INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2022
UNAUDITED
INDEX
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2022
December 31, 2021
Assets
(Unaudited)
Current Assets
Cash
$
5,022,037
$
6,065,461
Accounts receivable, internet of allowance for credit score losses of $0 and $0, respectively
998,803
956,555
Contract asset
75,404
147,913
Prepaid bills and different present belongings
339,625
217,296
Current belongings held for disposal
1,624,585
2,101,209
Total present belongings
8,060,454
9,488,434
Investment, value
200,000
200,000
Equipment, internet
45,721
55,105
Right-of-use asset – working lease
151,109
165,522
Intangibles
Intangible belongings, internet
1,850,542
5,551,540
Goodwill
1,996,167
3,511,167
Non-current belongings held for disposal
285,804
1,588,058
4,132,513
10,650,765
Total belongings
$
12,589,797
$
20,559,826
June 30, 2022
December 31, 2021
Liabilities and Stockholders’ Equity
(Unaudited)
Current Liabilities
Accrued bills
$
1,342,981
$
1,404,022
Contract liabilities
51,745
308,058
Due to Affiliate
47,520
93,954
Due to Seller
250,000
691,523
Other present liabilities
–
–
Current portion of lengthy-time period debt
599,537
–
Current portion of lease legal responsibility
30,154
29,265
Current liabilities held for disposal
2,833,698
3,333,733
Total present liabilities
5,155,635
5,860,555
Long-Term Liabilities
Deferred tax legal responsibility
6,279
5,581
Other lengthy-time period liabilities
–
–
Debt
2,380,181
–
Lease legal responsibility
120,955
136,257
Non-current liabilities held for disposal
334,127
365,977
Total liabilities
7,997,177
6,368,370
Commitments and Contingencies
Stockholders’ Equity
Ordinary shares, $0.02 par worth; approved shares 92,900,000 issued and excellent shares: 22,360,987 and 22,360,987, respectively
447,346
447,346
Series A-1 most well-liked inventory, $0.02 par worth;
1,176
1,094
approved shares: 2,600,000;
issued and excellent shares: 58,814 and 54,737, respectively;
liquidation desire: $127,585 and $118,741, respectively
Series B most well-liked inventory, $0.02 par worth;
2,496
2,496
approved shares: 3,700,000;
issued and excellent shares: 124,810 and 124,810, respectively;
liquidation desire: $272,996 and $274,939, respectively
Treasury inventory, 900 peculiar shares at value
(29,000
)
(29,000
)
Additional paid-in capital
74,347,227
72,101,783
Accumulated deficit
(70,176,625
)
(58,332,263
)
Total stockholders’ fairness
4,592,620
14,191,456
Total liabilities and stockholders’ fairness
$
12,589,797
$
20,559,826
The accompanying notes are an integral a part of the consolidated monetary statements.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended June 30
2022
2021
Revenues
$
3,647,590
$
1,631,966
Cost of Revenues
3,437,400
1,427,999
Gross Profit
210,190
203,967
Operating Expenses
Selling, common, and administrative bills
5,976,848
1,562,496
Transaction bills
–
883,990
Commitment payment expense
–
18,851,927
Goodwill and intangible asset impairment bills
4,726,000
–
Total working bills
10,702,848
21,298,413
Operating Loss
(10,492,658
)
(21,094,446
)
Other Income and Expense
Interest revenue
23,502
5,862
Other Expense
(64,434
)
–
Interest expense
(54,418
)
–
Total different revenue and expense
(95,350
)
5,862
Loss Before Income Taxes
(10,588,008
)
(21,088,584
)
Provision for revenue tax bills
700
700
Net Loss from persevering with operations
(10,588,708
)
(21,089,284
)
Loss from discontinued operations, internet of tax
(1,255,654
)
–
Net Loss
$
(11,844,362
)
$
(21,089,284
)
Numerator for fundamental and diluted internet loss per share:
Net loss from persevering with operations accessible to peculiar shareholders
$
(10,594,549
)
$
(21,494,974
)
Net loss from discontinued operations accessible to peculiar shareholders
$
(1,255,654
)
$
–
Denominator for fundamental and diluted internet loss per share:
Weighted common shares excellent
23,614,579
10,763,811
Net loss per share – Basic and diluted
Net loss from persevering with operations per share
$
(0.45
)
$
(2.00
)
Net loss from discontinued operations per share
(0.05
)
–
Net loss per share
$
(0.50
)
$
(2.00
)
The accompanying notes are an integral a part of the consolidated monetary statements.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Ordinary shares
Series A-1 most well-liked inventory
Series B most well-liked inventory
Additional
Total
Paid-In
Treasury
Stock
Accumulated
shareholders’
Shares
Amount
Shares
Amount
Shares
Amount
Capital
inventory
subscription
deficit
fairness
Balance, December 31, 2020 1
10,750,768
$
215,014
–
$
–
–
$
–
$
3,833,891
$
–
$
(5,266
)
$
(2,688,128
)
$
1,355,511
Net loss
–
–
–
–
–
–
–
–
–
(21,089,284
)
(21,089,284
)
Stock-based compensation expense
–
–
–
–
–
–
63,233
–
–
–
63,233
Collection of inventory subscription
–
–
–
–
–
–
–
–
5,266
–
5,266
Series A Preferred Stock low cost accretion
–
–
–
–
–
–
(326,530
)
–
–
–
(326,530
)
Series A Preferred Stock dividend accretion
–
–
–
–
–
–
(79,160
)
–
–
–
(79,160
)
Dividends on Series A Preferred Stock in widespread inventory
26,248
525
–
–
–
–
42,142
–
–
–
42,667
Balance, June 30, 2021 1
10,777,016
$
215,539
–
$
–
–
$
–
$
3,533,576
$
–
$
–
$
(23,777,412
)
$
(20,028,297
)
Balance, December 31, 2021
22,360,987
$
447,346
54,737
$
1,094
124,810
$
2,496
$
72,101,783
$
(29,000
)
$
–
$
(58,332,263
)
$
14,191,456
Net loss
–
–
–
–
–
–
–
–
–
(11,844,362
)
(11,844,362
)
Stock-based compensation expense
–
–
–
–
–
–
2,245,526
–
–
–
2,245,526
Dividends on Series B most well-liked inventory in Series A-1 most well-liked inventory
–
–
4,077
82
–
–
(82
)
–
–
–
–
Balance, June 30, 2022
22,360,987
$
447,346
58,814
$
1,176
124,810
$
2,496
$
74,347,227
$
(29,000
)
$
–
$
(70,176,625
)
$
4,592,620
1-
Equity construction was adjusted for all durations offered utilizing the trade ratio established within the Merger Agreement to mirror the variety of shares of the authorized dad or mum (the accounting acquiree) issued within the MTS Merger (reverse acquisition). See Note 3 for a dialogue of the MTS Merger.
The accompanying notes are an integral a part of the consolidated monetary statements.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30
Includes money stream actions from each persevering with and discontinued operations
2022
2021
Operating actions
Net loss
$
(11,844,362
)
$
(21,089,284
)
Adjustments to reconcile internet loss to internet money used for working actions:
to internet money used for working actions
Depreciation and amortization
586,750
94,881
Deferred tax expense
698
700
Stock-based compensation expense
2,245,526
63,233
Commitment payment expense
–
18,851,927
Gain on disposal of apparatus
(480
)
–
Goodwill and intangible asset impairment bills
4,726,000
–
Changes in belongings and liabilities
Accounts receivable
(42,248
)
(143,637
)
Contract asset
72,509
184,745
Prepaid bills and different present belongings
(122,329
)
(9,036
)
Accrued bills and Other present liabilities
(107,475
)
293,634
Contract liabilities
(256,313
)
(285,897
)
Other lengthy-time period liabilities
–
–
Net money used for working actions – persevering with operations
(4,741,724
)
(2,038,734
)
Net money generated by working actions – discontinued operations
1,257,436
–
Net money used for working actions
(3,484,288
)
(2,038,734
)
Investing actions
Capital expenditures for tools
(7,919
)
(20,064
)
Capital expenditures for internally developed software program
(80,215
)
(120,034
)
Proceeds from the sale of apparatus
4,993
–
Payments referring to the acquisition of FourCubed
(441,523
)
–
Net money used for investing actions – persevering with operations
(524,664
)
(140,097
)
Net money used for investing actions – discontinued operations
(10,443
)
–
Net money used for investing actions
(535,107
)
(140,097
)
Financing actions
Collection of inventory subscription
–
5,266
Proceeds from debt
3,250,000
–
Repayments of debt
(248,598
)
–
Payments of debt subject prices
(25,431
)
–
Net money generated by financing actions – persevering with operations
2,975,971
5,266
Net money generated by financing actions – discontinued operations
–
–
Net money generated by financing actions
2,975,971
5,266
Net change in money and restricted money
(1,043,424
)
(2,173,566
)
Cash and restricted money, starting of yr
6,065,461
2,585,180
Cash and restricted money, finish of yr
$
5,022,037
$
411,614
Non-cash financing actions
Dividends on Series B most well-liked inventory in Series A-1 most well-liked inventory
$
7,784
$
–
Series A Preferred Stock low cost accretion
–
326,530
Series A Preferred Stock dividend accretion
–
79,160
Dividends on Series A Preferred Stock in widespread inventory
–
(42,667
)
The accompanying notes are an integral a part of the consolidated monetary statements.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation
The condensed consolidated monetary statements included herein have been ready by SharpLink Gaming Ltd. (the “Company,” “SharpLink,” “we,” or “our”), pursuant to the foundations and rules of the Securities and Exchange Commission (“SEC”). In the opinion of the Company, the foregoing statements comprise all changes, consisting solely of regular recurring changes essential to current pretty the monetary place of the Company as of June 30, 2022 and December 31, 2021, its outcomes of operations for the six months ended June 30, 2022 and 2021, and money flows for the six months ended June 30, 2022 and 2021. The condensed consolidated steadiness sheet as of December 31, 2021, has been derived from the audited consolidated monetary statements as of that date. The preparation of monetary statements in conformity with accounting ideas usually accepted within the United States of America (“GAAP”) requires administration to make estimates and assumptions that have an effect on the reported quantities therein. Due to the inherent uncertainty concerned in making estimates, precise leads to future durations could differ from the estimates.
