Sharplink, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure and Control Procedures The Company’s Chief Executive Officer and the Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2024 and concluded that the Company’s disclosure controls and procedures are effective. The term disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is accumulated, recorded, processed, summarized and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure to be reported within the time periods specified in the SEC’s rules and regulations. 41 Table of Contents Management ’ s Report on Internal Control over Financial Reporting The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with US GAAP. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance of such reliability and may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management has conducted, with the participation of our Chief Executive Officer and our Chief Financial Officer, an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2024. Management’s assessment of internal control over financial reporting used the criteria set forth in SEC Release 33-8810 based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control over Financial Reporting — Guidance for Smaller Public Companies. Based on this evaluation, Management concluded that our system of internal control over financial reporting was effective as of December 31, 2024, based on these criteria. This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. As a smaller reporting company, our management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only the management’s report. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 42 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2024. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2024. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2024. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2024. 43 Table of Contents ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is incorporated by reference to the definitive proxy statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2024. 44 Table of Contents PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES Exhibit Number Description 2.1 Agreement and Plan of Merger, dated June 14, 2023, by and among SharpLink Gaming Ltd., SharpLink Gaming, Inc., and SharpLink Merger Sub Ltd. (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form S-4 filed with the SEC on June 15, 2023). 2.2* Amendment No. 1 to Agreement and Plan of Merger, dated July 24, 2023, by and among SharpLink Gaming Ltd., SharpLink Gaming, Inc., and SharpLink Merger Sub Ltd. (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form S-1 filed with the SEC on September 22, 2023). 3.1* Memorandum of Association (incorporated by reference to Exhibit 3.1 to Form 8-K filed with the SEC on April 26, 2023) (translated from Hebrew; the original language version is on file with the Registrant and is available upon request) 3.2* Second Amended and Restated Articles of Association of SharpLink Gaming Ltd. (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the SEC on May 26, 2023) 3.3* Amended and Restated Articles of Association of SharpLink Gaming, Ltd., dated October 24, 2023 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on October 25, 2023) 3.4* Amended Memorandum of Association, dated October 24, 2023 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on October 25, 2023) 3.5* Certificate of Incorporation of SharpLink Gaming, Inc. (incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-4 filed with the SEC on June 15, 2023) 3.6* Amended and Restated Certificate of Incorporation of SharpLink Gaming, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K12B filed with the SEC on February 13, 2024) 3.7* Certificate of Designation of the Series A-1 Preferred Stock of SharpLink Gaming, Inc., par value $0.0001 per share (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K12B filed with the SEC on February 13, 2024) 3.8* Certificate of Designation of the Series B Preferred Stock of SharpLink Gaming, Inc., par value $0.0001 per share (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K12B filed with the SEC on February 13, 2024) 3.9* Bylaws of SharpLink Gaming, Inc. (incorporated by reference to Exhibit 3.4 to the Current Report on Form 8-K12B filed with the SEC on February 13, 2024) 4.1* Form of Regular Warrant issued to Alpha Capital Anstalt (incorporated by reference to Exhibit 4.2 to the Report on Form 6-K submitted to the SEC on November 19, 2021) 4.2* Common Stock Purchase Warrant for 8,800,000 shares in favor of Alpha Capital Anstalt, dated February 15, 2023 (incorporated by reference to Exhibit 4.1 to Form 8-K/A filed with the SEC on February 17, 2023) 45 Table of Contents 4.3* MTS Warrant issued to Roy Hess for 58,334 Ordinary Shares of SharpLink Gaming Ltd. (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-4 filed with the SEC on June 15, 2023) 4.4* MTS Warrant issued to Roy Hess for 25,000 Ordinary Shares of SharpLink Gaming Ltd. (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-4 filed with the SEC on June 15, 2023) 4.5* Common Stock Purchase Warrant of SportsHub Games Network, Inc., dated October 29, 2018 (incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-1 filed with the SEC on September 22, 2023) 4.6* Form of Prefunded Warrant issued to Alpha Capital Anstalt (incorporated by reference to Exhibit 4.1 to the Report on Form 6-K submitted to the SEC on November 19, 2021) 10.1* Agreement and Plan of Merger, dated April 15, 2021, among the Registrant, SharpLink, Inc., and New SL Acquisition Corp. (incorporated by reference to Exhibit 99.2 to the Report on Form 6-K submitted to the SEC on April 15, 2021) 10.2* Amendment No. 1 to Agreement and Plan of Merger, dated July 23, 2021, Mer Telemanagement Solutions Ltd., New SL Acquisition Corp. and SharpLink, Inc. (incorporated by reference to Exhibit 2.2 to Form F-3 filed with the SEC on July 27, 2021) 10.3+* SharpLink, Inc. 2020 Stock Incentive Plan (incorporated by reference to Exhibit 99.2 to the Registration Statement on Form S-8 filed with the SEC on October 12, 2021) 10.4+* 2021 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed with the SEC on October 12, 2021) 10.5+* SharpLink Gaming, Inc. 2023 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-8 filed with the SEC on March 4, 2024) 10.6+* Employment Agreement by and between SharpLink, Inc. and Rob Phythian, dated July 26, 2021 (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-4 filed with the SEC on February 3, 2022) 10.7+* Employment Agreement by and between SharpLink, Inc. and Chris Nicholas, dated July 26, 2021(incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-4 filed with the SEC on February 3, 2022) 10.8+* Employment Agreement by and between SharpLink, Inc. and Bob DeLucia, dated August 16, 2022 (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1/A filed with the SEC on May 8, 2023) 10.9+* Directors and Officers Compensation Policy (incorporated by reference to Annex C to Exhibit 99.2 of the Report on Form 6-K submitted to the SEC on July 28, 2022) 10.10* Securities Purchase Agreement dated December 23, 2020, between SharpLink, Inc. and Alpha Capital Anstalt, as amended on June 15, 2021 and July 23, 2021 (incorporated by reference to Exhibit 10.1 to the Report on Form 6-K submitted to the SEC on November 19, 2021) 10.11* Securities Purchase Agreement dated November 16, 2021 between the Company and Alpha Capital Anstalt (incorporated by reference to Exhibit 10.1 to the Report on Form 6-K submitted to the SEC on November 19, 2021) 46 Table of Contents 10.12* Asset Purchase Agreement, dated December 21, 2021, by and among FourCubed Acquisition Company, LLC, 6t4 Company, FourCubed Management, LLC, Chris Carlson and SharpLink Gaming Ltd. (incorporated by reference to Exhibit 10.1 to the Report on Form 6-K submitted to the SEC on January 12, 2022) 10.13†* Registration Rights Agreement, dated December 31, 2021, by and among SharpLink Gaming Ltd., 6t4 Company, and Chris Carlson (incorporated herein by reference to Exhibit 10.2 to the Report on Form 6-K submitted to the SEC on January 12, 2022) 10.14* Agreement and Plan of Merger, dated September 7, 2022, by and among SharpLink Gaming Ltd., SHGN Acquisition Corp., SportsHub Games Network, Inc. and Christian Peterson, in his capacity as the Stockholder Representative (incorporated by reference to Annex A-1 to Exhibit 99.2 of the Report on Form 6-K submitted to the SEC on November 8, 2022) 10.15* First Amendment to Agreement and Plan of Merger, dated November 2, 2022, by and among SharpLink Gaming Ltd., SHGN Acquisition Corp., SportsHub Games Network, Inc. and Christian Peterson, in his capacity as the Stockholder Representative (incorporated by reference to Annex A-1 to Exhibit 99.2 of the Report on Form 6-K submitted to the SEC on November 8, 2022) 10.16††* Share and Asset Purchase Agreement, dated as of November 9, 2022, by and between SharpLink Gaming Ltd. and Entrypoint South Ltd. (incorporated herein by reference to Exhibit 2.1 to the Report on Form 6-K submitted to the SEC on January 5, 2023) 10.17* Revolving Credit Agreement, dated February 13, 2023, by and between SharpLink, Inc. and Platinum Bank (incorporated herein by reference to Exhibit 10.1 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.18* Revolving Promissory Note, dated February 13, 2023, executed by SharpLink, Inc. (incorporated herein by reference to Exhibit 10.2 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.19* Deposit Account Pledge and Control Agreement, dated February 13, 2023, by and between SHGN Acquisition Corp. and Platinum Bank (incorporated herein by reference to Exhibit 10.3 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.20* Form of Company Guaranty, dated February 13, 2023, issued by SHGN Acquisition Corp., SLG 1 Holdings LLC and SLG 2 Holdings LLC (incorporated herein by reference to Exhibit 10.4 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.21* Term Loan Agreement, dated June 9, 2020, by and between SportsHub Games Network, Inc. and Platinum Bank (incorporated herein by reference to Exhibit 10.5 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.22* Amendment Agreement, dated November 4, 2021, by and between SportsHub Games Network, Inc., LeagueSafe Management, LLC, Virtual Fantasy Games Acquisition, LLC, Rob Phythian, Chris Nicholas and Platinum Bank (incorporated herein by reference to Exhibit 10.6 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.23* Consent, Assumption and Second Amendment Agreement, dated February 13, 2023, by and between SHGN Acquisition Corp., LeagueSafe Management, LLC, Virtual Fantasy Games Acquisition, LLC and Platinum Bank (incorporated herein by reference to Exhibit 10.7 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 47 Table of Contents 10.24* Amended and Restated Term Promissory Note, dated February 13, 2023, executed by SHGN Acquisition Corp. (incorporated herein by reference to Exhibit 10.8 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.25* Security Agreement, dated June 9, 2020, executed by SHGN Acquisition Corp. (incorporated herein by reference to Exhibit 10.9 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.26* Third Party Security Agreement, dated as of June 9, 2020, executed by Virtual Fantasy Games Acquisition, LLC (incorporated herein by reference to Exhibit 10.10 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.27* Amended and Restated Deposit Account Pledge Agreement, dated February 13, 2023, executed by SHGN Acquisition Corp. (incorporated herein by reference to Exhibit 10.11 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.28* Revolving Credit Agreement, dated March 27, 2020, by and between SportsHub Games Network, Inc. and Platinum Bank (incorporated herein by reference to Exhibit 10.12 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.29* Second Amendment Agreement, dated November 4, 2021, by and between SportsHub Games Network, Inc., LeagueSafe Management, LLC, Virtual Fantasy Games Acquisition, LLC and Platinum Bank (incorporated herein by reference to Exhibit 10.13 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.30* Consent, Assumption and Third Amendment Agreement, dated February 13, 2023, by and between SHGN Acquisition Corp., LeagueSafe Management, LLC, Virtual Fantasy Games Acquisition, LLC and Platinum Bank (incorporated herein by reference to Exhibit 10.14 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.31* Amended and Restated Promissory Note executed by SHGN Acquisition Corp., dated February 13, 2023 (incorporated herein by reference to Exhibit 10.15 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.32* Security Agreement, dated March 27, 2020, executed by SportsHub Games Network, Inc. (incorporated herein by reference to Exhibit 10.16 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.33* Security Agreement, dated March 27, 2020, by and between LeagueSafe Management, LLC and SportsHub Games Network, Inc. (incorporated herein by reference to Exhibit 10.17 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.34* Third Party Security Agreement, dated March 27, 2020, executed by Virtual Fantasy Games Acquisition, LLC (incorporated herein by reference to Exhibit 10.18 to the Report on Form 8-K/A filed with the SEC on February 17, 2023) 10.35* Securities Purchase Agreement, dated February 14, 2023, by and between SharpLink, Inc. and Alpha Capital Anstalt (incorporated herein by reference to Exhibit 10.19 to the Report on Form 8-K filed with the SEC on February 16, 2023) 10.36* 8% Senior Convertible Debenture Due February 15, 2026 (incorporated herein by reference to Exhibit 10.20 to the Report on Form 8-K filed with the SEC on February 16, 2023) 48 Table of Contents 10.37* Registration Rights Agreement, dated February 14, 2026, by and between SharpLink, Inc. and Alpha Capital Anstalt (incorporated herein by reference to Exhibit 10.21 to the Report on Form 8-K filed with the SEC on February 16, 2023) 10.38* SportsHub Games Network, Inc. 2018 Equity Incentive Plan (incorporated by reference to Exhibit 10.6+ to the Registration Statement on Form S-1 filed with the SEC on September 22, 2023) 10.39* Form of Placement Agent Agreement (incorporated by reference to Exhibit 1.1 to the Registration Statement on Amendment No. 1 to Form S-1 filed with the SEC on October 6, 2023) 10.40* Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.6 to the Registration Statement on Amendment No. 1 to Form S-1 filed with the SEC on October 6, 2023) 10.41* Form of Ordinary Warrant (incorporated by reference to Exhibit 4.7 to the Registration Statement on Amendment No. 1 to Form S-1 filed with the SEC on October 6, 2023) 10.42* Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.8 to the Registration Statement on Amendment No. 1 to Form S-1 filed with the SEC on October 6, 2023) 10.43* Director Agreement with Obie McKenzie, dated February 12, 2024 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K12B filed with the SEC on February 13, 2024) 10.44* Director Agreement with Leslie Bernhard, dated February 11, 2024 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K12B filed with the SEC on February 13, 2024) 10.45* Confidentiality Agreement with Obie McKenzie, dated February 14, 2024 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K12B filed with the SEC on February 13, 2024 10.46* Confidentiality Agreement with Leslie Bernhard, dated February 14, 2024 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K12B filed with the SEC on February 13, 2024) 10.47* Director Agreement with Robert Gutkowski, dated February 16, 2024 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on February 21, 2024) 10.48* Confidentiality Agreement with Robert Gutkowski, dated February 16, 2024 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on February 21, 2024 10.49* 2024 Executive Compensation Plan, adopted February 16, 2024 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on February 21, 2024 10.50* Employment Agreement with Rob Phythian, dated February 16, 2024 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on February 21, 2024) 10.51* Employment Agreement with Robert DeLucia, dated February 16, 2024 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed with the SEC on February 21, 2024) 10.52* ATM Sales Agreement, dated May 1, 2024 between SharpLink Gaming, Inc. and A.G.P./Alliance Global Partners (incorporated herein by reference to Exhibit 1.2 to the Company’s Registration Statement on Form S-3 (File No. 333-279065) filed with the SEC on May 2, 2024) 10.53* Amended and Fully Restated Post Closing Assignment Agreement between SharpLink Gaming Ltd., SHGN Acquisition Corp., RSports Interactive and SportsHub PA Holdings, LLC, dated May 8, 2024 (incorporated herein by reference to Exhibit 1.1 to the Report on Form 8-K filed with the SEC on May 14, 2024) 10.54* Exchange Agreement No. 2 between SharpLink Gaming, Inc. and Alpha Capital Anstalt, dated July 10, 2024 (incorporated herein by reference to Exhibit 1.1 to the Report on Form 8-K filed with the SEC on July 16, 2024) 10.55* Common Stock Purchase Warrant between SharpLink Gaming, Inc. and Alpha Capital Anstalt (incorporated herein by reference to Exhibit 1.2 to the Report on Form 8-K filed with the SEC on July 16, 2024) 21.1** List of Subsidiaries 23.1** Consent of Cherry Bekaert, LLP 31.1** Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended 49 Table of Contents 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended 32.1** Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2** Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97.1** SharpLink Gaming, Inc. Clawback Policy 99.1* Convenience Translation of the 104H Tax Ruling from Israel Tax Authority, dated January 17, 2024 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed with the SEC on February 2, 2024). 