Airwa Inc 10-Q for FY2022 Q3
Airwa Inc. (YYAI)
About this 10-Q
Airwa Inc filed this 10-Q on March 17, 2022, covering the quarter ended January 31, 2022 (FY2022 Q3).
Headline figures
Quarter ended January 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $4.2M
- up 1.9% from $4.12M a year earlier
- Net loss
- $2.37M
- compared with a net loss of $1.29M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
For the transition period from ________ to ________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices, including Zip Code)
(Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☒ No ☐
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.
The registrant is a voluntary filer of reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 and has filed during the preceding 12 months all reports it would have been required to file by Section 13 or 15(d) of the Securities Exchange Act of 1934 if the registrant had been subject to one of such Sections.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | 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 Exchange Act). Yes ☐
The number of shares outstanding of the registrant’s Common Stock, $0.001 par value per share, as of February 28, 2022, was .
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue,” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by any forward-looking statements.
Important factors that may cause the actual results to differ from the forward-looking statements, projections or other expectations include, but are not limited to, the following:
| ● | risk that we will not be able to remediate identified material weaknesses in our internal control over financial reporting and disclosure controls and procedures; | |
| ● | risk that we fail to meet the requirements of the agreements under which we acquired our business interests, including any cash payments to the business operations, which could result in the loss of our right to continue to operate or develop the specific businesses described in the agreements; | |
| ● | risk that we will be unable to secure additional financing in the near future in order to commence and sustain our planned development and growth plans; | |
| ● | risk that we cannot attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations; | |
| ● | risks and uncertainties relating to the various industries and operations we are currently engaged in; | |
| ● | results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future growth, development or expansion will not be consistent with our expectations; | |
| ● | risks related to the inherent uncertainty of business operations including profit, cost of goods, production costs and cost estimates and the potential for unexpected costs and expenses; | |
| ● | risks related to commodity price fluctuations; | |
| ● | the uncertainty of profitability based upon our history of losses; | |
| ● | risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned development projects; | |
| ● | risks related to environmental regulation and liability; | |
| ● | risks related to tax assessments; and | |
| ● | other risks and uncertainties related to our prospects, properties and business strategy. |
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.
As used in this quarterly report, the “Company,” “we,” “us,” or “our” refer to Singer Bag Inc. and its subsidiaries, unless otherwise indicated.
| i |
SLINGER BAG INC.
INDEX
| ii |
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
SLINGER BAG INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| January 31, 2022 | April 30, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid inventory | ||||||||
| Loan and interest receivable | - | |||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Goodwill | - | |||||||
| Other intangible assets, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders’ Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued payroll and bonuses | ||||||||
| Deferred revenue | ||||||||
| Accrued interest - related party | ||||||||
| Notes payable - related party, net | ||||||||
| Convertible notes payable, net | - | |||||||
| Derivative liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Note payable, net | - | |||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 11) | - | - | ||||||
| Shareholders’ deficit | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding as of January 31, 2022 (unaudited) and April 30, 2021, respectively; and shares issuable as of January 31, 2022 (unaudited) and April 30, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements
| F-1 |
SLINGER BAG INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| January 31, | January 31, | January 31, | January 31, | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross income | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Research and development costs | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other expense (income): | ||||||||||||||||
| Amortization of debt discounts | ||||||||||||||||
| Loss on extinguishment of debt | - | |||||||||||||||
| Induced conversion loss | - | - | - | |||||||||||||
| Gain on change in fair value of derivatives | ( |
) | - | ( |
) | - | ||||||||||
| Loss on issuance of convertible notes | - | - | ||||||||||||||
| Interest expense - related party | ||||||||||||||||
| Interest expense, net | ||||||||||||||||
| Total other expense (income) | ( |
) | ||||||||||||||
| Loss before income taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Provision for income taxes | - | - | - | - | ||||||||||||
| Net loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other comprehensive gain (loss), net of tax | ||||||||||||||||
| Foreign currency translation adjustments | ( |
) | ( |
) | ( |
) | ||||||||||
| Total other comprehensive gain (loss), net of tax | ( |
) | ( |
) | ( |
) | ||||||||||
| Comprehensive loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per share, basic and diluted | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements
| F-2 |
SLINGER BAG INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT (UNAUDITED)
| Accumulated | ||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||
| Common Stock | Paid-in | Comprehensive | Accumulated | |||||||||||||||||||||
| Shares | Amount | Capital | Loss | Deficit | Total | |||||||||||||||||||
| Balance, April 30, 2020 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
| Shares issued related to note payable | ( |
) | - | - | - | |||||||||||||||||||
| Shares and warrants issued in connection with services | - | - | ||||||||||||||||||||||
| Foreign currency translation | - | - | - | ( |
) | - | ( |
) | ||||||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||
| Balance, July 31, 2020 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
| Shares issued for conversion of convertible debt | - | - | ||||||||||||||||||||||
| Shares and warrants issued in connection with services | - | - | ||||||||||||||||||||||
| Warrants issued related to notes payable – related party | - | - | - | - | ||||||||||||||||||||
| Foreign currency translation | - | - | - | ( |
) | - | ( |
) | ||||||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||
| Balance, October 31, 2020 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
| Shares issued in connection with purchase of trademark | - | - | ||||||||||||||||||||||
| Shares issued in connection with conversion of notes payable | - | - | ||||||||||||||||||||||
| Warrants issued related to notes payable – related party | - | - | - | - | ||||||||||||||||||||
| Warrants issued in connection with purchase of trademark | - | - | - | - | ||||||||||||||||||||
| Shares and warrants issued in connection with services | - | - | ||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | ||||||||||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||
| Balance, January 31, 2021 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
| Balance, April 30, 2021 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
| Shares issued for conversion of notes payable – related party | - | - | ||||||||||||||||||||||
| Shares issued in connection with acquisition | - | - | ||||||||||||||||||||||
| Shares and warrants issued in connection with services | - | - | ||||||||||||||||||||||
| Share-based compensation | - | - | ||||||||||||||||||||||
| Foreign currency translation | - | - | - | ( |
) | - | ( |
) | ||||||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||
| Balance, July 31, 2021 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
| Shares issued for conversion of warrants | ( |
) | - | - | ||||||||||||||||||||
| Shares issued for conversion of common shares issuable | - | - | - | |||||||||||||||||||||
| Elimination of related party derivative liabilities | - | - | - | - | ||||||||||||||||||||
| Shares and warrants issued in connection with services | - | - | ||||||||||||||||||||||
| Share-based compensation | - | - | - | - | ||||||||||||||||||||
| Foreign currency translation | - | - | - | - | ||||||||||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||
| Balance, October 31, 2021 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
| Shares and warrants issued in connection with services | - | - | ||||||||||||||||||||||
| Foreign currency translation | - | - | - | ( |
) | - | ( |
) | ||||||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||
| Balance, January 31, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements
| F-3 |
SLINGER BAG INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Nine Months Ended | ||||||||
| January 31, | January 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization expense | ||||||||
| Gain on change in fair value of derivatives | ( |
) | ||||||
| Shares and warrants issued with services | ||||||||
| Share-based compensation | - | |||||||
| Loss on extinguishment of debt | ||||||||
| Induced conversion loss | ||||||||
| Amortization of debt discounts | ||||||||
| Loss on issuance of convertible notes | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( |
) | ( |
) | ||||
| Inventories, net | ( |
) | ( |
) | ||||
| Prepaid expenses and other current assets | ( |
) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued payroll and bonuses | ||||||||
| Deferred revenue | ( |
) | ( |
) | ||||
| Accrued interest - related party | ||||||||
| Net cash from operating activities | ( |
) | ( |
) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of trademark | ( |
) | ||||||
| Note receivable issuance | ( |
) | ||||||
| Net cash from investing activities | ( |
) | ( |
) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from convertible notes | - | |||||||
| Debt issuance costs from convertible notes | ( |
) | ||||||
| Proceeds from notes - related party | ||||||||
| Repayments of notes - related party | ( |
) | - | |||||
| Repayment of note payable | ( |
) | ||||||
| Proceeds from note payable | ||||||||
| Other financing activities | ||||||||
| Net cash from financing activities | ||||||||
| Effect of exchange rate | ( |
) | ( |
) | ||||
| Net change in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beg of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | ||||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Transfer of notes payable to notes payable - related party | ||||||||
| Transfer of convertible note payable to notes payable | ||||||||
| Shares issued for conversion of notes payable – related party | ||||||||
| Shares issued in connection with acquisition | ||||||||
| Shares and warrants issued in connection with purchase of trademark | ||||||||
| Elimination of related party derivative liabilities | ||||||||
| Derivative liabilities recorded as debt discounts of convertible notes | ||||||||
| Conversion of notes payable and accrued interest into common stock | ||||||||
| Warrants and shares issued with note payable | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements
| F-4 |
SLINGER BAG INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
Organization
Lazex
Inc. (“Lazex”) was incorporated under the laws of the State of Nevada on July 12, 2015. On August 23, 2019, the majority
owner of Lazex entered into a Stock Purchase Agreement with Slinger Bag Americas Inc., a Delaware corporation (“Slinger Bag Americas”),
which was
On October 31, 2019, Slinger Bag Americas acquired control of Slinger Bag Canada, Inc., (“Slinger Bag Canada”) a Canadian company incorporated on November 3, 2017. There were no assets, liabilities or historical operational activity of Slinger Bag Canada at that time.
On
February 10, 2020, Slinger Bag Americas became the
On
June 21, 2021, Slinger Bag Americas entered into a membership interest purchase agreement with Charles Ruddy to acquire a
The operations of Slinger Bag Inc., Slinger Bag Americas, Slinger Bag Canada, Slinger Bag UK, SBL and Foundation Sports are collectively referred to as the “Company.”
