March 2022


    FirstFire Warrant carry standard registration rights.



57






Upon issuance of the March 2022 FirstFire Note, the Company received net
proceeds of $100,000. Upon issuance of the March 2022 FirstFire Commitment
Shares, the March 2022 FirstFire Note, and the March 2022 FirstFire Warrant, the
Company allocated the $100,000 in net proceeds received between the fair market
value of the March 2022 FirstFire Commitment Shares, the beneficial conversion
feature of the March 2022 FirstFire Note, and the March 2022 FirstFire Warrant.



Upon the issuance of the July 2022 FirstFire Note, July 2022 GS Note, July 2022
Ionic Note, and July 2022 Jefferson Note described below, the conversion price
of the March 2022 FirstFire Note was reduced from $1.00 per share to $0.10 per
share. Upon the issuance of the September 2022 FirstFire Note, September 2022
Ionic Note, and September 2022 Jefferson Note described below, the conversion
price of the March 2022 FirstFire Note was further reduced from $0.10 per share
to $0.02 per share.



During the quarter and six months ended November 30, 2022, the Company recorded
accrued interest expense of $2,532 and $2,532, respectively. In addition, during
the quarter and six months ended November 30, 2022, the Company recorded
accretion expense of $12,554 and $67,554, respectively, related to the accretion
of the debt discount.

As of November 30, 2022, the carrying value of the March 2022 FirstFire Note was $110,000as the debt discount was fully accreted.

March 2022 GS Capital Securities 12% Convertible Promissory Note


On March 21, 2022, the Company entered into a securities purchase agreement (the
"March 2022 GS SPA") with GS, pursuant to which the Company issued (i) a 12%
convertible promissory note (the "March 2022 GS Note") in the principal sum of
$82,500 (the "March 2022 GS Principal Sum"), (ii) 703 shares of its common stock
as a commitment fee ("March 2022 GS Commitment Shares"), and (iii) a three-year
warrant ("March 2022 GS Warrant") to purchase 37,500 shares of the Company's
common stock at an exercise price of $1.00, subject to certain adjustments.

The following are the material terms of the March 2022 GS SPA and March 2022 GS Note:

? The March 2022 GS Note matures on September 21, 2022 (the "March 2022 GS

Maturity Date").

? At its election, GS may convert the March 2022 GS Note into the Company's

common stock, subject to the Beneficial Ownership Limitations, at any time at

a conversion price equal to $1.00 per share, subject to certain adjustments.

? The Company agrees to pay interest on the March 2022 GS Principal Sum at the

rate of 12% per annum provided that the first six months of interest shall be

guaranteed.

? The March 2022 GS Note carries an original issue discount of $7,500 ("March

2022 GS OID").

? The March 2022 GS Note contains the Standard Prepayment Terms and Standard

Default Terms.

? Pursuant to the March 2022 GS SPA, the March 2022 GS Commitment Shares and the

shares underlying the March 2022 GS Note and March 2022 GS Warrant carry


    standard registration rights.


Upon issuance of the March 2022 GS Note, the Company received net proceeds of
$75,000. Upon issuance of the March 2022 GS Commitment Shares, the March 2022 GS
Note, and the March 2022 GS Warrant, the Company allocated the $75,000 in net
proceeds received between the fair market value of the March 2022 GS Commitment
Shares, the beneficial conversion feature of the March 2022 GS Note, and the
March 2022 GS Warrant.


Upon the issuance of the July 2022 FirstFire Note, July 2022 GS Note, July 2022
Ionic Note, and July 2022 Jefferson Note described below, the conversion price
of the March 2022 GS Note was reduced from $1.00 per share to $0.10 per share.
Upon the issuance of the September 2022 FirstFire Note, September 2022 Ionic
Note, and September 2022 Jefferson Note described below, the conversion price of
the March 2022 GS Note was further reduced from $0.10 per share to $0.02 per
share.


58






During the quarter and six months ended November 30, 2022, the Company recorded
accrued interest expense of $1,899 and $1,899, respectively. In addition, during
the quarter and six months ended November 30, 2022, the Company recorded
accretion expense of $9,416 and $50,666, respectively, related to the accretion
of the debt discount.

As of November 30, 2022, the carrying value of the March 2022 GS Note was $82,500 As the debt discount was fully accreted.

March 2022 Ionic Ventures 12% Convertible Promissory Note


On March 21, 2022, the Company entered into a securities purchase agreement (the
"March 2022 Ionic SPA") with Ionic, pursuant to which the Company issued (i) a
12% convertible promissory note (the "March 2022 Ionic Note") in the principal
sum of $110,000 (the "March 2022 Ionic Principal Sum"), (ii) 935 shares of its
common stock as a commitment fee ("March 2022 Ionic Commitment Shares"), and
(iii) a three-year warrant ("March 2022 Ionic Warrant") to purchase 50,000
shares of the Company's common stock at an exercise price of $1.00, subject


to
certain adjustments.

The following are the material terms of the March 2022 Ionic SPA and March 2022 Ionic Note:

? The March 2022 Ionic Note matures on September 21, 2022 (the "March 2022 Ionic

Maturity Date").

