UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number: 000-28950

SHARPLINK GAMING LTD.

(Exact name of registrant as specified in its charter)

Israel		98-1657258
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

333 Washington Avenue North, Suite 104, Minneapolis, Minnesota		55401
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (347) 913-3316

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Ordinary Shares		SBET		The Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “emerging growth company” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of May 12, 2023, there were 2,688,541 Ordinary Shares, nominal value NIS 0.60 per share, issued and outstanding.

SHARPLINK GAMING LTD.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	3

ITEM 1.	FINANCIAL STATEMENTS:	3

	Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	3

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022(unaudited)	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022(unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35

ITEM 4.	CONTROLS AND PROCEDURES	35

PART II		36

ITEM 1.	LEGAL PROCEEDINGS	36

ITEM 1A.	RISK FACTORS	36

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	36

ITEM 3.	DEFAULT UPON SENIOR SECURITIES	36

ITEM 4.	MINE SAFETY DISCLOSURES	36

ITEM 5.	OTHER INFORMATION	36

ITEM 6.	EXHIBITS	36

SIGNATURES		37

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

SHARPLINK GAMING LTD.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31, 2023			December 31, 2022
	(unaudited)			(audited)
Assets
Current Assets
Cash	$	28,830,217		$	39,324,529
Restricted cash		10,973,259			11,132,957
Accounts receivable, net of allowance for credit losses of $0 and $0, respectively		1,375,440			776,530
Unbilled receivables		507,091			47,000
Contract assets		227,312			219,116
Deferred Prize Expense		5,295,835			356,158
Prepaid expenses and other current assets		1,138,827			744,275
Current assets from discontinued operations		550,000			1,310,000
Total current assets		48,897,981			53,910,565

Investment, cost		200,000			200,000
Equipment, net		52,022			60,218
Right-of-use asset - operating lease		210,224			230,680
Intangibles
Intangible assets, net		3,783,204			3,727,933
Goodwill		6,916,095			6,916,095
Total assets	$	60,059,526		$	65,045,491

Liabilities and Stockholders’ Equity

Current Liabilities
Accounts payable and accrued expenses	$	1,884,865		$	2,125,707
Contract liabilities		7,729,639			2,166,451
Prize liability		6,219,199			6,061,434
Customer deposits		30,351,091			42,171,589
Line of credit		4,613,151			4,120,651
Current portion of long-term debt		1,030,802			1,018,918
Current portion of convertible debt, net of discount of $128,104 and $0, respectively, warrant discount of $1,125,303 and $0, respectively		3,146,593			-
Current portion of lease liability		31,538			31,070
Current liabilities from discontinued operations		685,500			1,215,213
Total current liabilities		55,692,378			58,911,033

Long-Term Liabilities
Deferred tax liability		18,476			6,206
Debt, less current portion		2,671,162			2,931,698
Lease liability, less current portion		188,476			210,037
Total liabilities		58,570,492			62,058,974

Commitments and Contingencies		-			-
Stockholders’ Equity

Ordinary shares, $0.20 par value; authorized shares 9,290,000 issued and outstanding shares: 2,688,541		537,731			537,731
Series A-1 preferred stock, $0.20 par value; authorized shares: 260,000; issued and outstanding shares: 6,880 and 6,630, respectively; liquidation preference: $149,258 and $138,414, respectively		1,376			1,326
Series B preferred stock, $0.20 par value; authorized shares: 370,000; issued and outstanding shares: 12,481 liquidation preference: $596,193 and $595,245, respectively		2,496			2,496
Preferred stock, value
Treasury stock, nine ordinary shares at cost		(29,000	)		(29,000	)
Additional paid-in capital		77,365,818			76,039,604
Accumulated deficit		(76,389,387	)		(73,565,641	)
Total stockholders’ equity		1,489,034			2,986,517
Total liabilities and stockholders’ equity	$	60,059,526		$	65,045,491

See accompanying notes to these condensed consolidated financial statements.