The Company operates in the sporting and athletic goods business. The Company is the owner of the Slinger Launcher, which is a portable tennis ball launcher, as well as other associated tennis accessories.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). As a result of the transactions described above, the accompanying consolidated financial statements include the combined results of Slinger Bag Inc., Slinger Bag Americas, Slinger Bag Canada, Slinger Bag UK, SBL and Foundation Sports for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation.
NOTE 2: GOING CONCERN
The
financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge
its liabilities in the normal course of business for the foreseeable future. The Company has an accumulated deficit of $
| F-5 |
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or being able to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from related parties, and/or private placement of debt and/or common stock. In respect to additional financing, refer to Notes 5, 6, 7, and 12. In the event that the Company is unable to successfully raise capital and/or generate revenues, the Company will likely reduce general and administrative expenses, and cease or delay its development plan until it is able to obtain sufficient financing. There can be no assurance that additional funds will be available on terms acceptable to the Company, or at all.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and based upon Securities and Exchange Commission rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, you should refer to the financial statements included in Slinger Bag Inc.’s Annual Report on Form 10-K for the year ended April 30, 2021. These financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Accordingly, actual results could differ from those estimates.
Financial Statement Reclassification
Certain prior year amounts have been reclassified in these consolidated financial statements to conform to current year presentation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. The majority of payments due from banks for credit card transactions process within 24 to 48 hours and are accordingly classified as cash and cash equivalents.
Accounts Receivable
The
Company’s accounts receivable are non-interest bearing trade receivables resulting from the sale of products and payable over terms
ranging from 15 to 60 days. The Company provides an allowance for doubtful accounts at the point when collection is considered doubtful.
Once all collection efforts have been exhausted, the Company charges-off the receivable with the allowance for doubtful accounts. The
Company had a $
Inventory
Inventory
is valued at the lower of the cost (determined principally on a first-in, first-out basis) or net realizable value. The Company’s
valuation of inventory includes inventory reserves for inventory that will be sold below cost and the impact of inventory shrink. Inventory
reserves are based on historical information and assumptions about future demand and inventory shrink trends. The Company’s inventory
as of January 31, 2022 consisted of $
| F-6 |
Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts, the balances of which at times may exceed insured limits. The Company continually monitors its banking relationships and consequently has not experienced any losses in such accounts. While we may be exposed to credit risk, we consider the risk remote and do not expect that any such risk would result in a significant effect on our results of operations or financial condition.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. The Company recognizes revenue for its performance obligation associated with its contracts with customers at a point in time once products are shipped. Amounts collected from customers in advance of shipping products ordered are reflected as deferred revenue on the accompanying consolidated balance sheets. The Company’s standard terms are non-cancelable and do not provide for the right-of-return, other than for defective merchandise covered under the Company’s standard warranty. The Company has not historically experienced any significant returns or warranty issues.
Fair Value of Financial Instruments
Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities
Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities
Level 3 — Unobservable pricing inputs in the market
Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their categorization within the fair value hierarchy.
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, and accounts payable. The carrying amount of these financial instruments approximates fair value due to their short-term maturity.
The Company’s derivative liabilities were calculated using Level 2 assumptions on the issuance and balance sheet dates via a Black-Scholes option pricing model and consisted of the following ending balances and gain amounts as of and for the three and nine months ended January 31, 2022:
SUMMARY OF DERIVATIVE LIABILITIES
| Note derivative is related to | January 31, 2022 ending balance | Gain (loss) for three months ended January 31, 2022 | Gain (loss) for nine months ended January 31, 2022 | |||||||||
| 4/11/21 conversion of 12/24/20 note payable | $ | $ | $ | ( | ) | |||||||
| 4/15/21 note payable | ( | ) | ||||||||||
| 5/26/21 conversion of notes payable – related party | ( | ) | ||||||||||
| 8/6/21 convertible notes | ( | ) | ( | ) | ||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | |||||
The Black-Scholes option pricing model assumptions for the derivative liabilities during the nine months ended January 31, 2022 and 2021 consisted of the following:
SUMMARY OF WARRANTS GRANTED VALUATION USING BLACK-SCHOLES PRICING METHOD
| 2022 | 2021 | |||||||
| Expected life in years | N/A | |||||||
| Stock price volatility | % | N/A | ||||||
| Risk free interest rate | % | N/A | ||||||
| Expected dividends | % | N/A | ||||||
Income Taxes
Income taxes are accounted for in accordance with the provisions of ASC 740, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts that are more likely than not to be realized.
| F-7 |
Goodwill
The Company accounts for goodwill in accordance with ASC 350, Intangibles - Goodwill and Other (“ASC 350”). ASC 350 requires that goodwill not be amortized, but reviewed for impairment if impairment indicators arise and, at a minimum, annually.
The goodwill impairment test is a two-step test. In the first step, the Company compares the fair value of each reporting unit with goodwill to its carrying value. The Company determines the fair value of its reporting units with goodwill using a combination of a discounted cash flow and a market value approach. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the goodwill impairment test in order to determine the implied fair value of the reporting unit’s goodwill and compare it to the carrying value of the reporting unit’s goodwill. The activities in the second step include valuing the tangible and intangible assets and liabilities. If the implied fair value of goodwill is less than the carrying value, an impairment loss is recognized for the difference.
There
was
Intangible Assets
Intangible
assets relate to the “Slinger” technology trademark, which the Company purchased on November 10, 2020, as well as the intangible
assets related to the purchase of Foundation Sports on June 21, 2021 (see Note 4). The Slinger trademark is amortized over its expected
life of
Long-Lived Assets
In
accordance with ASC 360-10, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate
that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted
future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying
amount. If those net undiscounted cash flows do not exceed the carrying amount, impairment, if any, is based on the excess of the carrying
amount over the fair value based on the market value or discounted expected cash flows of those assets and is recorded in the period
in which the determination is made. There was
The Company accounts for share-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). Under the fair value recognition provisions of this topic, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period.
Warrants
The Company grants warrants to key employees and executives as compensation on a discretionary basis. The Company also grants warrants in connection with certain note payable agreements and other key arrangements. The Company is required to estimate the fair value of share-based awards on the measurement date and recognize as expense that value of the portion of the award that is ultimately expected to vest over the requisite service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 6: Convertible Notes Payable, Note 7: Note Payable and Note 10: Shareholders’ Equity.
The warrants granted during the nine months ended January 31, 2022 and 2021 were valued using a Black-Scholes option pricing model on the date of grant using the following assumptions:
SUMMARY OF WARRANTS GRANTED VALUATION USING BLACK-SCHOLES PRICING METHOD
| 2022 | 2021 | |||||||
| Expected life in years | ||||||||
| Stock price volatility | % | % | ||||||
| Risk free interest rate | % | % | ||||||
| Expected dividends | % | % | ||||||
Foreign Currency Translation
A portion of SBL’s operations are conducted in Israel and its functional currency is the Israeli Shekel, the Company’s operations of Slinger Bag Canada are conducted in its functional currency of Canadian Dollars, and the Company’s Slinger Bag UK operations are conducted in its functional currency of the British pound (“GBP”). The accounts of SBL, Slinger Bag Canada, and Slinger Bag UK have been translated into U.S. dollars (“USD”). Assets and liabilities are translated into USD at the applicable exchange rates at period-end. Shareholders’ equity is translated using historical exchange rates. Revenue and expenses are translated at the average exchange rates for the period. Any translation adjustments are included as foreign currency translation adjustments on the consolidated statements of operations and comprehensive loss.
Basic earnings per share are calculated by dividing income available to shareholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period.
The Company had and common shares issuable as of January 31, 2022 and 2021, which were not included in the calculation of diluted earnings per share as the effect is antidilutive. The Company also had outstanding convertible notes payable that were convertible into and shares of common stock as of January 31, 2022 and 2021, respectively, outstanding warrants exercisable into and shares of common stock as of January 31, 2022 and 2021, respectively, and and shares related to make-whole provisions as of January 31, 2022 and 2021, respectively, which were excluded from the calculation of diluted earnings per share as the effect is antidilutive. As a result, the basic and diluted earnings per share are the same for each of the periods presented.
| F-8 |
Recent Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”), 2019-12, Simplifying the Accounting for Income Taxes, which amends ASC 740, Income Taxes (“ASC 740”). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s financial statements and related disclosures.
Other recently issued accounting pronouncements did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements.
NOTE 4: ACQUISITIONS
The Company allocated the aggregate purchase price for the acquisition based upon the tangible and intangible assets acquired, net of liabilities. The allocation of the purchase price is detailed below:
SCHEDULE OF INTANGIBLE ASSETS ACQUIRED
| Allocation
of purchase price |
||||
| Trade name | $ | |||
| Internally developed software | ||||
| Customer relationships | ||||
| Goodwill | ||||
| Total purchase price | $ | |||
The
trade name, internally developed software, and customer relationships will be amortized over their expected lives of
NOTE 5: NOTES PAYABLE – RELATED PARTY
Beginning
in October 2019, the Company entered into several loan agreements with a related party entity controlled by the former shareholder of
Slinger Bag Canada. Total outstanding borrowings from this related party as of April 30, 2021 amounted to $,
which was gross of total discounts of $
SUMMARY OF NOTES PAYABLE
| Note date | Maturity date | Interest rate | April 30, 2021 | |||||||
| % | $ | |||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| Total notes payable | $ | |||||||||
On
May 26, 2021, the Company and the related party lender entered into a note conversion agreement (the “Note Conversion Agreement”)
whereby the related party lender agreed to convert its total outstanding borrowings as of that date of $
The Company evaluated the conversion option of the notes payable to shares under the guidance in ASC 815, Derivatives and Hedging (“ASC 815”), and determined the conversion option qualified for equity classification. The Company also evaluated the profit guarantee under ASC 815 and determined it to be a make-whole provision, which is an embedded derivative within the host instrument. As the economic characteristics of the make-whole provision are dissimilar to the host instrument, the profit guarantee was bifurcated from the host instrument and stated as a separate derivative liability, which is marked to market at the end of each reporting period with the non-cash gain or loss recorded in the period as a gain or loss on derivative.