? At its election, Ionic may convert the March 2022 Ionic Note into the

Company's common stock, subject to the Beneficial Ownership Limitations, at

any time at a conversion price equal to $1.00 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the March 2022 Ionic Principal Sum at

the rate of 12% per annum provided that the first six months of interest shall

be guaranteed.

? The March 2022 Ionic Note carries an original issue discount of $10,000

("March 2022 Ionic OID").

? The March 2022 Ionic Note contains the Standard Prepayment Terms and Standard

Default Terms.

? Pursuant to the March 2022 Ionic SPA, the March 2022 Ionic Commitment Shares

and the shares underlying the March 2022 Ionic Note and March 2022 Ionic


    Warrant carry standard registration rights.




Upon issuance of the March 2022 Ionic Note, the Company received net proceeds of
$100,000. Upon issuance of the March 2022 Ionic Commitment Shares, the March
2022 Ionic Note, and the March 2022 Ionic Warrant, the Company allocated the
$100,000 in net proceeds received between the fair market value of the March
2022 Ionic Commitment Shares, the beneficial conversion feature of the March
2022 Ionic Note, and the March 2022 Ionic Warrant.



Upon the issuance of the July 2022 FirstFire Note, July 2022 GS Note, July 2022
Ionic Note, and July 2022 Jefferson Note described below, the conversion price
of the March 2022 Ionic Note was reduced from $1.00 per share to $0.10 per
share. Upon the issuance of the September 2022 FirstFire Note, September 2022
Ionic Note, and September 2022 Jefferson Note described below, the conversion
price of the March 2022 Ionic Note was further reduced from $0.10 per share


to
$0.02 per share.



During the quarter and six months ended November 30, 2022, the Company recorded
accrued interest expense of $2,532 and $2,532, respectively. In addition, during
the quarter and six months ended November 30, 2022, the Company recorded
accretion expense of $12,554 and $67,554, respectively, related to the accretion
of the debt discount.

As of November 30, 2022, the carrying value of the March 2022 Ionic Note was $110,000as the debt discount was fully accreted.

April 2022 Jefferson Street Capital LLC 12% Convertible Promissory Note


On April 1, 2022, the Company entered into a securities purchase agreement (the
"April 2022 Jefferson SPA") with Jefferson, pursuant to which the Company issued
(i) a 12% convertible promissory note (the "April 2022 Jefferson Note") in the
principal sum of $82,500 (the "April 2022 Jefferson Principal Sum"), (ii) 703
shares of its common stock as a commitment fee ("April 2022 Jefferson Commitment
Shares"), and (iii) a three-year warrant ("April 2022 Jefferson Warrant") to
purchase 37,500 shares of the Company's common stock at an exercise price of
$1.00, subject to certain adjustments.


59

The following are the material terms of the April 2022 Jefferson SPA and April 2022 Jefferson Note:

? The April 2022 Jefferson Note matures on October 1, 2022 (the "April 2022

Jefferson Maturity Date").

? At its election, Jefferson may convert the April 2022 Jefferson Note into the

Company's common stock, subject to the Beneficial Ownership Limitations, at

any time at a conversion price equal to $1.00 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the April 2022 Jefferson Principal Sum

at the rate of 12% per annum provided that the first six months of interest

shall be guaranteed.

? The April 2022 Jefferson Note carries an original issue discount of $7,500

("April 2022 Jefferson OID").

? The April 2022 Jefferson Note contains the Standard Prepayment Terms and

Standard Default Terms.

? Pursuant to the April 2022 Jefferson SPA, the April 2022 Jefferson Commitment

Shares and the shares underlying the April 2022 Jefferson Note and April 2022


    Jefferson Warrant carry standard registration rights.




Upon issuance of the April 2022 Jefferson Note, the Company received net
proceeds of $75,000. Upon issuance of the April 2022 Jefferson Commitment
Shares, the April 2022 Jefferson Note, and the April 2022 Jefferson Warrant, the
Company allocated the $75,000 in net proceeds received between the fair market
value of the April 2022 Jefferson Commitment Shares, the beneficial conversion
feature of the April 2022 Jefferson Note, and the April 2022 Jefferson Warrant.



Upon the issuance of the July 2022 FirstFire Note, July 2022 GS Note, July 2022
Ionic Note, and July 2022 Jefferson Note described below, the conversion price
of the April 2022 Jefferson Note was reduced from $1.00 per share to $0.10 per
share. Upon the issuance of the September 2022 FirstFire Note, September 2022
Ionic Note, and September 2022 Jefferson Note described below, the conversion
price of the April 2022 Jefferson Note was further reduced from $0.10 per share
to $0.02 per share.



During the quarter and six months ended November 30, 2022, the Company recorded
accrued interest expense of $1,627 and $1,627, respectively. In addition, during
the quarter and six months ended November 30, 2022, the Company recorded
accretion expense of $9,416 and $50,666, respectively, related to the accretion
of the debt discount. As of November 30, 2022, the carrying value of the April
2022 Jefferson Note was $82,500 as the debt discount was fully accreted by


that
date.

