SharpLink Gaming : INTERIM CONSOLIDATED FINANCIAL STATEMENTS – Form 6-K

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, web 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, price

200,000

200,000

Equipment, web

45,721

55,105

Right-of-use asset – working lease

151,109

165,522

Intangibles

Intangible belongings, web

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; licensed 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

licensed 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

licensed 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 bizarre shares at price

(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, basic, and administrative bills

5,976,848

1,562,496

Transaction bills

883,990

Commitment charge 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 earnings

23,502

5,862

Other Expense

(64,434

)

Interest expense

(54,418

)

Total different earnings and expense

(95,350

)

5,862

Loss Before Income Taxes

(10,588,008

)

(21,088,584

)

Provision for earnings tax bills

700

700

Net Loss from persevering with operations

(10,588,708

)

(21,089,284

)

Loss from discontinued operations, web of tax

(1,255,654

)

Net Loss

$

(11,844,362

)

$

(21,089,284

)

Numerator for primary and diluted web loss per share:

Net loss from persevering with operations accessible to bizarre shareholders

$

(10,594,549

)

$

(21,494,974

)

Net loss from discontinued operations accessible to bizarre shareholders

$

(1,255,654

)

$

Denominator for primary and diluted web 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 frequent 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 intervals offered utilizing the change ratio established within the Merger Agreement to replicate the variety of shares of the authorized father or mother (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 circulation actions from each persevering with and discontinued operations

2022

2021

Operating actions

Net loss

$

(11,844,362

)

$

(21,089,284

)

Adjustments to reconcile web loss to web money used for working actions:

to web 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 charge expense

18,851,927

Gain on disposal of kit

(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 gear

(7,919

)

(20,064

)

Capital expenditures for internally developed software program

(80,215

)

(120,034

)

Proceeds from the sale of kit

4,993

Payments regarding 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 problem 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 frequent 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 laws 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 stability sheet as of December 31, 2021, has been derived from the audited consolidated monetary statements as of that date. The preparation of economic statements in conformity with accounting rules 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 ends in future intervals might differ from the estimates.

Certain data and footnote disclosures usually included in monetary statements ready in accordance with GAAP have been omitted pursuant to guidelines and laws of the SEC. Accordingly, the condensed consolidated monetary statements don’t embody all the data and footnotes required by GAAP for full monetary assertion presentation. It is usually recommended that these condensed consolidated monetary statements be learn along side 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 adapt to the 2022 technique of presentation. These reclassifications had no impact on reported revenues, working loss, web loss from persevering with operations and web 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 web 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 traders 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 way of 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 means 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 might embody, however usually are 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 may be no assurance that the Company will have the ability to proceed as a going concern and procure further liquidity when wanted or underneath acceptable phrases, if in any respect; and due to this fact, the uncertainty associated to the Company’s means to proceed as a going concern stays.

The condensed consolidated monetary statements don’t embody any changes to the carrying quantities and classification of belongings, liabilities, and reported bills which may be essential 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 present incurred loss mannequin with a present anticipated credit score loss (“CECL”) mannequin that requires consideration of a broader vary of affordable and supportable data to tell credit score loss estimates. The Company could 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 anticipate ASC 326 to have a fabric impression on its consolidated monetary statements.

Note 4 – Additional Balance Sheet Information

Equipment, web

Equipment, web is offered web of gathered depreciation within the quantity of $89,314 and $76,789 as of June 30, 2022 and December 31, 2021, respectively.

Intangible belongings, web

Intangible belongings, web 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 as a result of $80,215 of further prices associated to internally developed software program that had been capitalized in the course of the six-month interval and $3,211,000 of impairment of the shopper 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 because of the lack of entry to gamers within the Russian market because of the 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 shopper relationship intangible, as decided utilizing the multi-interval extra earnings valuation methodology. Key assumptions included within the valuation of the shopper relationship included income development, attrition, working margin and low cost fee. There is inherent uncertainty included within the assumptions utilized in intangible impairment testing. A change to any of the assumptions might 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 prices

(1,515,000

)

(1,515,000

)