99.2* Declaration of Status for Israeli Income Tax Purposes (incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K filed with the SEC on February 2, 2024) 101.INS** Inline XBRL Instance Document 101.SCH** Inline XBRL Taxonomy Extension Schema Document 101.CAL** Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF** Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB** Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE** Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Previously filed ** Filed herewith † Pursuant to Item 601(b)(10)(iv) of Regulation S-K, certain information contained in this has been redacted as indicated therein †† Annexes and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally to the SEC a copy of any omitted annexes and schedules upon request. + Indicates management contract or compensatory plan. ITEM 16. FORM 10-K SUMMARY None. 50 Table of Contents SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SHARPLINK GAMING, Inc. Dated: March [ ], 2025 By: /s/ Rob Phythian Rob Phythian Chief Executive Officer and Director Dated: March [ ], 2025 By: /s/ Robert DeLucia Robert DeLucia Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signatures Title Date /s/ Rob Phythian Chief Executive Officer and Chairman March [ ], 2025 Rob Phythian (Principal Executive Officer) /s/ Robert DeLucia Chief Financial Officer March [ ], 2025 Robert DeLucia (Principal Financial Officer) /s/ Leslie Bernhard Director March [ ], 2025 Leslie Bernhard /s/ Robert Gutkowski Director March [ ], 2025 Robert Gutkowski /s/ Obie McKenzie Director March [ ], 2025 Obie McKenzie 51 Table of Contents INDEX TO FINANCIAL STATEMENTS Contents Page No. Reports of Independent Registered Public Accounting Firm (PCAOB ID 00 677 ) F-2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F-4 Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023 F-5 Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2024 and 2023 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 F-7 Notes to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023 F-8 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders SharpLink Gaming, Inc. and Subsidiaries Minneapolis, Minnesota Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of SharpLink Gaming, Inc. and Subsidiaries, formerly known as SharpLink Gaming, Ltd. and Subsidiaries, (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2024 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has recurring losses and negative cash flows from operations that raise substantial doubt about their ability to continue as a going concern. Management’s evaluations of the events and conditions and management’s plans regarding those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements; and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue from Contracts with Customers Description of Matter As described in Note 1 to the consolidated financial statements, a significant portion of the Company’s revenue recognized is for commission and fee revenue and software license contracts that include multiple performance obligations including, but not limited to, the following: development, hosting, operations, maintenance, and service of games and contests. Due to the nature of the Company’s revenue sources including multiple performance obligations, management exercises significant judgment in the following areas in determining appropriate revenue recognition: ● Determination of which products and services are considered to be a distinct performance obligation that should be accounted for separately or combined. ● Determination of the pattern of delivery for each distinct performance obligation. ● Determination of which products and services are recognized over time or point in time. ● Determination of recognition of the contract liabilities which also included prize liability and customer deposits. As a result, a high degree of auditor judgment was required in performing audit procedures to evaluate the reasonableness of management’s judgments. Changes in these estimates can have a material effect on the amount of revenue recognized on these contracts. F-2 Table of Contents How We Addressed the Matter in Our Audit Based on our knowledge of the Company, we determined the nature and extent of procedures to be performed over revenue, including the determination of revenue streams over which those procedures were performed. Our audit procedures included the following for each revenue stream where procedures were performed: ● Obtained an understanding of the internal controls and processes in place over the Company’s revenue recognition processes. ● Analyzed the significant assumptions and estimates made by management as discussed above. ● Selected a sample of revenue transactions and assessed the recorded revenue, analyzed the related contract, assessed likelihood of collection, tested management’s identification of distinct performance obligations, and compared amounts recognized for consistency within underlying documentation. Convertible Debenture and Related Warrants Description of Matter At December 31, 2024, the Company had a convertible note with an outstanding principal balance of $4.0 million net of debt discount, warrant discount, accrued interest, and changes in fair value contributing to a reported fair value as of December 31, 2024 of $4.4 million. In connection with the issuance of the convertible note, the Company also issued new and modified existing warrants with the holder. Calculations and accounting for the convertible note and warrant at fair value require management’s judgments related to initial and subsequent recognition, use of a valuation model, and determination of the appropriate inputs used in the selected valuation model. As more fully described in Note 8 to the consolidated financial statements, the Company made an election at the time of issuance to record the convertible note at its fair value with changes in fair value recorded through the consolidated statements of operations. To value the convertible note, the Company utilized a Monte Carlo Simulation to incorporate certain probabilities and assumptions determined at issuance and at December 31, 2024. A Black-Scholes valuation method was used in measuring the fair value of the warrants. Auditing management’s valuations of the convertible note and related warrants was challenging due to the complexity of the valuation model and the inputs that are highly sensitive to changes such as the common stock market price, volatility, risk free rates, and yields. How We Addressed the Matter in Our Audit Based on our knowledge of the Company, we determined the nature and extent of procedures to be performed over the convertible note and related warrants, including the determination of proper accounting treatment and the initial and subsequent measurement principles applied. Our audit procedures included the following: ● Obtained an understanding of the internal controls and processes in place over the Company’s recording of significant and unusual transactions dealing with complex accounting. ● Obtained and analyzed contracts related to the convertible note and warrants. ● Tested completeness and accuracy of the data used as well as management’s application of the relevant accounting guidance. ● Assessed the intent and ability of management while evaluating certain assumptions utilized in the valuation models. ● We evaluated the Company’s determination of fair value of the convertible note, including testing the appropriateness of the methodology used and assessing the reasonableness of the underlying inputs. /s/ Cherry Bekaert LLP We have served as the Company’s auditor since 2022. Raleigh, North Carolina March [ ], 2025 F-3 Table of Contents SHARPLINK GAMING, INC. CONSOLIDATED BALANCE SHEETS December 31, 2024 December 31, 2023 Assets Current Assets Cash $ 1,436,729 $ 2,487,481 Accounts receivable, net of allowance for credit losses of $ 0 264,831 415,119 Other Receivables 272,813 - Unbilled receivables - 12,000 Prepaid expenses and other current assets 310,180 383,295 Due from Rsports Interactive, Inc. 307 - Current assets from discontinued operations 269,788 67,805,379 Total current assets 2,554,648 71,103,274 Equipment, net 3,359 8,792 Intangible assets, net 13,162 168,112 Total assets $ 2,571,169 $ 71,280,178 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable and accrued expenses $ 478,280 $ 1,463,699 Line of credit - 6,345,978 Current portion of long-term debt - 645,571 Current portion of convertible debenture, net of discount of $ 0 and $ 283,335 , respectively, warrant discount of $ 0 and $ 831,746 , respectively, accrued interest of $ 0 and $ 299,648 , respectively - 4,395,753 Current liabilities from discontinued operations 10,020 66,396,883 Total current liabilities 488,300 79,247,884 Long-Term Liabilities Deferred tax liability - 7,155 Debt, less current portion - 1,424,908 Total liabilities 488,300 80,679,947 Commitments and Contingencies Stockholders’ Equity Series A-1 preferred stock, $ 0.0001 par value; authorized shares: 260,000 ; issued and outstanding shares: 7,202 ; liquidation preference: $ 116,997 1 1,440 Series B preferred stock, $ 0.0001 par value; authorized shares: 370,000 ; issued and outstanding shares: 12,481 ; liquidation preference: $ 529,122 1 2,496 Common stock, $ 0.0001 par value; authorized shares 100,000,000 ; issued and outstanding shares: 4,887,531 and 2,863,734 , respectively 461 572,770 Treasury stock, 90 common shares at cost ( 29,000 ) ( 29,000 ) Additional paid-in capital 79,920,365 77,909,981 Accumulated deficit ( 77,808,959 ) ( 87,857,456 ) Total stockholders’ equity (deficit) 2,082,869 ( 9,399,769 ) Total liabilities and stockholders’ equity $ 2,571,169 $ 71,280,178 See accompanying notes to these consolidated financial statements. F-4 Table of Contents SHARPLINK GAMING, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Year Ended December 31, 2024 2023 Revenues $ 3,662,349 $ 4,952,725 Cost of revenues 2,756,076 3,420,062 Gross profit 906,273 1,532,663 Operating expenses Selling, general, and administrative expenses 5,669,248 7,961,133 Goodwill and intangible asset impairment expenses - 2,464,732 Total operating expense 5,669,248 10,425,865 Operating loss ( 4,762,975 ) ( 8,893,202 ) Other income and expense Interest income 60,289 53,493 Interest expense ( 324,518 ) ( 1,150,341 ) Other income 297,510 ( 12,606 ) Change in fair value of convertible debenture and warrant liabilities 255,819 ( 1,230,234 ) Total other income (expense) 289,100 ( 2,339,688 ) Net loss before income taxes ( 4,473,875 ) ( 11,232,890 ) Income tax (expense) 232 ( 15,708 ) Net loss from continuing operations ( 4,473,643 ) ( 11,248,598 ) Net income (loss) from discontinued operations, net of tax 14,573,262 ( 2,994,584 ) Net income (loss) $ 10,099,619 $ ( 14,243,182 ) Numerator for basic and diluted net loss per share: Net loss from continuing operations available to common stockholders $ ( 4,473,643 ) $ ( 11,299,092 ) Net income (loss) from discontinued operations available to common stockholders 14,573,262 ( 2,994,584 ) Net income (loss) 10,099,619 ( 14,293,676 ) Denominator for net loss per share: Basic weighted average shares for continuing and discontinued operations 3,443,264 2,760,970 Diluted weighted average shares for discontinued operations 4,047,057 2,760,970 Net earnings (loss) per share: Net loss from continuing operations per share - basic $ ( 1.30 ) $ ( 4.09 ) Net income (loss) from discontinued operations per share – basic 4.23 ( 1.08 ) Net income (loss) per share - basic $ 2.93 $ ( 5.17 ) Net loss from continuing operations per share - diluted $ ( 1.30 ) $ ( 4.09 ) Net income (loss) from discontinued operations per share – diluted 3.59 ( 1.08 ) Net income (loss) per share - diluted $ 2.29 $ ( 5.17 ) See accompanying notes to these consolidated financial statements. F-5 Table of Contents SHARPLINK GAMING, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY (DEFICIT) FOR THE YEARS ENDED December 31, 2024 and 2023 Common/Ordinary shares Series A-1 preferred stock Series B preferred stock Additional Total Paid-In Treasury Accumulated shareholders' Shares Amount Shares Amount Shares Amount Capital stock deficit equity Balance, December 31, 2022 2,688,541 $ 537,731 6,630 $ 1,326 12,481 $ 2,496 $ 76,039,605 $ ( 29,000 ) $ ( 73,565,641 ) $ 2,986,517.00 Net loss - - - - - - - - ( 14,243,182 ) ( 14,243,182 ) Stock-based compensation expense - - - - - - 634,367 - - 634,367 Warrants issued in conjunction with convertible debenture - - - - - - 1,174,229 - - 1,174,229 Deemed dividends on Series B preferred stock anti-dilutive provision - - - - - - 48,633 - ( 48,633 ) - Issuance of ordinary shares for cashless exercised warrants 121,479 24,296 - - - - ( 24,296 ) - - - Issuance of ordinary shares to SportsHub shareholders which were previously reserved for future issuance 23,714 4,743 - - - - ( 4,743 ) - - - Issuance of ordinary shares for services rendered 30,000 6,000 - - - - 42,300 - - 48,300 Dividends on Series B preferred stock in Series A-1 preferred stock - - 572 114 - - ( 114 ) - - - Balance, December 31, 2023 2,863,734 $ 572,770 7,202 $ 1,440 12,481 $ 2,496 $ 77,909,981 $ ( 29,000 ) $ ( 87,857,456 ) $ ( 9,399,769 ) Net Income - - - - - - - - 10,099,619 10,099,619 Domestication equity adjustment - Note 1 - ( 572,476 ) - ( 1,439 ) - ( 2,495 ) 576,410 - - - Stock-based compensation expense - - - - - - 160,565 - - 160,565 Shares issued for vested restricted stock 350,001 - - - - - 449,360 - - 449,360 Issuance of common stock for exercise of warrants 389,209 39 - - - - 159,668 - - 159,707 Warrant settlement agreement - Note 8 - - - - - - ( 900,000 ) - - ( 900,000 ) Issuance of common stock for exchange of warrants - Note 8 156,207 15 - - - - 210,879 - ( 6,503 ) 204,391 Warrant exchange agreement - deemed dividend - Note 8 - - - - - - 44,619 - ( 44,619 ) - Warrant exchange agreement, issuance of pre-funded warrants - Note 8 - - - - - - 287,150 - - 287,150 Shares sold for cash 1,128,380 113 - - - - 869,216 - - 869,329 Warrant exchange amendment - Note 8 - - - - - - 152,517 - - 152,517 Balance, Balance at December 31, 2024 4,887,531 $ 461 7,202 $ 1 12,481 $ 1 $ 79,920,365 $ ( 29,000 ) $ ( 77,808,959 ) $ 2,082,869 See accompanying notes to these consolidated financial statements. F-6 Table of Contents SHARPLINK GAMING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED December 31, 2024 and 2023 Includes cash flow activities from both continuing and discontinued operations Year Ended December 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) 10,099,619 ( 14,243,182 ) Net income (loss) from discontinued operations, net of tax 14,573,262 ( 2,994,584 ) Net loss from continuing operations $ ( 4,473,643 ) $ ( 11,248,598 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 12,102 107,414 Amortization of loan costs - 10,714 Amortization of debt discount 71,781 459,148 Amortization of prepaid stock issued for services - 129,000 Change in fair value ( 255,819 ) 1,230,234 Accrued interest on convertible debenture - 299,648 Deferred tax expense ( 7,155 ) ( 6,206 ) Stock-based compensation expense 148,524 261,373 Goodwill and impairment expense - 2,464,732 Loss on disposal of equipment - 12,607 Changes in assets and liabilities Accounts receivable 162,288 25,754 Other receivable ( 272,813 ) - Due from Rsports Interactive, Inc. ( 307 ) - Prepaid expenses and other current assets 73,115 ( 6,390 ) Accounts payable and accrued expenses ( 1,314,126 ) 1,344,158 Net cash used in operating activities – continuing operations ( 5,856,053 ) ( 4,916,412 ) Net cash (used in) provided by operating activities - discontinued operations ( 16,958,433 ) 5,499,299 Net cash used in operating activities ( 22,814,486 ) 582,887 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for equipment ( 1,719 ) ( 12,147 ) Proceeds from sale of intellectual property 150,000 - Capital expenditures for internally developed software - ( 273,999 ) Net cash provided by (used in) investing activities – continuing operations 148,281 ( 286,146 ) Net cash used in investing activities - discontinued operations ( 18,857,834 ) ( 745,951 ) Net cash used for investing activities ( 18,709,553 ) ( 1,032,097 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from convertible debenture and purchase warrants ( 4,148,571 ) 4,000,000 Principal payments on convertible debt - ( 419,048 ) Proceeds from sale of common stock 869,275 - Proceeds from line of credit 550,000 6,350,000 Repayment of line of credit ( 6,900,000 ) - Principal payments on long-term debt ( 2,070,479 ) ( 620,173 ) Proceeds from exercise of warrants 159,892 - Debt issuance fees - ( 7,500 ) Net cash generated by (used in) financing activities – continuing operations ( 11,539,883 ) 9,303,279 Net cash (used in) generated by financing activities - discontinued operations ( 5,835,352 ) 481,575 Net cash generated by (used in) financing activities ( 17,375,235 ) 9,784,854 Net change in cash ( 58,899,274 ) 9,335,644 Cash and restricted