| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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 no 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 October 31, 2021 consisted of $ 3,820,645 3,441,456 1,566,330 250,000 1,591,826 1,777,028 347,362 23,000 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 six months ended October
31, 2021: SUMMARY OF DERIVATIVE LIABILITIES
Note
derivative is related to October
31, 2021 ending balance Gain
(loss) for three months ended October 31, 2021 Gain
(loss) for
six months
ended October
31, 2021
4/11/21 conversion of 12/24/20
note payable $ 795,482 $ 441,178 $ 434,369
4/15/21 note payable - 1,788,123 6,014,245
5/26/21 conversion of
notes payable – related party - 2,759,718 2,867,749
8/6/21 convertible notes 14,074,568 (185,450 ) (185,450 )
Total $ 14,870,050 $ 4,803,569 $ 9,130,913 The
Black-Scholes option pricing model assumptions for the derivative liabilities during the six months ended October 31, 2021 and 2020 consisted
of the following: SUMMARY OF VALUATION USING BLACK-SCHOLES PRICING METHOD
2021 2020
Expected life in years 1.7 5.0 N/A
Stock price volatility 50 %
– 155 % N/A
Risk free interest rate 0.16 1.21 % N/A
Expected dividends 0 % 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. Goodwill The
Company accounts for goodwill and other intangible assets in accordance with ASC 350, Intangibles - Goodwill and Other (“ASC 350”).
ASC 350 requires that goodwill and intangible assets with indefinite lives 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 no 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 20 2,904 zero 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 no Share-Based
Payments 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 six months ended October 31, 2021 and 2020 were valued using a Black-Scholes option pricing model on the
date of grant using the following assumptions: SUMMARY OF VALUATION USING BLACK-SCHOLES PRICING METHOD
2021 2020
Expected life in years 5 10 10
Stock price volatility 50 %
- 157 % 148 152 %
Risk free interest rate 0.90 %
- 1.63 % 0.68 0.85 %
Expected dividends 0 % 0 % 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. Earnings
Per Share 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 zero and 6,921,299 3,666,675 zero 37,264,721 16,025,000 244,910 zero 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. |