Certain info and footnote disclosures usually included in monetary statements ready in accordance with GAAP have been omitted pursuant to guidelines and rules of the SEC. Accordingly, the condensed consolidated monetary statements don’t embrace all the info and footnotes required by GAAP for full monetary assertion presentation. It is recommended that these condensed consolidated monetary statements be learn at the side of the consolidated monetary statements and the notes thereto for the yr ended December 31, 2021, that are included in SharpLink’s Form 20-F filed with the SEC on May 16, 2022.
Certain reclassifications had been made to the condensed consolidated assertion of operations for the six months ended June 30, 2021 to evolve to the 2022 methodology of presentation. These reclassifications had no impact on reported revenues, working loss, internet loss from persevering with operations and internet loss.
Note 2 – Going Concern
In the pursuit of SharpLink’s lengthy-time period development technique and the event of its lead era software program and associated enterprise, the Company has sustained continued working losses. During the six months ending June 30, 2022, the Company had a internet loss from persevering with operations of $10,588,708 and money utilized in working actions of $3,484,288. To fund these deliberate losses from operations, the Company raised capital from exterior buyers within the combination quantity of $18,000,000 throughout 2020 and 2021 within the type of Ordinary Shares, most well-liked inventory and warrants, as described in Notes 7 and eight. Additionally, in 2022 the Company secured further financing by a $3,250,000 time period mortgage, as described in Note 6. Based on continued anticipated money must develop the Company’s Affiliate Marketing Services-United States’ associated operations, there’s a substantial doubt concerning the Company’s capability to proceed as a going concern and the Company would require further liquidity to proceed its operations for 12 months from the date the monetary statements can be found to be issued.
The Company is evaluating methods to acquire the required further funding for future operations. These methods could embrace, however are usually not restricted to, acquiring fairness financing, issuing, or restructuring debt, getting into into different financing preparations, and restructuring of operations to develop revenues and cut back bills. The Company could also be unable to entry additional fairness or debt financing when wanted. As such, there will be no assurance that the Company will be capable to proceed as a going concern and procure further liquidity when wanted or beneath acceptable phrases, if in any respect; and due to this fact, the uncertainty associated to the Company’s capability to proceed as a going concern stays.
The condensed consolidated monetary statements don’t embrace any changes to the carrying quantities and classification of belongings, liabilities, and reported bills which may be obligatory if the Company had been unable to proceed as a going concern.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – New Accounting Pronouncements
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016 and subsequently amended in March 2022, the FASB issued ASC 326, Financial Instruments – Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments (“ASC 326”), which replaces the prevailing incurred loss mannequin with a present anticipated credit score loss (“CECL”) mannequin that requires consideration of a broader vary of affordable and supportable info to tell credit score loss estimates. The Company can be required to make use of a ahead-wanting CECL mannequin for accounts receivables, ensures and different monetary devices. The Company will undertake ASC 326 on January 1, 2023 and doesn’t count on ASC 326 to have a cloth impression on its consolidated monetary statements.
Note 4 – Additional Balance Sheet Information
Equipment, internet
Equipment, internet is offered internet of collected depreciation within the quantity of $89,314 and $76,789 as of June 30, 2022 and December 31, 2021, respectively.
Intangible belongings, internet
Intangible belongings, internet as of June 30, 2022 and December 31, 2021 consisted of the next:
Weighted-average
amortization interval
Cost – Net of
Accumulated
(years)
Impairment
Amortization
Net
Balance, June 30, 2022
Customer relationships
9
$
1,093,000
$
215,141
$
877,859
Acquired expertise
3
1,214,000
780,214
433,786
Internally developed software program
5
681,090
208,694
472,396
Software in growth
N/A
66,501
–
66,501
$
3,054,591
$
1,204,049
$
1,850,542
Balance, December 31, 2021
Customer relationships
9
$
4,304,000
$
131,429
$
4,172,571
Acquired expertise
3
1,214,000
360,357
853,643
Internally developed software program
5
654,021
142,050
511,971
Software in growth
N/A
13,354
–
13,354
$
6,185,376
$
633,836
$
5,551,540
The change within the gross carrying quantity of intangible belongings as of June 30, 2022 in comparison with December 31, 2021 was because of $80,215 of further prices associated to internally developed software program that had been capitalized throughout the six-month interval and $3,211,000 of impairment of the client relationship from the acquisition of sure enterprise belongings of FourCubed Management, LLC and 6t4 Company (the businesses, mixed “FourCubed,” and the acquisition, the “FourCubed Acquisition”), which was as a result of lack of entry to gamers within the Russian market as a result of exit of FourCubed’s largest buyer from that market. The extent of impairment was decided primarily based upon the projected efficiency of the asset group and the present valuation of the client relationship intangible, as decided utilizing the multi-interval extra earnings valuation methodology. Key assumptions included within the valuation of the client relationship included income development, attrition, working margin and low cost charge. There is inherent uncertainty included within the assumptions utilized in intangible impairment testing. A change to any of the assumptions may result in a future impairment that could possibly be materials. Amortization expense on intangible belongings was $570,213 and $85,885 for the six months ended June 30, 2022 and 2021, respectively.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Goodwill
Goodwill as of June 30, 2022 and December 31, 2021 consisted of the next:
Affiliate Marketing Services – United States
Sports Gaming Client Services
Affiliate Marketing Services – International
Total
Balance as of December 31, 2021
$
–
$
381,000
$
3,130,167
$
3,511,167
Less: Impairment expenses
–
–
(1,515,000
)
(1,515,000
)
Balance as of June 30, 2022
$
–
$
381,000
$
1,615,167
$
1,996,167
Cumulative goodwill impairment expenses
$
–
$
–
$
1,515,000
$
1,515,000
For the six months ending June 30, 2022, the Company recorded goodwill impairment of $1,515,000, which was as a result of lack of entry to gamers within the Russian market as a result of exit of FourCubed’s largest buyer from that market (see Note 5 – Acquisitions – FourCubed – Purchase Price Allocation). The extent of impairment was decided primarily based upon the projected efficiency of the reporting unit, as decided utilizing an revenue strategy valuation methodology. Key assumptions included within the willpower of the reporting unit’s honest worth included income development, working margin, lengthy-time period development charge and low cost charge. There is inherent uncertainty included within the assumptions utilized in goodwill impairment testing. A change to any of the assumptions may result in a future impairment that could possibly be materials.
Note 5 – Acquisitions
Mer Telemanagement Solutions Ltd. (“MTS”)
Description of the transaction
On July 26, 2021, Mer Telemanagement Solutions Ltd. (“MTS”), New SL Acquisition Corp., an entirely owned subsidiary of MTS (“Merger Sub”) and privately held SharpLink, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub merged with and into SharpLink, Inc., with SharpLink, Inc. surviving as an entirely owned subsidiary of MTS (the “Reverse Merger” or “MTS Merger”). Following the MTS Merger, the Company modified its identify from Mer Telemanagement Solutions Ltd. to SharpLink Gaming Ltd. On a professional forma and totally-diluted foundation for the Company as of the closing of the Merger Agreement, SharpLink, Inc. shareholders personal roughly 86% of the Company, inclusive of a inventory choice pool of 10% of the totally-diluted excellent share capital of the Company, and MTS securityholders personal roughly 14% of the totally-diluted excellent capital of the Company.
As a results of the MTS Merger, every excellent share of SharpLink, Inc. Common Stock was transformed into the proper to obtain SharpLink Ordinary Shares as calculated pursuant to the Exchange Ratio, as outlined within the Merger Agreement. Each excellent share of SharpLink, Inc. Series A Preferred Stock was transformed into the proper to obtain SharpLink Gaming Ltd. Series A-1 Preferred Shares, calculated pursuant to the Exchange Ratio. Each excellent share of SharpLink, Inc. Series A-1 Preferred Stock was transformed into the proper to obtain SharpLink Gaming Ltd. Series A-1 convertible most well-liked shares (“Series A-1 Preferred Stock”), calculated pursuant to the Exchange Ratio. Each excellent share of SharpLink, Inc. Series B Convertible Preferred Stock (“Series B Preferred Stock”), was transformed into the proper to obtain SharpLink Gaming Ltd. Series B Preferred Shares, calculated pursuant to the Exchange Ratio.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In reference to a closing situation of the Merger Agreement, a serious shareholder of each MTS and SharpLink, Inc., invested $6,000,000 in trade for 3,692,865 shares of Series B Preferred Stock.
Identification of accounting acquirer
Upon closing of the MTS Merger, SharpLink, Inc. shareholders held 86% of the Company, on a totally diluted and as-transformed foundation, and had majority of the voting shares. Additionally, instantly upon the closing of the MTS Merger, MTS administrators and officers resigned, pursuant to the Merger Agreement and SharpLink, Inc.’s executives turned officers of the Company and new members had been appointed to the board of administrators. The MTS Merger represents a reverse acquisition wherein SharpLink, Inc. is the accounting acquirer and MTS is the accounting acquiree. The Company utilized the acquisition methodology of accounting to the identifiable belongings and liabilities of MTS, which have been measured at estimated honest worth as of the date of the enterprise mixture.
Purchase Price
The buy worth relies on the MTS closing share worth of $6.80 on July 26, 2021 and a pair of,492,162 and 670,789 of Ordinary Shares and Preferred Shares, respectively, excellent as of July 26, 2021 (instantly previous to the closing of the MTS Merger), in addition to the honest worth of 108,334 share choices and warrants excellent as of such date. The following desk represents the acquisition consideration paid within the MTS Merger.