On
the date of conversion the Company recognized a $
| F-9 |
Per
the terms of the Note Conversion Agreement the accrued interest related to the notes payable was not converted into shares and is still
due to the related party. The Company and the related party agreed that interest will continue to accrue on the outstanding accrued interest
at a rate of
On
July 23, 2021, the Company entered into a loan agreement with its related party lender for borrowings of $
On
August 4, 2021, the Company entered into a loan agreement with its related party lender for borrowings of $
On
August 11, 2021, the Company repaid the outstanding principal and interest to its related party lender for the July 23, 2021 loan of
$
On
August 31, 2021, the Company’s related party lender cancelled the guarantee in the Note Conversion Agreement that the aggregate
gross sales of its converted shares will be no less than $
On
January 14, 2022, the Company entered into two loan agreements with Yonah Kalfa and Naftali Kalfa, each for $
There
was $
NOTE 6: CONVERTIBLE NOTES PAYABLE
On
August 6, 2021, the Company consummated the closing (the “Closing”) of a private placement offering (the “Offering”)
pursuant to the terms and conditions of that certain Securities Purchase Agreement, dated as of August 6, 2021 (the “Purchase Agreement”),
between the Company and certain accredited investors (the “Purchasers”). At the Closing, the Company sold to the Purchasers
(i)
| F-10 |
The
Convertible Notes mature on
The
Warrants are exercisable for
The Company evaluated the Warrants and the conversion options under the guidance in ASC 815 and determined they represent derivative liabilities given the variability in the exercise and conversion prices upon the event of an up list to the NASDAQ. The Company also evaluated the other embedded features in the agreement and determined the interest make-whole provision and the subsequent financing redemption represent put features that are also accounted for as derivative liabilities. The derivative liabilities are marked to market at the end of each reporting period with the non-cash gain or loss recorded in the period as a gain or loss on derivative (see Note 3).
The
Warrants were valued at $
As
part of the issuance of the Convertible Notes, the Company incurred and capitalized debt issuance costs of $
The Purchase Agreement was amended to, among other things, (i) delete Exhibit A and replace it in its entirety with the 8% Senior Convertible Note (the “Replacement Note”) filed as Exhibit 10.2 to the Company’s current report on Form 8-K dated January 5, 2021, (ii) add a new definition of “Inventory Financing”, (iii) amend Section 4.18 to add at the end of Section 4.18 before the final period “, it being agreed that the provisions of this Section 4.18 shall not apply to the Qualified Subsequent Financing expected to occur after the date hereof”, (iv) delete Section 4.20 and replace it in its entirety with substantially the same text, including the following after the period, replacing the period with a semicolon: “; provided that the provisions of this Section 4.20 shall not apply to (i) in respect of any Holder to the extent that such Holder is an investor or a purchaser of the securities offered pursuant such Subsequent Financing, and (ii) with respect to an Inventory Financing.”, and (v) add a new Section 4.21. Most-Favored Nation provision.
The Registration Rights Agreement was amended to, among other things, (i) delete the definition “Effectiveness Date” in Section 1 and replace it in its entirety with substantially the same text but revise the definition of “Effectiveness Date” causing the Initial Registration Statement required to be filed by January 31, 2022, and (ii) delete Section 2(d) and replace it in its entirety with substantially the same text but revised to delete the following “(2) no liquidated damages shall accrue or be payable hereunder with respect to any day on which the high price of the Common Stock on the Trading Market on which the Common Stock is then listed or traded is less than the then-applicable Conversion Price,” resulting in renumbering the text that follows as (2) instead of (3).
As
consideration for entering into the Omnibus Agreement, the outstanding principal balance of the Existing Note held by each Purchaser
was increased by twenty percent (
The
fair value of the derivative liability related to the Convertible Notes was $
Total
outstanding borrowings related to the Convertible Notes as of January 31, 2022 were $
| F-11 |
NOTE 7: NOTE PAYABLE
On
The Note is collateralized by all business assets, including patents, trademarks and other intellectual property. It is also collateralized by the ownership of Slinger Bag Americas, Slinger Bag Canada, SBL, and Slinger Bag UK.
In
connection with the Note, the Company issued
The Company evaluated the warrants and the profit guarantee under the guidance in ASC 815 and determined they represent a derivative liability given the profit guarantee represents a make-whole provision that is not separated from the host instrument. The derivative liability is marked to market at the end of each reporting period with the non-cash gain or loss recorded in the period as a gain or loss on derivative (see Note 3).
On August 6, 2021, the Company used the net proceeds from the issuance of the Convertible Notes (see Note 6) to pay 100% of the outstanding principal and accrued interest of the Note.
Amortization
of the debt discount related to the Note during the three and nine months ended January 31, 2022 was $
On
August 6, 2021, the Note payable holder exercised its right to convert its
There
were
NOTE 8: NOTE RECEIVABLE
On
July 21, 2021, the Company entered into a Convertible Loan Agreement with PlaySight Interactive Ltd (the “Borrower”) wherein
the Company granted the Borrower a line of credit with a six-month maturity date. Any borrowings under the line of credit bear interest
at a rate of
On
July 26, 2021, the Company issued $
As
of January 31, 2022, the total note receivable balance was $
| F-12 |
NOTE 9: RELATED PARTY TRANSACTIONS
In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attain adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by officers, directors, or shareholders. Amounts represent advances, amounts paid in satisfaction of liabilities, or accrued compensation that has been deferred. The advances are considered temporary in nature and have not been formalized by a promissory note.
Amounts
due to related parties were $
The
Company had outstanding notes payable of $
The
Company recognized net sales of $
NOTE 10: SHAREHOLDERS’ EQUITY
Common Stock Transactions During the Nine Months Ended January 31, 2022
On
May 26, 2021, the Company issued shares of its common stock for the conversion of related party notes payable (see Note 5).
The fair value of the common stock was $
On
June 23, 2021, the Company issued shares of its common stock as partial consideration for the acquisition of Foundation Sports
(see Note 4). The fair value of the total shares of common stock to be issued related to the acquisition was $
On July 6, 2021, the Company issued shares of its common stock to two employees as compensation for services rendered in lieu of cash, which resulted in $ in share-based compensation expense during the three months ended July 31, 2021.
On July 11, 2021, the Company issued shares of its common stock to a vendor as compensation for marketing and other services rendered, which resulted in $ of operating expenses during the three months ended July 31, 2021.
During the three months ended July 31, 2021, the Company granted an aggregate total of shares of its common stock and equity options to purchase up to shares (which are now expired) to six new brand ambassadors as compensation for services. The expense related to the issuance of the shares and equity options is being recognized over the service agreements, similar to the warrants and equity options issued to the four other brand ambassadors in the prior year. During the three and nine months ended January 31, 2022, the Company recognized $ and $ of operating expenses related to the shares, warrants and equity options granted to brand ambassadors.
On
August 6, 2021, the Note payable holder (see Note 7) exercised its right to convert its
On
August 6, 2021, the Company’s related party lender exercised its right to convert its
On October 11, 2021, the Company issued shares of its common stock to a vendor as compensation for marketing and other services rendered, which resulted in $ of operating expenses during the three months ended October 31, 2021.
On January 11, 2022, the Company issued shares of its common stock to a vendor as compensation for marketing and other services rendered, which resulted in $ of operating expenses during the three months ended January 31, 2022.
| F-13 |
Warrants Issued During the Nine Months Ended January 31, 2022
On
October 28, 2020, the Company granted warrants to a service provider for advertising services over the next year. The
warrants have an exercise price of $
On
October 29, 2020, the Company and the three members of its advisory board entered into agreements whereby each member will receive an
aggregate number of warrants each quarter equal to $ divided by the average closing price of the Company’s stock for
the five days prior to the Company’s most recently completed fiscal quarter. The warrants vest quarterly, have an exercise price
of $
On August 6, 2021, in connection with the Convertible Notes issuance (see Note 6) the Company issued warrants to purchase up to shares of common stock of the Company to the Purchasers.
On
August 6, 2021, in connection with the Convertible Notes issuance the Company also granted the lead placement agent for the Offering
On
September 3, 2021, the Company granted an aggregate total of warrants to key employees and officers of the
Company as compensation. The warrants have an exercise price of $
| F-14 |
NOTE 11: COMMITMENTS AND CONTINGENCIES
Leases
The
Company leases its office space under short-term leases with terms under a year. Total rent expense for the three months ended January
31, 2022 and 2021 amounted to $
Contingencies
From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company is not presently a party to any legal proceedings that it currently believes would individually or taken together have a material adverse effect on the Company’s business or financial statements.
NOTE 12: SUBSEQUENT EVENTS
On
February 2, 2022, Slinger Bag Australia Pty Ltd., a wholly-owned subsidiary of Slinger Bag Americas Inc. (which, in turn, is a wholly-owned
subsidiary of Slinger Bag Inc.) completed the acquisition of
Out of the Consideration Shares, the Company has retained shares as security for the obligations of Mr. Shaik and Divyaa Jalal, as trustees for the Jalaluddin Shaik Family Trust, in respect of any claim which may be made by or on behalf of the Company for breach of warranty or under an indemnity given under the terms of the Share Purchase Agreements by August 2, 2023. The retained shares will be issued promptly after August 2, 2023 to the extent that the Company has not made any such claims by that date.