Balance as of June 30, 2022

$

$

381,000

$

1,615,167

$

1,996,167

Cumulative goodwill impairment prices

$

$

$

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 because of the lack of entry to gamers within the Russian market because of the 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 earnings method valuation methodology. Key assumptions included within the willpower of the reporting unit’s truthful worth included income development, working margin, lengthy-time period development fee and low cost fee. There is inherent uncertainty included within the assumptions utilized in goodwill impairment testing. A change to any of the assumptions might 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 appropriate 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 appropriate 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 appropriate 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 appropriate 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 significant shareholder of each MTS and SharpLink, Inc., invested $6,000,000 in change 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 completely 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 grew to become officers of the Company and new members had been appointed to the board of administrators. The MTS Merger represents a reverse acquisition by which SharpLink, Inc. is the accounting acquirer and MTS is the accounting acquiree. The Company utilized the acquisition technique of accounting to the identifiable belongings and liabilities of MTS, which have been measured at estimated truthful worth as of the date of the enterprise mixture.

Purchase Price

The buy value relies on the MTS closing share value 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 truthful 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 value on July 26, 2021

$

6.80

MTS Ordinary Shares truthful worth

$

21,508,067

MTS warrants and choices truthful worth

$

601,965

Purchase consideration for accounting acquiree

$

22,110,032

The truthful 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 value

Fair worth of Ordinary Shares

$

6.80

Exercise value

$

2.64

Expected volatility

54.7

%

Expected dividends

0.0

%

Expected time period (in years)

3.0

Risk-free fee

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 value

Fair worth of Ordinary Shares

$

6.80

Exercise value

$

0.00

Expected volatility

54.7

%

Expected dividends

0.0

%

Expected time period (in years)

3.0

Risk-free fee

0.38

%

Fair worth per warrant

$

6.80

Warrants

25,000

Fair worth

$

170,000

MTS Options – $0 strike value

Fair worth of Ordinary Shares

$

6.80

Exercise value

$

0.00

Expected volatility

54.7

%

Expected dividends

0.0

%

Expected time period (in years)

3.0

Risk-free fee

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 truthful values at July 26, 2021, primarily utilizing Level 3 inputs. Estimates of truthful worth signify administration’s greatest estimate of assumptions about future occasions and uncertainties, together with important judgments associated to future money flows, low cost charges, aggressive tendencies, 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 truthful 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 truthful 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 truthful worth of web belongings acquired was recorded as goodwill and derived from the market value 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 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 authorized administration to enter into negotiations to promote the MTS enterprise. The Company is within the strategy of negotiating a Share and Asset Purchase Agreement with the transaction anticipated to be accomplished in the course of 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 intervals are individually reported as discontinued operations. For further data, see Note 14.

FourCubed

Description of the Transaction

On December 31, 2021, SharpLink, by way of 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 truthful worth of $1,606,202. Consideration of $6,195,000 was paid on the date of closing, $130,000 plus reimbursement 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 a further 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, equivalent to enterprise actions, income targets and gross margin targets. The Company has decided that the Earnout could be accounted for as efficiency-primarily based compensation underneath ASC 718 because of the persevering with employment requirement. Each milestone is unbiased of the opposite milestones, thus may be achieved individually. Beginning on the service inception date, the Company will consider the chance of accomplishment for every milestone. For milestones deemed possible, the Company will acknowledge compensation price 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 reaching specified milestones and continued employment, the Company doesn’t anticipate to acknowledge compensation price associated to the Earnout.

Purchase Price

The buy value relies on the money consideration paid and 606,114 Ordinary Shares issued and valued on the closing share value 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 value on December 31, 2021

$

2.65

Consideration in Ordinary Shares

1,606,202

Cash paid to Seller upon Closing

6,195,000

Cash as a result of Seller following Closing

691,523

Purchase consideration

$

8,492,725

Purchase Price Allocation

The FourCubed belongings and liabilities had been measured at estimated truthful values on December 31, 2021, primarily utilizing Level 3 inputs. Estimates of truthful worth signify administration’s greatest estimate of assumptions about future occasions and uncertainties, together with important judgments associated to future money flows, low cost charges, aggressive tendencies, margin and income development assumptions together with buyer attrition charges, price 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 truthful 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 truthful 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 truthful worth of web 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 website. FourCubed is compensated for that supply by way of 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 earnings 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 as a result of lack of entry to prospects 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 data 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 data 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 data excludes changes for estimated price 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 bizarre shareholders

