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Sunday, November 27, 2022

Simplicity Esports and Gaming Co (OTCMKTS: WINR) the Diverted River Reverse Merger

Simplicity Esports and Gaming Co (OTCMKTS: WINR) is making an explosive move northbound after the Company filed an 8k and issued a press release announcing the exchange agreement dated as of September 28, 2022, by and among the Company, Diverted River Technology, LLC the member(s) of Diverted River and Zachary Johnson, as the Members’ representative. Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire from the Members 100% of the membership interests of Diverted River held by the Members as of the closing in exchange for the issuance by the Company to the Members of shares of the Company’s common stock equal to 80% of the issued and outstanding shares of the Company’s common stock as of the Closing. 

Reverse merger SPACS can be more explosive than biotech’s when the incoming Company has real value but is undiscovered to investors and many RM stocks, we have covered on this website have gone from pennies to dollars. Two recent RM runners that stand out are TSNP/HMBL which went from sub pennies (where we first wrote about it) to several dollars per share. The other is HRBR which went from a few cents (where we first wrote about it) to $3 plus. WINR is fully reporting OTCQB and already established in the esports sector with 5 esports gaming center locations currently in operation. The Company has $10 million in assets vs $6.2 million in liabilities and $2,637,166 in revenues for the 9 months ended February 28, 2022. 

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Simplicity Esports and Gaming Co (OTCMKTS: WINR) owns 5 esports gaming centers and is the franchisor for 12 esports gaming centers that give the public an opportunity to experience gaming and esports in competitive and casual social settings, regardless of skill or experience. Simplicity branded teams compete in popular games such as Heroes of the Storm®. Simplicity Esports also organizes and hosts various in-person events and play from home, online tournaments. Heroes of the Storm® is a registered trademark of their owner. 

On September 28 WINR filed an 8k that stated: Simplicity Esports and Gaming Company entered into an exchange agreement dated as of September 28, 2022, by and among the Company, Diverted River Technology, LLC the member(s) of Diverted River from time to time and Zachary Johnson, as the Members’ representative. Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire from the Members 100% of the membership interests of Diverted River held by the Members as of the closing in exchange for the issuance by the Company to the Members of shares of the Company’s common stock equal to 80% of the issued and outstanding shares of the Company’s common stock as of the Closing. 

Following the Closing, Diverted River will become a wholly owned subsidiary of the Company. Also following the Closing, it is expected that the Company’s name will be changed to Diverted River Technology, Inc., and the business of the Company will become that of Diverted River, an ETO focused on a sustainable, high margin, recurring revenue business model that requires limited capital expenditures. 

At the Closing, the Company will expand the size of the Company’s Board of Directors by three persons, to a total of seven persons, and will name Mr. Johnson and, within 90 days after Closing, two other persons, as directors on the Board, one of whom will be an independent director. Also at the Closing, the Company will name Mr. Johnson as Chief Executive Officer of the Company. Within 90 days of Closing, the Board will name a Chief Technology Officer, subject to Mr. Johnson’s approval. At the Closing, the Company will also enter into employment agreements with Mr. Johnson and certain other Diverted River employees as identified and agreed by the parties. Within 90 days of Closing, the Company will hire Velocity 42 Limited as its primary software developer. 

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WINR

The Exchange Agreement contains certain covenants, representations and warranties customary for an agreement of this type. In addition, the Closing is subject to the satisfaction or waiver of certain conditions, including, but not limited to, (i) the increase by the Company of its authorized shares of common stock to 250,000,000 shares; (ii) execution by Diverted River of agreements with clients generating at least $60,000 per month in revenue for at least 24 months following the Closing, with such agreements being in form and substance as agreed to by the Company and Diverted River; (iii) settlement by the Company of any debt with landlords related to the closure of the Company’s gaming center venues; (iv) the Company having obtained binding commitments from investors to invest at least $4,000,000, through the issuance of shares of Company common stock; (v) repayment by the Company of its convertible notes, or execution of agreements with noteholders to convert such notes into shares of Company common stock comprising no more than 12.5% of the issued and outstanding common stock of the Company after giving effect to the Closing; (vi) reaching an agreement with warrant holders to amend the exercise price to be $1.00 per share; (vii) execution of note amendments by holders of Company promissory notes that are not presently convertible into shares of Company common stock such that the notes will be converted into Company common stock and such notes shall have been converted, with such shares being included in the 12.5% limitation set forth in clause (v) hereof; (viii) provision by Diverted River of audited financial statements; and (ix) completion of satisfactory due diligence reviews by the Company and Diverted River. The parties may terminate the Exchange Agreement pursuant to the terms of the Exchange Agreement, including, but not limited to, if the conditions to Closing have not been satisfied or waived by December 15, 2022. 

Diverted River is an ETO for the location-based entertainment (“LBE”) industry. Diverted River provides integration through their proprietary cloud-based user platform called Takoha into a multitude of entertainment, business, data and management systems to help managers and owners of LBEs provide a seamless experience for their customers while compiling all of their customers’ data in one analytics system. 

In a seperate press release, Roman Franklin, CEO of Simplicity Esports, stated, “I am thrilled with the prospect of working together with Zack Johnson and his incredible team. Their previous company, ggCircuit, had software and services that dominated the esports gaming center industry space. Their experience, relationships, and reputation provide a solid foundation to grow Diverted River into a powerhouse company servicing the technology needs of the broader $35 billion-dollar family entertainment center industry.” 

Zack Johnson, CEO of Diverted River, added, “We met Roman and Simplicity Esports three years ago when four different companies were bidding to buy our esports software company, ggCircuit. Simplicity Esports was a great client of ggCircuit and we are impressed with Roman and his business and financial intelligence in the public market. Now as we expand our platform experience into a 10x larger entertainment market, we are excited to join forces and launch our new platform together as Diverted River in 2023. Our team now boasts just shy of 80 million hours of usage on our software platforms over the past 20 years in high profile and public spaces in retail, educational, and esports venues. The Family Entertainment Center (“FEC”) industry is technologically fragmented and utilizes 15-17 software tools per business to manage their backend and customer experience. They are served by slow moving software companies utilizing outdated technology stacks that hold these businesses hostage with proprietary hardware and software. We plan to flip this industry on its head and provide solutions that allow venues to have open market hardware choices, and robust integration points with synergistic software platforms.” 

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WINR was up over 600 % on Thursday after the Company announced the reverse merger with Diverted River; an ETO for the location-based entertainment (“LBE”) industry. Diverted River provides integration through their proprietary cloud-based user platform called Takoha into a multitude of entertainment, business, data and management systems to help managers and owners of LBEs provide a seamless experience for their customers while compiling all of their customers’ data in one analytics system. Reverse merger SPACS can be more explosive than biotech’s when the incoming Company has real value but is undiscovered to investors and many RM stocks, we have covered on this website have gone from pennies to dollars. Two recent RM runners that stand out are TSNP/HMBL which went from sub pennies (where we first wrote about it) to several dollars per share. The other is HRBR which went from a few cents (where we first wrote about it) to $3 plus. WINR is fully reporting OTCQB and already established in the esports sector with 5 esports gaming center locations currently in operation. The Company has $10 million in assets vs $6.2 million in liabilities and $2,637,166 in revenues for the 9 months ended February 28, 2022. We will be updating on WINR when more details emerge so make sure you are subscribed to Microcapdaily.

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Disclosure: we hold no position in WINR either long or short and we have not been compensated for this article.

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