July 2022 FirstFire Global 12% Convertible Promissory Note


On July 14, 2022, the Company entered into a securities purchase agreement (the
"July 2022 FirstFire SPA") with FirstFire, pursuant to which the Company issued
(i) a 12% convertible promissory note (the "July 2022 FirstFire Note") in the
principal sum of $27,500 (the "July 2022 FirstFire Principal Sum"), (ii) 935
shares of its common stock as a commitment fee ("July 2022 FirstFire Commitment
Shares"), and (iii) a three-year warrant ("July 2022 FirstFire Warrant") to
purchase 50,000 shares of the Company's common stock at an exercise price of
$1.00, subject to certain adjustments.

The following are the material terms of the July 2022 FirstFire SPA and July 2022 FirstFire Note:

? The July 2022 FirstFire Note matures on September 14, 2022 (the "July 2022

FirstFire Maturity Date").

? At its election, FirstFire may convert the July 2022 FirstFire Note into the

Company's common stock, subject to the Beneficial Ownership Limitations, at

any time after 180 days from the date of issuance of the July 2022 FirstFire

Note at a conversion price equal to $0.10 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the July 2022 FirstFire Principal Sum at

the rate of 12% per annum provided that the first two months of interest shall

be guaranteed.

? The July 2022 FirstFire Note carries an original issue discount of $2,500


    ("July 2022 FirstFire OID").
  ? The July 2022 FirstFire Note contains the Standard Prepayment Terms and
    Standard Default Terms.



60



Upon issuance of the July 2022 FirstFire Note, the Company received net proceeds
of $25,000. Upon issuance of the July 2022 FirstFire Commitment Shares, the July
2022 FirstFire Note, and the July 2022 FirstFire Warrant, the Company allocated
the $25,000 in net proceeds received between the fair market value of the July
2022 FirstFire Commitment Shares and the July 2022 FirstFire Warrant.



Upon the issuance of the September 2022 FirstFire Note, September 2022 Ionic
Note, and September 2022 Jefferson Note described below, the conversion price of
the July 2022 FirstFire Note was further reduced from $0.10 per share to $0.02
per share.



During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $2,155 and $7,707, respectively, which included $1,459 and
$6,461, respectively, related to the accretion of the debt discount and accrued
interest in the amount of $696 and $1,246, respectively.

As of November 30, 2022, the carrying value of the July 2022 FirstFire Note was $27,500 as the debt discount was fully accreted by that date.

July 2022 GS Capital Securities 12% Convertible Promissory Note


On July 14, 2022, the Company entered into a securities purchase agreement (the
"July 2022 GS SPA") with GS, pursuant to which the Company issued (i) a 12%
convertible promissory note (the "July 2022 GS Note") in the principal sum of
$27,500 (the "July 2022 GS Principal Sum"), (ii) 935 shares of its common stock
as a commitment fee ("July 2022 GS Commitment Shares"), and (iii) a three-year
warrant ("July 2022 GS Warrant") to purchase 50,000 shares of the Company's
common stock at an exercise price of $1.00, subject to certain adjustments.

The following are the material terms of the July 2022 GS SPA and July 2022 GS Note:





  ? The July 2022 GS Note matures on September 14, 2022 (the "July 2022 GS
    Maturity Date").

? At its election, GS may convert the July 2022 GS Note into the Company's

common stock, subject to the Beneficial Ownership Limitations, at any time

after 180 days from the date of issuance of the July 2022 GS Note at a

conversion price equal to $0.10 per share, subject to certain adjustments.

? The Company agrees to pay interest on the July 2022 GS Principal Sum at the

rate of 12% per annum provided that the first two months of interest shall be

guaranteed.

? The July 2022 GS Note carries an original issue discount of $2,500 ("July 2022

GS OID").

? The July 2022 GS Note contains the Standard Prepayment Terms and Standard


    Default Terms.




Upon issuance of the July 2022 GS Note, the Company received net proceeds of
$25,000. Upon issuance of the July 2022 GS Commitment Shares, the July 2022 GS
Note, and the July 2022 GS Warrant, the Company allocated the $25,000 in net
proceeds received between the fair market value of the July 2022 GS Commitment
Shares and the July 2022 GS Warrant.



Upon the issuance of the September 2022 FirstFire Note, September 2022 Ionic
Note, and September 2022 Jefferson Note described below, the conversion price of
the July 2022 GS Note was further reduced from $0.10 per share to $0.02 per
share.



During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $2,155 and $7,707, respectively, which included $1,459 and
$6,461, respectively, related to the accretion of the debt discount and accrued
interest in the amount of $696 and $1,246, respectively.

As of November 30, 2022, 2022, the carrying value of the July 2022 GS Note was $27,500 as the debt discount was fully accreted by that date.