(21,008,431

)

Net loss from discontinued operations, web of tax, accessible to bizarre shareholders

(29,000

)

Net loss accessible to bizarre 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 data 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 fee of 4.00 % and requires a hard and fast month-to-month fee of $59,854, consisting of principal and curiosity, by way of 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 web inside Debt on the consolidated stability sheet and amortize on a technique which approximates the efficient curiosity technique 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 stability excellent on the time period mortgage is $3,001,402 as of June 30, 2022, of which $607,711 is due throughout 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 obligatory debt principal reimbursement) 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 comprises a father or mother 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 reimbursement 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 licensed 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 frequent 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 problem 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 don’t have any voting rights, nevertheless, with out the affirmative vote of the vast majority of the excellent shares of Series A most well-liked inventory, SharpLink, Inc. can not (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) improve the variety of licensed 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 fee per share (as a proportion of the acknowledged worth per share) of 8% every 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 licensed, validly issued, totally paid and non-assessable shares of frequent 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 some other 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 fee 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 problem date on the choice of the holder, into that variety of shares of frequent inventory decided by dividing the acknowledged worth of such share of Series A most well-liked inventory by the conversion value, $2.1693 per share. The conversion value could be decreased if SharpLink, Inc. points frequent inventory at a value decrease than the conversion value or points an instrument granting the holder rights to buy frequent inventory at a value decrease than the conversion value. As outlined within the certificates of designations of the Series A most well-liked inventory and upon the date the SharpLink frequent 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 routinely be transformed into that variety of shares of frequent 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 value.

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 problem most well-liked inventory equal to the higher of both 15% of the combination 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. could 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% every year or the utmost fee permitted by relevant regulation 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 offer 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 offer that instantly following the Second Tranche, SharpLink, Inc. shall problem 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 offer 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 licensed 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 don’t have any voting rights, nevertheless, with out the affirmative vote of the vast majority of the excellent shares of Series A-1 Preferred Stock, the Company can not (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) improve the variety of licensed 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 some other charges or liquidated damages then due (the popular liquidation desire), for every share of Series A-1 Preferred Stock earlier than any distribution or fee 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 problem date on the choice of the holder, into that variety of shares of frequent inventory decided by dividing the acknowledged worth of such share of Series A-1 Preferred Stock by the conversion value, $2.1693 per share. The conversion value could be decreased if the Company points frequent inventory at a value decrease than the conversion value or points an instrument granting the holder rights to buy frequent inventory at a value decrease than the conversion value. Upon the closing of the Going Public Transaction all excellent shares of Series A-1 most well-liked inventory shall routinely be transformed into that variety of shares of frequent 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 value.

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 could 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% every year or the utmost fee permitted by relevant regulation till the quantity is paid in full.

On July 26, 2021, the Company’s board licensed 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 don’t have any voting rights, nevertheless, with out the affirmative vote of the vast majority of the excellent shares of Series B Preferred Stock, the Company can not (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) improve the variety of licensed 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 fee per share (as a proportion of the acknowledged worth per share) of 8% every 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 licensed, validly issued, totally paid and non-assessable shares of frequent 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 some other charges or liquidated damages then due (the popular liquidation desire), for every share of Series B Preferred Stock earlier than any distribution or fee 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 problem date on the choice of the holder, into that variety of shares of frequent inventory decided by dividing the acknowledged worth of such share of Series B Preferred Stock by the conversion value, $2.1693 per share. The conversion value could be decreased if the Company points frequent inventory at a value decrease than the conversion value or points an instrument granting the holder rights to buy frequent inventory at a value decrease than the conversion value. Upon the closing of the Going Public Transaction all excellent shares of Series B Preferred Stock shall routinely be transformed into that variety of shares of frequent 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 value.

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 could 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% every year or the utmost fee permitted by relevant regulation 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 underneath the ticker image “SBET.” The MTS Merger was effectuated by a share change by which MTS issued shares to SharpLink, Inc. stockholders, leading to SharpLink, Inc. stockholders proudly owning roughly 86% of the capital inventory of SharpLink on a completely diluted, as-transformed foundation. The change 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 authorized 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 grew to become efficient on July 26, 2021 instantly previous to the effectiveness of the MTS Merger.

