SIMPLICITY ESPORTS & GAMING Co (WINR)·Q2 2019 Earnings Summary

Executive Summary

• Q2 2019 (three months ended November 30, 2018) reported zero revenue, operating expenses of $3.14M, net loss of $(2.98)M, and diluted EPS of $(1.21), reflecting a step‑change in costs versus prior quarters due to transaction-related items .
• Sequentially, results deteriorated versus Q1 2019 (zero revenue, net loss $(4.3)K, diluted EPS $0.00), while year‑over‑year losses expanded from $(41.2)K in Q2 2018 as the SPAC transitioned from trust‑interest income to operating entity obligations .
• Strategic catalysts: business combination with Smaaash closed Nov 20, 2018, name change to Smaaash Entertainment Inc., and trading began on Nasdaq (SMSH) Nov 23, 2018; observed prices were $5.50 (stock) and $0.37 (warrants) on Nov 23, 2018 .
• Risks: Nasdaq issued delisting notices for multiple listing deficiencies; management disclosed substantial doubt about going concern and intends to raise additional funds .

What Went Well and What Went Wrong

What Went Well

• Closed the business combination with Smaaash and secured exclusive master franchise and distribution rights for North and South America, establishing a pathway to monetization via franchise fees and product margins .
• Post‑quarter, completed the acquisition of Simplicity Esports, making esports the company’s primary business going forward: “As of December 31, 2018… the business of Simplicity has now become the primary business of the Company.” .
• Underlying partner footprint: Smaaash operates 40 centers (39 India, 1 U.S.), providing a base of products, IP, and operations to leverage for North/South America expansion .

What Went Wrong

• Operating expenses surged to $3.14M in Q2 (including $2.125M non‑cash advisory shares to Chardan), driving a net loss of $(2.98)M and EPS of $(1.21) despite zero revenue .
• Nasdaq delivered multiple deficiency notices (market value of publicly held shares, round‑lot holders, LAS filings), introducing listing risk and near‑term overhang .
• Cash outside trust was $414.4K with accrued expenses of $935.9K and a $1.8M secured demand note due in tranches in 2019, highlighting near‑term liquidity pressure .

Financial Results

Balance sheet and liquidity metrics (as of period end):

Segment breakdown

• No reportable segments or revenue in the quarter; operations were primarily SPAC-level costs, closing transactions, and establishing rights (Master Franchise and Master Distribution) .

KPIs (context)

• Smaaash centers operated: 40 (39 India, 1 U.S.), informing potential franchise pipeline in North/South America .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “As of December 31, 2018, upon the completion of the acquisition of Simplicity Esports, LLC, the business of Simplicity has now become the primary business of the Company.” .
• “These factors raise substantial doubt about the Company’s ability to continue as a going concern.” .
• Transaction details: at the special meeting, 4,448,260 shares were redeemed for ~$45.46M; common stock and warrants began trading on Nasdaq as SMSH/SMSHW on Nov 23, 2018 .
• Strategic rights: exclusive master franchise and license/distribution agreements for Smaaash products in North/South America, with fee structures (5% sign‑on, 5% revenue share, 15% product markup) .

Q&A Highlights

• No earnings call transcript or Q&A found for Q2 2019 in company filings or document catalog [ListDocuments results: none for earnings-call-transcript in period].

Estimates Context

• Wall Street consensus (S&P Global) for WINR was unavailable due to missing CIQ mapping; no EPS or revenue estimates retrieved for Q1/Q2 2019. As a result, comparisons to Street estimates could not be made [SpgiEstimatesError].

Where estimates may need to adjust:

• Given zero revenue and outsized Q2 operating costs tied to transaction and advisory items, any forward expectations should incorporate near‑term OpEx normalization, the timing of franchise openings, product sales ramp, and post‑combination esports monetization .

Key Takeaways for Investors

• The quarter marks a structural transition from SPAC/trust interest to operating entity obligations; losses widened as transaction costs and advisory share issuance hit P&L (EPS $(1.21)) .
• Strategic optionality exists via exclusive North/South America rights (franchise fees and distribution markups), but monetization requires execution on opening centers and selling products to franchisees .
• Liquidity is tight (cash $414K; accrued expenses ~$936K; $1.8M secured note due in 2019), implying near‑term capital raising need and dilution risk .
• Listing overhang: multiple Nasdaq deficiencies and appeal process elevate headline risk; monitor outcomes closely .
• Post‑quarter acquisition of Simplicity shifts focus to esports; near‑term narrative will center on team/brand monetization, events, sponsorships, and retail center strategy .
• Trading commenced as SMSH on Nov 23, 2018 ($5.50 stock, $0.37 warrants observed), with stock reaction tied to execution milestones and listing resolution .
• Tactically, expect volatility and binary outcomes around funding and listing decisions; medium‑term thesis hinges on scaling franchised centers and esports commercialization against a lean balance sheet .

Additional Documents Reviewed (Q2 2019 context)

• Form 10‑Q for Q2 2019 (period ended Nov 30, 2018): full financials, MD&A, risks, subsequent events –.
• Form 10‑Q for Q1 2019 (period ended Aug 31, 2018): prior quarter baseline –.
• Form 8‑K (Nov 30, 2018): business combination closing, Master Franchise/Distribution, settlement with Maxim, trading and press releases referenced –.

Notes

• No 8‑K 2.02 earnings press release or earnings call transcript found for Q2 2019 in the document catalog [ListDocuments results].