July 2022 Ionic Ventures, LLC 12% Convertible Promissory Note


On July 14, 2022, the Company entered into a securities purchase agreement (the
"July 2022 Ionic SPA") with Ionic, pursuant to which the Company issued (i) a
12% convertible promissory note (the "July 2022 Ionic Note") in the principal
sum of $27,500 (the "July 2022 Ionic Principal Sum"), (ii) 935 shares of its
common stock as a commitment fee ("July 2022 Ionic Commitment Shares"), and
(iii) a three-year warrant ("July 2022 Ionic Warrant") to purchase 50,000 shares
of the Company's common stock at an exercise price of $1.00, subject to certain
adjustments.


61

The following are the material terms of the July 2022 Ionic SPA and July 2022 Ionic Note:

? The July 2022 Ionic Note matures on September 14, 2022 (the "July 2022 Ionic

Maturity Date").

? At its election, Ionic may convert the July 2022 Ionic Note into the Company's

common stock, subject to the Beneficial Ownership Limitations, at any time

after 180 days from the date of issuance of the July 2022 Ionic Note at a

conversion price equal to $0.10 per share, subject to certain adjustments.

? The Company agrees to pay interest on the July 2022 Ionic Principal Sum at the

rate of 12% per annum provided that the first two months of interest shall be

guaranteed.

? The July 2022 Ionic Note carries an original issue discount of $2,500 ("July

2022 Ionic OID").

? The July 2022 Ionic Note contains the Standard Prepayment Terms and Standard


    Default Terms.




Upon issuance of the July 2022 Ionic Note, the Company received net proceeds of
$25,000. Upon issuance of the July 2022 Ionic Commitment Shares, the July 2022
Ionic Note, and the July 2022 Ionic Warrant, the Company allocated the $25,000
in net proceeds received between the fair market value of the July 2022 Ionic
Commitment Shares and the July 2022 Ionic Warrant.



Upon the issuance of the September 2022 FirstFire Note, September 2022 Ionic
Note, and September 2022 Jefferson Note described below, the conversion price of
the July 2022 Ionic Note was further reduced from $0.10 per share to $0.02


per
share.



During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $2,155 and $7,707, respectively, which included $1,459 and
$6,461, respectively, related to the accretion of the debt discount and accrued
interest in the amount of $696 and $1,246, respectively.

As of November 30, 2022, 2022, the carrying value of the July 2022 Ionic Note was $27,500 as the debt discount was fully accreted by that date.

July 2022 Jefferson Street Capital LLC 12% Convertible Promissory Note


On July 14, 2022, the Company entered into a securities purchase agreement (the
"July 2022 Jefferson SPA") with Jefferson, pursuant to which the Company issued
(i) a 12% convertible promissory note (the "July 2022 Jefferson Note") in the
principal sum of $27,500 (the "July 2022 Jefferson Principal Sum"), (ii) 935
shares of its common stock as a commitment fee ("July 2022 Jefferson Commitment
Shares"), and (iii) a three-year warrant ("July 2022 Jefferson Warrant") to
purchase 50,000 shares of the Company's common stock at an exercise price of
$1.00, subject to certain adjustments.

The following are the material terms of the July 2022 Jefferson SPA and July 2022 Jefferson Note:

? The July 2022 Jefferson Note matures on September 14, 2022 (the "July 2022

Jefferson Maturity Date").

? At its election, Jefferson may convert the July 2022 Jefferson Note into the

Company's common stock, subject to the Beneficial Ownership Limitations, at

any time after 180 days from the date of issuance of the July 2022 Jefferson

Note at a conversion price equal to $0.10 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the July 2022 Jefferson Principal Sum at

the rate of 12% per annum provided that the first two months of interest shall

be guaranteed.

? The July 2022 Jefferson Note carries an original issue discount of $2,500


    ("July 2022 Jefferson OID").
  ? The July 2022 Jefferson Note contains the Standard Prepayment Terms and
    Standard Default Terms.




Upon issuance of the July 2022 Jefferson Note, the Company received net proceeds
of $25,000. Upon issuance of the July 2022 Jefferson Commitment Shares, the July
2022 Jefferson Note, and the July 2022 Jefferson Warrant, the Company allocated
the $25,000 in net proceeds received between the fair market value of the July
2022 Jefferson Commitment Shares and the July 2022 Jefferson Warrant.



Upon the issuance of the September 2022 FirstFire Note, September 2022 Ionic
Note, and September 2022 Jefferson Note described below, the conversion price of
the July 2022 Jefferson Note was further reduced from $0.10 per share to $0.02
per share.


62






During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $2,155 and $7,707, respectively, which included $1,459 and
$6,461, respectively, related to the accretion of the debt discount and accrued
interest in the amount of $696 and $1,246, respectively.

As of November 30, 2022, the carrying value of the July 2022 Jefferson Note was $27,500 as the debt discount was fully accreted by that date.

September 2022 FirstFire Global 12% Convertible Promissory Note





On September 8, 2022, the Company entered into a securities purchase agreement
(the "September 2022 FirstFire SPA") with FirstFire, pursuant to which the
Company issued (i) a 12% convertible promissory note (the "September 2022
FirstFire Note") in the principal sum of $66,000 (the "September 2022 FirstFire
Principal Sum") and (ii) a three-year warrant ("September 2022 FirstFire
Warrant") to purchase 120,000 shares of the Company's common stock at an
exercise price of $1.00, subject to certain adjustments.