The Company’s fairness construction was adjusted for all intervals offered within the consolidated statements of shareholders’ fairness utilizing the change ratio established within the Merger Agreement to replicate the variety of shares of the authorized father or mother (the accounting acquiree) issued within the reverse acquisition. Ordinary share par worth and extra paid-in capital was adjusted for all intervals offered within the consolidated statements of shareholders’ fairness to replicate 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 charge and three,692,862 shares of SharpLink, Inc. Series B most well-liked inventory in change 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 in the course of the six months ending June 30, 2022.

Note 8 – Warrants

Warrant – Advisory Services

On February 1, 2021, SharpLink, Inc. issued a standard inventory buy warrant (“warrant”) in change for advisory providers, which gave the holder the appropriate 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 turn 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 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 value per share of frequent inventory underneath this warrant shall be $0.01.

The warrant is within the scope of ASC 718, Compensation – Stock Compensation, as a share-primarily based fee issued to nonemployees in change for providers. Compensation prices for a nonemployee share-primarily based fee 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 truthful 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 value

$

0.01

Expected volatility

58.2

%

Expected dividends

0.0

%

Expected time period (in years)

5.00

Risk-free fee

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 truthful worth was estimated utilizing a straight-line calculation, with the good thing about hindsight, between the truthful 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 truthful worth was decided on December 31, 2020, utilizing latest fairness financings and on July 26, 2021 utilizing the Company’s publicly traded share value. The Company decided that the straight-line calculation offers essentially 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 fabric change in worth.

The Company estimates the volatility of its underlying inventory by utilizing a median of the calculated historic volatility of a bunch of comparable publicly traded inventory. The anticipated dividend yield is calculated utilizing historic dividend quantities and the inventory value on the warrant issuance date. The danger-free fee 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 authorized the issuance of a warrant to the previous MTS CEO to accumulate 58,334 Ordinary Shares, at an train value 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 truthful 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 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 authorized the issuance of a warrant to the previous MTS CEO to accumulate 25,000 Ordinary Shares, with a $0 train value, 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 truthful 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 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 current 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 value of $3.75 per share. In addition, the Company bought to the identical investor sure prefunded bizarre share buy warrants (“Prefunded Warrants”) to buy 1,253,592 Ordinary Shares. The Prefunded Warrants had been bought at an providing value of $3.74 per warrant share and are exercisable at a value of $0.01 per share. In a concurrent non-public placement, the Company issued to the identical institutional investor, for every bizarre share and Prefunded Warrant bought within the providing, a further bizarre share buy warrant, every to buy one bizarre 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 value 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 web proceeds from the providing to the Ordinary Shares and warrants primarily based on relative truthful worth. The worth allotted to the warrants was recorded in further paid-in capital within the condensed consolidated stability sheets.

The truthful 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 value

$

0.01

Expected volatility

50.5

%

Expected dividends

0.0

%

Expected time period (in years)

4.00

Risk-free fee

1.03

%

Regular Warrants

Fair worth of Ordinary Shares

Exercise value

$

4.50

Expected volatility

50.5

%

Expected dividends

0.0

%

Expected time period (in years)

4.00

Risk-free fee

1.03

%

The truthful worth of Ordinary Shares was primarily based on the Company’s publicly traded bizarre share value. The Company estimated the volatility of its underlying inventory by utilizing a median of the calculated historic volatility of a bunch 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 value on the warrant issuance date. The danger-free fee 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 latest 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 value of $3.75 per share, and Pre-funded Warrants to buy 1,253,582 Ordinary Shares at an train value of $0.01 per Ordinary Share for a purchase order value 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 value of $4.50 per Ordinary Share.

Note 9 – Fair Value

In accordance with truthful worth accounting steerage, the Company determines truthful worth primarily based on the change value 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 truthful worth are categorised into the next hierarchy:

Level 1: Unadjusted quoted costs in energetic markets for an identical devices which might be accessible as of the measurement date