On October 6, 2021, the Company entered into a merger agreement (the “PlaySight Agreement”) with PlaySight Interactive Ltd. (“PlaySight”) and Rohit Krishnan, in his capacity as the Shareholders’ Representative (as defined in the PlaySight Agreement) (the “Shareholder Representative”), pursuant to which PlaySight will, subject to the satisfaction or waiver of certain closing conditions, become a wholly owned subsidiary of the Company. On February 16, 2022, SB Merger Sub Ltd., a private company formed under the laws of the State of Israel and a wholly owned subsidiary of the Company, PlaySight, and the Shareholders’ Representative, entered into an Addendum to and Amendment to the PlaySight Agreement (the “Amendment”) to finalize the merger transaction.
Under
the terms of the PlaySight Agreement, the Company agreed, among other things, to issue shares of the Company’s common
stock (subject to adjustment) in exchange for the merger (the “Completion Merger Consideration”). As a result of the parties
to the Agreement having agreed to such adjustment, the parties to the Amendment have agreed that the Completion Merger Consideration
shall comprise the issue by the Company of
Pursuant
to and in accordance with the terms of the Amendment, the Company agreed to purchase a certain number of shares of its common stock from
certain of PlaySight’s shareholders for a maximum aggregate liability of $
| F-15 |
In connection with the closing of the merger, the Convertible Loan Agreement between the Company and PlaySight that was entered into on July 21, 2021, was extinguished.
On
February 15, 2022, for and in consideration of $
| a) | On
or before March 15, 2022, the Company shall pay to Consignor $ for the purchase of
| |
| b) | The Company also agreed to purchase the remaining Consigned Goods in accordance with the following terms and conditions: |
| i. | Within
3 business days after a Registration Statement (as defined in the Purchase and Registration
Rights Agreements) filed under the Registration Rights Agreement for the Company’s
uplist to the Nasdaq is declared to be effective (the “Registration Effective Date”)
under the Securities Act (as defined in the Purchase and Registration Rights Agreements)
by the Commission (as defined in the Purchase and Registration Rights Agreements), the Company
shall pay Consignor $ | |
| ii. | If
the Registration Statement Effectiveness Date does not occur on or before April 14, 2022,
on April 15, 2022, the Company shall pay Consignor $ | |
| iii. | If
the Registration Effectiveness Date does not occur on or before April 30, 2022, on May 1,
2022, the Company shall pay Consignor $ |
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. We are closely monitoring the unfolding events due to the Russia-Ukraine conflict and its regional and global ramifications. We have one distributor in Russia, which is not material to our overall financial results. We do not have operations in Ukraine or Belarus. We are monitoring any broader economic impact from the current crisis. The specific impact on the Company's financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements. However, to the extent that such military action spreads to other countries, intensifies, or otherwise remains active, such action could have a material adverse effect on our financial condition, results of operations, and cash flows.
| F-16 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included elsewhere in this report and our Annual Report on Form 10-K for the year ended April 30, 2021. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements. See “Cautionary Statement Regarding Forward Looking Information’’ elsewhere in this report. Because this discussion involves risks and uncertainties, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview and Description of Business
Lazex Inc. (“Lazex”) was incorporated under the laws of the State of Nevada on July 12, 2015. On August 23, 2019, the majority owner of Lazex entered into a Stock Purchase Agreement with Slinger Bag Americas Inc., a Delaware corporation (“Slinger Bag Americas”), which was 100% owned by Slinger Bag Ltd. (“SBL”), an Israeli company. In connection with the Stock Purchase Agreement, Slinger Bag Americas acquired 20,000,000 shares of common stock of Lazex for $332,239. On September 16, 2019, SBL transferred its ownership of Slinger Bag Americas to Lazex in exchange for the 20,000,000 shares of Lazex acquired on August 23, 2019. As a result of these transactions, Lazex owned 100% of Slinger Bag Americas and the sole shareholder of SBL owned 20,000,000 shares of common stock (approximately 82%) of Lazex. Effective September 13, 2019, Lazex changed its name to Slinger Bag Inc.
On October 31, 2019, Slinger Bag Americas acquired control of Slinger Bag Canada, Inc., (“Slinger Bag Canada”) a Canadian company incorporated on November 3, 2017. There were no assets, liabilities or historical operational activity of Slinger Bag Canada at that time.
On February 10, 2020, Slinger Bag Americas became the 100% owner of SBL, along with SBL’s wholly owned subsidiary Slinger Bag International (UK) Limited (“Slinger Bag UK”), which was formed on April 3, 2019. The owner of SBL contributed it to Slinger Bag Americas for no consideration.
On June 21, 2021, Slinger Bag Americas entered into a membership interest purchase agreement with Charles Ruddy to acquire a 100% ownership stake in Foundation Sports Systems, LLC (“Foundation Sports”).
The operations of Slinger Bag Inc., Slinger Bag Americas, Slinger Bag Canada, Slinger Bag UK, SBL and Foundation Sports are collectively referred to as the “Company” or “Slinger.”
The Company operates in the sporting and athletic goods business. The Company is the owner of the Slinger Launcher, a highly portable and affordable ball launcher built into an easy to transport wheeled trolley bag. The Slinger Launcher allows anyone to simply and easily control the speed, frequency and elevation of balls that are launched for practice, training or fitness purposes.
The Company has initially focused all its energies on the tennis market worldwide, but is in the early stages of developing ball launchers for other ball sports.
For the regular tennis player, the Slinger Launcher is much more than a tennis ball launcher. It also functions as a complete tennis bag with ample room for racquets, shoes, towels, water bottles and other accessories and can charge mobile phones and other devices.
Tennis ball machines have been around since the 1950’s when they were introduced by Renne Lacoste. Improvements to performance were made in the 1970’s when Prince started its tennis business on the back of its first product – Little Prince – which was a vacuum operated ball machine. In the 1990’s the first battery operated machines came to the market and since that time very little, if anything, has changed in the structure of ball machine products outside of added computerization. Typically, the machines being marketed by traditional ball machine brands are large, cumbersome and awkward to operate. They are also very expensive – often well above U.S. $1,000. Up until today the vast majority of all tennis ball machines have sold to tennis facilities, with only a few being sold directly to tennis playing consumers.
According to the Tennis Industry Association (www.tia.org) the single largest challenge facing tennis participation is the fact that 34% of lapsed players cited a “lack of playing partner” as the reason for them stopping to play tennis. The Slinger Launcher goes a long way to solving this issue.
The global tennis market is regarded by industry experts, governing organizations, tennis brands and tennis-specific market research companies as having 100 million active players globally, with as many consumers again being avid fans of the sport. Of this 100 million tennis player market, 20 million players are regarded as frequent or avid players – players who play regularly - at least 1 time per month. These avid players drive the total tennis industry and account for 80% of all tennis revenues worldwide.
| 1 |
It is this avid player market that the Company is focused on penetrating with its Slinger Launcher and associated tennis accessories.
The Company intends to disrupt this traditional tennis market by creating a new ball machine category – called Slinger Launcher – and marketing portable and affordable Slinger Launchers directly to avid, regular tennis players. Constructed within a wheeled trolley tennis bag, a Slinger Launcher weighs around 15kgs / 34lbs when empty. If stored with 72 balls inside the weight increases to 19kgs / 42lbs. It can easily be stored in a car trunk, wheeled to the court and set up within minutes to use. The Slinger Launcher is powered by a 6.6Ah Lithium battery that can last up to 3.5 hours of play depending on the settings being used and frequency of use. The Slinger Launcher’s convenience as a tennis bag combined with its ease of operation and overall performance as a tennis ball launcher is the basis that the Company will target direct sales to these avid players.
While the initial brand focus is clearly on tennis, the Company is developing similar launchers to address other forms of tennis around the globe that are either rapidly gaining new participants or are already well-established sports in their own right. These include, but are not limited to, Pickleball (U.S.), Soft Tennis (Japan), and Paddle Tennis (International markets), all of which are currently in either development or testing and are planned for introduction in calendar 2022.
On December 3, 2020, Slinger signed an exclusive agreement with Flixsense Pty Limited d/b/a Gameface for the development of a tennis specific artificial intelligence (AI) application. The Company intends to introduce a market disrupting tennis app for players of all ages and abilities. This app will provide a wide range of analytics and other services and include practice and tennis fitness drills and activities, coaching tips and advice and a full suite of AI analytics. The Company will offer some services free of charge and will build a tiered subscription model for others. The app is expected to be ready to launch to the market in calendar 2022.
In future years, the Company plans to enter new ball sport markets such as baseball, softball, and cricket, which are currently planned for introduction in calendar 2023.
The Company delivers Slinger Launchers directly from the final assembly facility in Xiamen, China to customers either by direct shipment from the port in China, or to third party logistics facilities in Columbia, SC (U.S.) to support our U.S. business, Belleville, Ontario, Canada, Rotterdam, The Netherlands to support smaller distributors in Canada, Europe, the Middle East, Africa, and Israel.
Additionally, we ship full containers of our Slinger Triniti tennis balls from Wilson (our supplier) in Thailand to the United States and Belgium for onward distribution.