The following are the material terms of the September 2022 FirstFire SPA and September 2022 FirstFire Note:

? The September 2022 FirstFire Note matures on January 8, 2023 (the "September

2022 FirstFire Maturity Date").

? At its election, FirstFire may convert the September 2022 FirstFire Note into

the Company's common stock, subject to the Beneficial Ownership Limitations,

at any time at a conversion price equal to $0.02 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the September 2022 FirstFire Principal

Sum at the rate of 12% per annum provided that the first four months of

interest shall be guaranteed.

? The September 2022 FirstFire Note carries an original issue discount of $6,000

("September 2022 FirstFire OID").

? The September 2022 FirstFire Note contains the Standard Prepayment Terms and


    Standard Default Terms.




Upon issuance of the September 2022 FirstFire Note, the Company received net
proceeds of $60,000 and used such proceeds for working capital. Upon issuance of
the September 2022 FirstFire Note and the September 2022 FirstFire Warrant, the
Company allocated the $60,000 in net proceeds received between the fair market
value of the beneficial conversion feature of the September 2022 FirstFire Note
and the September 2022 FirstFire Warrant. The fair value of the beneficial
conversion feature of the September 2022 FirstFire Note was $57,756 and the fair
value of the September 2022 FirstFire Warrant was $2,244. The combination of
these two components as well as the September 2022 FirstFire OID resulted in a
total debt discount at issuance of $66,000 which is accreted over the term of
the September 2022 FirstFire Note.



During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $47,542 and $47,542, respectively, which included $44,902
and $44,902, respectively, related to the accretion of the debt discount and
accrued interest in the amount of $2,640 and $2,640, respectively.

As of November 30, 2022, the carrying value of the September 2022 FirstFire Note was $44,902, net of $21,098 in unaccreted debt discount.

September 2022 Ionic Ventures, LLC 12% Convertible Promissory Note





On September 8, 2022, the Company entered into a securities purchase agreement
(the "September 2022 Ionic SPA") with Ionic, pursuant to which the Company
issued (i) a 12% convertible promissory note (the "September 2022 Ionic Note")
in the principal sum of $66,000 (the "September 2022 Ionic Principal Sum") and
(ii) a three-year warrant ("September 2022 Ionic Warrant") to purchase 120,000
shares of the Company's common stock at an exercise price of $1.00, subject


to
certain adjustments.


63

The following are the material terms of the September 2022 Ionic SPA and September 2022 Ionic Note:

? The September 2022 Ionic Note matures on January 8, 2023 (the "September 2022

Ionic Maturity Date").

? At its election, Ionic may convert the September 2022 Ionic Note into the

Company's common stock, subject to the Beneficial Ownership Limitations, at

any time at a conversion price equal to $0.02 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the September 2022 Ionic Principal Sum

at the rate of 12% per annum provided that the first four months of interest

shall be guaranteed.

? The September 2022 Ionic Note carries an original issue discount of $6,000

("September 2022 Ionic OID").

? The September 2022 Ionic Note contains the Standard Prepayment Terms and


    Standard Default Terms.




Upon issuance of the September 2022 Ionic Note, the Company received net
proceeds of $60,000 and used such proceeds for working capital. Upon issuance of
the September 2022 Ionic Note and the September 2022 Ionic Warrant, the Company
allocated the $60,000 in net proceeds received between the fair market value of
the beneficial conversion feature of the September 2022 Ionic Note and the
September 2022 Ionic Warrant. The fair value of the beneficial conversion
feature of the September 2022 Ionic Note was $57,756 and the fair value of the
September 2022 Ionic Warrant was $2,244. The combination of these two components
as well as the September 2022 Ionic OID resulted in a total debt discount at
issuance of $66,000 which is accreted over the term of the September 2022 Ionic
Note.



During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $47,542 and $47,542, respectively, which included $44,902
and $44,902, respectively, related to the accretion of the debt discount and
accrued interest in the amount of $2,640 and $2,640, respectively.

As of November 30, 2022, the carrying value of the September 2022 Ionic Note was $44,902, net of $21,098 in unaccreted debt discount.

September 2022 Jefferson Street Capital LLC 12% Convertible Promissory Note





On September 8, 2022, the Company entered into a securities purchase agreement
(the "September 2022 Jefferson SPA") with Jefferson, pursuant to which the
Company issued (i) a 12% convertible promissory note (the "September 2022
Jefferson Note") in the principal sum of $27,500 (the "September 2022 Jefferson
Principal Sum") and (ii) a three-year warrant ("September 2022 Jefferson
Warrant") to purchase 45,454 shares of the Company's common stock at an exercise
price of $1.00, subject to certain adjustments.