MTS issued and excellent Ordinary Shares instantly previous to Merger
3,162,951
MTS share worth on July 26, 2021
$
6.80
MTS Ordinary Shares honest worth
$
21,508,067
MTS warrants and choices honest worth
$
601,965
Purchase consideration for accounting acquiree
$
22,110,032
The honest values of the MTS warrants and choices, that are additional disclosed in Notes 8 and 10, respectively, had been decided utilizing a Black Scholes choice-pricing mannequin with the next assumptions:
MTS Warrants – $2.642 strike worth
Fair worth of Ordinary Shares
$
6.80
Exercise worth
$
2.64
Expected volatility
54.7
%
Expected dividends
0.0
%
Expected time period (in years)
3.0
Risk-free charge
0.38
%
Fair worth per warrant
$
4.49
Warrants
58,334
Fair worth
$
261,965
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MTS Warrants – $0 strike worth
Fair worth of Ordinary Shares
$
6.80
Exercise worth
$
0.00
Expected volatility
54.7
%
Expected dividends
0.0
%
Expected time period (in years)
3.0
Risk-free charge
0.38
%
Fair worth per warrant
$
6.80
Warrants
25,000
Fair worth
$
170,000
MTS Options – $0 strike worth
Fair worth of Ordinary Shares
$
6.80
Exercise worth
$
0.00
Expected volatility
54.7
%
Expected dividends
0.0
%
Expected time period (in years)
3.0
Risk-free charge
0.38
%
Fair worth per choice
$
6.80
Options
25,000
Fair worth
$
170,000
Purchase Price Allocation
The MTS belongings and liabilities had been measured at estimated honest values at July 26, 2021, primarily utilizing Level 3 inputs. Estimates of honest worth symbolize administration’s finest estimate of assumptions about future occasions and uncertainties, together with vital judgments associated to future money flows, low cost charges, aggressive developments, margin and income development assumptions together with royalty charges and buyer attrition charges and others. Inputs used had been usually obtained from historic information supplemented by present and anticipated market circumstances and development charges anticipated as of the acquisition date.
The honest values of the belongings acquired, and liabilities assumed as of July 26, 2021 had been as follows:
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Assets:
Cash
916,000
Restricted money
1,016,000
Accounts receivable
356,000
Prepaid bills and different present belongings
322,000
Equipment
25,000
Other lengthy-time period belongings
261,000
Intangible belongings
483,000
Total Assets
$
3,379,000
Liabilities:
Accrued bills
2,129,000
Deferred income
914,000
Other present liabilities
495,000
Other lengthy-time period liabilities
312,000
Total liabilities
$
3,850,000
Net belongings acquired, excluding goodwill
$
(471,000
)
Goodwill
22,581,032
Purchase consideration for accounting acquiree
$
22,110,032
The honest worth, as decided by assumptions that market members would use in pricing the belongings, and weighted common helpful lifetime of the identifiable intangible belongings are as follows:
Weighted Average
Fair Value
Useful Life (Years)
Customer relationships
$
414,000
4
Developed expertise
69,000
3
$
483,000
The extra of the consideration for the acquisition over the honest worth of internet belongings acquired was recorded as goodwill and derived from the market worth of the shares on the time of the MTS Merger within the reverse acquisition. During the yr ended December 31, 2021, $21,722,213 of the MTS goodwill was impaired. The goodwill created within the acquisition just isn’t deductible for tax functions.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Results of the MTS Business Subsequent to the Acquisition
The monetary outcomes of the MTS enterprise have been included within the Company’s Enterprise TEM phase from the date of acquisition.
In June 2022, the Company’s Board of Directors permitted administration to enter into negotiations to promote the MTS enterprise. The Company is within the technique of negotiating a Share and Asset Purchase Agreement with the transaction anticipated to be accomplished throughout the second half of 2022. Accordingly, the belongings and liabilities of the MTS enterprise are individually reported as belongings and liabilities held for disposal for the six months ended June 30, 2022 (unaudited) and for the yr ended December 31, 2021. The outcomes of operations of MTS for all durations are individually reported as discontinued operations. For further info, see Note 14.
FourCubed
Description of the Transaction
On December 31, 2021, SharpLink, by its wholly owned subsidiary FourCubed Acquisition Company, LLC (“FCAC”), acquired sure enterprise belongings of FourCubed for complete consideration of $6,886,523 in money and 606,114 Ordinary Shares of SharpLink with an acquisition date honest worth of $1,606,202. Consideration of $6,195,000 was paid on the date of closing, $130,000 plus compensation of money acquired of $311,523 was due inside 45 days after closing and $250,000 was due inside 6 months after closing and topic to indemnity claims. Subsequent to closing, the vendor is ready to earn as much as an extra 587,747 Ordinary Shares of SharpLink by sustaining employment and assembly sure efficiency circumstances (the “Earnout”).
Earnout
The Company accounts for an earnout as enterprise mixture consideration or compensation in accordance with ASC 805, Business Combinations, and/or ASC 718, Compensation – Stock Compensation, relying on the particular phrases of the settlement.
Based on the phrases of the settlement, the variety of Ordinary Shares to be paid is fastened as of the settlement date and is paid within the type of Ordinary Shares in a number of tranches, contingent on continued employment and the achievement of efficiency milestones, comparable to enterprise actions, income targets and gross margin targets. The Company has decided that the Earnout can be accounted for as efficiency-primarily based compensation beneath ASC 718 as a result of persevering with employment requirement. Each milestone is impartial of the opposite milestones, thus will be achieved individually. Beginning on the service inception date, the Company will consider the likelihood of feat for every milestone. For milestones deemed possible, the Company will acknowledge compensation value over the requisite service interval.
In March 2022, the vendor’s employment was terminated. No efficiency-primarily based milestones had been achieved previous to termination. As the Earnout is contingent upon attaining specified milestones and continued employment, the Company doesn’t count on to acknowledge compensation value associated to the Earnout.
Purchase Price
The buy worth relies on the money consideration paid and 606,114 Ordinary Shares issued and valued on the closing share worth of $2.65 on December 31, 2021. The following desk represents the acquisition consideration to be paid within the FourCubed Acquisition.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Ordinary shares issued to vendor
606,114
Ordinary share worth on December 31, 2021
$
2.65
Consideration in Ordinary Shares
1,606,202
Cash paid to Seller upon Closing
6,195,000
Cash because of Seller following Closing
691,523
Purchase consideration
$
8,492,725
Purchase Price Allocation
The FourCubed belongings and liabilities had been measured at estimated honest values on December 31, 2021, primarily utilizing Level 3 inputs. Estimates of honest worth symbolize administration’s finest estimate of assumptions about future occasions and uncertainties, together with vital judgments associated to future money flows, low cost charges, aggressive developments, margin and income development assumptions together with buyer attrition charges, value to recreate mental property and others. Inputs used had been usually obtained from historic information supplemented by present and anticipated market circumstances and development charges anticipated as of the acquisition date.
The honest worth of the belongings acquired, and liabilities assumed as of December 31, 2021 had been as follows:
Assets:
Cash
$
311,523
Accounts receivable
424,593
Prepaid bills and different present belongings
9,468
Intangible belongings
4,928,000
Total belongings
$
5,673,584
Liabilities:
Accrued bills
$
311,026
Total liabilities
311,026
Net belongings acquired, excluding goodwill
$
5,362,558
Goodwill
3,130,167
Purchase consideration for accounting acquiree
$
8,492,725
The honest worth, as decided by assumptions that market members would use in pricing the belongings, and weighted common helpful lifetime of the identifiable intangible belongings are as follows:
Weighted Average
Fair Value
Useful Life (Years)
Customer relationships
$
4,144,000
10
Developed expertise
784,000
1
$
4,928,000
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The extra of the consideration for the acquisition over the honest worth of internet belongings acquired was recorded as goodwill, which is attributed to anticipated synergies and expanded market alternatives from combining the Company’s operations with FourCubed. The goodwill created within the acquisition is predicted to be deductible for tax functions.
FourCubed earns promoting commissions from on-line playing websites for connecting people to the websites. FourCubed has one efficiency obligation: to make the connection between the person and the net playing web site. FourCubed is compensated for that supply by a value per acquisition mannequin (CPA) or income share mannequin. In February 2022, FourCubed was notified by Entain plc, a gaming operator from which FourCubed earned over 85 % of its revenues, that it intends to exit the Russian market. Approximately 40 % of FourCubed’s annual income with an estimated working revenue margin of 25 %, is earned from gamers within the Russian market. During the six months ending June 30, 2022, the Company recorded impairment of $3,211,000 associated to the FourCubed buyer relationship and $1,515,000 associated to goodwill because of lack of entry to clients in Russia.
Results of the FourCubed Business Subsequent to the Acquisition
The monetary outcomes of the FourCubed enterprise have been included within the Company’s Affiliate Marketing Services – International phase from the date of acquisition.
Unaudited Pro Forma Information
The following unaudited supplemental professional forma monetary info presents the monetary outcomes for the six months ended June 30, 2021 as if the MTS Merger and FourCubed Acquisition had occurred on January 1, 2020. The professional forma monetary info contains, the place relevant, changes for: (i) further amortization expense of $270,450 that may have been acknowledged associated to the acquired intangible belongings, (ii) transaction prices and different one-time non-recurring prices which decreased bills by $1,368,390 and (iii) further curiosity expense of $47,343 from the debt association described in Note 6.
The professional forma monetary info excludes changes for estimated value synergies or different results of the combination of MTS and FourCubed into the Company’s enterprise:
June 30, 2021
Revenues
$
6,467,935
Loss from persevering with operations
(20,616,988
)
Less: dividends accrued on sequence B most well-liked inventory
(391,443
)
Net loss from persevering with operations accessible to peculiar shareholders
(21,008,431
)
Net loss from discontinued operations, internet of tax, accessible to peculiar shareholders
(29,000
)
Net loss accessible to peculiar shareholders
(21,037,431
)
Basic and diluted:
Net loss from persevering with operations per share
$
(1.45
)
Net loss from discontinued operations per share
–
Net loss per share
(1.45
)
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The professional forma monetary info is offered for illustrative functions solely and isn’t essentially indicative of the working outcomes that may have been achieved had the MTS Merger and FourCubed Acquisition been accomplished as of the date indicated or the outcomes which may be obtained sooner or later.
Note 6 – Debt
On January 31, 2022, FCAC, an entirely owned subsidiary of the Company, entered right into a $3,250,000 time period mortgage settlement with Platinum Bank. The settlement bears annual curiosity at a charge of 4.00 % and requires a set month-to-month cost of $59,854, consisting of principal and curiosity, by the time period mortgage’s maturity, which is January 31, 2027. The Company capitalized $25,431 of mortgage initiation charges related to the settlement that are offered internet inside Debt on the consolidated steadiness sheet and amortize on a technique which approximates the efficient curiosity methodology to curiosity expense on the consolidated assertion of operations.
For the six months ended June 30, 2022, FCAC paid $248,598 and $50,671 in principal and curiosity, respectively. The remaining principal steadiness excellent on the time period mortgage is $3,001,402 as of June 30, 2022, of which $607,711 is due inside the subsequent 12 months. In addition to customary non-monetary covenants, the time period mortgage requires FCAC to keep up a minimal quarterly debt service protection ratio, outlined as adjusted EBITDA divided by debt service (curiosity expense and necessary debt principal compensation) of 1.25.