The Company has contracted with exclusive distributors globally. These include Japan, UK, Ireland, Switzerland, Scandinavian markets (covering Denmark, Sweden, Norway, Finland), Australia, New Zealand, Bulgaria, Czech Republic, Singapore, Morocco, Slovenia, Slovkian Republic, Hungary, Croatia, Germany, Austria, France, Italy, Spain, Portugal, Netherlands, Belgium and Luxembourg, Russia, Middle East GCC markets, Egypt, Bangladesh, Pakistan, Malaysia, Greece, Panama, South Africa, Hong Kong, Macau, China, Indonesia, Philippines, Ecuador and Poland and we are in various stages of negotiation with other potential market distribution companies across the globe.
Strategic Brand Partnerships
The Company is actively working on securing a number of highly visible ground-breaking strategic partnerships across tennis. These partnerships will both provide the Company with co-branded products to supplement the core product offering and, at the same time, are expected to drive mutually beneficial marketing campaigns aimed at reaching avid tennis players globally. Details of such partners announced and active today include:
● Wilson Sporting Goods: North America: The Company has entered a strategic partnership with the global leader in tennis, Wilson, for the supply of co-branded Triniti tennis balls in the U.S. and Canada markets.
● Professional Tennis Registry (PTR): PTR is the world’s most prestigious teaching pro organization with more than 40,000 members. The Company has partnered with PTR for the supply of Slinger Launchers to their membership.
● Peter Burwash International (PBI): A high profile organization providing coaching and tennis services to high level, high quality hotels, resorts and tennis facilities across the globe. The Company is the official supplier of Slinger Launchers to PBI, which will be used at each location and PBI will offer an affiliate marketing program promoting sales to its list of global clients.
● DSV Logistics USA and OSL Logistics: DSV is one of the world’s leading suppliers of warehousing, freight forwarding and logistics. The Company will use DSV warehousing services in the U.S. to optimize logistical activities. OSL are currently providing all freight forwarding for the U.S. markets and Europe as well as 3rd party warehousing logistics in Rotterdam for Europe.
| 2 |
Competition
There are currently no competitors with products that are similar to the Slinger Launcher, based on its portability, affordability and tennis bag functionality. There are, however, other companies that make tennis ball machines, including the following:
| ● | Spinshot | |
| ● | Lobster Sports | |
| ● | Spinfire Pro 2 | |
| ● | Match Mate Rookie | |
| ● | Sports Tutor | |
| ● | Silent Partner |
Raw Materials
All materials used in the Slinger Launder are available off-the-shelf. The trolley bag is manufactured with 600D Polyester and has the CA65 certification for the U.S. market. The launcher housing, Oscillator and Telescopic Ball Tube parts are produced using an injection mold using poly propylene mixed with 30% glass fibers. The electronic motors, PCB boards and remote-control parts are all standard off-the-shelf items.
Intellectual Property
As at the date hereof, the Company has applied for international design and utility patent protection for its main 3 products: Slinger Launcher, Slinger Oscillator and Slinger Telescopic Ball Tube. Patents have been applied for in all key markets including the U.S., China, Taiwan, India, Israel and EU markets and granted in China and Israel. Trademarks have been applied for in all major markets around the globe. Trademark protection has been applied for and/or received in the following countries:
| ● | U.S. | |
| ● | Chile | |
| ● | Taiwan | |
| ● | Mexico | |
| ● | EU | |
| ● | Russia | |
| ● | Poland | |
| ● | Czech Republic | |
| ● | Australia | |
| ● | New Zealand | |
| ● | China | |
| ● | South Korea |
| 3 |
| ● | Vietnam | |
| ● | Singapore | |
| ● | India | |
| ● | Canada | |
| ● | Argentina | |
| ● | Brazil | |
| ● | United Arab Emirates* | |
| ● | South Africa* | |
| ● | Columbia* | |
| ● | Israel* | |
| ● | Japan* | |
| ● | Switzerland* | |
| ● | Indonesia* | |
| ● | Malaysia* | |
| ● | Thailand* | |
| ● | Turkey* |
*Protection is pending.
The Company is engaged in ongoing efforts to register more trademarks across an expanding list of products, services and applications, which are in various stages of the registration process.
Slinger Bag Inc. owns the rights to its Slingerbag.com domain.
Strategy
The Company has an opportunity to disrupt the traditional tennis market globally. The Company expects to drive 80% of its global revenues through its direct-to-consumer go-to-market strategy, whether that be through its on-line e-commerce platform at www.slingerbag.com or through associated e-commerce platforms established and managed by its distribution network. The balance of revenues will be driven through partnerships with leading wholesalers, federations and teaching pro organizations and other transactions across various markets. The Company will operate a third-party distributor structure in all markets with the exception of the United States, the largest tennis market globally, Canada and its founder’s home market of Israel. Distributor partners will have exclusive territories and will have a recognized background within the tennis industry for their market as well as having the financial capacity and service infrastructure to aggressively grow the Slinger brand. Uniquely in the sports industry, all consumer orders received into Slingerbag.com from markets outside the United States will be routed back to our local distribution partners to fulfill and to service their local customers. All distributor partners will purchase with advanced orders, either based on a vendor-direct FOB Asia direct ship or through 1 of our 3 global 3rd party distribution facilities on a duty paid basis and at premium cost price. Currently, the Company has signed a number of exclusive distribution agreements in key markets and has on-going discussions with other key potential distributor partners in other markets around the globe.
The United States market will remain a direct to consumer market for Slinger. As the largest tennis market in the world with 17.4 million players of which 10.5 million are regular / avid players, the United States is a key market both to establish the Slinger brand and to drive demonstrable growth. Recently the industry reported a significant increase in U.S. tennis participation and overall number of tennis play occasions, something that has been replicated in other key tennis markets around the globe. Direct to consumer sales will be supplemented by one or more leading tennis wholesalers who manage large databases of coach, player, college, high school and club clients. This market will be serviced out of a third-party logistics facility in West Columbia, SC and operated by one of Slinger’s preferred global logistics partners, DSV, one of the world’s leading suppliers of freight-forwarding, logistics and warehousing.
Brand Marketing
As a direct-to-consumer e-commerce brand, all marketing activity and advertising media will be centered around pushing consumers to www.slingerbag.com and converting them to purchases. Slinger has engaged a number of leading agencies to support its global marketing efforts:
Brand Nation is a world class influencer marketing agency based in London. Brand Nation will lead all influencer programming globally. Slinger has seeded about 50% of its planned 1,000 global influencers to date. Influencers targeted are wide ranging and include leading sports, tennis, film, TV, music and blogger celebrities all known for the fact that they play tennis regularly and have a fan base in excess of 10,000 followers. All influencer activity is rolled back up to the Slinger social media platforms as a means of generating significant brand awareness and product interest.
| 4 |
Ad Venture Media Group is a New York based leading PPC (pay-per-click) agency whose work is grounded in sophisticated scientific analysis of consumer data and consumer trends and they are recognized globally as leaders in paid search and paid social media campaigns. Ad Venture Media will lead all Slinger PPC activity on a performance-based fee structure and is briefed to drive consumer engagement, through bespoke advertising campaigns that are aligned to our product profitability objectives.
In the United States market, we have partnered with an organization called Team HQS who will manage an affiliate marketing program across U.S. based teaching professionals, players, juniors and events. These affiliates will be provided with unique affiliate marketing codes to share with their social media followers and other such communities that they are connected to and each will receive an affiliate marketing fee based on revenues generated by consumers purchasing Slinger products attributable to their unique code.
We continue to evaluate each support agency on a monthly basis and at the same time are continually exploring new avenues to expand our reach to our core customers.
Each of our distributor partners around the world are establishing their Slinger distribution business as Slinger itself would do if it was establishing a Slinger subsidiary in each market. As such, each distributor will also adopt all forms of Slinger brand marketing programs as well as initiating new local concepts of their own – all aimed at reaching the avid/regular tennis player directly and ensuring that the Slinger brand message is consistent around the globe. Slinger has agreed a local marketing budget structure with each distributor as part of its distribution agreement. This marketing budget will be primarily funded by the distributor partner with an additional contribution coming from Slinger with the contribution being linked to the distributor’s purchase objectives. Each distributor will execute local grassroots programs including demonstration days, local teaching pro partnerships, specialist tennis network communications, seeding of Slinger product locally as necessary to local key market tennis influencers to further increase the intensity of the influencer effort. Marketing dollars will also be allocated to Google, Facebook, YouTube and other social media advertising spend and, where appropriate, approved and overseen by Ad Venture Media Group.