The following are the material terms of the September 2022 Jefferson SPA and September 2022 Jefferson Note:

? The September 2022 Jefferson Note matures on January 8, 2023 (the "September

2022 Jefferson Maturity Date").

? At its election, Jefferson may convert the September 2022 Jefferson Note into

the Company's common stock, subject to the Beneficial Ownership Limitations,

at any time at a conversion price equal to $0.02 per share, subject to certain

adjustments.

? The Company agrees to pay interest on the September 2022 Jefferson Principal

Sum at the rate of 12% per annum provided that the first four months of

interest shall be guaranteed.

? The September 2022 Jefferson Note carries an original issue discount of $2,500

("September 2022 Jefferson OID").

? The September 2022 Jefferson Note contains the Standard Prepayment Terms and


    Standard Default Terms.




Upon issuance of the September 2022 Jefferson Note, the Company received net
proceeds of $25,000 and used such proceeds for working capital. Upon issuance of
the September 2022 Jefferson Note and the September 2022 Jefferson Warrant, the
Company allocated the $25,000 in net proceeds received between the fair market
value of the beneficial conversion feature of the September 2022 Jefferson
Commitment Shares and the September 2022 Jefferson Warrant. The fair value of
the beneficial conversion feature of the September 2022 Jefferson Note was
$24,147, and the fair value of the September 2022 Jefferson Warrant was $853.
The combination of these two components as well as the September 2022 Jefferson
OID resulted in a total debt discount at issuance of $27,500 which is accreted
over the term of the September 2022 Jefferson Note.



During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $19,809 and $19,809, respectively, which included $18,709
and $18,709, respectively, related to the accretion of the debt discount and
accrued interest in the amount of $1,100 and $1,100, respectively.


64

As of November 30, 2022, the carrying value of the September 2022 Jefferson Note was $18,709, net of $8,709 in unaccreted debt discount.

September 2022 GS Capital Securities 12% Convertible Promissory Note





On September 13, 2022, the Company entered into a securities purchase agreement
(the "September 2022 GS SPA") with GS, pursuant to which the Company issued (i)
a 12% convertible promissory note (the "September 2022 GS Note") in the
principal sum of $11,000 (the "September 2022 GS Principal Sum") and (ii) a
three-year warrant ("September 2022 GS Warrant") to purchase 18,000 shares of
the Company's common stock at an exercise price of $1.00, subject to certain
adjustments.

The following are the material terms of the September 2022 GS SPA and September 2022 GS Note:

? The September 2022 GS Note matures on January 8, 2023 (the "September 2022 GS

Maturity Date").

? At its election, GS may convert the September 2022 GS Note into the Company's

common stock, subject to the Beneficial Ownership Limitations, at any time at

a conversion price equal to $0.02 per share, subject to certain adjustments.

? The Company agrees to pay interest on the September 2022 GS Principal Sum at

the rate of 12% per annum provided that the first four months of interest

shall be guaranteed.

? The September 2022 GS Note carries an original issue discount of $1,000

("September 2022 GS OID").

? The September 2022 GS Note contains the Standard Prepayment Terms and Standard


    Default Terms.




Upon issuance of the September 2022 GS Note, the Company received net proceeds
of $25,000 and used such proceeds for working capital. Upon issuance of the
September 2022 GS Note and the September 2022 GS Warrant, the Company allocated
the $10,000 in net proceeds received between the fair market value of the
beneficial conversion feature of the September 2022 GS Note and the September
2022 GS Warrant. The fair value of the beneficial conversion feature of the
September 2022 GS Note was $9,604, and the fair value of the September 2022 GS
Warrant was $396. The combination of these two components as well as the
September 2022 GS OID resulted in a total debt discount at issuance of $11,000
which is accreted over the term of the September 2022 GS Note.


65






During the quarter and six months ended November 30, 2022, the Company recorded
interest expense of $7,473 and $7,473, respectively, which included $7,033 and
$7,033, respectively, related to the accretion of the debt discount and accrued
interest in the amount of $440 and $440, respectively.

As of November 30, 2022, the carrying value of the September 2022 GS Note was $7,033, net of $3,967 in unaccreted debt discount.





Secured Promissory Notes



On November 15, 2021, the Company entered into a 10% secured promissory note
with an accredited investor ("Secured Note One") for which it received net
proceeds of $250,000, consisting of a face amount of $262,500 and an original
issuance discount of $12,500 "(Secured Note One OID"). In addition, the Company
issued 30,000 commitment warrants to the investor for the purchase of the
Company's common stock at an exercise price of $10.73 per share ("Secured Note
One Warrants").



Upon issuance of the Secured Note One and Secured Note One Warrants, the Company
allocated the $250,000 in net proceeds received between the fair market value of
Secured Note One and the Secured Note One Warrants.



During the quarter ended November 30, 2022, the Company did not make any
principal payments. For the quarter ended November 30, 2022, the company
recognized $7,969 in total interest expense associated with Secured Note One,
comprised of $3,118 in accrued interest payable and $4,851 in accretion expense
related to the original issuance discount and debt discount related to the
warrants.