The excellent quantity of debt as of June 30, 2022 matures by yr as follows:
Year
Amount
2022
300,627
2023
620,173
2024
645,571
2025
672,471
2026
700,256
2027
62,304
3,001,402
The time period mortgage accommodates a dad or mum firm warranty, which states that the Company will enter right into a warranty settlement in favor of FCAC, pursuant to which the Company will assure the compensation of the mortgage, not later than 30 days following the Company’s redomicile to the United States.
Note 7 – Convertible Preferred Stock
On December 23, 2020, the SharpLink, Inc. board approved the institution and designation of 9,000 shares of 8% convertible most well-liked inventory (“Series A most well-liked inventory”) at $0.01 par worth. Additionally, the SharpLink, Inc. board reserved 4,150,000 shares of widespread inventory issuable upon the conversion of the shares of Series A most well-liked inventory. On December 23, 2020, SharpLink, Inc. entered right into a securities buy settlement with an investor to subject 2,000 shares of Series A most well-liked inventory for $2,000,000 (“First Tranche”).
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Terms of the Series A Preferred Stock are as follows:
Voting – Series A most well-liked inventory shall haven’t any voting rights, nonetheless, with out the affirmative vote of nearly all of the excellent shares of Series A most well-liked inventory, SharpLink, Inc. can’t (a) alter or change adversely the powers, preferences or rights given to the Series A most well-liked inventory, (b) authorize or create any class of inventory rating in precedence to as to dividends, redemption or distribution of belongings upon a liquidation, (c) amend its articles of incorporation or different constitution paperwork in any method that adversely impacts any rights of the holders, (d) enhance the variety of approved shares of Series A most well-liked inventory, or (e) enter into any settlement with respect to any of the above.
Dividends – Holders of every share of Series A most well-liked inventory shall be entitled to obtain cumulative dividends on the charge per share (as a proportion of the acknowledged worth per share) of 8% each year, payable quarterly on January 1, April 1, July 1 and October 1, starting on the primary such date after the issuance of such share of Series A most well-liked inventory and on every conversion date in money, or at SharpLink, Inc.’s choice, in duly approved, validly issued, totally paid and non-assessable shares of widespread inventory, or a mix thereof.
Liquidation – Upon any liquidation, dissolution or winding-up of SharpLink, Inc., whether or not voluntary or involuntary, Series A most well-liked inventory holders shall be entitled to obtain out of the belongings an quantity equal to the acknowledged worth of $1,000 per share, plus any accrued and unpaid dividends thereon and another charges or liquidated damages then due (the popular liquidation desire), for every share of Series A most well-liked inventory earlier than any distribution or cost shall be made to the holders of any Junior Securities.
Conversion – Each share of Series A most well-liked inventory shall be convertible, at any time and every so often from and after the unique subject date on the choice of the holder, into that variety of shares of widespread inventory decided by dividing the acknowledged worth of such share of Series A most well-liked inventory by the conversion worth, $2.1693 per share. The conversion worth can be decreased if SharpLink, Inc. points widespread inventory at a worth decrease than the conversion worth or points an instrument granting the holder rights to buy widespread inventory at a worth decrease than the conversion worth. As outlined within the certificates of designations of the Series A most well-liked inventory and upon the date the SharpLink widespread inventory is listed or quoted on any buying and selling market (the “Going Public Transaction,”), all excellent shares of Series A most well-liked inventory shall robotically be transformed into that variety of shares of widespread inventory, topic to a useful possession limitation of 9.99%, decided by dividing the acknowledged worth of such share of Series A most well-liked inventory by the conversion worth.
Second Tranche – Immediately previous to finishing the Going Public Transaction, SharpLink, Inc. shall promote to the present Series A most well-liked inventory shareholder not lower than $5,000,000 of most well-liked inventory.
Commitment Fee – Immediately following the Second Tranche, SharpLink, Inc. shall subject most well-liked inventory equal to the larger of both 15% of the mixture of the First and Second Tranche or 3% of the Company’s issued and excellent capital.
Redemption – SharpLink, Inc. shall redeem all the excellent shares of Series A most well-liked inventory if SharpLink, Inc. has not accomplished the Going Public Transaction by December 23, 2021. SharpLink, Inc. can be required to redeem on the combination acknowledged worth, plus accrued however unpaid dividends, all liquidated damages. Interest shall accrue on the lesser of 12% each year or the utmost charge permitted by relevant legislation till the quantity is paid in full. SharpLink, Inc. accretes the carrying worth of the Series A most well-liked inventory to the complete redemption worth ratably till December 23, 2021.
On June 15, 2021, the Company entered into the primary modification to the securities buy settlement, which amended the next phrases:
Second Tranche – Amended to supply that instantly previous to finishing the Going Public Transaction, SharpLink, Inc. shall promote to the present Series A most well-liked inventory shareholder Series B most well-liked inventory for $6,000,000.
Commitment Fee – Amended to supply that instantly following the Second Tranche, SharpLink, Inc. shall subject Series A-1 Preferred Stock equal to three% of the issued and excellent capital of the Company.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On July 23, 2021, the Company entered into the second modification to the securities buy settlement, which amended the next phrases:
Second Tranche – Amended to supply that instantly previous to finishing the Going Public Transaction, SharpLink, Inc. shall promote to the present Series A most well-liked inventory shareholder 2,765,824 shares of Series B most well-liked inventory for $6,000,000.
On July 26, 2021, the Company’s board approved the institution and designation of 525,016 shares of Series A-1 Preferred Stock at $0.01 par worth.
Terms of the Series A-1 Preferred Stock are as follows:
Voting – Series A-1 Preferred Stock shall haven’t any voting rights, nonetheless, with out the affirmative vote of nearly all of the excellent shares of Series A-1 Preferred Stock, the Company can’t (a) alter or change adversely the powers, preferences or rights given to the Series A-1 Preferred Stock, authorize or create any class of inventory rating in precedence to as to dividends, redemption or distribution of belongings upon a liquidation, (c) amend its articles of incorporation or different constitution paperwork in any method that adversely impacts any rights of the holders, (d) enhance the variety of approved shares of Series A-1 Preferred Stock, or (e) enter into any settlement with respect to any of the above.
Liquidation – Upon any liquidation, dissolution or winding-up of the Company, whether or not voluntary or involuntary, Series A-1 Preferred Stock holders shall be entitled to obtain out of the belongings an quantity equal to the acknowledged worth of $2.1693 per share, plus any accrued and unpaid dividends thereon and another charges or liquidated damages then due (the popular liquidation desire), for every share of Series A-1 Preferred Stock earlier than any distribution or cost shall be made to the holders of any Junior Securities.
Conversion – Each share of Series A-1 Preferred Stock shall be convertible, at any time and every so often from and after the unique subject date on the choice of the holder, into that variety of shares of widespread inventory decided by dividing the acknowledged worth of such share of Series A-1 Preferred Stock by the conversion worth, $2.1693 per share. The conversion worth can be decreased if the Company points widespread inventory at a worth decrease than the conversion worth or points an instrument granting the holder rights to buy widespread inventory at a worth decrease than the conversion worth. Upon the closing of the Going Public Transaction all excellent shares of Series A-1 most well-liked inventory shall robotically be transformed into that variety of shares of widespread inventory, topic to a useful possession limitation of 9.99%, decided by dividing the acknowledged worth of such share of Series A-1 Preferred Stock by the conversion worth.
Redemption – The Company shall redeem all the excellent shares of Series A-1 Preferred Stock if the Company has not accomplished the Going Public Transaction by July 26, 2022. The Company can be required to redeem on the combination acknowledged worth, plus accrued however unpaid dividends, all liquidated damages. Interest shall accrue on the lesser of 12% each year or the utmost charge permitted by relevant legislation till the quantity is paid in full.
On July 26, 2021, the Company’s board approved the institution and designation of two,765,824 shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”) at $0.01 par worth.
Terms of the Series B Preferred Stock are as follows:
Voting – Series B Preferred Stock shall haven’t any voting rights, nonetheless, with out the affirmative vote of nearly all of the excellent shares of Series B Preferred Stock, the Company can’t (a) alter or change adversely the powers, preferences or rights given to the Series B most well-liked inventory, (b) authorize or create any class of inventory rating in precedence to as to dividends, redemption or distribution of belongings upon a liquidation, (c) amend its articles of incorporation or different constitution paperwork in any method that adversely impacts any rights of the holders, (d) enhance the variety of approved shares of Series B Preferred Stock, or (e) enter into any settlement with respect to any of the above.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dividends – Holders of every share of Series B Preferred Stock shall be entitled to obtain cumulative dividends on the charge per share (as a proportion of the acknowledged worth per share) of 8% each year, payable quarterly on January 1, April 1, July 1 and October 1, starting on the primary such date after the issuance of such share of Series B Preferred Stock and on every conversion date in money, or on the Company’s choice, in duly approved, validly issued, totally paid and non-assessable shares of widespread inventory, or a mix thereof.
Liquidation – Upon any liquidation, dissolution or winding-up of the Company, whether or not voluntary or involuntary, Series B Preferred Stock holders shall be entitled to obtain out of the belongings an quantity equal to the acknowledged worth of $2.1693 per share, plus any accrued and unpaid dividends thereon and another charges or liquidated damages then due (the popular liquidation desire), for every share of Series B Preferred Stock earlier than any distribution or cost shall be made to the holders of any Junior Securities.
Conversion – Each share of Series B Preferred Stock shall be convertible, at any time and every so often from and after the unique subject date on the choice of the holder, into that variety of shares of widespread inventory decided by dividing the acknowledged worth of such share of Series B Preferred Stock by the conversion worth, $2.1693 per share. The conversion worth can be decreased if the Company points widespread inventory at a worth decrease than the conversion worth or points an instrument granting the holder rights to buy widespread inventory at a worth decrease than the conversion worth. Upon the closing of the Going Public Transaction all excellent shares of Series B Preferred Stock shall robotically be transformed into that variety of shares of widespread inventory, topic to a useful possession limitation of 9.99%, decided by dividing the acknowledged worth of such share of Series B Preferred Stock by the conversion worth.