cash, beginning of period including discontinued operations 60,441,130 51,105,486 Cash and restricted cash, end of period including discontinued operations 1,541,856 60,441,130 Less cash from discontinued operations ( 105,127 ) ( 57,953,649 ) Cash, end of period $ 1,436,729 $ 2,487,481 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest 485,531 485,531 Cash paid for taxes 504,755 86,320 NON-CASH INVESTING ACTIVITIES: Shares issued for services provided - 48,300 NON-CASH FINANCING ACTIVITIES: Settlement agreement, liability issued for warrants ( 900,000 ) - Issuance of common stock in exchange of warrants 210,879 - Issuance of common stock for vested restricted stock 449,360 - Deemed Dividend 44,619 48,633 Warrant exchange agreement, issuance of pre-funded warrants 287,150 - Warrant exchange amendment, revalue of strike price and removal of repurchase requirement 152,386 - Discount on convertible debenture and purchase warrant - 1,574,229 Shares issued for cashless exercised warrants - 24,296 Shares issued to SportsHub shareholders which were previously reserved for future issuance - 4,743 Dividends on Series B preferred stock in Series A-1 preferred stock - 1,861 Extension of maturity of operating lease liability - 77,742 See accompanying notes to these consolidated financial statements. F-7 Table of Contents SHARPLINK GAMING, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED December 31, 2024 and 2023 Note 1 – Summary of Significant Accounting Policies Nature of Business The Company is a Delaware corporation. SharpLink is an online performance marketing company that delivers unique fan activation solutions to its sportsbook and casino partners. Through its global affiliate marketing network, known as PAS.net, SharpLink drives qualified traffic and player acquisitions, retention and conversions to U.S. regulated sportsbooks and global casino gaming partners worldwide. In addition, SharpLink owns a performance marketing platform through which the Company owns and operates state-specific web domains designed to attract, acquire and drive local sports betting and casino traffic directly to its sportsbook and casino partners which are licensed to operate in each respective state. Prior to the sale of SharpLink’s Sports Gaming Client Services and SportsHub Gaming Network business units in January 2024 to RSports Interactive, Inc. (“RSports”), a Minnesota corporation, (the “Sale of Business”), the SportsHub Gaming Network unit owned and operated an online gaming business that primarily facilitated daily and seasonal peer-to-peer fantasy contests for its end users. The SportsHub Gaming Network business unit also operated a website that provided a variety of services to private fantasy league commissioners, including secure online payment options, transparent tracking and reporting of transactions, payment reminders, in-season security of league funds, and facilitation of prize payouts. SharpLink’s Free-to-Play ( "F2P" ) sports game development business was engaged in the provision of F2P sports game and mobile app development services to a marquis list of customers, which included several of the biggest names in sports and sports betting, including Turner Sports, NBA, NFL, PGA TOUR, NASCAR and BetMGM, among others. On January 18, 2024, the Company entered into a Purchase Agreement (the “PA”) with RSports to sell the Company’s fantasy sports and sports game development business units to RSports. All of the issued and outstanding common stock or membership interests of Sports Technologies, LLC, a Minnesota limited liability company, SHGN and Holdings Quinn, LLC, a Delaware limited liability company (collectively referred to as the “Divested Operations”) were sold for $ 22,500,000 in an all cash transaction. The transaction resulted in SharpLink selling a majority of its assets and the classification of the Divested Operation’s financial results as discontinued operations. All prior periods presented have been restated to present the Divested Operations financial results as discontinued operations. All explanations and amounts relating to discontinued operations are referred throughout the consolidated financial statements to Note 3 - Discontinued Operations. On February 13, 2024, SharpLink Israel completed its previously announced domestication merger (“Domestication Merger”), pursuant to the terms and conditions set forth in an Agreement and Plan of Merger (the “Domestication Merger Agreement”), dated June 14, 2023 and amended July 24, 2023, among SharpLink Israel, SharpLink Merger Sub Ltd., an Israeli company and a wholly owned subsidiary of SharpLink US (“Domestication Merger Sub”) and SharpLink Gaming, Inc. (“SharpLink US”). The Domestication Merger was achieved through a merger of SharpLink Merger Sub with and into SharpLink Israel, with SharpLink Israel surviving the merger and becoming a wholly owned subsidiary of SharpLink US. The Domestication Merger was approved by the shareholders of SharpLink Israel at an extraordinary special meeting of shareholders held on December 6, 2023. SharpLink US’s Common Stock commenced trading on the Nasdaq Capital Market under the same ticker symbol, SBET, on February 14, 2024. As a result of the Domestication Merger, all SharpLink Israel ordinary shares outstanding immediately prior to the Domestication Merger will automatically convert, on a one -for- one basis, into the right to receive, and become exchangeable for, shares of SharpLink US common stock, par value $ 0.0001 per share (“Common Stock”) and all preferred shares, options, and warrants of SharpLink Israel outstanding immediately prior to the Domestication Merger will be converted into or exchanged for equivalent securities of SharpLink US on a one -for- one basis. The following represents the expected change in the par value based on the outstanding ordinary and preferred shares at December 31, 2023 to common and preferred stock after the redomestication on February 13, 2024: Ordinary Shares Par value for ordinary shares at $ 0.20 as reported at February 13, 2024 $ 572,770 Par value for common stock at $ 0.0001 at February 13, 2024 294 Net change in par value — will be reflected in additional paid-in capital $ 572,476 Preferred Shares Par value for Series A-1 preferred stock at $ 0.20 par value as reported at February 13, 2024 $ 1,440 Par value for Series A-1 preferred stock at $ 0.0001 par value as reported at February 13, 2024 1 Net change in par value — will be reflected in additional paid-in capital $ 1,439 Par value for Series B preferred stock at $ 0.20 par value as reported at February 13, 2024 2,496 Par value for Series B preferred stock at $ 0.0001 par value at February 13, 2024 1 Net change in par value — will be reflected in additional paid-in capital $ 2,495 Principles of Consolidation The accompanying consolidated financial statements include the accounts of SharpLink Gaming Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions between consolidated subsidiaries have been eliminated in consolidation. F- 8 Table of Contents We operate in one reportable segment. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. The Company’s chief operating decision maker (“CODM”), our Chief Executive Officer, allocates resources and assesses performance based upon discrete financial information at the segment level. Reclassifications Certain amounts in prior periods have been reclassified to reflect the impact of the discontinued operations treatment in order to conform to the current period presentation. See Note 3. During the year ended December 31, 2024, we realigned our organizational structure and resources to more closely align with our strategic priorities. As a result of the change, we have one reportable segment, consisting of Affiliate Marketing, for the purpose of making operational and resource decisions and assessing financial performance. See Note 13 . Functional Currency The Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. The resulting monetary assets and liabilities are translated into U.S. dollars at exchange rates prevailing on the subsequent balance sheet date. Revenue and expense components are translated to U.S. dollars at weighted-average exchange rates in effect during the period. Foreign currency transaction gains and losses resulting from remeasurement are recognized in other income, net within the consolidated statements of operations. Reverse Share Split On April 23, 2023, the Company effected a one -for- ten ( 1:10 ) reverse share split of all the Company’s share capital and adopted amendments to its Memorandum of Association and Second Amended and Restated Articles of Association (“M&AA”) whereby the Company (i) decreased the number of issued and outstanding ordinary shares, nominal value NIS 0.60 per share, from 26,881,244 to 2,688,541; (ii) reduced the total number of the Company’s authorized shares under its M&AA from 92,900,000 shares of ordinary shares, nominal value NIS 0.06 (USD 0.02 ) per share, to 9,290,000 shares of ordinary shares, nominal value NIS 0.60 (USD 0.20 ) per share; and (ii) decreased by a ratio of one -for- ten ( 1:10 ) the number of retrospectively issued and outstanding shares of ordinary shares. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retrospectively adjusted as of the earliest period presented in the financial statements to reflect the reverse stock split. Discontinued Operations In June 2022, the Company’s Board of Directors approved management to enter into negotiations to sell MTS. The Company completed the sale of MTS on December 31, 2022. Accordingly, the assets and liabilities of the MTS business are separately reported as assets and liabilities from discontinued operations as of December 31, 2024 and 2023 The results of operations and cash flows of MTS for all periods are separately reported as discontinued operations. In December 2023, the Company’s Board of Directors approved management to enter into a Letter of Intent with RSports for RSports to purchase the Company’s Sports Gaming Client Services and SportsHub Gaming Network businesses. In December 2023, the Company discontinued its C4 technology due to the lack of market acceptance. C4 technology centered on cost effectively monetizing our own and our customers’ respective online audiences of U.S. fantasy sports and casual sports fans and casino gaming enthusiasts by converting them into loyal online sports and iGaming bettors. On January 18, 2024, the Company entered into a PA with RSports to sell the Company’s Sports Gaming Client Services and SHGN business units to RSports. All of the membership interests of Sports Technologies, LLC, a Minnesota limited liability company, Holdings Quinn, LLC, a Delaware limited liability company and SHGN who owns all of the issued membership interests in SportsHub Reserve, LLC, (“SHReserve”), a Minnesota limited liability company; SportsHub PA, LLC, (“SHPA”), a Pennsylvania limited liability company, and SportsHub Holdings, LLC, (“SHHoldings”), a Minnesota limited liability company, and SportsHub Operations, LLC, (“SHOperations”), a Minnesota limited liability company (SHReserve, SHPA, SHHoldings and SHOperations, collectively, the “SHGN Subsidiaries”) were sold for $ 22,500,000 in an all-cash transaction. The amount of cash received from sale of business, net of cash transferred of $ 18,857,834 , as reflected on the statement of cash flows, reflects the receipt of cash of $ 22,500,000 , net of the cash transferred of $ 41,357,834 . The majority of cash transferred of $ 41,357,834 was reflected in discontinued operations customer deposits liability and deferred revenue of $ 36,959,573 and $ 4,888,704 , respectively. See Note 3 . F- 9 Table of Contents Restricted Cash Restricted cash consists of funds held for payment of prize liabilities for various daily and seasonal peer-to-peer fantasy games. The Company maintained separate accounts to segregate users’ funds from operational funds. See Note 3. Concentrations of Credit Risk Cash and restricted cash are deposited with major banks in the United States and Israel. Such deposits in the United States may be in excess of insured limits and are not insured in other jurisdictions. Generally, the FDIC limit per bank is $250,000. Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact on the Company’s financial condition, results of operations and cash flows. The following represents the cash on hand at December 31, 2024 by banking institution and does not include any reduction for the FDIC insured limit of $250,000. Bank December 31, 2024 Platinum Bank $ 1,141,775 Silicon Valley Bank 193,552 Other 101,402 Total $ 1,436,729 The Company performs ongoing credit evaluations of its customers. In certain circumstances, the Company may require letters of credit, other collateral or additional guarantees. Accounts Receivable The Company’s policy for estimating the allowance for credit losses on accounts receivables considers several factors including historical loss experience, the age of delinquent receivable balances due, and economic conditions. Specific customer reserves are made during review of significant outstanding balances due, in which customer creditworthiness and current economic trends may indicate that it is probable the receivable will not be recovered. Accounts receivables are written off after collection efforts occur and the receivable is deemed uncollectible. Adjustments to the allowance for credit losses are recorded in selling, general and administrative expense. During the years ended December 31, 2024 and 2023 , there was no amount of the allowance for credit losses. The Company recognized unbilled revenue when revenue is recognized prior to invoicing. F- 10 Table of Contents Investment, cost During the year ended December 31, 2021, the Company invested $ 200,000 in Quintar, Inc. an augmented reality company headquartered in California. This investment provided the Company with 280,903 shares, which equates to a 1.12 % ownership interest in Quintar. SharpLink does not exercise significant control over Quintar due to its minority ownership role and the fact that SharpLink does not have a seat on Quintar’s Board of Directors, nor hold any special voting rights. As a result, of the Company’s lack of influence over Quintar and the fact that the valuation of Quintar is not easily determinable (privately held business with few transactions) the Company accounts for the Quintar investment through the cost method of accounting. The Company reviews the investment for impairment at each reporting period based on current conditions. This is informed by Quintar’s operating results and financing activities. No impairment was indicated related to the Quintar investment for the year ended December 31, 2023. The investment was sold as part of the Sale of Business to RSports. See Note 3. Contract Assets Contract assets include unbilled revenue, which is the amount of revenue recognized in excess of the amount billed to customers and costs incurred incremental to the contract and to fulfill contract obligations. See Note 3. Deferred Prize Expense Deferred prize expense consists of the expense related to prize funds offered through various fantasy games hosted by the Company. These prize funds are paid to the participants once a fantasy game has concluded and final winners have been determined. Deferred prize expense is recognized over the life of the fantasy games and is reported as a current asset in discontinued operations. See Note 3. Equipment Equipment is recorded at cost. Expenditures for renewals and improvements that significantly add to the productivity capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are expensed. When equipment is retired or sold, the cost and related accumulated depreciation are eliminated from the accounts and the resultant gain or loss is reflected in income. Depreciation is provided using the straight-line method, based on useful lives of the assets which ranges from three to seven years. Depreciation expense from continuing operations for the years ended December 31, 2024 and 2023 , was $ 7,152 and $ 10,289 , respectively. Accumulated depreciation from continuing operations as of December 31, 2024 and 2023 was $ 31,911 and $ 24,759 , respectively. Leases The Company determines if an arrangement is or contains a lease at inception or modification of the arrangement. An arrangement is or contains a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period of time in exchange for consideration. Control over the use of the identified asset means the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset. For a lease with terms greater than a year, a right-of-use (ROU) asset and lease liability is recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The initial measurement of the operating lease ROU asset also includes any prepaid lease payments and are reduced by any previously accrued deferred rent. The Company’s operating lease does not provide a readily determinable implicit rate; therefore, the Company uses its incremental borrowing rate to discount the lease payments based on the information available at commencement date ( 7.2 %). The Company’s operating lease does not include a fixed rental escalation clause. Lease terms include optional renewal periods when it is reasonably certain that such options will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term. See Note 3 . Intangible and Long-Lived Assets Intangible