SHARPLINK GAMING LTD.
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June 30,
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December 31, | ||||||
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2021
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2020
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Unaudited
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$ | $ | ||||||
Restricted cash
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Trade receivables (net of allowance for credit losses of $
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Other accounts receivable and prepaid expenses
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Assets of discontinued operations (Note 1b)
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Total current assets
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NON- CURRENT ASSETS:
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Severance pay fund
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Property and equipment, net
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Deferred taxes
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Goodwill
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Total non-current assets
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Total assets
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$ | $ |
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June 30,
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December 31, | ||||||
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2021
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2020
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Unaudited
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES:
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Trade payables
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$ | $ | ||||||
Deferred revenues
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Accrued expenses and other liabilities
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Liabilities of discontinued operations (Note 1b)
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Total current liabilities
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ACCRUED SEVERANCE PAY
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COMMITMENTS AND CONTINGENT LIABILITIES (Note 3)
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SHAREHOLDERS' EQUITY (Note 5):
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Share capital -
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Ordinary shares of NIS
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Preferred Shares of NIS
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Additional paid-in capital
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Treasury shares at cost (
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Accumulated deficit
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Total shareholders' equity
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Total liabilities and shareholders' equity
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$ | $ |
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Six months ended June 30, | |||||||
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2021
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2020
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Unaudited
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Revenues
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Telecom services
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$ | $ | ||||||
Telecom product sales
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Total revenues
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Cost of revenues
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Telecom services
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Telecom product sales
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Total cost of revenues
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Gross profit
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Operating expenses
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Selling and marketing
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General and administrative
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Goodwill impairment
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Total operating expenses
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Operating loss
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Financial income (expense), net
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Loss before taxes on income
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Tax benefit (taxes on income), net
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Net loss from continuing operations
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Loss from discontinued operations
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( |
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Net loss
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$ | ( |
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Net loss per share:*
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Basic and diluted net loss per share from continuing operations
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$ | ( |
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Basic and diluted net earnings per share from discontinued operations
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( |
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Basic and diluted net loss per share
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$ | ( |
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Weighted average number of shares used in computing basic and diluted net loss per share
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*)
Additional |
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Share capital
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Preferred shares
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paid-in
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Treasury
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Accumulated
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Number*
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Amount
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Number
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Amount
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capital
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shares
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deficit
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Total
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Balance as of January 1, 2020
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(
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(
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Stock-based compensation
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-
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-
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Conversion of preferred shares into ordinary shares
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(
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(
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Issuance of preferred shares
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-
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Net loss
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-
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-
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(
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(
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Balance as of June 30, 2020
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(
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)
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(
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)
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*)
Additional |
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Share capital
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Preferred shares
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paid-in
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Treasury
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Accumulated
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Number*
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Amount
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Number
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Amount
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capital
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shares
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deficit
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Total
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Balance as of January 1, 2021
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(
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)
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(
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)
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Conversion of preferred shares into ordinary shares
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(
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)
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(
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Issuance of ordinary shares to Vexigo’s former shareholders- warrants exercise
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(
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Net loss
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-
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-
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(
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(
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Balance as of June 30, 2021
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(
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)
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(
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)
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*) see also Note 6(c) regarding reverse stock split.