Redemption – The Company shall redeem all the excellent shares of Series B Preferred Stock if the Company has not accomplished the Going Public Transaction by July 26, 2022. The Company can be required to redeem on the combination acknowledged worth, plus accrued however unpaid dividends, all liquidated damages. Interest shall accrue on the lesser of 12% each year or the utmost charge permitted by relevant legislation till the quantity is paid in full.
On July 26, 2021, SharpLink, Inc. accomplished the MTS Merger, modified its identify to SharpLink Gaming Ltd. and commenced buying and selling on NASDAQ beneath the ticker image “SBET.” The MTS Merger was effectuated by a share trade wherein MTS issued shares to SharpLink, Inc. stockholders, leading to SharpLink, Inc. stockholders proudly owning roughly 86% of the capital inventory of SharpLink on a totally diluted, as-transformed foundation. The trade ratio used to find out the variety of shares issued to SharpLink, Inc. shareholders was 1.3352, which was calculated pursuant to the phrases of the Merger Agreement.
At the Company’s Extraordinary General Meeting of Shareholders held on July 21, 2021, the Company’s shareholders permitted an Amended and Restated Articles of Association, which was effected upon consummation of the MTS Merger. The Amended and Restated Articles of Association elevated the registered share capital to 92,900,000 Ordinary Shares, 800,000 Series A Preferred Stock, 2,600,000 Series A-1 Preferred Stock and three,700,000 Series B Preferred Stock, every at a par worth of USD $0.02 per share, reflecting the reverse inventory cut up at a ratio of 1-to-2, which turned efficient on July 26, 2021 instantly previous to the effectiveness of the MTS Merger.
The Company’s fairness construction was adjusted for all durations offered within the consolidated statements of shareholders’ fairness utilizing the trade ratio established within the Merger Agreement to mirror the variety of shares of the authorized dad or mum (the accounting acquiree) issued within the reverse acquisition. Ordinary share par worth and extra paid-in capital was adjusted for all durations offered within the consolidated statements of shareholders’ fairness to mirror the brand new par worth of Ordinary Shares after the 1-to-2 reverse inventory cut up.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The MTS Merger represented a Going Public Transaction. Immediately previous to the MTS Merger, the excellent shares of the SharpLink, Inc. Series A Preferred Stock had been exchanged for 1,230,956 shares of SharpLink, Inc. Series A-1 Preferred Stock. Additionally, the holder of the Series A most well-liked inventory obtained 700,989 shares of SharpLink, Inc. Series A-1 most well-liked inventory to settle the dedication payment and three,692,862 shares of SharpLink, Inc. Series B most well-liked inventory in trade for $6,000,000 to settle the second tranche dedication.
Subsequent to the MTS Merger, the holder of the Series A-1 Preferred Stock and Series B Preferred Stock transformed 1,931,945 and three,568,055 shares, respectively, to Ordinary Shares of the Company, every at a 1:1 ratio. No conversions of Series A-1 and B Preferred Stock to Ordinary Shares had been carried out throughout the six months ending June 30, 2022.
Note 8 – Warrants
Warrant – Advisory Services
On February 1, 2021, SharpLink, Inc. issued a typical inventory buy warrant (“warrant”) in trade for advisory providers, which gave the holder the proper to buy as much as 636,867 shares of SharpLink, Inc.’s Common Stock.
The phrases of the warrant are as follows:
Voting and Dividends – This warrant doesn’t entitle the holder to any voting rights, dividends or different rights as a shareholder of SharpLink, Inc. previous to the train of the warrant.
Exercisability and Termination Dates – The warrant will vest and develop into exercisable by the holder instantly previous to the Going Public Transaction. If the Going Public Transaction doesn’t happen by August 1, 2022, the warrant will terminate and shall now not be exercisable by the holder. In the occasion {that a} Going Public Transaction is consummated previous to the preliminary termination date, the warrant shall be vested, totally exercisable and the termination date shall be prolonged 5 years from the exercisability date.
Exercise Price – The train worth per share of widespread inventory beneath this warrant shall be $0.01.
The warrant is within the scope of ASC 718, Compensation – Stock Compensation, as a share-primarily based cost issued to nonemployees in trade for providers. Compensation prices for a nonemployee share-primarily based cost award with a efficiency situation, such because the Going Public Transaction, is acknowledged when the efficiency situation turns into possible of incidence, which in SharpLink, Inc.’s case was when the Going Public Transaction is accomplished. On July 26, 2021, SharpLink, Inc. accomplished the MTS Merger. The warrant vested and have become totally exercisable into 850,330 Ordinary Shares within the Company. The warrant’s grant date honest worth of $2,001,677 was acknowledged upon the completion of the Going Public Transaction utilizing a Black Scholes choice-pricing mannequin with the next assumptions:
Fair worth of Ordinary Shares on grant date
$
2.36
Exercise worth
$
0.01
Expected volatility
58.2
%
Expected dividends
0.0
%
Expected time period (in years)
5.00
Risk-free charge
0.42
%
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SharpLink, Inc.’s underlying inventory was not publicly traded on the issuance date of the warrant, however its honest worth was estimated utilizing a straight-line calculation, with the advantage of hindsight, between the honest values decided as of December 31, 2020 and July 26, 2021 of $0.63 per share and $6.80 per share, respectively. SharpLink, Inc.’s underlying inventory honest worth was decided on December 31, 2020, utilizing current fairness financings and on July 26, 2021 utilizing the Company’s publicly traded share worth. The Company decided that the straight-line calculation supplies probably the most affordable foundation for the valuation of the warrant issued on February 1, 2021, as a result of the Company didn’t establish any single occasion that occurred throughout this interim interval that may have precipitated a cloth change in worth.
The Company estimates the volatility of its underlying inventory by utilizing a mean of the calculated historic volatility of a gaggle of comparable publicly traded inventory. The anticipated dividend yield is calculated utilizing historic dividend quantities and the inventory worth on the warrant issuance date. The threat-free charge relies on the United States Treasury yield curve in impact on the time of the grant. The anticipated time period is estimated primarily based on contractual phrases.
Warrants – MTS
Prior to the MTS Merger, the MTS shareholders permitted the issuance of a warrant to the previous MTS CEO to accumulate 58,334 Ordinary Shares, at an train worth of $2.642, which vested and have become instantly exercisable upon the consummation of the MTS Merger. The warrant was granted on July 21, 2021 and expires three years after the grant date. The grant date honest worth was acknowledged as an expense upon vesting, which occurred instantly previous to the MTS Merger. The compensation expense associated to this warrant was acknowledged within the MTS monetary outcomes instantly previous to the MTS Merger and thus just isn’t included within the SharpLink consolidated assertion of operations. This warrant doesn’t entitle the holder to any voting rights, dividends or different rights as a shareholder of SharpLink previous to the train of the warrant.
Prior to the MTS Merger, the MTS shareholders permitted the issuance of a warrant to the previous MTS CEO to accumulate 25,000 Ordinary Shares, with a $0 train worth, which vested and have become instantly exercisable upon the consummation of the MTS Merger. The warrant was granted on July 21, 2021 and expires three years after the grant date. The grant date honest worth was acknowledged as an expense upon vesting, which occurred instantly previous to the MTS Merger. The compensation expense associated to this warrant was acknowledged within the MTS monetary outcomes instantly previous to the merger and thus just isn’t included within the SharpLink consolidated assertion of operations. This warrant doesn’t entitle the holder to any voting rights, dividends or different rights as a shareholder of SharpLink previous to the train of the warrant.
Prefunded Warrants and Regular Warrants
On November 16, 2021, the Company entered right into a Securities Purchase Agreement with an present institutional investor pursuant to which the Company issued and bought, in a registered direct providing, an combination of 1,413,075 of the Company’s Ordinary Shares at an providing worth of $3.75 per share. In addition, the Company bought to the identical investor sure prefunded peculiar share buy warrants (“Prefunded Warrants”) to buy 1,253,592 Ordinary Shares. The Prefunded Warrants had been bought at an providing worth of $3.74 per warrant share and are exercisable at a worth of $0.01 per share. In a concurrent non-public placement, the Company issued to the identical institutional investor, for every peculiar share and Prefunded Warrant bought within the providing, an extra peculiar share buy warrant, every to buy one peculiar share (“Regular Warrants”). The Regular Warrants are initially exercisable six months following issuance and terminate 4 years following issuance. The Regular Warrants have an train worth of $4.50 per share and are exercisable to buy an combination of two,666,667 Ordinary Shares.
The phrases of the Prefunded Warrants are as follows:
Voting and Dividends – This warrant doesn’t entitle the holder to any voting rights, dividends or different rights as a shareholder of the Company previous to the train of the warrant.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Vesting Date – November 19, 2021
Termination Date – When the warrant is exercised in full.
The phrases of the Regular Warrants are as follows:
Voting and Dividends – This warrant doesn’t entitle the holder to any voting rights, dividends or different rights as a shareholder of the Company previous to the train of the warrant.
Vesting Date – May 19, 2022
Termination Date – November 19, 2025
The Prefunded Warrants and Regular Warrants don’t require a money settlement for the warrants. Based on the phrases of the agreements, the warrants had been freestanding, fairness-linked devices that represented separate items of account. The Company allotted the worth of internet proceeds from the providing to the Ordinary Shares and warrants primarily based on relative honest worth. The worth allotted to the warrants was recorded in further paid-in capital within the condensed consolidated steadiness sheets.
The honest worth of the Prefunded Warrants and Regular Warrants was decided utilizing a Black Scholes choice-pricing mannequin with the next assumptions:
Prefunded Warrants
Fair worth of Ordinary Shares
$
3.25
Exercise worth
$
0.01
Expected volatility
50.5
%
Expected dividends
0.0
%
Expected time period (in years)
4.00
Risk-free charge
1.03
%
Regular Warrants
Fair worth of Ordinary Shares
Exercise worth
$
4.50
Expected volatility
50.5
%
Expected dividends
0.0
%
Expected time period (in years)
4.00
Risk-free charge
1.03
%
The honest worth of Ordinary Shares was primarily based on the Company’s publicly traded peculiar share worth. The Company estimated the volatility of its underlying inventory by utilizing a mean of the calculated historic volatility of a gaggle of comparable publicly traded inventory and the Company’s publicly traded Ordinary Shares. The anticipated dividend yield was calculated utilizing historic dividend quantities and the inventory worth on the warrant issuance date. The threat-free charge was primarily based on the United States Treasury yield curve in impact on the time of the grant. The anticipated time period was estimated primarily based on contractual phrases.