Distribution Agreements
Slinger Bag Americas has entered into exclusive distribution agreements for Slinger’s line of products, including, but not limited to, tennis ball launcher devices, tennis ball launcher accessories, sports bags, tennis balls, tennis court accessories and other tennis related products in the following markets and with the following distributors:
| Territory | Distributor | Minimum Purchase Requirement of Slinger Bag Tennis Ball Launchers | ||
| Japan | Globeride Inc. | 32,500 through the end of January 2025 | ||
| United Kingdom and Ireland | Framework Sports & Marketing Ltd | 9,000 through the end of May 2025 | ||
| Switzerland | Ace Distribution | 3,000 through the end of May 2025 | ||
| Denmark, Finland, Norway and Sweden | Frihavnskompagniet ApS | 6,500 through the end of December 2025 | ||
| Morocco | Planet Sport Sarl | 1,000 through the end of December 2025 | ||
| Australia | Sportsman Warehouse t/a Tennis Only | 2,500 through the end of 2025 | ||
| New Zealand | Sporting Goods Specialists | 100 through the end of 2025 | ||
| Bulgaria | Ark Dream EOOD | 950 through the end of 2025 | ||
| Chile | Sporting Brands Ltda | 165 through the end of 2025 | ||
| Croatia, Hungary and Slovenia | Go 4 d.o.o. | 380 through the end of 2025 | ||
| Austria, Belgium, France, Germany, Italy, Luxembourg, Portugal, Spain and The Netherlands | Dunlop International Europe Ltd | 120,000 through the end of 2025 | ||
| Singapore | Tennis Bot Pte Ltd | 950 through the end of 2025 | ||
| India | Racquets4U | 10,000 through the end of 2025 | ||
| Israel | Eran Shine | 2,050 through the end of 2025 | ||
| Bahrain, Bangladesh, Egypt, Kuwait, Maldives, Oman, Pakistan, Qatar, Saudi Arabia, Sri Lanka, Tunisia and United Arab Emirates | Color Sports Inc | 3,000 through the end of 2025 | ||
| Greece | Elsol | 380 through the end of 2025 | ||
| Panama | Orange Pro | 50 through the end of 2021 | ||
| Russia | Neva Sport | 1,900 through the end of 2025 | ||
| Malaysia | Tennis Bot | 500 through the end of 2025 | ||
| Czech and Slovak Republics | RaketSport s.r.o | 3,000 through the end of 2025 | ||
| South Africa | Golf Racket Pty Ltd | 5,000 through the end of 2025 | ||
| Hong Kong and Macau | Tennis Bot | 750 through the end of 2025 | ||
| Indonesia and Philippines | Tennis Bot | 650 through the end of 2026 | ||
| China | Xiamen Powerway Sports Co. Ltd | 17,500 through the end of 2026 | ||
| Poland | Frameworks Sports Poland | 1,850 through the end of 2026 | ||
| Ecuador | Brandsinc SA / Siati Express | 240 through the end of 2026 | ||
| Total | 223,915 |
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Brand Endorsements
We have reached agreements with several globally recognized tennis players and coaches to become brand ambassadors.
Tommy Haas (former ATP #2 Player) has been appointed the Slinger Bag Chief Ambassador. In this role Tommy will support Slinger in building out its global ambassador team focused on identifying ambassadors in our key global business markets of the U.S., Japan, Europe, Australia, China, Brazil and India. Tommy will also be very active supporting and promoting Slinger across the globe with personal appearances at Slinger events and via online training and drill videos.
Mike and Bob Bryan (aka the Bryan Brothers – the foremost doubles team in the tennis world) have extended their ambassador agreements and will continue to feature prominently in our marketing activities and messaging.
Additionally, we have brand endorsements with the following athletes and coaches:
| ● | Eugenie Bouchard | |
| ● | Luke and Murphy Jensen (aka the Jensen Brothers) | |
| ● | Darren Cahill | |
| ● | Nick Bollettieri | |
| ● | Patrick Mouratoglou | |
| ● | Dustin Brown |
Each of the foregoing athletes and coaches is or was either a world-ranked singles or doubles tennis player or, in the case of Nick Bollettieri and Patrick Mouratoglou, the coach of a number of world-ranked tennis players, has a large following of fans and supporters and is active across many aspects of tennis today.
The Professional Tennis Registry (PTR) – a United States-based teaching teacher association with approximately 40,000 members will become a non-exclusive strategic partner for Slinger with all their members able to access an affiliate member part of our website.
Peter Burwash International (PBI) – a United States-based, highly respected, global tennis services company set up by Peter Burwash some 35 years ago. PBI provides tennis programs and other tennis services to as many as 56 of the globes leading hotels and resorts. Slinger Launchers will be available to use at each resort and the PBI team will be actively promoting Slinger as part of our affiliate marketing activity.
PTCA Central Europe – a European coach organization of leading touring pro coaches and they, like others, will undertake an affiliate marketing approach.
Tie Break 10s – a global organization that owns and operates Tie Break 10 events both independently and in partnership with major global tour events, e.g., Indian Wells. These events involve top players playing ‘tie-break’ matches with the event fully completed in one evening and with a significant cash prize for the winner. Slinger will be promoted at each of these events and will be available for fans to test out as well as the Slinger brand name being prominently used on Tie Break 10s social media.
Tennis One App – a United States-based company that has developed and successfully marketed an all-inclusive tennis app for players across the globe. Slinger has engaged with Tennis One to support its coaches corner segment – a weekly podcast series and in doing so benefits from the brand exposure available through the reach of the consumers using the app on a regular basis.
Functional Tennis – an Ireland based social media tennis blog site with an excess of 250,000 followers. Slinger is engaged with Functional Tennis in a variety of ways and is the presenting sponsor of its weekly Tennis Podcast.
We are currently in discussions with other organizations, events, prominent coaches and players and have to date seeded Slinger products to 12 of the Top 20 ATP male players, 5 of the top 20 WTA women players, plus numerous other top-class touring and teaching professionals.
Throughout 2020 we sponsored several prominent tennis events, e.g., Battle of the Brits, Tie Break 10s (all shown live across the globe).
Research and Development
The Company is involved in additional research and development of transportable, affordable and player-enhancing ball launching machines and associated game improvement products for all ball sports. Following a successful launch of its tennis ball launcher, Slinger is currently field testing its new pickleball, paddle and soft tennis launchers, which are expected to be introduced to the market in calendar 2022. Slinger plans to introduce similar transportable, versatile and affordable ball launchers for baseball, softball, cricket, badminton and other high participation ball sports over the course of the next 3 years. In this connection, on September 10, 2020, Slinger entered into an agreement with Igloo Design, which is the same company that designed the Slinger Launcher for tennis, for a Slinger ball launcher for baseball and softball. This development commenced in the second half of 2020 and initial design ideas and further direction have been provided.
We retain outside consultants to provide research and product design services and each consultant has a specific expertise (e.g., molding technology, electronics, product design, bag design, as examples). We also are working with a select group of highly qualified and resourceful third-party suppliers in Asia. We are continually striving to identify product enhancements, new concepts and improvement to the production process on an on-going daily basis. In respect of any new project, management provides detailed briefs, market data, product cost targets, competitive analysis, timelines and project cost goals to either the product consultants or vendors and manages them to agreed upon key performance indicators (“KPIs”). These KPI’s include, but are not limited to: (i) manufacturing to target costs; (ii) agreed development timelines; (iii) established quality criteria; and (iv) defined performance criteria.
We also retain specialist trademark and patent attorneys and work with these attorneys on the projects, as needed.
Government Regulation
Both Slinger Launcher and Slinger Oscillator meet all the U.S. government requirements for electrical, radio wave and battery standards as well as having all necessary and required certification to facilitate global marketing and sales of these products.
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Results of Operations for the Three Months Ended January 31, 2022 and 2021
The following are the results of our operations for the three months ended January 31, 2022 as compared to 2021:
| For the Three Months Ended | ||||||||||||
| January 31, | January 31, | |||||||||||
| 2022 | 2021 | Change | ||||||||||
| (Unaudited) | (Unaudited) | |||||||||||
| Net sales | $ | 4,201,745 | $ | 4,123,648 | $ | 78,097 | ||||||
| Cost of sales | 3,234,430 | 3,245,493 | (11,063 | ) | ||||||||
| Gross income | 967,315 | 878,155 | 89,160 | |||||||||
| Operating expenses: | ||||||||||||
| Selling and marketing expenses | 920,161 | 351,845 | 568,316 | |||||||||
| General and administrative expenses | 2,942,501 | 1,385,626 | 1,556,875 | |||||||||
| Research and development costs | 275,908 | 137,156 | 138,752 | |||||||||
| Total operating expenses | 4,138,570 | 1,874,627 | 2,263,943 | |||||||||
| Loss from operations | (3,171,255 | ) | (996,472 | ) | (2,174,783 | ) | ||||||
| Other expense (income): | ||||||||||||
| Amortization of debt discounts | 2,750,000 | 39,175 | 2,710,825 | |||||||||
| Loss on extinguishment of debt | - | 95,760 | (95,760 | ) | ||||||||
| Induced conversion loss | - | - | - | |||||||||
| Gain on change in fair value of derivatives | (5,943,967 | ) | - | (5,943,967 | ) | |||||||
| Loss on issuance of convertible notes | 2,200,000 | - | 2,200,000 | |||||||||
| Interest expense - related party | 28,167 | 137,480 | (109,313 | ) | ||||||||
| Interest expense, net | 164,669 | 22,199 | 142,470 | |||||||||
| Total other expense (income) | (801,131 | ) | 294,614 | (1,095,745 | ) | |||||||
| Loss before income taxes | (2,370,124 | ) | (1,291,086 | ) | (1,079,038 | ) | ||||||
| Provision for income taxes | - | - | - | |||||||||
| Net loss | $ | (2,370,124 | ) | $ | (1,291,086 | ) | $ | (1,079,038 | ) | |||
Net sales
Net sales increased $78,097, or 2%, during the three months ended January 31, 2022 as compared to the three months ended January 31, 2021. The increase is due to an increase in the number of new orders placed on the Company’s website and from its international distributors and fulfilled during the three months ended January 31, 2022 as compared to the three months ended January 31, 2021 when the product was still relatively new to the market. As of January 31, 2022, we had deferred revenue of $18,508 representing amounts received for units that have not been shipped to customers. We expect these orders to be fulfilled and the sales to be recognized in the Company’s next fiscal quarter.
Cost of sales and Gross income
Cost of sales decreased $11,063 during the three months ended January 31, 2022 as compared to the three months ended January 31, 2021, which is primarily due to increased shipping costs in the prior year. Gross income increased $89,160, or 10%, during the three months ended January 31, 2022 as compared to the three months ended January 31, 2021 due to the increased sales and lower cost of sales.