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Six months ended June 30, | |||||||
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2021
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2020
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Unaudited
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Cash flows from operating activities
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Net loss
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$ | ( |
) |
$
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( |
) | ||
Loss from discontinued operations
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( |
) | ( |
) | ||||
Net loss from continuing operations
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( |
) | ( |
) | ||||
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Adjustments required to reconcile net loss from continuing operations to net cash used in operating activities:
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Depreciation and amortization
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Impairment of goodwill
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Decrease in deferred tax, net
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Stock-based compensation
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Decrease in accrued severance pay, net
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( |
) | ( |
) | ||||
Decrease in trade receivables, net
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Decrease in other accounts receivable and prepaid expenses
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Increase (decrease) in trade payables
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( |
) | ||||||
Decrease in accrued expenses and other liabilities
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( |
) | ( |
) | ||||
Increase in deferred revenues
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Net cash used in operating activities from continuing operations
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( |
) | ( |
) | ||||
Net cash used in operating activities from discontinued operations
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( |
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Net cash used in operating activity
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( |
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Cash flows used in investing activities
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Purchase of property and equipment
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Net cash used in investing activities from continuing operations
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Cash flows from financing activities
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Proceeds from issuance of shares
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Net cash provided by financing activities from continuing operations
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Decrease in cash, cash equivalents and restricted cash
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( |
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) | ||||
Cash, cash equivalents and restricted cash at the beginning of the year
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Cash, cash equivalents and restricted cash at the end of the period
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$ | $ | ||||||
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Supplemental disclosure of cash flows activities
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Cash paid during the year for income taxes
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$ | $ |
a. |
SharpLink Gaming Ltd. (formaly Mer Telemanagement Solutions Ltd.) (the "Company" or "MTS") was incorporated on December 27, 1995. The Company and its subsidiaries (the "Group") is a worldwide provider of telecom expense management (“TEM”), billing solutions and contact center software.
The Company's wholly-owned subsidiaries in the United States and Hong Kong, MTS IntegraTRAK Inc. and MTS Asia Ltd., act as marketing and customer service organizations in those countries.
The Company's shares listed for trade on the Nasdaq Capital Market under the symbol "SBET" (See also Note 6).
On September 6, 2018, the Company entered into a Securities Purchase Agreement (the "Alpha Capital SPA") with Alpha Capital Anstalt, an institutional investor (“Alpha Capital”, for the investment of $
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b. |
Discontinued operations:
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1. |
In March 2009, the Company discontinued the operations of TABS Brazil Ltda. (“TABS Brazil”) its wholly owned subsidiary in Brazil.
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2. |
In June 2018, the Company discontinued the operations of Vexigo Ltd. (“Vexigo”) a wholly owned subsidiary in Israel, which was then sold to a third party. Vexigo, a privately-held Israeli-based software company supporting video advertising over the internet and mobile devices, was acquired by the Company in April 2015.
The results of the discontinued operations including prior periods' comparable results, assets and liabilities which have been retroactively included in discontinued operations as separate line items in the statements of income and balance sheets are presented below.
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Six months ended June 30,
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||||||||
2021
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2020
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|||||||
Unaudited
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||||||||
Operating expenses (income)
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$
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$
|
|
||||
Operating loss (income)
|
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|
||||||
Financial expenses (income), net
|
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(
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)
|
|||||
Total net loss (income) from discontinued operations
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$
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|
$
|
|
NOTE 1:
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GENERAL (Cont.)
|
Six months ended June 30,
|
||||||||
2021
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2020
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|||||||
Unaudited
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||||||||
Cash and cash equivalents
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$
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$
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|
||||
Property and equipment, net
|
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|
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Total assets of discontinued operations
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Trade payables
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||||||
Accrued expenses and other liabilities
|
|
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Total liabilities of discontinued operations
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$
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$
|
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c. |
The Company has historically suffered recurring losses from its operating activities.
The Company incurred losses for the six months period ended June 30, 2021 and 2020, amounting to $
In addition, the Company incurred negative cash flows from continuing operations of $629 for the six months period ended June 30, 2021.
Those factors raise substantial doubt about the Company's ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due.