During the six months ended November 30, 2022, the Company paid $4,500 on the
Secured Note One. For the six months ended November 30, 2022, the company
recognized $15,976 in total interest expense associated with Secured Note One,
comprised of $1,077 in cash interest payments, $5,197 in accrued interest
payable and $9,702 in accretion expense related to the original issuance
discount and debt discount related to the warrants.

As of November 30, 2022, the carrying value of Secured Note One is $47,119, net of $77,613 in unaccreted debt discounts.





On November 18, 2021, the Company entered into a 10% secured promissory note
with an accredited investor ("Secured Note Two") for which it received net
proceeds of $150,000, consisting of a face amount of $157,500 and an original
issuance discount of $7,500 ("Secured Note Two OID"). In addition, the Company
issued 18,000 commitment warrants for the purchase of the Company's common stock
at an exercise price of $10.73 per share ("Secured Note Two Warrant").



Upon issuance of the Secured Note Two and Secured Note Two Warrants, the Company
allocated the $150,000 in net proceeds received between the fair market value of
Secured Note Two and the Secured Note Two Warrants.

During the quarter ended November 30, 2022, the Company did not make any made
principal payments on Secured Note Two. For the quarter ended November 30, 2022,
the company recognized $4,789 in total interest expense associated with Secured
Note Two, comprised of $1,878 in accrued interest payable and $2,911 in
accretion expense related to the original issuance discount and debt discount
related to the warrants.



For the six months ended November 30, 2022, the company recognized $9,597 in
total interest expense associated with Secured Note Two, comprised of $646 in
cash interest payments, $3,130 in accrued interest payable and $5,821 in
accretion expense related to the original issuance discount and debt discount
related to the warrants.

As of November 30, 2022, the carrying value of Secured Two Note is $28,550, net of $46,568 in unaccreted debt discounts.





Related Party Note Payable



On December 10, 2021, the Company entered into a loan agreement with Jed Kaplan,
the Company's former Chairman of the Board, that has a principal amount of
$247,818 (See Note 6 - Related Party Transactions). The loan bears interest at a
rate of 5% per annum and matured on June 10, 2022.



On June 10, 2022, the loan and accrued interest of $6,178 were converted into a
17% equity stake in Simplicity One, increasing Kaplan's total stake to 37% and
reducing the Company's stake to 59%.



During the quarter ended November 30, 2022, the Company recognized interest
expense of $0 with no comparable amount during the prior period. During the six
months ended November 30, 2022, the Company recognized interest expense of $339
with no comparable amount during the prior period.



Other Short Term Note Payable



During 2020, the Company received loan proceeds in the amount of $82,235 under
the Paycheck Protection Program established as part of the Coronavirus Aid,
Relief and Economic Security Act ("CARES Act"). During the year ended May 31,
2022, $40,500 of the obligation was forgiven by the Small Business
Administration. As of November 30, 2022, the outstanding balance of this
obligation was $41,735.

Adoption of 2020 Omnibus Incentive Plan





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


66






Critical Accounting Policies



The preparation of consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America ("GAAP") requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and income and
expenses during the periods reported. Actual results could materially differ
from those estimates.



Revenue Recognition



In accordance with ASC 606, Revenues from Contracts with Customers, the Company
recognizes revenue when performance obligations under the terms of a contract
with the customer are satisfied. Product sales occur once control is transferred
upon delivery to the customer. Revenue is measured as the amount of
consideration the Company expects to receive in exchange for transferring goods
and services.

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

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





Company-owned Store Sales



The Company-owned stores principally generate revenue from retail esports gaming
centers. Revenues from Company-owned stores are recognized when the products are
delivered, or the service is provided. After hours, the Company also mines for
crypto currency using the computer equipment at the company-owned stores. Crypto
mining revenue is recognized as the mining occurs. As of November 30, 2022, all
Company-owned store have been sold or closed.



Franchise Revenues



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



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



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

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

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




67






Esports Revenue


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



Accounts Receivable



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

Intangible Assets and Impairment





Intangible assets that are subject to amortization are reviewed for potential
impairment whenever events or circumstances indicate that carrying amounts may
not be recoverable. Assets not subject to amortization are tested for impairment
at least annually. These costs were included in intangible assets on our balance
sheet and amortized on a straight-line basis when placed into service over the
estimated useful lives of the costs, which is 3 to 5 years.



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



Goodwill

Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not amortize goodwill, but we assess our goodwill for impairment at least annually.





Fair Value Measurements


Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. ASC 820 establishes a three-tier fair
value hierarchy which prioritizes the inputs used in measuring fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurements) and the
lowest priority to unobservable inputs (level 3 measurements). These tiers
include:

? Level 1 inputs are quoted prices in active markets for identical assets or

liabilities.

? Level 2 inputs are observable for the asset or liability, either directly or

indirectly, including quoted prices in active markets for similar assets or

liabilities.

? Level 3 inputs are unobservable and reflect the Company's own assumptions.






Other than the derivative liability, the Company does not have a material amount
of financial assets or liabilities that are required to be measured at fair
value on a recurring basis under U.S. GAAP. None of the Company's non-financial
assets or non-financial liabilities are required to be measured at fair value on
a recurring basis.