assets consist of acquired technology and are carried at cost less accumulated amortization. The Company amortizes the cost of identifiable intangible assets on a straight-line basis over the expected period of benefit, which is estimated at three years, see Note 3 . Costs associated with internally developed software are expensed as incurred unless they meet generally accepted accounting criteria for deferral and subsequent amortization. Software development costs incurred prior to the application development stage are expensed as incurred. For costs that are capitalized, the subsequent amortization is the straight-line method over the remaining economic life of the product, which is estimated to be five years. F- 11 Table of Contents The Company begins amortizing the asset and subsequent enhancements once the software is ready for its intended use. The Company reassesses whether it has met the relevant criteria for deferral and amortization at each reporting date. The Company capitalized $ 0 and $ 273,999 of costs in the development of its software for continuing operations for the years ended December 31, 2024 and 2023 , respectively. The Company reviews the carrying value of its long-lived assets, including equipment and finite-lived intangible assets, for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimate future cash flows expected to result from its use and eventual disposition. In cases where undiscounted cash flows are less than the carrying value of an asset group, an impairment loss is recognized equal to an amount by which the asset group’s carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of customer loss, obsolescence, demand, competition, and other economic factors. During the fourth quarter of 2023, management determined the Company had experienced a triggering event due to receiving notification the Company’s largest Affiliate Marketing Services customer was in the process of leaving the European Poker Affiliate Solutions market, which would reduce future marketing commissions, The Company impaired the customer relationships intangible asset and software in development for Affiliate Marketing segment as a result of this information and impact on future cash flows. The impairment charge has been included in the Goodwill and intangible asset impairment expense line item in the consolidated statement operations for the year ended December 31, 2023. Goodwill and Impairment The Company evaluates the carrying amount of goodwill annually or more frequently if events or circumstances indicate that the goodwill may be impaired. Factors that could trigger an impairment review include significant underperformance relative to historical or forecasted operating results, a significant decrease in the market value of an asset or significant negative industry or economic trends. The Company completes impairment reviews for its reporting units using a fair-value method based on management’s judgments and assumptions. When performing its annual impairment assessment, the Company evaluates the recoverability of goodwill assigned to each of its reporting units by comparing the estimated fair value of the respective reporting unit to the carrying value, including goodwill. The Company estimates fair value utilizing the income approach and the market approach or a combination of both income and market approaches. The income approach requires management to make assumptions and estimates for each reporting unit, including projected future operating results, economic projections, anticipated future cash flows, working capital levels, income tax rates, and a weighted-average cost of capital reflecting the specific risk profile of the respective reporting unit. The key assumptions used in the income approach include revenue growth, operating income margin, discount rate and terminal growth rate. These assumptions are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using market and industry data as well as Company-specific risk factors for each reporting unit. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. The market approach estimates fair value using performance multiples of comparable publicly traded companies. In the event the fair value of a reporting unit is less than the carrying value, including goodwill, an impairment loss is recognized for the difference between the implied fair value and the carrying value of the reporting unit. For the year ended December 31, 2023, the Company recorded goodwill impairment of $ 1,615,167 , which was due to the Company’s largest Affiliate Marketing Services customer announcing its intention in the fourth quarter of 2023 to leave the Company’s PAS network, which would reduce future marketing commissions. The extent of impairment was determined based upon the projected performance of the reporting unit, as determined using an income approach valuation methodology. Key assumptions included in the determination of the reporting unit’s fair value included revenue growth, operating margin, long-term growth rate and discount rate. There is no goodwill balance as of the year ended December 31, 2024. See Note 3 for discontinued operations impairment. F- 12 Table of Contents Accounts Payable The composition of accounts payable and accrued expenses from continuing operations are as follows: December 31, 2024 December 31, 2023 Accounts payable $ 281,394 $ 834,060 Accrued wages and payroll expenses 49,184 63,359 Accrued bonus 58,280 305,747 Accrued interest - 48,875 Other accrued expenses 89,422 211,658 $ 478,280 $ 1,463,699 Prize Liability The Company’s prize liability consists of funds to be paid to participants of the various fantasy games hosted by the Company. These prizes are paid to the participants once a fantasy game has concluded and final winners have been determined. Prize liability is recorded in current liabilities from discontinued operations. See Note 3. Customer Deposits The Company’s liability for customer obligations is in wallet accounts and accounts on the SportsHub platform. Cash related to these accounts may be drawn at the customer’s request. Customer deposits are recorded in current liabilities from discontinued operations. See Note 3. Contract Liabilities Contract liabilities include payments received and billings made in advance of the satisfaction of performance obligations under the contract and are realized when the associated revenue is recognized under the contract. See Note 3. Convertible Debenture at Fair Value The Company accounts for convertible debentures using an amortized cost model. The discount for warrants, the Original Issuance Discount (“OID”) and the initial allocation of fair value of compound derivatives reduce the initial carrying amount of the convertible notes. The carrying value is accredited to the stated principal amount at contractual maturity using the effective-interest method with a corresponding charge to interest expense. Debt discounts are presented on the consolidated balance sheets as a direct deduction from the carrying amount of that related debt. The Company made an irrevocable election at the time of issuance of the Debenture to record the Debenture at its fair value (the “Fair Value Option”) with changes in fair value recorded through the Company’s consolidated statements of operations within other income (expense) at each reporting period. The Fair Value Option provides the Company a measurement basis election for financial instruments on an instrument-by-instrument basis. F- 13 Table of Contents Treasury Stock Company shares held as treasury shares are recognized at cost, and as a deduction from equity. Any gain or loss arising from a purchase, sale, issuance or cancellation of treasury shares is recognized directly in equity at the time of such event. Warrants The Company accounts for a warrant as an equity instrument, liability or share-based compensation in accordance with ASC 480, Distinguishing Liabilities from Equity, and/or ASC 718, Compensation – Stock Compensation, depending on the specific terms of the agreement. Revenue The Company follows a five -step model to assess each sale to a customer; identify the legally binding contract, identify the performance obligations, determine the transaction price, allocate the transaction price, and determine whether revenue will be recognized at a point in time or over time. Revenue is recognized upon transfer of control of promised products or services (i.e., performance obligations) to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Affiliate Marketing Services operating segment generates revenue by earning commissions from sportsbooks and casino operators when a new depositor is directed to them by our affiliate marketing websites. See Note 14 . F- 14 Table of Contents Advertising and Marketing Expenses The Company incurred $ 214,325 in advertising and marketing expenses for continuing operations and $ 12,491 for discontinued operations, respectively, for the year ended December 31, 2024 . For the year ended December 31, 2023 , the Company incurred $ 675,496 in marketing and advertising expenses for continuing operations and $ 176,224 for discontinued operations. Stock-Based Compensation Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the requisite service period. The Company estimates the fair value of each stock-based award on the measurement date using the Black-Scholes option valuation model which incorporates assumptions as to stock price volatility, the expected life of the options, risk-free interest rate, and dividend yield. For restricted stock awards, the Company records the value of the Company stock at the date of the grant as stock based compensation expense. Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes, under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities, net operating losses, and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company uses a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. A tax position is recognized when it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation processes. A tax position that meets the more-likely-than- not recognition threshold is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority. The standard also provides guidance on derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition. Net Loss Per Share Basic net loss per share is calculated by dividing net loss available to ordinary shareholders, adjusted for preferred stock discount accretion and dividends accrued on preferred stock, by the weighted-average number of ordinary shares outstanding during the period excluding the effects of any potentially dilutive securities. Diluted net loss per share is computed similar to basic loss per share, except that the denominator is increased to include the number of additional ordinary shares that would have been outstanding if potential ordinary shares had been issued if such additional common shares were dilutive. As the Company had a net loss from continuing operations and net income from discontinued operations for the year ended December 31, 2024 , the following presents dilutive and anti-dilutive securities. For continuing operations, since there was a net loss, all securities presented below were excluded from weighted average shares outstanding. For discontinued operations, dilutive securities presented below were included in the net income per share calculation and the anti-dilutive securities were excluded in weighted average shares outstanding: Year Ended December 31, 2024 Dilutive: Prefunded warrants 469,560 Regular warrants 134,233 Total Dilutive 603,793 Anti-Dilutive: Stock options 108,261 Series A-1 preferred stock 7,202 Series B preferred stock 12,481 SportsHub warrants 3,015 Restricted Stock Units 150,003 Total Anti-dilutive 280,962 As the Company had a net loss from continuing operations and discontinued operations for the year ended December 31, 2023 , the following anti-dilutive securities outstanding were excluded in weighted average shares outstanding: Anti-Dilutive: Year Ended December 31, 2023 Stock options 414,819 Series A-1 preferred stock 7,202 Series B preferred stock 12,481 MTS warrants 8,333 Purchase warrants 880,000 Regular warrants 266,667 SportsHub warrants 3,015 Total Anti-dilutive 1,592,517 December 31, 2024 The calculation of the net loss per share and weighted-average shares of the Company’s ordinary shares outstanding for the periods presented are as follows: For the Year Ended December 31, 2024 2023 Net loss from continuing operations $ ( 4,473,643 ) $ ( 11,248,598 ) Less: deemed dividends on series B preferred stock - ( 48,633 ) Less: dividends on series B preferred stock - ( 1,861 ) Net loss from continuing operations available to common stockholders ( 4,473,643 ) ( 11,299,092 ) Net income (loss) from discontinued operations, net of tax, available to common stockholders 14,573,262 ( 2,994,584 ) Net income (loss) available to common stockholders $ 10,099,619 $ ( 14,293,676 ) Basic weighted-average shares for continuing and discontinued operations 3,443,264 2,760,970 Diluted weighted average shares for discontinued operations 4,047,057 2,760,970 Basic: Net (loss) from continuing operations per share $ ( 1.30 ) $ ( 4.09 ) Net income (loss) from discontinued operations per share 4.23 ( 1.08 ) Net income (loss) per share $ 2.93 $ ( 5.17 ) Fully Diluted: Net (loss) from continuing operations per share $ ( 1.30 ) $ ( 4.09 ) Net income (loss) from discontinued operations per share 3.59 ( 1.08 ) Net income (loss) per share $ 2.29 $ ( 5.17 ) Fair Value Measurements The Company has determined the fair value of certain assets and liabilities in accordance with generally accepted accounting principles, which provides a framework for measuring fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs. F- 15 Table of Contents A fair value hierarchy has been established, which prioritizes the valuation inputs into three broad levels. Level 1 inputs consist of quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the related asset or liability. Level 3 inputs are unobservable inputs related to the asset or liability. Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our most critical estimates include those related to use of accounting for revenue recognition, stock-based compensation, warrants and discontinued operations. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Contingencies From time to time, we may become involved in lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Although we currently maintain liability insurance coverage intended to cover professional liability and certain other claims, we cannot assure that our insurance coverage will be adequate to cover liabilities arising out of claims asserted against us in the future where the outcomes of such claims are unfavorable to us. Liabilities in excess of our insurance coverage, including coverage for professional liability and certain other claims, could have a material adverse effect on our business, financial condition and results of operations. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update 2023 - 07 – Segment Reporting (Topic ASC 280 ) Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosure about significant segment expenses. The enhancements under this update require disclosure of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss, require disclosure of other segment items by reportable segment and a description of the composition of other segment items , require annual disclosures under ASC 280 to be provided in interim periods, clarify use of more than one measure of segment profit or loss by the CODM, require that the title of the CODM be disclosed with an explanation of how the CODM uses the reported measures of segment profit or loss to make decisions, and require that entities with a single reportable segment provide all disclosures required by this update and required under ASC 280. The Company adopted ASU 2023 - 07 for the annual period ending December 31, 2024. See Note 13 . Recently Issued Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued Accounting Standards Update 2023 - 09 – Income Taxes (Topic ASC 740 ) Income Taxes. The ASU improves the transparency of income tax disclosures by requiring ( 1 ) consistent categories and greater disaggregation of information in the rate reconciliation and ( 2 ) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023 - 09 will become effective beginning of our 2025 fiscal year. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. We do not expect that this guidance will have a material impact upon our financial position and results of operations. In November 2024, the Financial Account Standards Board (FASB), issued Accounting Standards Update (ASU) 2024 - 04, Debt-Debt with Conversions and Other Option. ASU 2024 - 04 is intended to clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. This ASU is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on its disclosures. In November 2024, the FASB issued Accounting Standards Update No. 2024 - 03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ) : Disaggregation of Income Statement Expenses ("ASU 2024 - 03" ), and in January 2025, the FASB issued Accounting Standards Update No. 2025 - 01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Clarifying the Effective Date ("ASU 2025 - 01" ). ASU 2024 - 03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024 - 03, as clarified by ASU 2025 - 01, is effective for us for our annual reporting for fiscal 2028 and for interim period reporting beginning in fiscal 2029 on a prospective basis. Both early adoption and retrospective application are permitted. The Company is currently evaluating the impact that the adoption of these standards will have on its consolidated financial statements and disclosures. F- 16 Table of Contents Note 2 - Going Concern In the pursuit of SharpLink’s previous long-term growth strategy centered on the development of its fan activation and conversion software and related businesses, the Company has sustained continued operating losses. During the 12 months ended December 31, 2024 and 2023 , the Company had a net loss from continuing operations of $( 4,473,643 ) and $( 11,248,598 ), respectively; and cash (used)/provided by operating activities from continuing and discontinued operations of $( 22,814,486 ) and $ 582,887 for the years ended December 31, 2024 and 2023 , respectively. On January 18, 2024, the Company completed the Sale of Business of our Sports Gaming Client Services and SportsHub Gaming Network business units for $ 22.5 million in an all cash transaction. In connection with the closing of the Sale of Business, SharpLink repaid in full all outstanding term loans and lines of credit with Platinum Bank, together with accrued but unpaid interest and all other amounts due in connection with such repayment under existing credit agreements, totaling an aggregate $ 14,836,625 and thereby terminating all existing credit facilities with Platinum Bank and discharging the debt on the Company’s balance sheet. See Note 3 . In addition, the Company redeemed the outstanding convertible debenture issued to Alpha Capital Anstalt ("Alpha") for 110 % of the outstanding balance, plus accrued and unpaid interest, $ 4,484,230 in aggregate, thereby satisfying all obligations under the debenture and discharging the debt on the balance sheet. See Note 8 . On May 2, 2024, the Company entered into an At-The-Market ("ATM") Sales Agreement (the "ATM Sales Agreement”) with A.G.P./Alliance Global Partners (the "Agent”) pursuant to which the Company may offer and sell, from time to time, through the Agent, as sales agent and/or principal, shares of its common stock, par value $ 0.0001 per share (the "Common Stock”), having an aggregate offering price of up to $ 1,676,366 , subject to certain limitations on the amount of Common Stock that may be offered and sold by the Company set forth in the ATM Sales Agreement (the "Offering”). The Company is not obligated to make any sales of Common Stock under the ATM Sales Agreement and any determination by the Company to do so will be dependent, among other things, on market conditions and the Company’s working capital needs. As of December 31, 2024, SharpLink had raised gross proceeds of $ 896,215 from the sale of 1,128,380 shares of Common Stock pursuant to the ATM Sales Agreement. See Note 9. On February 4, 2025, the Company filed a prospectus supplement that amended and supplemented the ATM Sales Agreement (see Note 9 ) and the information in the prospectus supplement, dated May 2, 2024, relating to the offer and sale of up to $ 1,676,366 of our shares of Common Stock, $ 0.0001 par value per share. The Company has sold 2,843,902 shares of Common Stock in accordance with the ATM Sales Agreement under the initial and supplemental prospectuses with total proceeds to the Company of $ 1,834,925 . We may need to raise additional capital to fund the Company’s growth and future business operations. We cannot be certain that additional funding will be available on acceptable terms or at all. If we are not able to secure additional funding when needed to support our business growth and to respond to business challenges, track and comply with applicable laws and regulations, develop new technology and services or enhance our existing offering, improve our operating infrastructure, enhance our information security systems to combat changing cyber threats and expand personnel to support our business, we may have to delay or reduce the scope of planned strategic growth initiatives. Moreover, any additional equity financing that we obtain may dilute the ownership held by our existing shareholders. The economic dilution to our shareholders will be significant if our stock price does not materially increase, or if the effective price of any sale is below the price paid by a particular shareholder. Any debt financing could involve substantial restrictions on activities and creditors could seek additional pledges of some or all of our assets. If we fail to obtain additional funding as needed, we may be forced to cease or scale back operations, and our results, financial conditions and stock price would be adversely affected. As such, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period. Note 3 – Discontinued Operations In accordance with ASC 205 - 20 Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major impact on an entity’s operations and financial results when the components of an entity meets the criteria in ASC paragraph 205 - 20 - 45 - 10. In the period in which the component meets the held for sale or discontinued operations criteria the major assets, other assets, current liabilities and non-current liabilities shall be reported as a component of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the income (loss) of continuing operations. F- 17 Table of Contents Sale of Sports Gaming Client Services and SportsHub Gaming Network On January 18, 2024, SharpLink Israel (“Parent Seller”) and SLG1 Holdings, LLC, a Delaware limited liability company and wholly owned subsidiary of SharpLink (“Subsidiary Seller”), SHGN Acquisition Corp. (“SHGN,” and together with Parent Seller and Subsidiary Seller, the “Seller”), a Delaware corporation and wholly owned subsidiary of SharpLink, entered into a Purchase Agreement (the “PA”) with RSports Interactive, Inc., a Minnesota corporation (“Buyer”). The Subsidiary Seller owns all of the issued and outstanding membership interests of Sports Technologies, LLC, a Minnesota limited liability company, SHGN and Holdings Quinn, LLC, a Delaware limited liability company (collectively referred to as the “Targets”). The PA contemplated the sale of the Company’s Sports Gaming Client Services and SportsHub Gaming Network business units to the Buyer, by selling all of the issued and outstanding membership interests of the Targets and the Acquired Subsidiaries for $ 22,500,000 in an all cash transaction. SHGN owns all of the membership interests in Virtual Fantasy Games Acquisitions, LLC , a Minnesota limited liability company; LeagueSafe Management, LLC , a Minnesota limited liability company; SportsHub Reserve, LLC, a Minnesota limited liability company; SportsHub PA, LLC, a Pennsylvania limited liability company; SportsHub Operations, LLC, a Minnesota limited liability company; SportsHub Holdings, LLC, a Minnesota limited liability company; SportsHub Regulatory, LLC, a Minnesota limited liability company; and SportsHub Player Reserve, LLC, a Minnesota limited liability company (collectively, the “Acquired Subsidiaries”). As a result of the Sale of Business, we ceased our Sports Game Client Services and SportsHub Gaming Network segments. The historical results of these business segments have been reflected as discontinued operations in our consolidated financial statements for all periods prior to the closing date of the Sale of Business on January 18, 2024. In connection with the Sale of Business, the Company entered into with the Buyer a Transition Services Agreement to provide for an orderly transfer and the continuity of business services. The Parent Seller would be able to use certain Buyer employees at an agreed upon hourly rate. The Buyer would be charged monthly amounts for business services such as accounting software, insurance and data services. On May 8, 2024, SharpLink entered into an amended and fully restated Post Closing Assignment Agreement with RSports, whereby SharpLink and RSports have agreed to amend the PA to exclude the transfer/sale of SHGN and have agreed to the assignment/sale of the Acquired Subsidiaries membership interests in SHReserve and SHPA to be made directly to RSports upon and subsequent to the approval of a petition by the Pennsylvania Gaming Control Board. Based on this amended agreement, the sale of the business is an asset sale for legal and tax purposes instead of an equity sale. Further, in connection with the Sale of Business, SharpLink entered into a Post Closing Covenant Agreement (the “PCCA”) with the Buyer defining the post-closing terms and conditions relating to certain transfers and assignments of assets subsequent to the closing of the Sale of Business, including: ● Transferring control of all bank accounts held by the Targets to the Buyer; ● Transferring or cooperating with the application process for all state gaming licenses held by the Targets in connection with the change of control to the Buyer; ● Providing the Buyer with an accounting of all funds due to and from and any deferred revenue between Sports Technologies, LLC, SHGN and SharpLink, Inc.; ● Assigning to Buyer or its affiliates, or cause the counterparty to consent to, all contracts assumed by the Buyer or its affiliates on or subsequent to the closing based upon change of control provisions; and ● Assigning to Buyer or its affiliates all of its intellectual property rights purchased in the PA for the Acquired Subsidiaries or Targets. In accordance with the terms of the PCCA, SharpLink will complete all post-closing covenants following the closing as reasonably possible, with the exception of Seller covenants that are dependent on governmental authorities or governmental orders for completion, in which case it will use diligent, good faith efforts to cause the same to be completed as soon as practical. The $ 14.6 million gain was calculated by measuring the difference between the fair value of consideration received less the carrying amount of assets and liabilities sold in accordance with ASC 810. In the statement of cashflows for the year ended December 31, 2024, the net cash used in investing activities - discontinued operations is due to cash received from the sale of business of $ 22,500,000 , net of the cash transferred of $ 41,357,834 . The majority of the cash transferred of $ 41,357,834 was reflected in discontinued operations customer deposits liability and deferred revenue of $ 36,959,573 and $ 4,888,704 , respectively. During the year ended December 31, 2024, SharpLink paid RSports $ 157,857 , respectively, for use of accounting service personnel under the PCCA agreement. RSports paid SharpLink $ 89,940 under the PCCA agreement for the same period. The Sports Gaming Client Services performance obligations are satisfied over time (software licenses). Software license revenue is recognized when the customer has access to the license and the right to use and benefit from the license. Other items relating to charges collected from customers include reimbursable expenses. Charges collected from customers as part of the Company’s sales transactions are included in revenues and the associated costs are included in cost of revenues. SportsHub collects fees from customers for daily and season-long online fantasy sports games in advance and recognizes the related fees over the term of the online fantasy game. It also collects various forms of fee revenue from customers using its wallet system platform. Its performance obligation is to provide these customers with an online platform to collect entry fees, provide transparency into league transactions, encourage timely payment of entry fees, safeguard funds during the season and facilitate end-of-season prize payouts. Fee revenue related to payment transactions is deferred until the end of the specific season. Other types of fee revenue are recognized on a transactional basis when users complete transactions or when a customer’s account becomes inactive under the terms of the user agreement. SportsHub also provides sports simulation software that customers pay a fee to access over a period of time. SportsHub provides and maintains the software throughout the duration of the season, which constitutes a single performance obligation and revenue is recognized over the term of the service. SportsHub also collects subscription fees from users of its Fantasy National Golf Club. Its performance obligation under these contracts is to provide subscribers with access to SportsHub’s intellectual property. Revenue is initially deferred and recognized ratably over the subscription period. Any discounts, promotional incentives or waived entry fees are treated as a reduction in revenue. Any minimal promotions where funds are issued to a user’s wallet account are recognized as marketing expenses, included in selling, general, and administrative expenses. Sale of MTS The Company negotiated a Share and Asset Purchase Agreement which was closed on December 31, 2022. The majority of the assets of the primary reporting unit within MTS were sold. Accordingly, the assets and liabilities of the MTS business were separately reported as assets and liabilities from discontinued operations. The results of operations and cash flows of MTS for all periods are separately reported as discontinued operations. During the year ended December 31, 2024 , the Company was notified by the Buyer of an earn-out payment due to SharpLink in connection with the sale and received $ 297,387 in an earn-out proceeds. No further earn-out payment is expected. During the year ended December 31, 2024 , in accordance with the dissolution of certain MTS entities, the Company wrote-off $ 400,669 of aged liabilities in the statement of operations for discontinued operations. This write-off was recorded in the Other (expense) income line item below. C4 Technology In December 2023, the Company discontinued its C4 technology due to the lack of market acceptance. C4 technology centered on cost effectively monetizing our own and our customers’ respective online audiences of U.S. fantasy sports and casual sports fans and casino gaming enthusiasts by converting them into loyal online sports and iGaming bettors. F- 18 Table of Contents Summary Reconciliation of Discontinued Operations For the Year Ended For the Year Ended December 31, 2024 December 31, 2023 Revenues $ 445,510 $ 9,035,670 Cost of Revenues 169,607 5,643,426 Gross Profit 275,903 3,392,244 Operating Expenses Selling, general, and administrative expenses 544,685 6,843,856 Goodwill and intangible asset impairment expenses - 674,982 Operating Loss ( 268,782 ) ( 4,126,594 ) Interest income 101,714 1,778,999 Other (expense) income 501,320 ( 100,648 ) Gain on sale of business 14,670,811 - Interest expense (9,027 ) ( 503,401 ) Total other income and expense 15,264,818 1,174,950 Income (loss) before income taxes 14,996,036 ( 2,951,644 ) Income tax expense 422,774 42,940 Income (loss) from discontinued operations, net $ 14,573,262 $ ( 2,994,584 ) The following table presents a reconciliation of the carrying amounts of major classes of assets and liabilities of the Company classified as discontinued operations as of December 31, 2024 and December 31, 2023 : December 31, December 31, 2024 2023 Carrying amounts of major classes of assets included as part of discontinued operations: Current assets Cash $ 105,127 $ 46,369,229 Restricted cash - 11,584,320 Accounts receivable, net of $ 0 allowance for credit losses - 738,739 Unbilled receivables - 9,447 Contract assets - 274,833 Deferred prize expense - 340,781 Prepaid expenses and other current assets 164,661 439,697 Investment, cost - 200,000 Equipment, net - 36,860 Right-of-use asset – operating lease - 250,194 Intangible assets, net - 2,260,351 Goodwill - 5,300,928 Total current assets $ 269,788 $ 67,805,379 F- 19 Table of Contents December 31, December 31, 2024 2023 Carrying amounts of major classes of liability included as part of discontinued operations: Current Liabilities Accounts payable and accrued expenses 10,020 $ 1,123,105 Contract liabilities - 2,407,924 Prize liability - 6,475,400 Customer obligations - 50,249,095 Line of credit - 5,000,000 Current portion of long-term debt - 869,426 Current portion of lease liability - 251,898 Deferred tax liability - 20,035 Total current liabilities $ 10,020 $ 66,396,883 Note 4 – Intangible Assets Intangible assets as of December 31, 2024 and 2023 consisted of the following: Weighted Average Amortization Period (Years) Cost, Net of Impairment Accumulated Amortization Net Balance, December 31, 2024 Acquired technology 5 $ 24,700 $ 11,538 $ 13,162 $ 24,700 $ 11,538 $ 13,162 Balance, December 31, 2023 Customer relationships 5 - 10 $ 208,124 $ 208,124 $ - Acquired technology 3 - 5 808,700 790,588 18,112 Software in development N/A 150,000 - 150,000 $ 1,166,824 $ 998,712 $ 168,112 The Company sold $ 150,000 of software in development to a third party during the year ended December 31, 2024. During the year ended December 31, 2023, the Company recorded $ 849,565 of impairment charges to the customer relationship and internally developed software in Affiliate Marketing segment due to the loss of future revenues by the exit of Affiliate Marketing segment's largest customer from the European market. Amortization expense for the years ended December 31, 2024 and 2023 was $ 4,950 and $ 97,125 respectively, for continued