The Company intends to finance operating costs over the next twelve months with existing cash on hand after reducing operating spend if needed. During 2018 - 2020, the Company implemented a substantive cost reduction mainly by employee’s layoff and reduced its lease expenses during the first quarter of 2019 and the second half of 2020. The Company searched for additional sources of financing and on April 15, 2021, the Company entered into a definitive agreement and Plan of Merger (the “Merger Agreement”) with SharpLink, Inc., a company incorporated under the laws of the State of Minnesota and a leading online technology company that works with sports leagues, fantasy sports sites and media companies to connect fans to relevant and timely betting content sourced from its sportsbook partners (“SharpLink”), and New SL Acquisition Corp., a company incorporated under the laws of the State of Delaware and a wholly-owned subsidiary of the Company (“Merger Sub”). Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, including approval of the transaction by the Company’s shareholders, Merger Sub will be merged with and into SharpLink (the “Merger”), with SharpLink surviving the Merger as a wholly-owned subsidiary of the Company. As a result of the transaction, the securityholders of SharpLink will own
The accompanying unaudited interim consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. The unaudited interim consolidated financial statements for the period ended June 30, 2021, do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty to the Company's ability to continue as a going concern.
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NOTE 3:
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COMMITMENTS AND CONTINGENT LIABILITIES
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a. |
Lease commitments:
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During the first half of 2020, the Company’s facilities in Israel were leased under non-obligating lease contract on a monthly basis. The monthly rental charge ranged from $
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b. |
Royalty commitments:
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The Company is committed to pay royalties to Israel Innovation Authority ("IIA"), formerly known as the Office of the Chief Scientist, of the Ministry of Industry, Trade and Labor of the Government of Israel on proceeds from sales of products resulting from the research and development projects in which the IIA participated. In the event that development of a specific product in which the IIA participated is successful, the Company will be obligated to repay the gzrants through royalty payments at the rate of
|
||
As of June 30, 2021, the Company had a contingent liability to pay royalties in the amount of approximately $
|
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The Company has paid or accrued royalties in its cost of revenues relating to the repayment of such IIA grants in the amount of $
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c.
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Claims and demands:
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1. |
Claims related to discontinued operations:
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The Company is a party to various tax claims that arose in TABS Brazil a subsidiary which was discontinued in 2009. During 2019, the Company reassessed the likelihood of those tax claims and based on its legal advisors' opinion it concluded that they have become remote.
In August 2007, the Company’s Brazilian subsidiary, TABS Brazil, was ordered by the Labor Law Court in Brazil to pay approximately $
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2. |
During February 2020, a legal action was filed against the Company’s US subsidiary in the New York Supreme Court in the amount of $
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3. |
On June 28, 2021, following the announcement of the Merger Agreement with SharpLink, the Company learned of a complaint by a purported shareholder of the Company that was filed in the Supreme Court of the State of New York against the
|
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4. |
Company and its directors (the “Complaint”). The Complaint alleges that the intrinsic value of the Company is in excess of the amount the Company’s shareholders will receive in connection with the Merger and that the proxy statement submitted by the Company in connection with the proposed Merger omits material information as set forth in the Complaint. The Complaint has not been served on the defendants but, based on a cursory review, the Company and its legal counsel believe that the claims asserted in the Complaint are without merit and the Company plans to vigorously defend against them.
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NOTE 4: |
RELATED PARTY TRANSACTIONS AND BALANCES
|
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a. |
The Company receives certain services from C. Mer, a publicly traded company. Mr. Haim Mer, the Company's chairman of the board and Mr. Isaac Ben Bassat, a former director of the Company, are members of the controlling group of C. Mer. These services include reimbursement for shared expenses related to a commercial insurance policy. |
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b. | From January 1, 2009 until September 2011, as part of the acquisition of certain assets and liabilities of AnchorPoint, Inc., the Company received certain services from Data Distributors Inc., a company controlled by Mr. Roger Challen, a former director of the Company and the controlling shareholder of the Info Group Inc., a beneficial owner of |
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c. |
Balances and transactions with related parties were as follows: |
1. Balances with related parties:
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June 30, 2021
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December 31,
2020 |
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Unaudited |
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Other accounts payable and accrued expenses
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$ | $ |
2. Transactions with related parties:
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Six months ended June 30,
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2021
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2020
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Unaudited |
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Amounts charged by related parties:
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Cost of revenues
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$ | $ | ||||||
Operating expenses
|
||||||||
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$ | $ |
NOTE 5:
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SHAREHOLDERS' EQUITY
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a. |
Share capital:
|
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The Ordinary shares entitle their holders the right to receive notice to participate in and vote at general meetings of the Company and the right to receive cash dividends, if declared.