For the six months ended June 30, 2022, there have been no issuances of recent warrants, no conversion of excellent warrants, and all warrants excellent are totally vested.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In November 2021, Alpha Capital acquired 1,413,075 Ordinary Shares at an providing worth of $3.75 per share, and Pre-funded Warrants to buy 1,253,582 Ordinary Shares at an train worth of $0.01 per Ordinary Share for a purchase order worth of $3.75 per Pre-funded Warrant. The complete gross proceeds to the Company had been $9,987,465. In addition, concurrently with the acquisition of Ordinary Shares and Pre-funded Warrants, Alpha obtained warrants to buy 2,666,667 Ordinary Shares at an train worth of $4.50 per Ordinary Share.
Note 9 – Fair Value
In accordance with honest worth accounting steerage, the Company determines honest worth primarily based on the trade worth that may be obtained to promote an asset or paid to switch a legal responsibility in an orderly transaction between market members. The inputs used to measure honest worth are labeled into the next hierarchy:
Level 1: Unadjusted quoted costs in lively markets for an identical devices which might be accessible as of the measurement date
Level 2: Other vital pricing inputs which might be both instantly or not directly observable
Level 3: Significant unobservable pricing inputs, which lead to using administration’s personal assumptions
Assumptions Used in Determining Fair Value of the Commitment Fee
The dedication payment, which required the Company to promote to the present Series A Preferred Stock shareholder 2,765,824 shares of Series B Preferred Stock for $6,000,000 and to subject Series A-1 Preferred Stock equal to the larger of both 15% of the mixture of the First and Second Tranche or 3% of the Company’s issued and excellent capital instantly following the Second Tranche (collectively, the dedication payment and second tranche), required the Company to switch a variable variety of shares exterior of its management and was labeled as a legal responsibility. Liability-classified devices are recorded at their estimated honest values at every reporting interval till they’re exercised, terminated, reclassified, or in any other case settled. The Company utilized a Monte Carlo simulation to worth the dedication payment. The Company chosen this mannequin because it believes it’s reflective of all vital assumptions that market members would doubtless think about in negotiating the switch of the dedication payment. Such assumptions embrace, amongst different inputs, inventory worth volatility, threat-free charge, likelihood of finishing a Going Public Transaction, conversion worth of the popular inventory and the underlying inventory worth. The Company’s underlying inventory honest worth was decided utilizing a straight-line calculation, according to the tactic described in Note 8. The change within the dedication payment was $18,851,927 for the six months ended June 30, 2021, and is recorded in dedication payment expense within the condensed consolidated assertion of operations. Immediately previous to the MTS Merger, the holder of the Series A Preferred Stock obtained 700,989 Series A-1 Preferred Stock within the Company to settle the dedication payment and three,692,862 shares of Series B Preferred Stock within the Company in trade for $6,000,000 to settle the second tranche dedication.
Significant inputs and assumptions used within the valuation mannequin as of June 30, 2021 are as follows:
Probability of a Going Public Transaction
90.0
%
Volatility
50.6
%
Stock worth of public firm on the time of measurement
$
6.14
Date of a Going Public Transaction
July 31, 2021
Pro-forma widespread shares excellent at Going Public Transaction date
23,366,319
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 – Stock Compensation
During 2020, SharpLink, Inc. permitted and adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which allows the grant of inventory choices to its workers, administrators and consultants for as much as 400,000 shares of SharpLink, Inc. widespread inventory. In reference to the MTS Merger, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”) and reserved 2,336,632 Ordinary Shares of the Company for issuance. The Company believes that awards beneath the 2020 and 2021 Plans higher align the pursuits of its workers with these of its shareholders. Option awards are usually granted with an train worth equal to the market worth of the Company’s Ordinary Shares on the date of grant; these choices usually vest primarily based on three years of steady service and have ten-yr contractual phrases. Certain choice and share awards present for accelerated vesting if there’s a change in management, as outlined within the plans.
The Company granted 360,000 choices beneath the 2020 Plan throughout the yr ended December 31, 2020. In reference to the MTS Merger, the excellent choices had been adjusted by the Exchange Ratio of 1.3352 pursuant to the Merger Agreement. The Company granted 1,312,000 choices to non-government workers beneath the 2021 Plan for the six months ended June 30, 2022. To present for satisfactory shares to subject to those workers, sure executives forfeited an combination 1,140,000 choices, 360,000 of which had been vested. As a outcome, 780,000 choices are deemed to have been forfeited and 360,000 choices are deemed to have expired. In accordance with the provisions of ASC 718, all unrecognized inventory compensation related to these forfeited or expired choices should be expensed instantly and resulted within the recognition of $1,655,506 within the second quarter of 2022 which might have in any other case been acknowledged over roughly the subsequent 18 months. The Company acknowledged inventory compensation expense of $2,245,526 and $63,233 for the six months ended June 30, 2022 and 2021, respectively.
The honest worth of every choice award is estimated on the date of grant utilizing a Black Scholes choice-pricing mannequin. The Company makes use of historic choice train and termination information to estimate the time period the choices are anticipated to be excellent. The threat-free charge relies on the U.S. Treasury yield curve in impact on the time of grant. The anticipated dividend yield is calculated utilizing historic dividend quantities and the inventory worth on the choice subject date. The anticipated volatility is decided utilizing the volatility of peer firms. The Company’s underlying inventory has been publicly traded for the reason that date of the MTS Merger. All choice grants made beneath 2020 Plan had been previous to the MTS Merger. The SharpLink, Inc. underlying inventory was not publicly traded however was estimated on the date of the grants utilizing valuation strategies that think about valuations from current fairness financings in addition to future deliberate transactions.
The honest worth of every inventory choice grant is estimated on the date of grant utilizing the Black Scholes choice pricing mannequin with the next assumptions:
June 30, 2022
Expected volatility
51.1-53.1
%
Expected dividends
0.0
%
Expected time period (years)
5.5 – 5.8
Risk-free charge
1.44 – 2.95
%
Fair worth of Ordinary Shares on grant date
$0.42 – $1.33
There had been no choices granted within the first half of 2021.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The abstract of exercise beneath the plans as of June 30, 2022, and alter throughout the six months ended June 30, 2022 is as follows:
Weighted
Weighted common
Aggregate
common
remaining
intrinsic
Options
Shares
train worth
contractual time period
worth
Outstanding as of December 31, 2021
1,783,567
4.96
Granted
1,334,500
1.00
Exercised
–
–
Forfeited
(1,005,573
)
5.46
Expired
(362,452
)
6.52
Outstanding as of June 30, 2022
1,750,042
1.26
9.4
22,500
Exercisable as of June 30, 2022
457,739
1.08
8.2
22,500
Unamortized inventory compensation expense of $651,986 as of June 30, 2022, shall be amortized by 2025 and has a weighted common recognition interval of 1.1 years.
Note 11 – Operating Segments
The Company has three working segments: Affiliate Marketing Services – United States, Sports Gaming Client Services, and Affiliate Marketing Services – International. Each working phase can also be a reportable phase.
The Affiliate Marketing Services – United States phase collects info on potential U.S. domiciled sports activities bettors, connects them with contextual sports activities betting content material, and converts them to paying sports activities betting clients in trade for both a pre-negotiated share of a sportsbook operator’s income, or a set payment from such operator. In addition, the phase supplies sports activities betting information (e.g., betting strains) to sports activities media publishers in trade for a set payment.
The Sports Gaming Client Services phase supplies its shoppers with growth, internet hosting, operations, upkeep, and repair of free-to-play video games and contests. These relationships will be both software program-as-service (“SaaS”) preparations which might be hosted by SharpLink and accessed by its shoppers’ web sites or different digital media; or software program licenses that permit the shopper to take the software program on premise.
The Affiliate Marketing Services – International phase is an iGaming and online marketing community, centered on delivering high quality visitors and participant acquisitions, retention and conversions to international iGaming operator companions worldwide.
In addition to the three working segments set forth above, the Company has the Enterprise TEM phase, which refers back to the Company’s MTS enterprise. In June 2022, the Company’s Board of Directors permitted administration to enter into negotiations to promote the MTS enterprise. The Company is within the technique of negotiating a Share and Asset Purchase Agreement and the transaction is predicted to be accomplished throughout the 2nd half of 2022. Accordingly, the belongings and liabilities of the MTS enterprise are individually reported as belongings and liabilities held for disposal for the six months ended June 30, 2022 and 2021 (every unaudited). The outcomes of operations of MTS for all durations are individually reported as discontinued operations. For further info, see Note 14.
Any intercompany revenues or bills are eradicated in consolidation. All of the Company’s working revenues and bills, apart from these excluded from Adjusted EBITDA as detailed beneath, are allotted to the Company’s reportable segments. The Company defines and calculates Adjusted EBITDA as internet loss earlier than the impression of curiosity revenue or expense, revenue tax provision, and depreciation and amortization, and additional adjusted for inventory compensation expense, transaction bills, dedication payment expense and goodwill and intangible asset impairment bills, as described within the reconciliation beneath.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A measure of phase belongings and liabilities has not been presently offered to the Company’s chief working choice maker and is due to this fact not offered beneath.