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Selling and marketing expenses
Selling and marketing expenses increased $568,316, or 162%, during the three months ended January 31, 2022 as compared to the three months ended January 31, 2021. This increase is largely driven by an increase in social media advertising, sponsorships, and other investments in our public relations presence in the current year in order to drive sales and build brand awareness.
General and administrative expenses
General and administrative expenses, which primarily consist of compensation (including share-based compensation) and other employee-related costs, as well as legal fees and fees for professional services, increased $1,556,875 during the three months ended January 31, 2022 as compared to the three months ended January 31, 2021. This increase is primarily driven by a $504,093 increase in legal fees related to closing costs incurred as part of the acquisitions of PlaySight Interactive Ltd. and Flixsense Pty Ltd. d/b/a Gameface during the three months ended January 31, 2022 and filing fees related to our S-1 that was filed in January 2022 and other SEC filings. The remainder of the increase is largely due to an increase in compensation expense due to increased headcount to support the continued growth of the business as well as the acquisition of Foundation Sports in 2021.
Research and development costs
Research and development costs increased $138,752 during the three months ended January 31, 2022 as compared to the three months ended January 31, 2021. This increase is primarily driven by our investment in a new platform and app that will integrate artificial intelligence (AI) technology to offer more value to our customers, as well as the continued development and testing of launchers for new ball sports that are expected to be brought to market in the future.
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Other expense
Total other expense decreased $1,095,745 during the three months ended January 31, 2022 as compared to the three months ended January 31, 2021. The decrease in expense was primarily due to the increased gain on the change in fair value of derivatives as well as a decrease in the loss on extinguishment of debt and related party interest expense as a result of lower related party debt balances year over year. These decreases were partially offset by the loss on the issuance of the Convertible Notes as well as an increase in amortization of debt discounts and interest expense, net due to the issuance of the Convertible Notes during the current year.
Results of Operations for the Nine Months Ended January 31, 2022 and 2021
The following are the results of our operations for the Nine months ended January 31, 2022 as compared to 2021:
| For the Nine Months Ended | ||||||||||||
| January 31, | January 31, | |||||||||||
| 2022 | 2021 | Change | ||||||||||
| (Unaudited) | (Unaudited) | |||||||||||
| Net sales | $ | 12,139,860 | $ | 7,308,701 | $ | 4,831,159 | ||||||
| Cost of sales | 8,302,386 | 5,762,143 | 2,540,243 | |||||||||
| Gross income | 3,837,474 | 1,546,558 | 2,290,916 | |||||||||
| Operating expenses: | ||||||||||||
| Selling and marketing expenses | 2,515,067 | 1,051,785 | 1,463,282 | |||||||||
| General and administrative expenses | 41,535,188 | 2,974,404 | 38,560,784 | |||||||||
| Research and development costs | 553,274 | 180,705 | 372,569 | |||||||||
| Total operating expenses | 44,603,529 | 4,206,894 | 40,396,635 | |||||||||
| Loss from operations | (40,766,055 | ) | (2,660,336 | ) | (38,105,719 | ) | ||||||
| Other expense (income): | ||||||||||||
| Amortization of debt discounts | 5,400,285 | 325,426 | 5,074,859 | |||||||||
| Loss on extinguishment of debt | 7,096,730 | 1,528,580 | 5,568,150 | |||||||||
| Induced conversion loss | - | 51,412 | (51,412 | ) | ||||||||
| Gain on change in fair value of derivatives | (15,074,880 | ) | - | (15,074,880 | ) | |||||||
| Loss on issuance of convertible notes | 5,889,369 | - | 5,889,369 | |||||||||
| Interest expense – related party | 106,895 | 454,029 | (347,134 | ) | ||||||||
| Interest expense, net | 446,339 | 169,455 | 276,884 | |||||||||
| Total other expense | 3,864,738 | 2,528,902 | 1,335,836 | |||||||||
| Loss before income taxes | (44,630,793 | ) | (5,189,238 | ) | (39,441,555 | ) | ||||||
| Provision for income taxes | - | - | - | |||||||||
| Net loss | $ | (44,630,793 | ) | $ | (5,189,238 | ) | $ | (39,441,555 | ) | |||
Net sales
Net sales increased $4,831,159, or 66%, during the nine months ended January 31, 2022 as compared to the nine months ended January 31, 2021. The increase is due to an increase in the number of new orders placed on the Company’s website and from its international distributors and fulfilled during the nine months ended January 31, 2022 as compared to the nine months ended January 31, 2021 when a large portion of the orders during the first three months of the year were related to the Kickstarter and Indiegogo crowdfunding campaigns initiated in fiscal year 2019.
Cost of sales and Gross income
Cost of sales increased $2,540,243, or 44%, during the nine months ended January 31, 2022 as compared to the nine months ended January 31, 2021, which was primarily due to the increase in net sales. Gross income increased $2,290,916, or 148%, during the nine months ended January 31, 2022 as compared to the nine months ended January 31, 2021.
| 9 |
The increase in gross margin is largely due to the first quarter of the prior year resulting in a gross loss on net sales due to (1) discounted pricing on the initial crowdfunding orders, (2) as fulfillment was later than initially scheduled we fulfilled orders with the “deluxe” version of launcher (including all features), as well as tennis balls, both of which increased cost of sales, and (3) due to sanctions by the U.S. against Chinese sourced products, the import duty was raised on all launchers brought into the U.S. increasing our cost of sales. As a result, our cost of sales exceeded initial sales values raised in our crowdfunding campaigns. As of the beginning of the third quarter in the prior year, substantially all of the initial crowdfunding orders had been fulfilled.
Selling and marketing expenses
Selling and marketing expenses increased $1,463,282, or 139%, during the nine months ended January 31, 2022 as compared to the nine months ended January 31, 2021. This increase is largely driven by an increase in social media advertising, sponsorships, and other investments in our public relations presence in the current year in order to drive sales and build brand awareness.
General and administrative expenses
General and administrative expenses, which primarily consist of compensation (including share-based compensation) and other employee-related costs, as well as legal fees and fees for professional services, increased $38,560,784 during the nine months ended January 31, 2022 as compared to the nine months ended January 31, 2021. This increase is primarily driven by an increase of $32,569,112 of share-based compensation related to warrants granted to employees, a $1,264,590 increase in expense related to shares and warrants issued in connection with services the majority of which relate to the warrants issued to the lead placement agent as part of the issuance of the Convertible Notes and shares and warrants issued to brand ambassadors, and a $1,000,000 increase in legal fees related to closing costs incurred as part of the acquisitions of PlaySight Interactive Ltd. and Flixsense Pty Ltd. d/b/a Gameface during the nine months ended January 31, 2022. The remainder of the increase is largely due to an increase in compensation expense due to increased headcount to support the continued growth of the business as well as the acquisition of Foundation Sports in 2021.
Research and development costs
Research and development costs increased $372,569 during the nine months ended January 31, 2022 as compared to the nine months ended January 31, 2021. This increase is primarily driven by our investment in a new platform and app that will integrate artificial intelligence (AI) technology to offer more value to our customers, which we began developing in December 2020, as well as the continued development and testing of launchers for new ball sports that are expected to be brought to market in the future.
Other expense
Total other expense increased $1,335,836 during the nine months ended January 31, 2022 as compared to the nine months ended January 31, 2021. The increase was primarily due to the loss on the issuance of the Convertible Notes, an increase in loss on extinguishment of debt as a result of the conversion of the notes payable – related party, and increases in amortization of debt discounts and interest expense, net due to the issuance of the Convertible Notes during the nine months ended January 31, 2022. These increases were partially offset by an increased gain on the change in fair value of derivatives as well as a decrease in induced conversion loss and related party interest expense as a result of lower related party debt balances year over year.
Liquidity and Capital Resources
Our financial statements have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. We had an accumulated deficit of $73,454,066 as of January 31, 2022, and more losses are anticipated in the development of the business. Accordingly, there is substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
| 10 |
The ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or being able to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from related parties, and/or private placement of debt and/or common stock. In respect to additional financing, refer to Notes 5, 6, 7, and 12. In the event that the Company is unable to successfully raise capital and/or generate revenues, the Company will likely reduce general and administrative expenses, and cease or delay its development plan until it is able to obtain sufficient financing. There can be no assurance that additional funds will be available on terms acceptable to the Company, or at all.
The following is a summary of our cash flows from operating, investing and financing activities for the nine months ended January 31, 2022 and 2021:
| For the Nine Months Ended | ||||||||
| January 31, | January 31, | |||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (7,783,098 | ) | $ | (3,139,286 | ) | ||
| Net cash used in investing activities | (2,250,000 | ) | (30,000 | ) | ||||
| Net cash provided by financing activities | 10,209,420 | 3,420,000 | ||||||
We had cash and cash equivalents of $1,082,446 as of January 31, 2022, as compared to $928,796 as of April 30, 2021.
Net cash used in operating activities was $7,783,098 during the nine months ended January 31, 2022, as compared to $3,139,286 during the same period in 2021. Our net cash used in operating activities during the nine months ended January 31, 2022 was primarily the result of our net loss of $44,630,793 for the period as well as increases in inventory, prepaid expenses and other current assets, and accounts receivable as well as decreases in deferred revenue during the period, which was partially offset by net non-cash expenses of $37,815,432 and increases in accounts payable and accrued expenses, accrued payroll and bonuses and accrued interest – related party during the period. Our net cash used in operating activities during the nine months ended January 31, 2021 was primarily the result of our net loss of $5,189,238 for the period as well as increases in inventory and accounts receivable as well as decreases in deferred revenue during the period, which was partially offset by net non-cash expenses of $2,354,195, increases in accounts payable and accrued expenses, accrued payroll and bonuses, and accrued interest – related party as well as a decrease in prepaid expenses and other current assets during the period.