operations. Estimated future amortization expense related to the intangible assets placed into service is $ 5,032 per year through August 31, 2027. F- 20 Table of Contents Note 5 – Goodwill For the year ending December 31, 2023, the Company recorded goodwill impairment of $ 1,615,167 , which was due to the loss of future revenue by the exit of Affiliate Marketing segment’s largest customer from the European market in the fourth quarter of 2023. The extent of impairment was determined based upon the projected performance of the reporting unit, as determined using an income approach valuation methodology. Key assumptions included in the determination of the reporting unit’s fair value included revenue growth, operating margin, long-term growth rate and discount rate. There is inherent uncertainty included in the assumptions used in goodwill impairment testing. Note 6 - Line of Credit On February 13, 2023, the Company entered into a Revolving Credit Agreement with Platinum Bank (the “Lender”) and executed a variable rate ( 9.0 % as of December 31, 2023) revolving promissory note of $ 7,000,000 , expiring February 26, 2025. As collateral, the Company granted a security interest in and to all of the Company’s right, title and interest in certain assets on account at Platinum Bank, together with all financial assets, security entitlements with respect to such financial assets, investment property, securities and other property, to secure the payment and performance of the revolving credit agreement. There was $ 0 and $ 6,350,000 outstanding as of December 31, 2024, and 2023. The Company incurred $ 7,500 in debt issuance costs associated with the revolving note, which are presented as net amount of $ 4,022 within the line of credit on the balance sheet and amortized on a method which approximates the effective interest method to interest expense on the consolidated statement of operations. In connection with the Sale of Business of the Company’s Sports Gaming Client Services and SportsHub Gaming Network business units in January 2024, the revolving credit line was paid off. See Note 3. F- 21 Table of Contents Note 7 - Debt On January 31, 2022 , FourCubed Acquisition Company, LLC (“FCAC”), a wholly owned subsidiary of the Company, entered into a $ 3,250,000 term loan agreement with Platinum Bank (the “Term Loan Agreement”). The Term Loan Agreement bears annual interest at a rate of 4.0 % and requires a fixed monthly payment of $ 59,854 , consisting of principal and interest, through the term loan’s maturity, which is January 31, 2027. The Company capitalized $ 25,431 of loan initiation fees associated with the Term Loan Agreement which are presented net within debt on the condensed consolidated balance sheet and amortized on a method which approximates the effective interest method to interest expense on the condensed consolidated statement of operations. On January 18, 2024 , in conjunction with the Sale of Business, the term loan was paid off. See Note 3. Note 8 - Convertible Debenture and Warrant Convertible Debenture at Fair Value The Company accounts for convertible debentures using an amortized cost model. The discount for warrants, the Original Issuance Discount (“OID”) and the initial allocation of fair value of compound derivatives reduce the initial carrying amount of the convertible notes. The carrying value is accredited to the stated principal amount at contractual maturity using the effective-interest method with a corresponding charge to interest expense. Debt discounts are presented on the consolidated balance sheets as a direct deduction from the carrying amount of that related debt. The Company made an irrevocable election at the time of issuance of the Debenture to record the Debenture at its fair value (the “Fair Value Option”) with changes in fair value recorded through the Company’s consolidated statements of operations within other income (expense) at each reporting period. The Fair Value Option provides the Company a measurement basis election for financial instruments on an instrument-by-instrument basis. F- 22 Table of Contents On February 14, 2023, the Company entered into the SPA with Alpha, a current shareholder of the Company, pursuant to which the Company issued to Alpha, an 8 % Interest Rate, 10 % Original Issue Discount, Senior Convertible Debenture (the “Debenture”) in the aggregate principal amount of $ 4,400,000 for a purchase price of $ 4,000,000 on February 15, 2023. The Debenture is convertible, at any time, and from time to time, at Alpha’s option, into ordinary shares of the Company (the “Conversion Shares”), at an initial conversion price equal to $ 7.00 per share, subject to adjustment as described below and, in the Debenture, (the “Conversion Price”). In addition, the Conversion Price of the Debenture was subject to an initial reset immediately prior to the Company’s filing of a registration statement covering the resale of the underlying shares to the lower of $ 7.00 and the average of the five Nasdaq Official Closing Prices immediately preceding such date (the “Reset Price”). The registration statement on Form S- 1 (file No.: 333 - 271396 ) was filed on April 21, 2023, and as a result, the Reset Price is now $ 4.1772 . The initial adjustment of the Conversion Price to the Reset Price had a floor price of $ 3.00 (the “Floor Price”). Commencing November 1, 2023 and continuing on the first day of each month thereafter until the earlier of (i) February 15, 2026 ( the “Maturity Date”) and (ii) the full redemption of the Debenture (each such date, a “Monthly Redemption Date”), the Company will redeem $ 209,524 plus accrued but unpaid interest, and any amounts then owing under the Debenture (the “Monthly Redemption Amount”). The Monthly Redemption Amount will be paid in cash; provided, that the Company may elect to pay all or a portion of a Monthly Redemption Amount in ordinary shares of the Company, based on a conversion price equal to the lesser of (i) the then Conversion Price of the Debenture and (ii) 80% of the average of the VWAPs (as defined in the Debenture) for the five consecutive trading days ending on the trading day that is immediately prior to the applicable Monthly Redemption Date. The Company may also redeem some or all of the then outstanding principal amount of the Debenture at any time for cash in an amount equal to the then outstanding principal amount of the Debenture being redeemed plus accrued but unpaid interest, liquidated damages and any amounts then owing under the Debenture. These monthly redemption and optional redemptions are subject to the satisfaction of the Equity Conditions (as defined in the Debenture). The Debenture initially accrues interest at the rate of 8 % per annum for the first 12 months from the February 15, 2023, at the rate of 10 % per annum for the ensuing 12 months, and thereafter until Maturity, at the rate of 12 %, Interest may be paid in cash or ordinary shares of the Company or a combination thereof at the option of the Company; provided that interest may only be paid in shares if the Equity Conditions (as defined in the Debenture) have been satisfied, including Shareholder Approval. The Debenture includes a beneficial ownership blocker of 9.99 %. The Debenture provides for adjustments to the Conversion Price in connection with stock dividends and splits, subsequent Sale of Business and rights offerings, pro rata distributions, and certain Fundamental Transactions. In the event the Company, at any time while the Debentures is outstanding, issues or grants any right to re-price, ordinary shares or any type of securities giving rights to obtain ordinary shares at a price below the Conversion Price, Alpha shall be extended full-ratchet anti-dilution protection (subject to customary Exempt Transaction issuances), and such reset shall not be limited by the Floor Price. At the time of execution, on February 14, 2023, the Company recorded an initial debt discount of $ 400,000 based on the allocation of fair value for the Debenture, which will be amortized into interest expense over term of the Debenture. For the period from February 14, 2023 through December 31, 2023, the Company recognized $ 1,230,234 change in fair value of the convertible Debenture which is reflected in Other income and expense in the condensed consolidated statement of operations and $ 116,667 for the amortization of the OID, which is included in interest expense on the condensed consolidated statement of operations. Pursuant to Section 8 (a)(vi) of the Debenture, it is an event of default if the Company is party to a fundamental transaction or agrees to sell or dispose of all or in excess of 33 % of its assets in one transaction or a series of related transactions. On January 19, 2024, SharpLink and Alpha entered into a settlement agreement (the “Settlement Agreement”) whereby Alpha agreed to waive (i) the event of default under Section 8 (a)(vi) of the Debenture in connection with the Sale of Business; and (ii) payment of the Mandatory Default Amount; and the parties agreed that the Company would pay 110 % of the outstanding principal amount of the Debenture, plus accrued and unpaid interest, in the aggregate total amount of $ 4,484,230 (the “Debenture Redemption Amount”). On January 19, 2024, the Company paid Alpha the Debenture Redemption Amount. As a result, the Company’s obligations under the Debenture have been satisfied. F- 23 Table of Contents Purchase Warrant On February 15, 2023, the Company also issued to Alpha a warrant (the “Warrant”) to purchase 880,000 ordinary shares of the Company at an initial exercise price of $ 8.75 (the “Warrant Shares,” and, together with the Conversion Shares, and any other ordinary shares of the Company that may otherwise become issuable pursuant to the terms of the Debenture and Warrant, the “Underlying Shares”). The Warrant is exercisable in whole or in part, at any time on or after February 15, 2023 and before February 15, 2028. The exercise price of the Warrant was subject to an initial reset immediately prior to the Company’s filing of a proxy statement that included a shareholder proposal to approve the issuance of Underlying Share in excess of 19.99 % of the issued and outstanding ordinary shares on the Closing Date (the “Shareholder Proposal”) to the lower of $ 8.75 and the average of the five Nasdaq Official Closing Prices immediately preceding such date the. As a result, the exercise price has been reset to $ 4.0704 , the average of the five Nasdaq Official Closing Prices immediately preceding April 14, 2023, the date the Company filed its preliminary proxy statement which included the Shareholder Proposal. The Warrant includes a beneficial ownership blocker of 9.99 %. The Warrant provides for adjustments to the exercise price, in connection with stock dividends and splits, subsequent Sale of Business and rights offerings, pro rata distributions, and certain Fundamental Transactions. In the event the Company, at any time while the Warrant is still outstanding, issues or grants any right to re-price, ordinary shares or any type of securities giving rights to obtain ordinary shares at a price below exercise price, Alpha shall be extended full-ratchet anti-dilution protection on the Warrant (reduction in price, only, no increase in number of Warrant Shares, and subject to customary Exempt Transaction issuances), and such reset shall not be limited by the Floor Price. At the time of execution, the Company classified the Warrant as an equity contract and performed an initial fair value measurement. As the Warrant was issued with the sale of the Debenture, the value assigned to the Warrant was based on an allocation of proceeds, subject to the allocation to the Debenture. The Company recorded a debt discount for the Warrant of $ 1,174,229 , based on the Black Scholes option-pricing model which was calculated independently of the fair value of the Debenture, and recorded the Warrant as additional paid in capital in the condensed consolidated balance sheet as of December 31, 2023. Amortization of the debt discount amounted to $ 342,482 for the period ended December 31, 2023 and is included in interest expense on the condensed consolidated statements of operations. The Warrant provides that in the event of a fundamental transaction, SharpLink, at Alpha’s option, would repurchase the Warrant from Alpha on the terms set forth in Section 3 (e)(ii) of the 2023 Warrant (the “Warrant Repurchase”). On January 19, 2024, SharpLink and Alpha entered into a settlement agreement (the “Settlement Agreement”) whereby Alpha agreed to waive (i) the event of default under Section 3 (e)(ii) of the Warrant in connection with the Sale of Business Pursuant to Section 5 ( 1 ) of the Warrant, Alpha further agreed to waive its right to elect that, in connection with and at the closing of the Sale of Business, the Warrant shall be repurchased by the Company as set forth in Section 3 (e) of the 2023 Warrant. The Parties agreed in the Settlement Agreement that the Warrant Repurchase for its Black Scholes value shall take place upon the earlier of (a) June 30, 2024; ( b) the Company raising a gross amount of not less than $ 3,000,000 whether by equity or debt; and (c) the Company entering into a “fundamental transaction” as defined in the 2023 Warrant. The Parties further agree in the Settlement Agreement to fix the Black Scholes value of the 2023 Warrant for purposes of the Warrant Repurchase at $ 900,000 . On March 6, 2024, SharpLink entered into an Exchange Agreement (the “Exchange Agreement”) with Alpha to change the Warrant Repurchase of $ 900,000 . Pursuant to the terms and conditions set forth in the Exchange Agreement, the Company agreed to exchange the 2023 Warrant for (i) 156,207 shares of Common Stock (the “Shares”), (ii)a pre-funded warrant in the amount of 469,560 shares of Common Stock (the “Pre-Funded Warrant”) and (iii) the unexchanged balance of the 2023 Warrant Repurchase (the “Warrant Repurchase Balance”). The Warrant Repurchase Balance of 254,233 warrants is valued at $ 170,636 and shall be subject to the repurchase terms set forth in the Settlement Agreement. The Pre-Funded Warrant and the Warrant Repurchase Balance were valued using Black Scholes option-pricing model. As part of this transaction, the Company recorded a deemed dividend of $ 44,619 as presented in the statement of stockholders’ equity for the year ended December 31, 2024. On June 30, 2024 , SharpLink negotiated an Amendment to the Exchange Agreement (the "Amendment") to reduce the strike price per warrant of the unexchanged balance of the 2023 Warrants Repurchase Balance from $ 4.07 to $ 0.0001 and to remove the re-purchase option. The modification to the Exchange Agreement was valued on June 29, 2024, the day before the modification, using the Black Scholes option-pricing model. The Company recorded a fair value adjustment of $17,996 on the condensed consolidated statements of operations during the second quarter of 2024 and removed the remaining accrued warrant liability of $ 152,386 through an adjustment to additional paid in capital. On December 9, 2024, Alpha exercised 120,000 warrants from the 2023 Warrants Repurchase Balance at a strike price per warrant of $.0001 per share. Additionally, on January 23, 2024, Alpha exercised 266,667 warrants issued pursuant to the Exchange Agreement at a strike price per warrant of $.60 per share with the Company receiving approximately $ 160,000 . Further, during this same period, 2,500 warrants with a strike price of $ 0 were exercised by former management of MTS. The fair value of the Warrant Repurchase balance and the Pre-Funded Warrant are estimated on the following dates using the Black Scholes option pricing model with the following assumptions: January 19, 2024 March 6, 2024 March 31, 2024 June 30, 2024 Expected volatility 112.98 % 90.90 % 87.36 % 88.06 % Expected dividends 0.00 % 0.00 % 0.00 % 0.00 % Expected term (years) 4.08 3.92 3.90 3.63 Risk-free rate 3.75 % 4.12 % 4.21 % 4.33 % F- 24 Table of Contents Note 9 - At-The-Market ("ATM") Offering On May 2 , 2024, the Company entered into an At The Market Sales Agreement (the "ATM Sales Agreement") with A.G.P/Alliance Global Partners (the "Agent") pursuant to which the Company may offer and sell, from time to time, through the Agent, as sales agent and/or principal, shares of its common stock, par value $ 0.0001 per share (the "Common Stock"), having an aggregate offering price of up to $ 1,676,366 , subject to certain limitations on the amount of Common Stock that may be offered and sold by the Company set forth in the ATM Sales Agreement (the "Offering"). The Company is not obligated to make any sales of Shares under the ATM Sales Agreement and any determination by the Company to do so will be dependent, among other things, on market conditions and the Company's capital raising needs. As of December 31, 2024, SharpLink has raised gross proceeds of $ 896,215 (net proceeds of $ 869,329 , less professional fees) from the sale of 1,128,380 common shares under the ATM Sales Agreement. Note 10 - Fair Value In accordance with fair value accounting guidance, the Company determines fair value based on the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As disclosed in Note 8, SharpLink entered into a Settlement Agreement on January 19, 2024 for the 2023 Warrant for purposes of the Warrant Repurchase at $ 900,000 . On March 6, 2024, SharpLink entered