Summarized monetary info for the Company’s reportable segments for the six months ended June 30, 2022 is proven beneath:
Affiliate Marketing Services -United States
Affiliate Marketing Services -International
Sports Gaming Client Services
Enterprise TEM
Total
Revenue
$
170,032
$
1,763,961
$
1,713,597
$
–
$
3,647,590
Adjusted EBITDA
(3,425,502
)
183,408
181,446
–
Adjusted for
Stock compensation expense
1,815,740
6,361
423,425
–
2,245,526
Goodwill and intangible asset impairment bills
–
4,726,000
–
–
4,726,000
Depreciation and amortization
71,909
468,045
46,796
–
586,750
Interest revenue
23,502
–
–
–
23,502
Interest expense
–
(54,418
)
–
–
(54,418
)
Income tax provision
700
–
–
–
700
Net Loss from persevering with operations
(5,337,353
)
(4,962,580
)
(288,775
)
–
(10,588,708
)
Loss from discontinued operations
–
–
–
(1,255,654
)
(1,255,654
)
Net loss
$
(5,337,353
)
$
(4,962,580
)
$
(288,775
)
$
(1,255,654
)
$
(11,844,362
)
Capital expenditures
83,438
965
3,731
10,443
98,577
Summarized monetary info for the Company’s reportable segments for the six months ended June 30, 2021 is proven beneath:
Affiliate Marketing Services -United States
Affiliate Marketing Services -International
Sports Gaming Client Services
Enterprise TEM
Total
Revenue
$
103,541
$
–
$
1,528,425
$
–
$
1,631,966
Adjusted EBITDA
(1,324,804
)
–
124,389
–
Adjusted for
Stock compensation expense
46,160
–
17,073
–
63,233
Transaction bills
883,990
–
–
–
883,990
Commitment payment expense
18,851,927
–
–
–
18,851,927
Goodwill and intangible asset impairment bills
–
–
–
–
–
Depreciation and amortization
48,147
–
46,734
–
94,881
Interest revenue
(5,862
)
–
–
–
(5,862
)
Interest expense
–
–
–
–
–
Income tax provision
700
–
–
–
700
Net Loss from persevering with operations
(21,149,866
)
–
60,582
–
(21,089,284
)
Loss from discontinued operations
–
–
–
–
–
Net loss
$
(21,149,866
)
$
–
$
60,582
$
–
$
(21,089,284
)
Capital expenditures
125,850
–
14,248
–
140,098
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Summarized revenues by nation wherein the Company operated for the six months ended June 30, 2022 and 2021 is proven beneath:
Affiliate Marketing Services -United States
Affiliate Marketing Services -International
Sports Gaming Client Services
Enterprise TEM
Total
June 30, 2022
United States
$
170,032
$
–
$
1,713,597
$
–
$
1,883,629
Rest of World
–
1,763,961
–
–
1,763,961
Revenues
$
170,032
$
1,763,961
$
1,713,597
$
–
$
3,647,590
June 30, 2021
United States
$
103,541
$
–
$
1,528,425
$
–
$
1,631,966
Rest of World
–
–
–
–
–
Revenues
$
103,541
$
–
$
1,528,425
$
–
$
1,631,966
The Company doesn’t have materials tangible lengthy-lived belongings in international jurisdictions.
The Company’s Sports Gaming Client Services and Affiliate Marketing Services – International segments derive a good portion of their revenues from a number of massive clients. The desk beneath presents the share of consolidated revenues derived from massive clients:
June 30,
2022
2021
Customer A
41
%
0
%
Customer B
21
%
37
%
Note 12 – Revenue Recognition
The Company’s Affiliate Marketing Services – United States and Sports Gaming Client Services working segments enter into contracts with clients for the event, internet hosting, operations, upkeep, and repair of video games and contests which might be hosted by the Company and accessed by the client’s web site or different digital media. This usually leads to income from growing, internet hosting, and sustaining software program for patrons (cloud-hosted SaaS) or licensing income for the event of software program.
The Affiliate Marketing Services – International phase earns promoting commissions from on-line playing websites, for connecting gamers/gamblers to the websites and subsequent commissions are paid to the Company primarily based on income sharing preparations with the playing web site.
The Company follows a 5-step mannequin to evaluate every sale to a buyer; establish the legally binding contract, establish the efficiency obligations, decide the transaction worth, allocate the transaction worth, and decide whether or not income shall be acknowledged at a cut-off date or over time.
Revenue is acknowledged upon switch of management of promised services or products (i.e., efficiency obligations) to clients in an quantity that displays the consideration to which the Company expects to be entitled in trade for promised items or providers. The Affiliate Marketing Services – United States and Sports Gaming Client Services working segments’ efficiency obligations are happy both over time (cloud-hosted SaaS) or at a cut-off date (software program licenses). Software license income is acknowledged when the client has entry to the license and the proper to make use of and profit from the license. Other gadgets referring to expenses collected from clients embrace reimbursable bills. Charges collected from clients as a part of the Company’s gross sales transactions are included in revenues and the related prices are included in value of revenues.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Affiliate Marketing Services – International preparations have one efficiency obligation, which is to make the connection between the net playing web site and the participant/gambler. Subsequently, the Company has the proper to future earnings from the net playing web site, primarily based on that participant/gambler’s actions. The enterprise acknowledges income because the providers are carried out, which is when a participant/gambler joins an internet playing web site and/or when the participant/gambler has carried out a income share exercise as recognized within the phrases of its contract with the net playing web site.
Revenues by Category
The Company combines its income into the next classes:
For the six month ended June 30, 2022
Affiliate Marketing Services -United States
Affiliate Marketing Services -International
Sports Gaming Client Services
Total
Software-as-a-service
$
170,032
$
–
$
1,713,597
$
1,883,629
Services and different
–
1,763,961
–
1,763,961
$
170,032
$
1,763,961
$
1,713,597
$
3,647,590
For the six month ended June 30, 2021
Affiliate Marketing Services -United States
Affiliate Marketing Services -International
Sports Gaming Client Services
Total
Software-as-a-service
$
103,541
$
–
$
1,528,425
$
1,631,966
Services and different
–
–
–
–
$
103,541
$
–
$
1,528,425
$
1,631,966
The Company follows a 5-step mannequin to evaluate every sale to a buyer; establish the legally binding contract, establish the efficiency obligations, decide the transaction worth, allocate the transaction worth, and decide whether or not income shall be acknowledged at a cut-off date or over time. Revenue acknowledged cut-off date and over time is offered by interval beneath:
For the six month ended June 30, 2022
Affiliate Marketing Services -United States
Affiliate Marketing Services -International
Sports Gaming Client Services
Total
Point in time
$
–
$
1,763,961
$
–
$
1,763,961
Over time
170,032
–
1,713,597
1,883,629
$
170,032
$
1,763,961
$
1,713,597
$
3,647,590
For the six month ended June 30, 2021
Affiliate Marketing Services -United States
Affiliate Marketing Services -International
Sports Gaming Client Services
Total
Point in time
$
–
$
–
$
–
$
–
Over time
103,541
–
1,528,425
1,631,966
$
103,541
$
–
$
1,528,425
$
1,631,966
Contract Balances
The timing of income recognition could differ from the timing of invoicing to clients and these timing variations lead to contract superior billings on the Company’s consolidated steadiness sheet. The Company has an enforceable proper to cost upon invoicing and information deferred income when income is acknowledged subsequent to invoicing. The Company acknowledges unbilled income when income is acknowledged previous to invoicing.
The Company acknowledges contract belongings associated to direct prices incurred to satisfy the contracts. These prices are primarily labor prices related to the event of the software program. The Company defers these prices and amortizes labor prices into value of income over the interval income is acknowledged.
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The exercise in contract belongings as of June 30, 2022 and December 31, 2021 are as follows:
Balance as of December 31, 2021
$
147,913
Labor prices expensed
(350,716
)
Labor prices deferred
278,207
Balance as of June 30, 2022
$
75,404
The Company’s belongings and liabilities associated to its contracts with clients had been as follows:
June 30, 2022
December 31, 2021
Accounts receivable, internet of allowance for credit score losses
$
815,668
$
793,795
Unbilled income (reported in accounts receivable)
183,135
162,760
Contract belongings
75,404
147,913
Contract liabilities
$
(51,745
)
$
(308,058
)
During the six months ended June 30, 2022, the Company acknowledged all income that was included in deferred income originally of the interval. All different exercise in deferred income is as a result of timing of invoices in relation to the timing of income.
Note 13 – Income Taxes
On a quarterly foundation, we estimate our annual efficient tax charge and file a quarterly revenue tax provision primarily based on the anticipated charge. As the yr progresses, we refine our estimate primarily based on the information and circumstances, together with discrete occasions, by every tax jurisdiction. The efficient tax charge for every of the six month durations ended June 30, 2022 and 2021 was (0.0)%.
Note 14 – Discontinued Operations
In accordance with ASC 205-20 Presentation of Financial Statements: Discontinued Operations, a disposal of a part of an entity or a gaggle of parts of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or can have) a serious impression on an entity’s operations and monetary outcomes when the parts of an entity meets the factors in ASC paragraph 205-20-45-10. In the interval wherein the part meets the held on the market or discontinued operations standards the key belongings, different belongings, present liabilities and non-present liabilities shall be reported as a part of complete belongings and liabilities separate from these balances of the persevering with operations. At the identical time, the outcomes of all discontinued operations, much less relevant revenue taxes (profit), shall be reported as parts of internet revenue (loss) separate from the revenue (loss) of continuous operations.
In June 2022, the Company’s Board of Directors permitted administration to enter into negotiations to promote MTS. The Company is within the technique of negotiating a Share and Asset Purchase Agreement with the transaction anticipated to be accomplished throughout the 2nd half of 2022. Accordingly, the belongings and liabilities of the MTS enterprise are individually reported as belongings and liabilities held for disposal as of June 30, 2022 (unaudited) and December 31, 2021. The outcomes of operations and money flows of MTS for all durations are individually reported as discontinued operations.
In accordance with the approval by the Company’s Board of Directors to promote MTS, administration undertook an impairment evaluation of MTS’ intangible belongings and goodwill. Management concluded that the intangible belongings of buyer relationships and developed expertise and its goodwill had been impaired and recorded an impairment cost for $1,224,671 within the outcomes for the six-month ended June 30, 2022 (unaudited). The impairment cost was decided primarily based on an evaluation of the conclusion of belongings, the last word disposition of liabilities and the associated carrying worth of belongings. The impairment cost has been included within the Loss from Discontinued Operations, internet of tax line merchandise within the condensed consolidated assertion operations for the six months ended June 30, 2022 (unaudited).
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the key lessons of line gadgets constituting the loss from discontinued operations, internet of revenue taxes as offered within the condensed consolidated statements of operations for the six months ended June 30, 2022 (unaudited) is summarized within the desk beneath.