The Company has not elected to use fair value measurement for any assets or liabilities for which fair value measurement is not presently required by U.S. GAAP. However, the Company believes the fair values of cash and cash equivalents, accounts receivable, inventory, accounts payable, and accrued liabilities approximate their carrying amounts.

Latest news about Simplicity Esports and Gaming Company

Simplicity Esports and Gaming Company announced that it has received $0.06425 million in funding from 1800 Diagonal Lending, LLC	13/23/13	CI
Simplicity Esports and Gaming Company Reports Earnings Results for the Third Quarter and Nine Months Ended February 28, 2023	20/23/20	CI
Simplicity Esports and Gaming Company Reports Earnings Results for the Second Quarter and Six Months Ended November 30, 2022	10/23/10	CI
Simplicity Esports and Gaming Company announced that it expects to receive $0.033 million in funding from FirstFire Capital Management LLC, Ionic Ventures, LLC	08/23/08	CI
Simplicity Esports and Gaming Company announced that it has received $0.064 million in funding from Ionic Ventures, LLC, FirstFire Capital Management LLC	30/23/30	CI
Simplicity Esports and Gaming Company Announces Resignation of Max Hooper	16/22/16	CI
Simplicity Esports and Gaming Company Reports Earnings Results for the First Quarter Ended August 31, 2022	09/22/09	CI
Diverted River Technology, LLC agreed to acquire Simplicity Esports and Gaming Company (OTCPK : WINR) in a reverse merger transaction.	28/22/28	CI
Simplicity Esports and Gaming Company Reports Earnings Results for the Full Year Ended May 31, 2022	27/22/27	CI
Simplicity Esports and Gaming Company Auditor Raises 'Going Concern' Doubt	27/22/27	CI
Simplicity Esports and Gaming Company announced that it expects to receive $0.06 million in funding from Ionic Ventures, LLC	08/22/08	CI
Simplicity Esports and Gaming Company announced that it has received $0.1 million in funding from Ionic Ventures, LLC, Jefferson Street Capital LLC, FirstFire Capital Management LLC, GS Capital Partners LLC	14/22/14	CI
Simplicity Esports and Gaming Company Announces CFO Changes	09/22/09	CI
Simplicity Esports and Gaming Company Announces Board Changes	09/22/09	CI
Simplicity Esports and Gaming Company Provides Revenue Guidance for the Fiscal Year Ending May 31, 2022	25/22/25	CI
Simplicity Esports and Gaming Company Announces Resignation of Jed Kaplan as Member of the Board of Directors	25/22/25	CI
Simplicity Esports and Gaming Company Appoints Beatrice Tarka as Chairperson	29/22/29	CI
Simplicity Esports and Gaming Company Announces Board of Directors Changes	29/22/29	CI
Simplicity Esports and Gaming Company Reports Earnings Results for the Third Quarter and Nine Months Ended February 28, 2022	15/22/15	CI
Simplicity Esports and Gaming Company announced that it expects to receive $0.075 million in funding from Jefferson Street Capital LLC	01/22/01	CI
Simplicity Esports and Gaming Company announced that it expects to receive $0.11 million in funding from FirstFire Capital Management LLC	21/22/21	CI
Simplicity Esports and Gaming Company Signs Agreement for Opening of Two New Esports Gaming Centers for Live Stream Broadcast Company Huvi	18/22/18	CI
Simplicity Esports and Gaming Company Reports Earnings Results for the Second Quarter and Six Months Ended November 30, 2021	15/22/15	CI
Simplicity Esports and Gaming Company Signs Equipment Loan to Purchase New PCs with NVIDIA 3090 GPUs for Gaming and Cryptocurrency Mining in its Esports Gaming Centers	19/21/19	CI
Simplicity Esports Signs Agreement with Certified Guaranty Company to Make 29 of Its Locations Official Submission Centers	05/21/05	CI

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Company Profile

Simplicity Esports and Gaming Company, through its subsidiary, PLAYlive Nation, Inc. (PLAYlive), has a network of franchised esports gaming centers. The Company has five franchised locations operating in California, Georgia, Ohio, South Carolina and Texas. PLAYlive offers a video gaming lounge concept to qualified franchisees. PLAYlive offers single-unit location franchises, as well as agreements to develop multiple locations. The Companyâs organized, multiplayer video games that include real-time strategy, fighting, first-person shooter and multiplayer online battle arena games. It also includes games, which can be played, primarily by amateurs, in multiplayer competitions on the Sony PlayStation, Microsoft Xbox and WII Nintendo systems.

Sector

Internet Services

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Sector Internet Gaming

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SIMPLICITY ESPORTS AND GAMING COMPANY	-50.00%	8.98T
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Internet Gaming

Simplicity Esports and Gaming Company

Equities

WINR

US82887P2092

Internet Services

SIMPLICITY ESPORTS & GAMING CO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

Latest news about Simplicity Esports and Gaming Company

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Annual profits - Rate of surprise

Sector Internet Gaming