Level 2: Other important 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 charge, 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 problem Series A-1 Preferred Stock equal to the higher of both 15% of the combination of the First and Second Tranche or 3% of the Company’s issued and excellent capital instantly following the Second Tranche (collectively, the dedication charge and second tranche), required the Company to switch a variable variety of shares exterior of its management and was categorised as a legal responsibility. Liability-classified devices are recorded at their estimated truthful 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 charge. The Company chosen this mannequin because it believes it’s reflective of all important assumptions that market members would probably think about in negotiating the switch of the dedication charge. Such assumptions embody, amongst different inputs, inventory value volatility, danger-free fee, chance of finishing a Going Public Transaction, conversion value of the popular inventory and the underlying inventory value. The Company’s underlying inventory truthful worth was decided utilizing a straight-line calculation, according to the strategy described in Note 8. The change within the dedication charge was $18,851,927 for the six months ended June 30, 2021, and is recorded in dedication charge 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 charge and three,692,862 shares of Series B Preferred Stock within the Company in change 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 value of public firm on the time of measurement

$

6.14

Date of a Going Public Transaction

July 31, 2021

Pro-forma frequent 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. authorized 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. frequent 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 underneath 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 value equal to the market value 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 underneath the 2020 Plan in the course of 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 underneath the 2021 Plan for the six months ended June 30, 2022. To present for satisfactory shares to problem to those workers, sure executives forfeited an combination 1,140,000 choices, 360,000 of which had been vested. As a consequence, 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 have to 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 truthful 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 danger-free fee 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 value on the choice problem date. The anticipated volatility is decided utilizing the volatility of peer corporations. The Company’s underlying inventory has been publicly traded because the date of the MTS Merger. All choice grants made underneath 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 latest fairness financings in addition to future deliberate transactions.

The truthful 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 fee

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 underneath the plans as of June 30, 2022, and alter in the course of the six months ended June 30, 2022 is as follows:

Weighted

Weighted common

Aggregate

common

remaining

intrinsic

Options

Shares

train value

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, will likely be amortized by way of 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 be a reportable phase.

The Affiliate Marketing Services – United States phase collects data 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 prospects in change for both a pre-negotiated share of a sportsbook operator’s income, or a hard and fast charge from such operator. In addition, the phase offers sports activities betting information (e.g., betting strains) to sports activities media publishers in change for a hard and fast charge.

The Sports Gaming Client Services phase offers its shoppers with growth, internet hosting, operations, upkeep, and repair of free-to-play video games and contests. These relationships may be both software program-as-service (“SaaS”) preparations which might be hosted by SharpLink and accessed by way of its shoppers’ web sites or different digital media; or software program licenses that enable the consumer to take the software program on premise.

The Affiliate Marketing Services – International phase is an iGaming and internet affiliate 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 authorized administration to enter into negotiations to promote the MTS enterprise. The Company is within the strategy of negotiating a Share and Asset Purchase Agreement and the transaction is predicted to be accomplished in the course of 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 intervals are individually reported as discontinued operations. For further data, 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 under, are allotted to the Company’s reportable segments. The Company defines and calculates Adjusted EBITDA as web loss earlier than the impression of curiosity earnings or expense, earnings tax provision, and depreciation and amortization, and additional adjusted for inventory compensation expense, transaction bills, dedication charge expense and goodwill and intangible asset impairment bills, as described within the reconciliation under.

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 supplied to the Company’s chief working determination maker and is due to this fact not offered under.

Summarized monetary data for the Company’s reportable segments for the six months ended June 30, 2022 is proven under:

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 earnings

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 data for the Company’s reportable segments for the six months ended June 30, 2021 is proven under:

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 charge expense

18,851,927

18,851,927

Goodwill and intangible asset impairment bills

Depreciation and amortization

48,147

46,734

94,881

Interest earnings

(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 by which the Company operated for the six months ended June 30, 2022 and 2021 is proven under:

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 giant prospects. The desk under presents the share of consolidated revenues derived from giant prospects:

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 prospects for the event, internet hosting, operations, upkeep, and repair of video games and contests which might be hosted by the Company and accessed by way of the shopper’s web site or different digital media. This usually ends in income from creating, 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 website.

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 value, allocate the transaction value, and decide whether or not income will likely be acknowledged at a time limit or over time.