into an Exchange Agreement (the "Exchange Agreement”) with Alpha to change the Warrant Repurchase of $ 900,000 . Pursuant to the terms set forth in the Exchange Agreement, the Company agreed to exchange the 2023 Warrant for (i) 156,207 shares of Common Stock (the "Shares”), (i) a pre-funded warrant in the amount of 469,560 shares of Common Stock (the "Pre-Funded Warrant”) and ( i) the remaining unexchanged balance of the 2023 Warrant Repurchase (the "Warrant Repurchase Balance”). On June 30, 2024, SharpLink negotiated an Amendment to the Exchange Agreement (the "Amendment") to reduce the strike price per warrant of the unexchanged balance of the 2023 Warrants Repurchase Balance from $ 4.07 to $ 0.0001 and to remove the re-purchase option. The fair value of the warrant liability was zero as of December 31, 2024. The following provides a summary of the Convertible Debenture recorded at fair value as of December 31, 2024 : Fair Value, December 31, 2023 $ 4,395,753 Principle and interest convertible debenture repayments ( 4,395,753 ) Issuance of warrant repurchase balance 900,000 Conversion of warrants to shares and pre-funded warrants ( 498,029 ) Change in fair value of warrant repurchase balance ( 231,589 ) Change in fair value of warrant amendment ( 17,996 ) Settlement of warrant liability due to amendment ( 152,386 ) Fair Value, December 31, 2024 $ - As disclosed in Note 8, the Debenture and the Warrant were reported at fair value at issuance. The Debenture is adjusted to fair value on a recurring basis with changes in fair value recorded through the Company’s consolidated statements of operations as other income (expense) for the 12 months ended December 31, 2024 . The following table sets forth the Company’s consolidated financial assets and liabilities measured at fair value by level within the fair value hierarchy on December 31, 2023. Convertible Debenture Level I $ - Level II $ - Level III $ 4,395,753 Total $ 4,395,753 The following table presents a reconciliation of the beginning and ending balances of the Debenture measured at fair value on a recurring basis that uses significant unobservable inputs (Level 3 ) and the related expenses and losses recorded in the consolidated statement of operations during the 12 months ended December 31, 2023. Fair Value, December 31, 2022 $ - Issuance of convertible debenture 2,825,771 Accretion for discount for warrants 342,481 Accretion for discount for OID 116,667 Interest expense 299,648 Principle repayments ( 419,048 ) Change in fair value 1,230,234 Fair Value, December 31, 2023 $ 4,395,753 The fair value of the Debenture was determined using a Monte Carlo Simulation (“MCS”) which incorporates the probability and timing of the consummation of a Fundamental Transaction event and conversion of the Debenture as of the valuation date. The MCS implied a discount rate at issuance that resulted in a total value to the debenture and warrants that equated to the transaction proceeds. This discount rate was 50.0% at issuance and was calibrated to the December 31, 2023 valuation date by comparing the B rated commercial paper credit spread at both dates. B spreads as follows: Issuance - February 14, 2023 4.13 % Fair Value - December 31, 2023 1.29 % F- 25 Table of Contents At inception, the Company valued the Debenture using a Monte Carlo Simulation model using the value of the underlying stock price of $ 3.50 , exercise price of $ 8.75 , expected dividend rate of 0 %, risk-free interest rate of 3.96 % and volatility of 40.0 %. The Company estimated the term of the warrant to be 2.9 years. On December 31, 2023, the Company valued the Debenture using a Monte Carlo Simulation model using the expected dividend rate of 0 % and the risk-free interest rate of 5.60 %. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Note 11 - Convertible Preferred Stock On July 26, 2021, the Company’s Board authorized the establishment and designation of 52,502 shares of Series A- 1 Preferred Stock at $ 0.10 par value. Terms of the Series A- 1 Preferred Stock are as follows: Voting – Series A- 1 Preferred Stock has equal rights to vote on all matters submitted to a vote of the Ordinary shares (on an as-converted basis, but only up to the number of votes equal to the number of Ordinary shares into which the Preferred Shares would be convertible pursuant to the Beneficial Ownership Limitation), however, without the affirmative vote of the majority of the outstanding shares of Series A- 1 Preferred Stock, the Company cannot (a) alter or change adversely the powers, preferences or rights given to the Series A- 1 Preferred Stock, authorize or create any class of stock ranking in priority as to dividends, redemption or distribution of assets upon a liquidation, (c) amend its articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (d) increase the number of authorized shares of Series A- 1 Preferred Stock, or (e) enter into any agreement with respect to any of the above. Liquidation – Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, Series A- 1 Preferred Stock holders shall be entitled to receive out of the assets an amount equal to the stated value of $ 16.246 per share, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due (the preferred liquidation preference), for each share of Series A- 1 Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities. Conversion – Each share of Series A- 1 Preferred Stock shall be convertible, at any time and from time to time from and after the original issue date at the option of the holder, into that number of shares of ordinary shares determined by dividing the stated value of such share of Series A- 1 Preferred Stock by the conversion price, $ 16.246 per share. The conversion price would be reduced if the Company issues ordinary shares at a price lower than the conversion price or issues an instrument granting the holder rights to purchase ordinary shares at a price lower than the conversion price. Upon the closing of the Going Public Transaction all outstanding shares of Series A- 1 preferred stock shall automatically be converted into that number of shares of ordinary shares, subject to a beneficial ownership limitation of 9.99 %, determined by dividing the stated value of such share of Series A- 1 Preferred Stock by the conversion price. On July 26, 2021, the Company’s board authorized the establishment and designation of 276,582 shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”) at $ 0.10 par value. Terms of the Series B Preferred Stock are as follows: Voting – Series B Preferred Stock shall have no voting rights, however, without the affirmative vote of the majority of the outstanding shares of Series B Preferred Stock, the Company cannot (a) alter or change adversely the powers, preferences or rights given to the Series B preferred stock, (b) authorize or create any class of stock ranking in priority to as to dividends, redemption or distribution of assets upon a liquidation, (c) amend its articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (d) increase the number of authorized shares of Series B Preferred Stock, or (e) enter into any agreement with respect to any of the above. F- 26 Table of Contents Dividends – Holders of each share of Series B preferred stock shall be entitled to receive cumulative dividends until the second anniversary of the Original Issue date of July 26, 2021 at the rate per share (as a percentage of the stated value per share) of 8 % per annum, payable quarterly on January 1, April 1, July 1 and October 1, beginning on the first such date after the issuance of such share of Series B preferred stock and on each conversion date in cash, or at the Company’s option, in duly authorized, validly issued, fully paid and non-assessable shares of preferred A- 1 shares, or a combination thereof. In accordance with the Series B preferred stock terms, dividends of Series A- 1 preferred stock are accrued on a quarterly basis, within additional paid in capital. A total of 7,202 shares at a value of $ 326,356 have been recorded in additional paid in capital as of the years ended December 31, 2024 and 2023 . The Company stopped accruing dividends as of July 26, 2023. Liquidation – Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, Series B Preferred Stock holders shall be entitled to receive out of the assets an amount equal to the stated value of $ 16.246 per share, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due (the preferred liquidation preference), for each share of Series B Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities. Conversion – Each share of Series B Preferred Stock shall be convertible, at any time and from time to time from and after the original issue date at the option of the holder, into that number of shares of ordinary shares determined by dividing the stated value of such share of Series B Preferred Stock by the conversion price, $ 16.246 per share. The conversion price would be reduced if the Company issues ordinary shares at a price lower than the conversion price or issues an instrument granting the holder rights to purchase ordinary shares at a price lower than the conversion price. Anti-Dilution Adjustment – If and whenever the Company issues or sells Ordinary shares for a consideration price that is less than the Series B Preferred Shares Conversion Price, then immediately after such Dilutive Issuance, the Conversion Price of the Series B Preferred Shares shall be reduced to equal the Discounted Per Share Ordinary Share Purchase Price and the holders are entitled to receive a number of conversion shares, but in no event shall the Conversion Price become lower than the greater of (i) $ 2.00 or (ii) 20% of the closing price on the Trading Day immediately prior to the Effective Date. Deemed Dividend – On February 14, 2023, the Company executed an SPA with a current shareholder of the Company (see Note 8 ) which triggered the anti-dilution adjustment for Series B Preferred Shares. As such, the Company recognized a deemed dividend of $ 48,633 for an additional 16,486 shares in incremental share value as an adjustment to accumulated deficit and additional paid in capital for the period ended December 31, 2023. The Company had zero shares of Series A Preferred Stock outstanding as of December 31, 2024 and 2023 . As of December 31, 2024 and 2023 , the Company had 7,202 shares of Preferred Series A- 1 Stock and 12,481 shares of Series B Preferred Stock outstanding, respectively. Note 12 - Warrants In conjunction with the Convertible Debenture and Warrant issuance on February 14, 2023, 266,667 warrants that were previously issued to Alpha on November 19, 2021 were revalued on February 14, 2023, reducing the exercise price from $ 45.00 per warrant share to $ 0.60 per warrant share. The Company performed a Black Scholes model for the re-pricing of the warrants using the value of the underlying stock price of $ 5.10 stock price, exercise price of $ 0.60 , expected dividend rate of 0 %, risk-free interest rate of 4.04 % and volatility of 52.57 % and remaining term of 2.9 years. These same assumptions were applied to the 880,000 warrants. The value allocated to the warrants on November 19, 2021 was $ 11,435 and was recorded in Additional Paid-In Capital. The fair value of the re-priced warrants on February 15, 2023 was $ 1,218,205 , an increase of $ 1,206,771 . The incremental value of the warrants is also recorded in Additional Paid-In Capital as of December 31, 2023 as a deemed dividend. On December 9, 2024, Alpha exercised 120,000 warrants from the 2023 Warrants Repurchase Balance at a strike price per warrant of $.0001 per share. Additionally, on January 23, 2024, Alpha exercised 266,667 warrants issued pursuant to the Exchange Agreement at a strike price per warrant of $.60 per share with the Company receiving approximately $ 160,000 . Further, during this same period, 2,500 warrants with a strike price of $ 0 were exercised by former management of MTS. On June 6, 2023, an investor exercised 125,359 warrants via a cashless exercise for 121,479 ordinary shares. On June 14, 2023, the Company filed a registration statement on Form S- 1 (file number: 333 - 272652 ) with the SEC to register 266,667 ordinary shares issuable upon exercise of the purchase warrants issued to Alpha in November 2021. The registration statement on Form S- 1 was deemed effective on September 29, 2023. During the 12 months ended December 31, 2023, the Company recognized 3,015 warrants acquired during the SportsHub Acquisition. The warrants have an exercise price of $ 17.90 and were originally set to expire October 29, 2028. F- 27 Table of Contents Following is a summary of the Company’s warrant activity for the year ended December 31, 2024 : Number of Weighted Average Weighted Average Shares Exercise Price Per Share Remaining Life (Years) Outstanding as of December 31, 2023 1,158,015 $ 3.43 3.58 Previously issued regular warrants exchanged ( 723,793 ) 4.10 - Exchanged revalued warrants issued 723,793 - 7.69 Exercised ( 545,374 ) $ 0.68 - Expired ( 5,833 ) $ 26.42 - Outstanding as of December 31, 2024 606,808 $ 0.09 7.71 Following is a summary of the Company’s warrant activity for the year ended December 31, 2023 : Number of Weighted Average Weighted Average Shares Exercise Price Per Share Remaining Life (Years) Outstanding as of December 31, 2022 400,359 $ 0.82 2.83 Previously issued regular warrants ( 266,667 ) ( 45.00 ) 0.43 Revalued regular warrants 266,667 0.60 0.43 Exercised ( 125,359 ) ( 0.10 ) - Issued and vested 883,015 4.15 3.15 Outstanding as of December 31, 2023 1,158,015 $ 3.43 3.58 Note 13 - Stock Compensation Equity awards are generally granted with an exercise price equal to the market price of the Company’s Ordinary shares at the date of grant; those options generally vest based on three years of continuous service and have ten -year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control, as defined in the plans. The Company granted 0 and 155,755 options for the year ended December 31, 2024 and 2023 , respectively. The Company granted 500,004 and 0 restricted stock units for the year ended December 31, 2024 and 2023, respectively. The Company recognized stock compensation expense of $ 160,565 and $ 634,367 for the years ended December 31, 2024 and 2023 , respectively, of which $ 12,041 and $ 372,994 of expense are recorded in discontinued operations. The fair value of each option award is estimated on the date of grant using a Black Scholes option-pricing model. The Company uses historical option exercise and termination data to estimate the term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issue date. The expected volatility is determined using the volatility of peer companies. The Company’s underlying stock has been publicly traded since the date of the MTS Merger. Subsequent to the MTS Merger, option grants made under the SharpLink Inc. 2021 Plan utilized the publicly traded stock price of the Company on the day of the option award. All option grants made under the SharpLink, Inc. 2020 Stock Incentive Plan were prior to the MTS Merger. The underlying SharpLink, Inc. stock under that plan was not publicly traded but was estimated on the date of the grants using valuation methods that consider valuations from recent equity financings as well as future planned transactions. All option grants made under the SportsHub Games Network Inc. 2018 Incentive Plan were prior to the SportsHub Acquisition. The underlying SportsHub stock under that plan was not publicly traded but was estimated on the date of the grants using valuation methods that consider valuations from recent equity financings as well as future planned transactions. F- 28 Table of Contents The fair value of each stock option grant is estimated on the date of grant using the Black Scholes option pricing model with the following assumptions: December 31, 2024 December 31, 2023 Expected volatility 51.02 - 116.56 % 53.6 -116.6 % Expected dividends 0 % 0 % Expected term (years) 5.0 - 6.0 5.7 Risk-free rate .40 - 4.33 % 3.4 - 4.3 % Fair value of Ordinary Shares on grant date 2.53 3 - 67.40 40 1.70 0 - 4.03 03 The summary of option activity under the plans as of December 31, 2024 and 2023 , and change during the 12 months ended December 31, 2024 and 2023 is as follows: Weighted Weighted average average remaining Aggregate exercise contractual intrinsic Options Shares price term value Outstanding as of December 31, 2023 414,819 $ 8.79 7.7 $ 3,750 Granted - - Exercised ( 2,500 ) 0.62 Forfeited ( 104,648 ) 5.69 Expired ( 199,410 ) 11.06 Outstanding as of December 31, 2024 108,261 $ 7.59 7.6 $ - Exercisable as of December 31, 2024 79,571 $ 8.05 7.6 $ - Weighted Weighted average average remaining Aggregate exercise contractual intrinsic Options Shares price term value Outstanding as of December 31, 2022 288,914 $ 11.40 $ 7,750 Granted 155,755 $ 4.46 Exercised - - Acquired 1 14,552 $ 14.16 Forfeited ( 42,989 ) $ 6.99 Expired ( 1,413 ) $ 8.84 Outstanding as of December 31, 2023 414,819 $ 8.79 7.7 $ 3,750 Exercisable as of December 31, 2023 245,275 $ 10.59 6.9 $ 3,750 1 During the 12 months ended December 31, 2023, the Company recognized 14,552 options that were acquired during the SportsHub Acquisition. The options have an exercise price of $ 14.16 and expire December 21, 2032. The options were fully vested upon the completion of the SportsHub acquisition. Unamortized stock compensation expense of $ 109,080 and $ 630,473 