SHARPLINK GAMING LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the Three Months Ended,
	March 31, 2023			March 31, 2022

Revenues	$	3,390,391		$	1,896,335
Cost of revenues		2,046,750			1,268,902
Gross profit		1,343,641			627,433

Operating expenses
Selling, general, and administrative expenses		3,671,417			2,829,892
Goodwill and intangible asset impairment expenses		-			4,726,000
Total operating expenses		3,671,417			7,555,892
Operating loss		(2,327,776	)		(6,928,459	)

Other income and expense
Interest income		272,421			12,314
Interest expense		(337,421	)		(20,384	)
Change in fair value of convertible debenture		(255,229	)		-
Total other income and expense		(320,229	)		(8,070	)

Net loss before income taxes		(2,648,005	)		(6,936,529	)
Provision for income tax expenses		30,741			-
Net loss from continuing operations		(2,678,746	)		(6,936,529	)
Net loss from discontinued operations, net of tax		(145,000	)		(108,000	)

Net loss	$	(2,823,746	)	$	(7,044,529	)

Numerator for basic and diluted net loss per share:
Net loss from continuing operations available to ordinary shareholders	$	(2,679,695	)	$	(6,940,124	)
Net loss from discontinued operations available to ordinary shareholders		(145,000	)		(108,000	)
		(2,824,695	)		(7,048,124	)

Denominator for basic and diluted net loss per share:
Weighted average shares outstanding		2,813,900			2,361,974

Net loss per share - Basic and diluted
Net loss from continuing operations per share	$	(0.95	)	$	(2.94	)
Net loss from discontinued operations per share		(0.05	)		(0.05	)
Net loss per share	$	(1.00	)	$	(2.99	)

See accompanying notes to these condensed consolidated financial statements.

SHARPLINK GAMING LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(UNAUDITED)

	Shares		Amount		Shares		Amount		Shares		Amount		Capital			stock			deficit			equity
	Ordinary shares				Series A-1 preferred stock				Series B preferred stock
													Additional									Total
													Paid-In			Treasury			Accumulated			shareholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			stock			deficit			equity


Balance, December 31, 2021		2,236,615	$	447,346		5,474	$	1,094		12,481	$	2,496	$	72,101,783		$	(2,900	)	$	(58,332,263	)	$	14,191,456

Net loss		-		-		-		-		-		-		-			-			(7,044,529	)		(7,044,529	)
Stock-based compensation expense		-		-		-		-		-		-		380,685			-			-			380,685
Dividends on Series B preferred stock in Series A-1 preferred stock		-		-		-		-		-		-		-			-			-			-
Balance, March 31, 2022		2,236,615		447,346		5,474		1,094		12,481		2,496		72,482,468			(2,900	)		(65,376,792	)		7,527,612

Balance, December 31, 2022		2,688,541	$	537,731		6,630	$	1,326		12,481	$	2,496	$	76,039,605		$	(2,900	)	$	(73,565,641	)	$	2,986,517

Net loss		-		-		-		-		-		-		-			-			(2,823,746	)		(2,823,746	)
Stock-based compensation expense		-		-		-		-		-		-		152,034			-			-			152,034
Warrants issued in conjunction with convertible debenture		-		-		-		-		-		-		1,174,229			-			-			1,174,229
Dividends on Series B preferred stock in Series A-1 preferred stock		-		-		250		50		-		-		(50	)		-			-			-
Balance, March 31, 2023		2,688,541		537,731		6,880		1,376		12,481		2,496		77,365,818			(2,900	)		(76,389,387	)		1,489,034

See accompanying notes to these condensed consolidated financial statements.

SHARPLINK GAMING LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the Three Months Ended March 31,
Includes cash flow activities from both continuing and discontinued operations	2023			2022

Operating activities
Net loss from continuing operations	$	(2,678,746	)	$	(6,936,529	)
Net loss from discontinued operations, net of tax	$	(145,000	)	$	(108,000	)
Net loss	$	(2,823,746	)	$	(7,044,529	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization

SEC Form 10-Q filed by SharpLink Gaming Ltd.