Revenue is acknowledged upon switch of management of promised services or products (i.e., efficiency obligations) to prospects in an quantity that displays the consideration to which the Company expects to be entitled in change for promised items or providers. The Affiliate Marketing Services – United States and Sports Gaming Client Services working segments’ efficiency obligations are glad both over time (cloud-hosted SaaS) or at a time limit (software program licenses). Software license income is acknowledged when the shopper has entry to the license and the appropriate to make use of and profit from the license. Other objects regarding prices collected from prospects embody reimbursable bills. Charges collected from prospects as a part of the Company’s gross sales transactions are included in revenues and the related prices are included in price 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 website and the participant/gambler. Subsequently, the Company has the appropriate to future earnings from the net playing website, 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 a web based playing website 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 website.

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 value, allocate the transaction value, and decide whether or not income will likely be acknowledged at a time limit or over time. Revenue acknowledged time limit and over time is offered by interval under:

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 might differ from the timing of invoicing to prospects and these timing variations lead to contract superior billings on the Company’s consolidated stability sheet. The Company has an enforceable proper to fee 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 meet 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 price 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 prospects had been as follows:

June 30, 2022

December 31, 2021

Accounts receivable, web 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 in the beginning of the interval. All different exercise in deferred income is because of the timing of invoices in relation to the timing of income.

Note 13 – Income Taxes

On a quarterly foundation, we estimate our annual efficient tax fee and report a quarterly earnings tax provision primarily based on the anticipated fee. 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 fee for every of the six month intervals 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 bunch of parts of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or could have) a significant impression on an entity’s operations and monetary outcomes when the parts of an entity meets the standards in ASC paragraph 205-20-45-10. In the interval by which the part meets the held on the market or discontinued operations standards the foremost 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 earnings taxes (profit), shall be reported as parts of web earnings (loss) separate from the earnings (loss) of continuous operations.

In June 2022, the Company’s Board of Directors authorized administration to enter into negotiations to promote MTS. The Company is within the strategy of negotiating a Share and Asset Purchase Agreement with the transaction anticipated to be accomplished in the course of 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 intervals 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 belief 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, web 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 foremost courses of line objects constituting the loss from discontinued operations, web of earnings taxes as offered within the condensed consolidated statements of operations for the six months ended June 30, 2022 (unaudited) is summarized within the desk under.

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, basic, 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 earnings and expense

(12,345

)

Loss Before Income Taxes

(1,254,654

)

Provision for earnings 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 courses of belongings and liabilities of the Company categorised as discontinued operations as of June 30, 2022 (unaudited) and December 31, 2021:

June 30, 2022

(Unaudited)

December 31, 2021

Carrying quantities of main courses 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, web 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, web

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 courses 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 intervals 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 bizarre shareholders

(10,594,549

)

(21,494,974

)

Net loss from discontinued operations, web of tax, accessible to bizarre shareholders

(1,255,654

)

Net loss accessible to bizarre 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 intervals 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 change ratio calculated pursuant to the MTS Merger Agreement of 1.3352.

For the intervals 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 stability sheet.

The Company makes use of Hays Companies (“Hays”) as an insurance coverage dealer. Hays is taken into account a associated social gathering 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 location of those insurance policies.

The Company leases workplace house 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 intervals 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 way of 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 trade main fantasy and sports activities recreation 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 will likely 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 change 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, will likely 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 unbiased 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 will likely be authorized by the Compensation Committee and Board of Directors and can present for fee of an combination bonus of as much as 10 month-to-month base salaries (presently $250,000) (the “Annual Bonus”). The Annual Bonus will include: (i) a discretionary bonus primarily based on the general satisfaction from the CEO’s efficiency, together with the standards set forth within the compensation coverage, in an quantity of as much as 3 month-to-month base salaries, which will likely be decided by the Compensation Committee and Board of Directors, and (ii) the rest, which will likely 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 targets and finances;

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”) as a result 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 will likely be granted choices to accumulate 450,000 Ordinary Shares (the “Option Grant”), underneath our 2021 Plan, constituting roughly 1.6% of the excellent share capital of the Company calculated on a completely-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 value per share of the choice will likely be equal to the closing sale value 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, underneath 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 value per share of the choice will likely be equal to the closing sale value 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 underneath the 2021 Plan by a further 3.1 million bizarre Shares, in order that the Company will likely be entitled to problem as much as 5,436,632 Ordinary Shares underneath the 2021 Plan.

33

Disclaimer
Sharplink Gaming Ltd. printed this content material on 07 October 2022 and is solely chargeable for the knowledge 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 earnings 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%

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