as of December 31, 2024 and 2023 will be amortized through 2026 for 28,690 and 166,544 of unvested options, respectively, and has a weighted average recognition period of two years. The summary of restricted stock unit activity under the plans as of December 31, 2024 and 2023 , and change during the 12 months ended December 31, 2024 and 2023 is as follows: Weighted Average Weighted Remaining Aggregate Average Grant Contractual Intrinsic Shares Date Fair Value Term Value Outstanding as of December 31, 2023 - $ - - Granted 500,004 0.72 - - Cancelled - - - - Vested and released ( 350,001 ) 0.75 - - Outstanding and unvested as of December 31, 2024 150,003 $ 0.65 13.13 $ - During the year ended December 31, 2024, the Company recognized $ 449,360 in expense related to restricted stock units. Unamortized compensation expense for restricted stock units is $ 106,793 as of December 31, 2024 and 2023 he remaining 150,003 of unvested units, will be recognized in 2025. Note 14 - Operating Segments The Company’s Chief Executive Officer serves as the Chief Operating Decision Maker (“CODM”) and evaluates the financial performance of the business and makes resource allocation decisions on a consolidated basis. As a result, the Company operates as a single reportable segment under ASC 280, Segment Reporting. The Company's operations include performance marketing services, lead generation, and data analytics, all of which are managed centrally. The Company focuses on delivering quality traffic and player acquisitions, retention and conversions to global casino gaming partners worldwide in exchange for a commission (cost per acquisition or portion of net gaming revenues) paid to the Company by the partners for the new players referred to them. The CODM assesses financial performance based on consolidated revenue, operating profit, and key operating expenses as detailed below. The following table presents significant segment expenses regularly provided to and reviewed by the CODM: Affiliate Marketing Segment December 31, 2024 December 31, 2023 Revenue $ 3,662,349 $ 4,952,725 Less: Cost of revenues 2,756,076 3,420,062 Segment gross profit 906,273 1,532,663 Less: Salaries and benefits 1,428,737 1,910,163 Contractors and consulting expense 307,278 809,378 Marketing expense 214,325 675,496 Other segment expenses (1) 3,429,808 9,370,516 Segment net loss from continuing operations before income taxes ( 4,473,875 ) ( 11,232,890 ) Reconciliation of profit or loss Adjustments and reconciling items - - Consolidated net loss from continuing operations before income taxes ( 4,473,875 ) ( 11,232,890 ) (1) - other segment items included in Segment net loss include: professional fees, insurance, general and administrative expenses, depreciation and amortization, foreign currency exchange gains and losses, other income and interest expense F- 29 Table of Contents These expenses represent the key cost components reviewed by the CODM in assessing the Company's performance. The CODM evaluates income generated from the Company’s assets using net income (loss) as a key metric. The CODM utilizes this measure to assess return on assets when making strategic decisions, including whether to reinvest profits into the affiliate marketing platform, enhance technology and data analytics capabilities, or expand partnerships with advertisers and publishers. The following table presents revenue by geographic region, based on the location of the Company’s customers: For the year ended December 31, 2024 : Affiliate Marketing Services United States $ 815,727 Rest of the World $ 2,846,622 Revenue $ 3,662,349 For the year ended December 31, 2023 : Affiliate Marketing Services United States $ 754,446 Rest of the World $ 4,198,279 Revenue $ 4,952,725 F- 30 Table of Contents As the Company operates as one reportable segment, total segment assets and total consolidated assets are effectively the same. As such, segment assets are equivalent to total consolidated assets as presented on the balance sheet and all significant accounting policies, major customers, and revenue-related disclosures required under GAAP are included elsewhere in the financial statements. The Company’s Affiliate Marketing Services segment derive a significant portion of their revenues from several large customers. The table below presents the percentage of consolidated revenues derived from large customers: December 31, 2024 December 31, 2023 Customer A 39 % 35 % Customer B 22 % 38 % Customer C 14 % 6 % Customer D 14 % 8 % These four customers had amounts due to the Company of $ 225,286 and $ 219,372 for December 31, 2024 and 2023 , respectively. Note 15 - Revenue Recognition For the year ended December 31, 2024 and 2023 , the Company has recognized its revenue at a point in time. The Company categorizes its revenue as Services and recognized $ 3,662,349 and $ 4,952,725 for the year ended December 31, 2024 and 2023. The Company’s assets and liabilities related to its contracts with customers were as follows: December 31, 2024 December 31, 2023 Accounts receivable $ 264,831 $ 415,119 Unbilled revenue $ - $ 12,000 The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in contract advanced billings on the Company’s consolidated balance sheet. The Company recognized unbilled revenue when revenue is recognized prior to invoicing. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, and not to facilitate financing arrangements. F- 31 Table of Contents Note 16 -- Income Taxes Deferred tax assets and liabilities as of December 31, 2024 and 2023 consisted of the following: December 31, 2024 December 31, 2023 Deferred tax assets Net operating losses $ 4,941,593 $ 5,786,541 Research and development tax credit 26,818 30,429 Nonqualified stock options 111,915 76,059 Equipment 882 1,402 Goodwill 585,490 590,235 Section 174 Capitalization 157,863 70,437 Intangible assets 982,462 1,043,615 Accrued expenses and other 26,790 103,947 Gross deferred tax assets $ 6,833,813 $ 7,702,665 Valuation Allowance ( 6,833,813 ) ( 7,709,820 ) Net deferred tax assets $ - $ ( 7,155 ) As of December 31, 2024 , the Company maintained a valuation allowance against certain deferred tax assets to reduce the total to an amount management believed was appropriate. Realization of deferred tax assets is dependent upon sufficient future taxable income during the periods when deductible temporary differences and carryforwards are expected to be available to reduce taxable income. As of December 31, 2024 , the Company has a federal tax net operating loss carryforward of $ 21,832,273 , which will be available to offset future taxable income indefinitely. The Company has net operating loss carryforwards in various states. The net tax effected value of those state net operating loss carryforwards is $ 6,150,701 in various states. The state net operating loss carryforwards will begin to expire in 2034 and are available to offset future taxable income or reduce taxes payable through 2045. The Company also has net operating loss carryforwards in foreign jurisdictions of approximately $ 41,100,000 that are reported in discontinued operations. The Company’s ability to utilize these net operating loss carryforwards to offset future taxable income may be subject to certain limitations. The foreign net operating losses related to operations in Israel and Hong Kong can be carried forward indefinitely. The Company has US federal and state research and development tax credits of $ 26,818 as of December 31, 2024 , that will be available to offset future tax liabilities. Research and development tax credits will begin to expire in 2029. F- 32 Table of Contents The provision for (benefit from) income taxes charged to income for the years ended December 31, 2024 and 2023 consist of the following: December 31, 2024 December 31, 2023 US current tax (benefit) expense $ ( 232 ) $ 15,708 Foreign current tax expense - - Provision for income tax expenses (benefit) - - $ ( 232 ) $ 15,708 A reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows: December 31, 2024 December 31, 2023 Income tax benefit at federal statutory rate 21.0 % 21.0 % State and local income taxes net of federal tax benefit 2.1 % 0.5 % Meals and entertainment, non-deductible expenses and tax-exempt income -0.1 % -0.1 % Officer's life insurance -0.1 % Club Dues -0.1 % 0.0 % Incentive stock option expense -0.7 % -0.1 % Equity reversal 0.9 % 0.0 % Nondeductible goodwill impairment 0.0 % -8.2 % Nondeductible debt expenses -1.5 % -8.8 % Financial statement true up 0.1 % 0.0 % Miscellaneous other adjustments -0.8 % 0.0 % Change in valuation allowance -21.0 % -4.3 % Provision for income tax expenses (benefit) -0.1 % 0.0 % The Company has not provided any additional U.S. federal or state income taxes or foreign withholding taxes on the undistributed foreign earnings or basis differences as such differences have been considered indefinitely reinvested in the business. The determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings is not practicable because of the complexities associated with its hypothetical calculation. The Company files income tax returns in the U.S. federal jurisdiction, Minnesota, and various other states. The Company is not subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2018. The Company also files in Israel, Hong Kong and other foreign jurisdictions. The Company is not subject to audit in periods prior to 2018 in Israel and 2016, in Hong Kong The other foreign jurisdictions have various tax examination periods. We follow the authoritative guidance on accounting for and disclosure of uncertainty in tax positions which requires us to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the uncertain tax benefit amount recognized in the financial statements is reduced to the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement with the relevant taxing authority. Interest and penalties related to uncertain tax positions are included in the provision for income taxes in the condensed consolidated statements of operations. In accordance with the Discontinued Operations - Sale of Sports Gaming Client Services and SportsHub Gaming Network (See Note 3 ), management performed an evaluation of the technical merits of the Israeli Controlled Foreign Corporate Rules to determine the taxability of the gain from the Sale of Business from an Israeli tax perspective. This analysis also considered the results of the U.S. income tax. Management determined that the technical merits for uncertain tax exposure resulting from the gain for Israeli tax purposes did not exceed the more-likely-than- not threshold and has not recorded any income tax liability at December 31, 2024. Management’s determination is based on known facts and circumstances and requires judgment of a complex set of rules and regulations. If facts and circumstances change, such as closing, liquidating or selling of the businesses’ equity that is remaining, including events outside the Company’s control, this could have a material impact on the management’s determination. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as additional income tax expense. During the years ended December 31, 2024 and 2023 , the Company did not recognize material income tax expense related to interest and penalties. The Company’s uncertain tax position balance from continuing operations was $ 0 at December 31, 2024 . F- 33 Table of Contents Note 17 – Related Party Transactions Brown and Brown The Company uses Brown & Brown (“Brown”), which acquired Hays Companies, as an insurance broker. Brown is considered a related party as an executive of Brown served previously on the Board of Directors of SharpLink Israel through February 2024. The Company paid $ 405,417 and $ 921,565 for the years ending December 31, 2024 and 2023 , respectively for insurance coverage brokered by Brown. SharpLink Israel’s former director earned no commissions for the placement of these policies. The Company leases office space in Canton, Connecticut from CJEM, LLC (CJEM), which is owned by a previous executive of the Company, who left the Company in January 2024. The Company paid rent expense of $ 3,200 and $ 38,400 in years ending December 31, 2024 and 2023 See Note 3. Note 18 – Subsequent Events The Company performed an evaluation of subsequent events for potential recognition and disclosure past the date of the financial statements’ issuance. At-The-Market ("ATM") Offering On February 4, 2025, the Company filed a prospectus supplement that amends and supplements the ATM Sales Agreement (see Note 9 ) and the information in the prospectus supplement, dated May 2, 2024, relating to the offer and sale of up to $ 1,676,366 of our shares of Common Stock, $ 0.0001 par value per share. Pursuant to the ATM Sales Agreement dated as of May 2, 2024, within 60 days of the date of the prospectus supplement, the Company achieved a common stock closing price of $ 0.94 on December 6, 2024. Accordingly, under the terms of the ATM Sales Agreement, the Company could offer and sell through the initial prospectus, as amended and supplemented by this prospectus supplement, shares of Common Stock having an aggregate offering price of up to $ 1,835,052 from time to time to or through the Agents. Through February 6, 2025, the Company has sold 2,843,902 shares of Common Stock in accordance with the ATM Sales Agreement under the initial and supplemental prospectuses with total proceeds to the Company of $ 1,834,925 . There is no remaining availability under the initial and supplemental prospectuses. Regaining Compliance with Nasdaq Continued Listing Standards As previously reported on Form 10 -Q filed by the Company on August 15, 2024, the Company received a letter on July 17, 2024, from Nasdaq notifying the Company that, because the closing bid price for its common stock had been below $1.00 per share for 30 consecutive trading days, it was not compliant with the Minimum Bid Price Requirement (the “Bid Price Deficiency Notice”). In accordance with Nasdaq Marketplace Rule 5810 (c)( 3 )(A), the Company had a period of 180 calendar days, or until January 7, 2025, to regain compliance with the Minimum Bid Price Requirement. Further, as previously reported on our Current Report on Form 8 -K filed on November 22, 2024, the Nasdaq Staff notified the Company that it did not comply with the $2.5 million minimum stockholders’ equity requirement, as set forth in Nasdaq Listing Rule 5550 (a)( 2 ). The Company had 45 calendar days to submit a plan to regain compliance or until January 6, 2025. On January 8, 2025, SharpLink received a letter (the “Notice”) from the Listing Qualifications Department of the Nasdaq indicating the Company’s continued non-compliance with Nasdaq Marketplace Rule 5550 (a)( 2 ) (the “Bid Price Rule”). The Notice from the Staff informed the Company that the Staff had determined that the Company has not regained compliance with the Minimum Bid Price Requirement and was not eligible for a second 180 -day compliance period, due to the Company’s previously reported failure to comply with the $5,000,000 minimum stockholders’ equity requirement for initial listing on The Nasdaq Capital Market as required under Listing Rule 5505 (b)( 1 ). The Company had a hearing with the Nasdaq Hearing Panel on February 25, 2025. The Company’s Common Stock will remain listed and eligible for trading on Nasdaq pending the ultimate conclusion of the hearing process. SharpLink is working to evidence compliance with Minimum Bid Price Requirement and Minimum Stockholder’s Equity Requirement for continued listing on the Nasdaq Capital Market and intends to submit a plan to that effect to the Nasdaq Hearings Panel (the “Panel”) as part of the hearing process; however, there can be no assurance the Panel will grant any request for continued listing or that the Company will be able to regain compliance with the applicable listing criteria within the period of time that may be granted by the Panel. Acquisition of 10% Equity Stake in Armchair Enterprises On February 24, 2025 , SharpLink entered into a subscription agreement ("Subscription Agreement") with U.K.-based Armchair Enterprises Limited ("Armchair"), which owns and operates CryptoCasino.com. The acquisition of a 10 % equity stake in Armchair was made for $ 500,000 in cash, along with a right of first refusal to acquire a controlling interest in Armchair. Launched in October 2024, CryptoCasino.com is an innovative online gaming platform that partners with some of the world’s leading gaming studios. It utilizes blockchain technology to provide users with a secure, transparent and engaging next-generation gaming experience. The platform plans to offer over 6,000 online slots and table games, a live dealer casino, a premium sportsbook, an eSports betting hub and a racebook, among other features. CryptoCasino.com accepts a wide range of cryptocurrencies, including Bitcoin, Ethereum, Litecoin and more, catering to various user preferences globally while ensuring enhanced security, transparency and anonymity for players. In addition, CryptoCasino.com offers both traditional registration and Web3 connectivity. By connecting instantly with wallets like MetaMask and Trust Wallet, players can easily deposit and withdraw funds within seconds. In addition, CryptoCasino.com serves over one billion unique Telegram users by providing a Telegram Casino integration, which allows anyone to join and start playing with just one click. F-34