Summary Reconciliation of Discontinued Operations
Six months ended June 30, 2022
Revenues
$
1,869,830
Cost of Revenues
1,044,175
Gross Profit
825,655
Operating Expenses
Selling, common, and administrative bills
843,293
Goodwill and intangible asset impairment bills
1,224,671
Total working bills
2,067,964
Operating Loss
(1,242,309
)
Other Income and Expense
(12,345
)
Total different revenue and expense
(12,345
)
Loss Before Income Taxes
(1,254,654
)
Provision for revenue tax bills
1,000
Loss from discontinued operations
$
(1,255,654
)
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following desk presents a reconciliation of the carrying quantities of main lessons of belongings and liabilities of the Company labeled as discontinued operations as of June 30, 2022 (unaudited) and December 31, 2021:
June 30, 2022
(Unaudited)
December 31, 2021
Carrying quantities of main lessons of belongings included as a part of held for disposal
Current Assets
Cash
$
587,178
$
690,181
Restricted money
688,951
1,025,029
Accounts receivable, internet of allowance
254,546
137,405
Prepaid bills and different present belongings
93,910
248,594
Total present belongings
$
1,624,585
$
2,101,209
Non-current belongings
Equipment, internet
18,850
16,505
Other Long-Term Assets
266,954
283,632
Intangibles and goodwill
–
1,287,921
Total non-present belongings
$
285,804
$
1,588,058
June 30, 2022
(Unaudited)
December 31, 2021
Carrying quantities of main lessons of legal responsibility included as a part of held for disposal
Current Liabilities
Accrued bills
$
1,682,904
$
1,902,477
Contract liabilities
753,626
896,933
Other present liabilities
397,168
534,323
Total present liabilities
$
2,833,698
$
3,333,733
Other lengthy-time period liabilities
$
334,127
$
365,977
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 15 – Net Loss Per Share
The calculation of loss per share and weighted-common shares of the Company’s Ordinary Shares excellent for the durations offered are as follows:
Six months ended June 30
2022
2021
Net loss from persevering with operations
$
(10,588,708
)
$
(21,089,284
)
Less: low cost accretion on sequence A most well-liked inventory
–
(326,530
)
Less: dividends on sequence A most well-liked inventory
–
(79,160
)
Less: dividends on sequence B most well-liked inventory
(5,841
)
–
Net loss from persevering with operations accessible to peculiar shareholders
(10,594,549
)
(21,494,974
)
Net loss from discontinued operations, internet of tax, accessible to peculiar shareholders
(1,255,654
)
–
Net loss accessible to peculiar shareholders
$
(11,850,203
)
$
(21,494,974
)
Basic and diluted weighted-common shares excellent
23,614,579
10,763,811
Basic and diluted:
Net loss from persevering with operations per share
$
(0.45
)
$
(2.00
)
Net loss from discontinued operations per share
(0.05
)
–
Net loss per share
$
(0.50
)
$
(2.00
)
The MTS Merger was accounted for as a reverse acquisition. In accordance with ASC 805, Business Combinations, the fairness construction within the consolidated monetary statements following a reverse acquisition displays the fairness construction of the authorized acquirer (MTS), together with the fairness pursuits issued by the authorized acquirer to impact the enterprise mixture. For durations previous to the MTS Merger date, the weighted-common variety of Ordinary Shares excellent represents the authorized acquiree’s (SharpLink, Inc.) historic weighted-common variety of Common Stock multiplied by the trade ratio calculated pursuant to the MTS Merger Agreement of 1.3352.
For the durations offered, the next securities weren’t required to be included within the computation of diluted shares excellent:
2022
2021
Stock choices
1,750,048
360,000
Series A most well-liked inventory
–
940,405
Series A-1 most well-liked inventory
58,814
–
Series B most well-liked inventory
124,810
–
Warrant
–
636,867
MTS warrants
83,334
–
Regular warrants
2,666,667
–
Total
4,683,673
1,937,272
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 16 – Related Party Transactions
SportsHub Games Network, Inc, (the “Affiliate” or “SportsHub”) owns roughly 40% of the excellent Ordinary Shares of the Company as of June 30, 2022. The Affiliate has traditionally paid direct bills incurred by the Company’s subsidiary, Sports Technologies, LLC (“STI”), which incorporates salaries and associated expense for the staff of STI. The Affiliate collects money on behalf of the STI’s income producing actions. The Company has generated a payable to the Affiliate for bills paid on behalf of STI in extra of money collected by the Affiliate on behalf of STI’s income producing actions, which is recorded in Due to Affiliate within the consolidated steadiness sheet.
The Company makes use of Hays Companies (“Hays”) as an insurance coverage dealer. Hays is taken into account a associated celebration as an government of Hays serves on the board of administrators for the Company. The Company paid $514,764 and $12,603 for the six months ending June 30, 2022 and 2021, respectively for insurance coverage protection brokered by Hays. The Company’s director earned no commissions for the position of those insurance policies.
The Company leases workplace area in Canton, Connecticut from CJEM, LLC, which is owned by an government of the Company. The Company paid lease expense of $19,200 in every of the six month durations ending June 30, 2022 and 2021 associated to this lease.
Note 17 – Subsequent Events
The Company carried out an analysis of subsequent occasions for potential recognition and disclosure by the date of the monetary statements issuance.
On August 17, 2022, the Company introduced that Robert DeLucia, CPA was named because the Company’s new Chief Financial Officer, efficient August 22, 2022, changing former CFO, Brian Bennett, who elected to go away the Company to pursue new profession alternatives.
On September 8, 2022, SharpLink introduced that it entered into an Agreement and Plan of Merger pursuant to which it’ll purchase 100% of SportsHub, an business main fantasy and sports activities sport supplier, in an all-inventory transaction. Closing of the acquisition is topic to the satisfaction of sure closing circumstances, together with shareholder approval by SharpLink’s shareholders. SportsHub is presently the Company’s largest shareholder, holding roughly 8.9 million shares of the Company’s Ordinary Shares. Pursuant to the phrases and circumstances of the merger settlement, SportsHub shall be required to distribute such shares to its stockholders efficient as of instantly previous to the closing of the merger. Upon the closing of the merger, the stockholders of SportsHub will obtain an combination of three.67 million Ordinary Shares of the Company in trade for all excellent capital inventory of SportsHub. All of the roughly 12.6 million Company Ordinary Shares to be distributed or issued to the stockholders of SportsHub pursuant to the share distribution and the merger, as relevant, shall be topic to a six-month lock-up interval; thereafter, a proportion of the holder’s shares could also be eligible for resale every month till no restriction exists.
On September 13, 2022, the next resolutions had been adopted on the 2022 Annual General Meeting of Shareholders:
●
The reelection of Joe Housman, Rob Phythian, Chris Nicholas, Paul Abdo and Tom Doering as members of the Board of Directors for a time period expiring at our 2023 Annual General Meeting of Shareholders;
●
the appointment of RSM US LLP, registered public accountants, as our impartial registered public accountants for the yr ending December 31, 2022;
●
the approval of the annual bonus phrases, particular bonus and fairness compensation to Mr. Rob Phythian, our Chief Executive Officer as follows:
o
Mr. Phythian could also be eligible to obtain a bonus primarily based on an annual bonus plan that shall be permitted by the Compensation Committee and Board of Directors and can present for cost of an combination bonus of as much as 10 month-to-month base salaries (presently $250,000) (the “Annual Bonus”). The Annual Bonus will encompass: (i) a discretionary bonus primarily based on the general satisfaction from the CEO’s efficiency, together with the factors set forth within the compensation coverage, in an quantity of as much as 3 month-to-month base salaries, which shall be decided by the Compensation Committee and Board of Directors, and (ii) the rest, which shall be primarily based on a number of of the measurable standards set forth within the Company’s compensation coverage, with such targets and weights as decided by the Compensation Committee and Board of Directors, primarily based on the Company’s lengthy-time period objectives and funds;
SHARPLINK GAMING LTD.
(FORMERLY KNOWN AS MER TELEMANAGEMENT SOLUTIONS LTD.)
AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
o
Mr. Phythian will obtain a one-time particular bonus of $68,000 (the “Special Bonus”) because of his particular contribution to the profitable execution and consummation of an approximate $10 million spherical of financing with an institutional investor throughout November 2021;
o
Mr. Phythian shall be granted choices to accumulate 450,000 Ordinary Shares (the “Option Grant”), beneath our 2021 Plan, constituting roughly 1.6% of the excellent share capital of the Company calculated on a totally-diluted foundation. One-third of the choice will vest and be exercisable on the primary anniversary of the grant date of September 13, 2022, one-third of the choice will vest and be exercisable on the second anniversary of the grant date and one-third of the choice will vest and be exercisable on the third anniversary of the grant date, topic in all instances to Mr. Phythian’s continued providers to the Company. The train worth per share of the choice shall be equal to the closing sale worth of our Ordinary Shares on the Nasdaq Capital Market on the date of grant or $1.17. The choice will expire on the tenth anniversary of the date of grant;
●
The approval of choice grants of 33,500 Ordinary Shares, beneath our 2021 Plan, to our Chairman of the Board and a Company director. The choices will vest and be exercisable on the primary anniversary of the grant date of September 13, 2022, topic to the choice holder’s continued providers to the Company. The train worth per share of the choice shall be equal to the closing sale worth of our Ordinary Shares on the Nasdaq Capital Market on the date of grant or $1.17. The choices will expire on the tenth anniversary of the date of grant; and
●
The approval of amending the 2021 Plan (see Note 10) to extend the variety of Ordinary Shares accessible for issuance beneath the 2021 Plan by an extra 3.1 million peculiar Shares, in order that the Company shall be entitled to subject as much as 5,436,632 Ordinary Shares beneath the 2021 Plan.
33
Disclaimer
Sharplink Gaming Ltd. revealed this content material on 07 October 2022 and is solely answerable for the data contained therein. Distributed by Public, unedited and unaltered, on 07 October 2022 20:51:08 UTC.
Publicnow 2022
All information about SHARPLINK GAMING LTD.
Sales 2021
4,15 M
–
–
Net revenue 2021
-55,6 M
–
–
Net money 2021
6,59 M
–
–
P/E ratio 2021
-0,67x
Yield 2021
–
Capitalization
19,2 M
19,2 M
–
EV / Sales 2020
–
EV / Sales 2021
12,3x
Nbr of Employees
53
Free-Float
44,8%
Chart SHARPLINK GAMING LTD.
Duration :
Auto.
2 months
3 months
6 months
9 months
1 yr
2 years
5 years
10 years
Max.
Period :
Day
Week
Technical evaluation developments SHARPLINK GAMING LTD.
Short TermMid-TermLong TermTrendsBearishNeutralBearish
Income Statement Evolution
https://www.marketscreener.com/quote/inventory/SHARPLINK-GAMING-LTD-10121/information/SharpLink-Gaming-INTERIM-CONSOLIDATED-FINANCIAL-STATEMENTS-Form-6-Okay-41954247/