|
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In August 2017, the Company converted $
|
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The Alpha Capital SPA included a greenshoe option for a future investment by Alpha Capital of up to $
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b. |
Share options:
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In 2003, the Company adopted its 2003 Incentive Share Option Plan (the "2003 Plan") that conforms with the provisions of section 102 of the Israel Income Tax Ordinance. As amended by the Company’s shareholders in 2013 and 2016, the 2003 Plan authorizes the grant of options to purchase up to
|
||
In June 2006, the Company adopted its 2006 Stock Option plan (the "2006 Plan"), intended to grant options to officers, employees and directors of MTS IntegraTRAK or any subsidiary of the Company. Each option granted under the 2006 Plan may be either an option intended to be treated as an "incentive stock option", within the meaning of section 422 of the Internal Revenue Code of 1986, as amended, or an option that will be treated as a "non-qualified stock option". As amended in 2011 and 2013, the 2006 Plan authorizes the grant of options to purchase up to
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On October 1, 2017 the Company authorized an options grant to its CEO, to acquire
|
||
The compensation committee in a meeting held on April 6, 2021 and the board of directors in a meeting held on April 8, 2021, approved, subject to the approval of the Company’s shareholders, the following equity compensation:(1) to the Company’s CEO: (a) a warrant to acquire
|
||
As of June 30, 2021,
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NOTE 6:
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SHAREHOLDERS' EQUITY (Cont.)
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c. |
A summary of option activity under the Company's stock option plans to its employees as of June 30, 2021, and changes during the six months ended June 30, 2021, are as follows:
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Number of options
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Weighted-average exercise price
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Weighted- average remaining contractual term (in years)
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Aggregate intrinsic value
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Outstanding at January 1, 2021
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$ | $ | ||||||||||||||
Granted
|
$ | - | $ | - | ||||||||||||
Exercised
|
$ | - | $ | - | ||||||||||||
Expired and forfeited
|
( |
) | $ | ( |
) | $ | - | |||||||||
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||||||||||||||||
Outstanding at June 30, 2021
|
$ | - | $ | |||||||||||||
|
||||||||||||||||
Exercisable at June 30, 2021
|
$ | - | $ |
There were no new grants or exercises during the six months ended June 30, 2021 and 2020.
|
||
The total compensation cost related to options granted to employees under the Company's share-based compensation plans recognized for the six months ended June 30, 2021 and 2020 amounted to $
|
||
As of June 30, 2021, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company's stock option plans.
|
||
d. |
Total stock-based compensation expenses recognized during the period:
|
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The total stock-based compensation expense related to employees' equity-based awards, recognized for the six months ended June 30, 2021 and 2020, was comprised as follows:
|
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Six months ended 30 June | |||||||
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2021
|
2020
|
||||||
General and administrative
|
||||||||
|
$ | $ |
NOTE 6: |
SUBSEQUENT EVENTS |
a. |
On July 21, 2021 the Company’s shareholders approved the Merger Agreement between the Company and SharpLink. In addition, the Company’s shareholders approved the equity compensation to the Company’s CEO and CFO as describe in Note 5(b) above. |
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b. |
On July 22, 2021 Alpha Capital converted |
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c. |
The closing of the Merger between the Company and SharpLink occurred on July 26, 2021. In connection with the closing of the Merger, the Company completed a |
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d. |
On July 26, 2021 Alpha Capital converted |
|
e. |
In connection with the consummation of the Merger, the Company changed its name from Mer Telemanagement Solutions Ltd. to SharpLink Gaming Ltd. and commenced trading under the ticker symbol “SBET” on a post-reverse split basis on July 28, 2021. |
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|
||
f. |
On July 28, 2021, the Company received formal notice from Nasdaq that, as a result of the merger, the Company satisfies all applicable rules for continued listing on The Nasdaq Capital Market. |