Net cash used in investing activities was $2,250,000 and $30,000 for the nine months ended January 31, 2022 and 2021, respectively. Our net cash used in investing activities during the nine months ended January 31, 2022 consisted of $2,250,000 in issuances related to a note receivable while our net cash used in investing activities during the nine months ended January 31, 2021 related to our purchase of the Slinger trademark
Net cash provided by financing activities was $10,209,420 for the nine months ended January 31, 2022, as compared to $3,420,000 for the same period in 2021. Cash provided by financing activities for the nine months ended January 31, 2022 primarily consisted of proceeds of $11,000,000 from convertible notes payable and proceeds of $3,000,000 from notes payable with a related party, which was partially offset by a $2,000,000 repayment of a note payable, a $1,000,000 repayment of related party notes payable and $800,251 in debt issuance costs related to the convertible notes payable. Cash provided by financing activities for the nine months ended January 31, 2021 consisted of proceeds of $2,300,000 from notes payable with a related party and proceeds of $1,120,000 from a note payable.
| 11 |
Description of Indebtedness
Notes Payable – Related Party
On January 14, 2022, the Company entered into two loan agreements with Yonah Kalfa and Naftali Kalfa, each for $1,000,000, pursuant to which the Company received a total amount of $2,000,000. The loans bear interest at a rate of 8% per annum and are required to be repaid in full by April 30, 2022 or such other date as may be accepted by the lenders. The Company is not permitted to make any distribution or pay any dividends unless or until the loans are repaid in full.
There was $2,000,000 in outstanding borrowings from the Company’s related parties as of January 31, 2022. Accrued interest due to these related parties as of January 31, 2022 amounted to $850,092.
See Note 5 to the condensed consolidated financial statements for additional information.
Convertible Notes Payable
On August 6, 2021, the Company consummated the closing (the “Closing”) of a private placement offering (the “Offering”) pursuant to the terms and conditions of that certain Securities Purchase Agreement, dated as of August 6, 2021 (the “Purchase Agreement”), between the Company and certain accredited investors (the “Purchasers”). At the Closing, the Company sold to the Purchasers (i) 8% Senior Convertible Notes (the “Convertible Notes”) in an aggregate principal amount of $11,000,000 and (ii) warrants to purchase up to 7,333,334 shares of common stock of the Company (the “Warrants” and together with the Convertible Notes, the “Securities”). The Company received an aggregate of $11,000,000 in gross proceeds from the Offering, before deducting offering expenses and commissions.
On December 31, 2021, the Purchase Agreement and Convertible Notes were amended in an Omnibus Amendment Agreement pursuant to which the holders of the Convertible Notes agreed to make certain changes to the terms of the Purchase Agreement and Convertible Notes in exchange for an increase in the principal amount of the Convertible Notes from $11,000,000 to $13,200,000 and such increased principal balance is reflected on the replacement note issued to each note holder. The full terms of the Omnibus Amendment Agreement were disclosed in our current report on Form 8-K dated January 5, 2022.
Total outstanding borrowings related to the Convertible Notes as of January 31, 2022 were $13,200,000. The outstanding amount is net of total discounts of $5,622,222 for a net book value of $7,577,778 as of January 31, 2022.
See Note 6 to the condensed consolidated financial statements for additional information.
Note Payable
On April 15, 2021, the Company entered into a $2,000,000 note payable (the “Note”). The Note matures April 14, 2023 and bears interest at fifteen percent (15%) per year. The Company pays interest at maturity, at which time all principal and unpaid interest is due.
On August 6, 2021, the Company used the net proceeds from the issuance of the Convertible Notes to pay 100% of the outstanding principal and accrued interest of the Note.
See Note 7 to the condensed consolidated financial statements for additional information.
Future amounts due as of January 31, 2022 are summarized as follows:
| Payments due by period | ||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
| Convertible notes payable | $ | 13,200,000 | $ | 13,200,000 | $ | - | $ | - | $ | - | ||||||||||
| Notes payable – related party | 2,000,000 | 2,000,000 | - | - | - | |||||||||||||||
| Total | $ | 15,200,000 | $ | 15,200,000 | $ | - | $ | - | $ | - | ||||||||||
We expect that working capital requirements will continue to be funded through a combination of our existing funds, cash flows from operations and further issuances of debt and/or securities. Our working capital requirements are expected to increase in line with the growth of our business.
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to the (i) acquisition of inventory; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Effect of Inflation and Changes in Prices
We do not believe that inflation and changes in prices will have a material effect on our operations.
Going Concern
Our independent registered public accounting firm auditors’ report accompanying our April 30, 2021 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide this information.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as the Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act 13a-15, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report.
Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was not effective as of January 31, 2022 due to the material weaknesses that were identified and listed below.
Changes in Internal Control Over Financial Reporting
In connection with our management’s assessment of controls over financial reporting during the year ended April 30, 2021, we identified the following material weaknesses:
| ● | The Company lacks adequate segregation of duties due to the small size of the organization. Further, the Company lacks an independent Board of Directors or Audit Committee to ensure adequate monitoring or oversight. | |
| ● | The Company lacks accounting resources and controls to prevent or detect material misstatements. Specifically, the Company continues to have a material weakness in our controls over accounting for inventory due to a lack of controls over ensuring inventory movement was being processed accurately and in a timely manner, which resulted in significant audit adjustments relating to the value of our inventory and cost of sales. Further, while the Company engages service providers to assist with U.S. GAAP compliance the Company lacks resources with adequate knowledge to oversee those services. Lastly, the Company does not have sufficient resources to complete timely reconciliations and transactional reviews, which resulted in delays in the financial reporting process in the prior year. |
To remediate the material weaknesses, we have initiated compensating controls in the near term and are enhancing and revising our existing controls, including ensuring we have sufficient management review procedures and adequate segregation of duties. These controls are still in the process of being implemented. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded they are operating effectively. As a result, the material weaknesses continue to be listed as of January 31, 2022.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We know of no pending proceedings to which any director, member of senior management, or affiliate is either a party adverse to us or has a material interest adverse to us.
None of our executive officers or directors have (i) been involved in any bankruptcy proceedings within the last five years, (ii) been convicted in or has pending any criminal proceedings (other than traffic violations and other minor offenses), (iii) been subject to any order, judgment or decree enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity or (iv) been found to have violated any Federal, state or provincial securities or commodities law and such finding has not been reversed, suspended or vacated.
Item 1A. Risk Factors
There have been no material changes to our risk factors as previously disclosed in Part I, Item 1A. included in our Annual Report on Form 10-K for the year ended April 30, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 26, 2021, the Company issued 1,636,843 shares of its common stock for the conversion of related party notes payable.
On June 23, 2021, the Company issued 540,000 shares of its common stock as partial consideration for the acquisition of Foundation Sports.
On July 6, 2021, the Company issued 50,215 shares of its common stock to two employees as compensation for services rendered in lieu of cash.
On July 11, 2021, the Company issued 18,750 shares of its common stock to a vendor as compensation for marketing and other services rendered.
During the six months ended October 31, 2021, the Company granted an aggregate total of 90,937 shares of its common stock to six new brand ambassadors as compensation for services.
On August 6, 2021, the Note payable holder exercised its right to convert its 2,200,000 outstanding warrants into shares of common stock of the Company.
On August 6, 2021, the Company’s related party lender exercised its right to convert its 2,750,000 outstanding warrants and 6,921,299 common shares issuable into 9,671,299 shares of common stock of the Company.
On October 11, 2021, the Company issued 18,750 shares of its common stock to a vendor as compensation for marketing and other services rendered.
On January 11, 2022, the Company issued 18,750 shares of its common stock to a vendor as compensation for marketing and other services rendered.
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Item 6. Exhibits
| * | Incorporated by reference to the Company’s Current Report as previously filed on Form 8-K on January 5, 2022 |
| ** | Incorporated by reference to the Company’s Current Report as previously filed on Form 8-K on January 18, 2022 |
| *** | Incorporated by reference to the Company’s Current Report as previously filed on Form 8-K on February 8, 2022 |
| **** | Incorporated by reference to the Company’s Current Report as previously filed on Form 8-K on February 22, 2022 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SLINGER BAG INC. | ||
| Dated: March 17, 2022 | By: | /s/ Mike Ballardie |
| Mike Ballardie | ||
| President and Chief Executive Officer | ||
| Dated: March 17, 2022 | By: | /s/ Jason Seifert |
| Jason Seifert | ||
| Chief Financial Officer | ||
| 16 |
Exhibit 31.1
CERTIFICATION
Pursuant to Rule 13a-14(a) and 15d-14(a)
Under the Securities Exchange Act of 1934, as Amended
I, Mike Ballardie, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Slinger Bag Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: March 17, 2022 | |
| /s/ Mike Ballardie | |
| Mike Ballardie | |
| President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
Pursuant to Rule 13a-14(a) and 15d-14(a)
Under the Securities Exchange Act of 1934, as Amended
I, Jason Seifert, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Slinger Bag Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: March 17, 2022 | |
| /s/ Jason Seifert | |
| Jason Seifert | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report (the “Report”) of Slinger Bag Inc. (the “Company”) on Form 10-Q for the quarter ended January 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Mike Ballardie, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods referred to in the Report. |
Date: March 17, 2022
| By: | /s/ Mike Ballardie | |
| Mike Ballardie | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report (the “Report”) of Slinger Bag Inc. (the “Company”) on Form 10-Q for the quarter ended January 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Jason Seifert, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods referred to in the Report. |
Date: March 17, 2022
| By: | /s/ Jason Seifert | |
| Jason Seifert | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |