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, 2023 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. 42 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, 2023. 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, 2023, 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. 43 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE SharpLink Gaming, Inc. Officers and Directors The following table and biographical summaries set forth information, including principal occupation and business experience, about SharpLink’s directors and executive officers as of March 29, 2024: Directors Name Age Position Rob Phythian 59 Chairman of the Board, Director and CEO Robert DeLucia 60 Chief Financial Officer Leslie Bernhard (1) (2) (3) 80 Independent Director Robert Gutkowski (1) (2) (3) 76 Independent Director Obie McKenzie (1) (2) (3) 78 Independent Director (1) Indicates independent director under NASDAQ rules (2) Member of the Audit Committee (3) Member of the Compensation Committee Rob Phythian : Mr. Phythian, age 59, currently serves as Chairman of the Board and Chief Executive Officer of SharpLink; and he continues to serve as President, CEO and the sole director of SharpLink Israel – positions he has held since July 2021. From 2015 to 2021, Mr. Phythian was also Chief Executive Officer and a director of SportsHub Games Network, Inc., a fantasy sports consolidation and daily game operator. Before SportsHub, Mr. Phythian was co-founder and CEO of SportsData, where he was responsible for corporate operations, business development and strategic partnerships. Mr. Phythian was CEO of SportsData from 2010 until 2013, when SportsData was sold to international data company Sportradar. Mr. Phythian stayed with Sportradar U.S., working on key league and customer relationships including Google, Turner Sports, NBC, CBS and the NFL. Prior to Sportradar U.S., Mr. Phythian founded Fanball.com, which was sold to FUN Technologies, a publicly-traded company. Mr. Phythian has a Bachelor’s degree in Business Administration from the University of St. Thomas (Minnesota). Robert DeLucia : Mr. DeLucia, age 60, has served as Chief Financial Officer of SharpLink since February 2024; and previously served as Chief Financial Officer of SharpLink Israel from August 2022 through February 2024. Prior to joining SharpLink Israel, he served as Interim Chief Financial Officer of Neon Logistics, LLC, where he was tasked with leading the Company’s financial restatements and transition to U.S. GAAP accounting. From February through December 2022, he was Chief Accounting Officer at GTT Communications, a tier one Internet backbone service supplier. Previously, Mr. DeLucia served as Controller of Eastern Airlines during its business reboot from January 2020 through November 2020. From October 2016 through 2019, he worked at Tarsus CFO Services, providing fractional CFO services to primarily mid-sized private equity firms; and from December 2011 through April 2016, he was Corporate Controller and Divisional CFO of Taurus Aerospace Group and Aviation Technical Services. Mr. DeLucia earned both Bachelor of Arts and Bachelor of Science degrees from Robert Morris University. Leslie Bernhard: Ms. Bernhard has served as a director of SharpLink, Chair of the Audit Committee and a member of the Compensation Committee since February 2024. She has served as chairman of the board of Nasdaq-listed Nexalin Technology, Inc. since November 2023. From February 2017 through the present, she has also been an independent director of Sachem Capital Corp., a NYSE American-listed REIT real estate investment trust). In addition, she has served as the non-executive chairman of the board of Milestone Scientific Inc. (‘Milestone”), an NYSE American-listed developer and manufacturer of medical and dental devices, since October 2009, and as an independent director of Milestone since May 2003. She also served as Interim Chief Executive Officer of Milestone from October 2017 to December 2017. From 2007 through September 2018, Ms. Bernhard was an independent director of Universal Power Group, Inc., a global supplier of power solutions. In 1986, she co-founded AdStar, Inc., an electronic ad intake service to the newspaper industry, and served as its president, chief executive officer and executive director until 2012. Earlier in her career, Bernhard held management positions at Revlon, Inc., Walt Disney Productions, Inc. and the Gillette Company. She earned a Bachelor of Science Degree in Education from St. John’s University. 44 Robert Gutkowski: Mr. Gutkowski has served as a director of SharpLink and as member of the Audit and Compensation Committees since February 2024. From October 2014 through the present, Mr. Gutkowski has led RMG Sports Ventures LLC, a company he founded, to originate and advise private equity and other institutional capital on investments in sports, entertainment and media. Mr. Gutkowski recently co-originated the acquisition of True Temper Sports (the largest producer of golf shafts in the world) for Lincolnshire Management and made a substantial investment alongside Lincolnshire in True Temper Sports. In December 1991, Mr. Gutkowski was named President of MSG Network, where he was responsible for the operations of the New York Knicks basketball team, the New York Rangers hockey team - which won the 1994 Stanley Cup Championship, MSG Communications - including the MSG Network, the nation’s largest regional cable network, MSG Entertainment, and the MSG Facilities Group - which operated The Garden Arena and The Paramount Theater. Mr. Gutkowski joined MSG Network in 1985 and held various senior executive positions, including President of the MSG Network. Under his leadership, the subscriber base of the MSG Network, the oldest and largest regional sports network in the country, more than doubled to 5.1 million subscribers. The Yankees, together with the New York Knicks and the New York Rangers, became the foundations of MSG Network’s year-round operation. In 1993 and 1994, MSG Network was the most active building in the country in bookings and revenues and was named “Arena of the Year” by Pollstar Magazine . In 1996, Mr. Gutkowski founded The Marquee Group, a worldwide sports and entertainment firm that managed, produced and marketed sports and entertainment events, as well as provided representation for athletes, entertainers and broadcasters. The Marquee Group, which became a public company in 1996, acquired many related companies, including Athletes and Artists, Sports Marketing and Television International, QBQ Entertainment, Tollin-Robbins Productions, Park Associates, Alphabet City Records, Cambridge Golf and ProServ, before being acquired by SFX in 1999 for over $100 million. Mr. Gutkowski is a graduate of Hofstra University, where he earned a Bachelor of Business Administration degree. Obie McKenzie: Mr. McKenzie has served as a member of the Board of Directors of the Company since February 2024. Beginning in January 2019 through to the present, Mr. McKenzie has served as Vice Chairman of Cordiant Capital, a global infrastructure and real assets investment firm focused on digital infrastructure, renewable energy infrastructure and agriculture. In his role as Managing Director of BlackRock Inc. from January 2000 through December 2018, he was wholly responsible for managing relationships with some of the largest pension funds in the United States to include the Teacher Retirement System of Texas, New York City Employees’ Retirement System and the Federal Reserve Employee Benefits System, among others. During his accomplished career, Mr. McKenzie served as Managing Director at Merrill Lynch from 1990 through 2006; Executive Director at UBS Asset Management and Managing Director at Chase Investors from 1987 through 1990; as well as Founder and President of McKenzie & Company, an NASD registered broker-dealer from 1984 through 1987. During the late 1970’s and early 1980’s, Mr. McKenzie held positions at Citibank, Chemical Bank and Freedom National Bank as a commercial banker. He was also Manager of Banking and Pensions at The New York Times in 1975 and began his career as a Corporate Finance Associate for Morgan Stanley in 1972. Mr. McKenzie was a founding board member of the National Association of Securities Professionals, where he received the “Wall Street Hall of Fame Award” in 2001. In 2010, Mr. McKenzie received the AIMSE Richard A. Lothrop Outstanding Achievement Award in recognition for his outstanding achievements in the investment management industry and his community. In 2011, he was named by Black Enterprise Magazine as one of the 75 Most Powerful Blacks on Wall Street; and in 2013, he was named Public Fund Marketer of the Year by Money Management Intelligence . Mr. McKenzie earned a Bachelor of Science degree from Tennessee State University and an MBA from Harvard Business School. 45 SharpLink Gaming, Ltd. (“SharpLink Israel”) Officers and Directors The following table and biographical summaries set forth information, including principal occupation and business experience, about SharpLink Israel’s directors and executive officers prior to SharpLink Israel’s domestication merger with SharpLink in February 2024. Excluding Mr. Phythian, all officers and directors of SharpLink Israel resigned as officers and directors in connection with the completion of the domestication merger, effective February 13, 2024. Name Age Position Rob Phythian 59 President, CEO and Director Robert DeLucia 60 Former Chief Financial Officer David Abbott 58 Former Chief Technology Officer Joseph Housman 42 Former Chairman of the Board and Director Chris Nicholas 55 Former Chief Operating Officer and Director Paul J. Abdo 53 Former Independent Director Thomas Doering (1) (2) (3) 57 Former Independent Director Scott Pollei (1) (2) (3) 62 Former Outside Independent Director Adrienne Anderson (1) (2) (3) 46 Former Outside Independent Director (1) Indicates independent director under NASDAQ rules (2) Member of the Audit Committee (3) Member of the Compensation Committee Joseph Housman : Mr. Housman, age 42, served as the Chairman of SharpLink Israel’s board since July 2021 and resigned in February 2024 in connection with the domestication merger; and he served on the board of directors of SharpLink, Inc. since its inception in February 2019 through July 2021. Since 2014, Mr. Housman has served as Vice President for Hays Companies | Brown & Brown Insurance, a national insurance brokerage firm, where he works with clients on risk management solutions with an emphasis on private equity and M&A transactions. Prior to Hays Companies, Mr. Housman was employed at Deloitte from 2004 to 2014 in the firm’s private company tax group. Mr. Housman also serves as a director of several private company businesses, working closely with the management teams on strategic growth and management initiatives, as well as advising and negotiating on acquisitions, operations, and dispositions of private company investments. Mr. Housman was also a director of SportsHub Games Network, Inc. (“SportsHub”) from 2015 through September 2021 when he resigned. He is a CPA (inactive) in the state of Minnesota and earned a Bachelor of Arts degree in Accounting from Saint John’s University (Minnesota). Chris Nicholas : Mr. Nicholas, age 55, acted as SharpLink Israel’s Chief Operating Officer and director since July 2021; and until February 2024, he also served as the Chief Operating Officer of SharpLink, Inc., a position he held since SharpLink, Inc. was founded in February 2019. Prior to SharpLink, Inc., Mr. Nicholas was Chief Operating Officer and a director of SportsHub, from 2016 to 2019, and continued providing services to SportsHub on a limited part-time basis until June 1, 2021. Mr. Nicholas resigned his position as a director of SportsHub in September 2021. Prior to SportsHub, he was the Founder and CEO of Sports Technologies, Inc (“Sports Technologies”), which SportsHub purchased in 2016. Prior to Sports Technologies, Mr. Nicholas spent ten years at ESPN.com, most recently as Executive Producer, where he was responsible for the Fantasy Sports and ESPN Insider businesses. Mr. Nicholas began his career in 1994 at Starwave Corporation, an internet media company that was the first to put sports news, information and fantasy games on the Internet. Mr. Nicholas earned a Bachelor of Arts degree from Dartmouth College. David Abbott: Mr. Abbott, age 58, joined SharpLink Israel in September 2022 and served as its Chief Technology Officer since November 2022. Prior to joining SharpLink Israel, Mr. Abbott spent more than eight years at Sportradar (Nasdaq: SRAD), serving first as Senior Vice President of Innovation and Technology and rising to Managing Director of U.S. Sports Media, where he focused on the growth and development of the company’s media strategy in the United States. Founded in 2001, Swiss-based Sportradar is a sports technology company serving over 1,700 sports federations, media outlets, betting operators and consumer platforms across 120 countries. Sportradar’s U.S.-based business traces its start to its 2014 acquisition of SportsData, a provider of sports-related live data and digital content co-founded by Mr. Abott and SharpLink’s CEO, Rob Phythian, in 2010. Following the acquisition, Mr. Abbott joined Sportradar to establish and build its U.S. presence. A frequent speaker at sports industry conferences and trade events, Mr. Abbott has also volunteered over the past several years as a mentor to CEOs of emerging software companies in association with the Minnesota Emerging Software Advisory. He earned his MBA in Finance from the University of St. Thomas – Opus College of Business and a Bachelor of Science degree in Computer Science from the University of Minnesota, Institute of Technology. 46 Paul J. Abdo : Mr. Abdo, age 53, served on SharpLink Israel’s board of directors from July 2021 through February 2024. Mr. Abdo is the CEO of Abdo Publishing, a worldwide educational publisher of print and digital content for schools. Prior to becoming CEO in 2015, Mr. Abdo worked in several different facets of the company including editorial, marketing, and international sales, starting and leading several divisions in the company including Spotlight Books, EPIC Press, and Essential Library. Mr. Abdo also serves on the board of the parent company, Abdo Consulting Group Inc. (ACGI), which has holdings in publishing, finance, real estate, and gaming. Mr. Abdo is also on the board of BankVista, a community bank with several branches in Minnesota. He obtained Bachelor’s and M.A. degrees in English from Minnesota State University, Mankato. Tom Doering : Mr. Doering, age 57 on SharpLink Israel’s board of directors from July 2021 through February 2024. Mr. Doering is an experienced business leader, technology investor and strategic advisor. Since 2006, he has served on the boards of directors and as an advisor for multiple privately held companies in the technology, fantasy sports, consumer services, travel and non-profit industries. In 2008, he co-founded and served on the board of directors of LeagueSafe, a premier fantasy sports league management company that was acquired by SportsHub Game Network in 2016. Prior to LeagueSafe, Mr. Doering co-founded E-Travel Experts (ETX) in 1998 and served as CEO until it was acquired in 2004 by Affiliated Computer Services. ETX was a provider of technology enabled solutions as well as fraud prevention, ticketing, accounting and back-office operations to the then-emerging Internet travel industry. Outside Directors Scott Pollei : Mr. Pollei, age 63, served on SharpLink Israel’s board of directors from July 2021 through February 2024. He is currently a partner at Dunn Lake Partners, LLC, a business and financial advisory firm that he founded in April 2019. From March 2020 to December 2020, Mr. Pollei served as Interim Chief Financial Officer of Crescent Electrical Supply Company, a wholesale distributor of electrical supplies based in East Dubuque, Illinois, and he served as a board member and finance and Audit Committee chair of that company from 2011 until his appointment as Interim CFO. From June 2017 to December 2019, Mr. Pollei was Chief Financial Officer at Fastbridge Learning, Inc., a SaaS provider of educational and assessment tools to the pre-K through 12th grade education market. Mr. Pollei was a partner in B2B CFO, LLC, a business and financial consulting firm, from September 2016 until March 2019. Prior to that, from August 2014 to August 2016, Mr. Pollei was Chief Operating Officer at Boulay PLLP, a public accounting and financial advisory firm. Prior to Boulay, from January 1994 until March 2014 he served in a number of positions of increasing responsibility at The Dolan Company, an NYSE-traded publisher and media company, including serving as its Chief Financial Officer from 1994 to 2009 and thereafter as Chief Operating Officer until his resignation in March 2014. The Dolan Company filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in March 2014, and emerged from bankruptcy in June 2014. Mr. Pollei began his career in public accounting with KPMG US, LLP. He is a certified public accountant (inactive) and earned a Bachelor’s degree in Accounting, cum laude , from Luther College. Adrienne Anderson : Ms. Anderson, age 46, served on SharpLink Israel’s board of directors from July 2021 through February 2024. She is a certified public accountant and has spent the last several years of her career primarily focused on financial statement audits under Public Company Accounting Oversight Board auditing standards for SEC reporting companies. Since January 2019, Ms. Anderson has been an audit partner at D. Brooks and Associates, CPAs, a certified public accounting firm based in West Palm Beach, Florida, where she focuses her practice on accounting, auditing, attest and review services, specializing in working with emerging growth and high growth technology, manufacturers, distributors and service companies, as well as government contractors, both SEC registrants and private companies. Prior to that, from October 2014 to December 2018, she was with WithumSmith + Brown, a large regional CPA firm, having been promoted to partner of the firm in July 2017. Ms. Anderson earned a Bachelor of Science in Accounting from Eastern Illinois University and is a certified public accountant licensed in the states of Florida and Illinois. 47 Board of Directors Our business and affairs are managed under the direction of our Board of Directors. As of March 29, 2024, our Board consists of four directors, three of whom qualify as “independent” under the listing standards of Nasdaq. Directors serve until the next annual meeting or until their successors are elected and qualified. Officers are appointed to serve until their successors have been elected and qualified. Director Independence Our Board of Directors is composed of a majority of “independent directors” as defined under the rules of Nasdaq. Nasdaq Listing Rule 5605(a)(2) provides that an “ independent director ” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Under such definition, our Board has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our Board has determined that Leslie Bernhard, Robert Gutkowski and Obie McKenzie are all independent directors of the Company. Family Relationships There are no family relationships among the officers and directors, nor are there any arrangements or understanding between any of the Directors or Officers of our Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director. Involvement in Certain Legal Proceedings During the last ten years, none of our officers, directors, promoters or control persons have been involved in any legal proceedings as described in Item 401(f) of Regulation S-K. SharpLink Israel’s Board and Committee Meetings Held in 2023; 2023 Annual General Meeting of Shareholders and Extraordinary General Meeting of Shareholders Held in 2023 During 2023, the Board of Directors of SharpLink Israel held a total of 25 meetings, the Audit Committee of SharpLink Israel held a total of six meetings, and the Compensation Committee held a total of two. The Board and committees also acted by unanimous written consent on various matters throughout the year. All of the board members attended the 2023 Annual General Meeting of Shareholders via teleconference held on May 26, 2023; and participated in three Extraordinary General Meeting of Shareholders held on January 20, 2023, October 17, 2023 and November 29, 2023. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s directors, officers and stockholders who beneficially own more than 10% of any class of equity securities of the Company registered pursuant to Section 12 of the Exchange Act, collectively referred to herein as the “Reporting Persons,” to file initial statements of beneficial ownership of securities and statements of changes in beneficial ownership of securities with respect to the Company’s equity securities with the SEC. All Reporting Persons are required by SEC regulation to furnish us with copies of all reports that such Reporting Persons file with the SEC pursuant to Section 16(a). Based solely on our review of the copies of such reports and upon written representations of the Reporting Persons received by us, we believe that all of SharpLink’s and SharpLink Israel’s officers and directors have timely complied with the Section 16(a) filing requirements. 48 Committees of the Board of Directors The composition and responsibilities of each committee are described below. Members serve on committees until their resignation or until otherwise determined by our Board. Each of these committees has adopted a written charter that satisfies the applicable standards of the SEC and the Nasdaq Listing Rules, which we have posted on the investor relations section of our website found at www.sharplink.com. Audit Committee The Audit Committee, which is established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, is responsible for assisting the Board of Directors in its oversight of the integrity of the Company’s financial statements, the qualifications and independence of the Company’s independent auditors, and the Company’s internal financial and accounting controls. The audit committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to: ● reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the Board whether the audited financial statements should be included in our Annual Report on Form 10-K; ● discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; ● discussing with management major risk assessment and risk management policies, including those relating to cybersecurity; ● monitoring the independence of the independent auditor; ● verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; ● reviewing and approving all related-party transactions; ● inquiring and discussing with management our compliance with applicable laws and regulations; ● pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed; ● appointing or replacing the independent auditor; ● determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; and ● establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies. The members of the Audit Committee are Leslie Bernhard, Obie McKenzie and Robert Gutkowski. Each member of the Audit Committee qualifies as an independent director under the corporate governance standards of the Nasdaq and the independence requirements of Rule 10A-3 of the Exchange Act. The Board of Directors has determined that Ms. Bernhard qualifies as an “audit committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation S-K and meets the financial sophistication requirements of the Nasdaq, and as such serves as the Audit Committee Chair. 49 Compensation Committee The Compensation Committee approves the compensation objectives for the Company, approves the compensation of the named executive officers and approves or recommends to the Board of Directors for approval the compensation of the chief executive officer. The Compensation Committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to: ● reviews, approves and determines, or makes recommendations to our Board regarding the compensation of our executive officers; ● administers our equity compensation plans; ● reviews and approves, or makes recommendations to our Board, regarding incentive compensation and equity compensation plans; ● establishes and reviews general policies relating to compensation and benefits of our employees; and ● oversees and administers the Company’s clawback policy. The members of the Compensation Committee are Obie McKenzie, Leslie Bernhard and Robert Gutkowski. Mr. McKenzie serves as the Chairman of the Compensation Committee. Each member of the Compensation Committee is a non-employee director within the meaning of Rule 16b-3 of the rules promulgated under the Exchange Act, each is an outside director as defined by Section 162(m) of the United States Internal Revenue Code of 1986, as amended, or the Code, and each is an independent director as defined by Nasdaq. The Compensation Committee has adopted a written charter that satisfies the applicable standards of the SEC and the Nasdaq, which is available on our website. Code of Ethics The Company has adopted a Code of Ethics for adherence by its Chief Executive Officer and Chief Financial Officer to ensure honest and ethical conduct; full, fair and proper disclosure of financial information in the Company’s periodic reports filed pursuant to the Securities Exchange Act of 1934; and compliance with applicable laws, rules, and regulations. Any person may obtain a copy of our Code of Ethics, without charge, by mailing a request to the Company at the address appearing on the front page of this Annual Report on Form 10-K or by viewing it on our website found at www.sharplink.com. Board Diversity Matrix The matrix below summarizes certain information regarding the diversity of both SharpLink Israel’s board as of December 31, 2023 and of SharpLink US’s board as of March 27, 2024: SharpLink Israel SharpLink US As of December 31, 2023 As of February 13, 2024 Total Number of Directors 7 4 Female Male Female Male Part I: Gender Identity Directors 1 6 1 3 Part II: Demographic Background African American or Black 0 0 0 1 Asian 0 0 0 0 Hispanic or Latinx 0 0 0 0 White 1 6 1 2 Did Not Disclose Demographic Background 0 0 0 0 0 0 1 50 Summary Director Compensation The following table provides certain information concerning the compensation for services rendered in all capacities by each non-employee director serving on SharpLink Israel’s board during the year ended December 31, 2023. Name Fees Earned ($) Option Awards ($) (1) Total ($) Joseph Housman 75,000 16,078 91,078 Paul Abdo 54,400 16,078 70,478 Tom Doering 58,600 2,388 60,988 Scott Pollei 58,600 — 58,600 Adrienne Anderson 58,600 — 58,600 (1) Represents the share-based compensation expenses recorded in SharpLink’s consolidated financial statements for the year ended December 31, 2023, based on the options’ fair value, calculated in accordance with accounting guidance for equity-based compensation. For a discussion of the assumptions used in reaching this valuation see NOTE 12 included in the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 and incorporated by reference herein. ITEM 11. EXECUTIVE COMPENSATION SharpLink Israel’s Executive Compensation Policy Overview SharpLink Israel’s compensation policy for its executives and directors was intended to assist in achieving the goals of SharpLink Israel and its work plans with a long term view and to ensure that: 1) the interests of the officers and directors will be as close as possible in conformity to the interests of SharpLink Israel’s shareholders; 2) SharpLink Israel was able to recruit and retain senior managers who had the ability to lead SharpLink Israel to business success and to confront the challenges that it may have had to face; 3) the officers and directors were motivated to achieve a high level of business performance without taking unreasonable risks; and 4) an appropriate balance was created between the various components, short-term vs. long-term, and compensation in cash vs. equity-based compensation. Being a public company engaged in the business of providing technology and services focused on connecting sports fans with sports media companies, leagues, teams and sportsbooks, and iGaming enthusiast with casino gaming operators, the Company faced the ongoing task of recruiting and retaining leading managers and professionals, in competition with other companies operating in the same or similar fields. For the past three years, there has not been any particular shortage of quality managerial manpower with expertise in the Company’s particular field of business. However, given the dynamic nature of the field, which features an increasing number of competitors, some of which are much larger companies than SharpLink Israel was, there was a concern that such a shortage may emerge during the coming years. SharpLink Israel’s compensation policy was intended, inter alia, to ensure its ability to recruit and retain the quality managerial manpower that it required for the continued and successful development of its business, considering the challenges characterizing the employment markets in which it operated. 51 Compensation of Executives and Directors in View of Our Values and Business Strategy SharpLink Israel saw a need to compensate its executives and directors for their contribution to its business success over time and to have consideration for the broad areas of responsibility and authority imposed upon them. However, given that SharpLink Israel employed a relatively small number of employees, most of whom had specialized professional or technical expertise, SharpLink Israel acknowledged the importance of appropriate compensation for all of its employees and of maintaining a reasonable ratio between the overall executives and directors to the compensation of other employees. SharpLink Israel’s Compensation Committee annually assessed the ratio between the terms of service and employment of each of its executives and directors and the average and median compensation of other SharpLink Israel employees. In the opinion of the Compensation Committee and Board members, the ratio was appropriate and reasonable in view of the nature of SharpLink Israel, its size, the mixture of manpower and its field of operation, and did not affect the labor relations at SharpLink Israel. In addition, it was also determined that the ratio between the terms of service and employment of each one of its officers and directors (excluding equity compensation) and the average and median cost of employment of SharpLink Israel’s other employees should not exceed 10. SharpLink Israel’s policy was that the overall compensation of the officers should be substantially influenced by the business results of SharpLink Israel and by the personal contribution of each manager to the attainment of those results. To the extent that the managerial level was higher, it was determined that there would be an increase in influence of business results and the personal contribution of each manager to the attainment of these results on the compensation of the manager. To that end, the higher the management level, the more substantial the relative weight attached to compensation components that are dependent upon performance were. Components of Executive Compensation SharpLink Israel’s overall compensation of each employee, and especially the officers, was built using several components so that each component rewarded its employees for a different aspect of his or her contribution to SharpLink Israel. Specifically, compensation components included fixed based salary; health and medical benefits; variable, performance-based rewards (annual bonus, commissions and grants); and equity-based compensation. In addition to or in lieu of bonuses paid under an annual bonus plan or as a discretionary bonus, SharpLink Israel was permitted to pay a special bonus to officers and directors due to achievements of milestones and goals determined by the Board of Directors, in accordance with SharpLink Israel’s strategic business plan, including in connection with material projects that were under development, acquisition or disposition of material assets, financing activities and achievement of department tasks, up to a maximum of three monthly base salaries per year, subject to limitations set forth in applicable law and the predefined cap on annual bonuses defined in SharpLink Israel’s Directors and Officers Compensation Policy. SharpLink US New Executive Compensation Policy Overview Executive Compensation and Analysis The Compensation Committee is committed to the close alignment of our executive pay programs with Company and individual performance and our stockholders’ interest, while ensuring we can attract and retain key talent in the organization. Compensation Philosophy SharpLink’s executive compensation program is designed to attract, motivate, retain and fairly reward highly skilled executives who bring the business acumen necessary to achieve our long-term business objectives. We pay for performance and design executive compensation programs that reward short- and long-term performance and align the financial interests of our executive officers with those of our shareholders. To that end, the compensation packages provided to our Named Executive Officers (“NEOs”) include both cash- and equity-based components. We evaluate performance and compensation levels to ensure that: ● We maintain our ability to attract and retain outstanding employees in executive positions; ● Executive compensation remains competitive with the compensation paid to similarly situated executives at comparable companies; and ● Compensation programs are applied in an internally consistent manner. 52 What We Do in Our Compensation Programs ● Establish, communicate and monitor measurable goals and objectives; ● Review total compensation when making executive compensation decisions; ● Establish maximum award levels for short- and long-term incentive plans; ● Assess our programs against peer companies and best industry practices; ● Require executives to set up 10b5-1 programs to properly manage all stock transactions; ● Avoid incentives that encourage undue or excessive risk; ● Annually assess risks associated with our compensation program; and ● Subject incentive compensation of executives to our formal clawback policy. Roles of the Compensation Committee, Management and Peer Groups Role of the Compensation Committee Our Compensation Committee is responsible for establishing the compensation of our NEOs; and oversees administration of the Company’s executive compensation plan, policies and programs, including providing guidance on corporate goals and objectives relating to compensation, short-term bonus (incentive) plans and long-term equity compensation plans, and approval of grants of equity awards. Role of Management Management participates in the review and refinement of our executive compensation program. The CEO meets with Committee members to discuss compensation packages for the NEOs and to review the performance of the Company and each NEO, other than himself, and makes recommendations with respect to the appropriate base salary, annual cash bonus, event-driven bonus(es) and grants of short- and long-term equity awards. Role of Peer Groups, Surveys and Benchmarking We consider multiple sources of data to evaluate the fairness of potential rewards associated with our compensation structures and whether they meet our compensation objectives. We also consider how our compensation practices compare to market practices among relevant companies in terms of size and/or industry. Among other factors, we carefully evaluate compensation data for executive officer positions for public companies of our size and/or operating in our industry culled from proxy statements filed with the SEC. The Committee may consider competitive market compensation of peer group companies but does not attempt to maintain a certain target percentile within the peer group or otherwise rely solely on such data. The Committee strives to incorporate flexibility into the compensation programs and processes to respond to and adjust for SharpLink’s evolving business and the value delivered by our NEOs. Compensation Committee Interlocks and Insider Participation All officer compensation and bonuses for executive officers are determined by our Compensation Committee, which is comprised of non-employee directors. None of our executive officers serve, or in the past has served, as a member of our Compensation Committee. None of the members of our Compensation Committee is or has been an officer or employee of our Company. Components of Executive Compensation The key elements of our executive compensation packages for NEOs are base salary, short-term (annual) cash bonus, one-time cash bonus for significant milestone events being achieved, equity-based awards and our employee benefits programs. ● A base salary provides our NEOs with a competitive level of fixed compensation, which reflects individual performance and scope of responsibilities, as well as the competitive market for executive talent; and benefits our shareholders by offering competitive salaries that will allow us to attract and retain talented executives. In determining base salaries for our NEOs, the Committee considers a number of factors including: ○ The scope of responsibilities, prior experience and qualifications; 53 ○ Past individual performance; ○ Base salary and total compensation relative to other executives in similar positions; ○ Competitive market conditions and market data; and ○ Recommendations of the CEO, other than with respect to his own compensation. ● An (annual) cash bonus rewards our NEOs for achieving Company and individual goals over the course of the year; and benefits our shareholders by ensuring our NEOs remain focused on meeting key short-term business objectives and performance metrics. We offer our NEOs the opportunity to earn annual cash bonuses based on achieving performance against Committee-approved performance goals. The Committee, in its sole discretion, with respect to the CEO and in collaboration with the CEO for all other NEOs, determines whether and to what extent annual cash bonuses shall be paid to each NEO. ● One-time cash bonuses reward our NEOs who play a material role in a significant milestone achieved by the Company, e.g., completing a strategic acquisition that has positive impact on SharpLink’s overall financial performance or raising mission critical growth capital. The Committee, in its sole discretion, with respect to the CEO and in collaboration with the CEO for all other NEOs, determines whether and to what extent one-time cash bonuses are paid to each NEO based on the materiality of each significant milestone achieved. ● Equity-based awards incentivize our NEOs, designed to drive achievement of long-term operational and financial goals and increased shareholder value, as well as to attract and retain key talent over a sustained time period. The Committee sets each NEOs’ equity based awards on their respective role and responsibilities, internal equity considerations, competitive market conditions and data and target direct compensation. ● In addition to the primary elements of compensation described above, the NEOs may participate in benefits programs generally available to our employees. Summary Executive Compensation Table The following table sets forth all compensation paid or payable by the Company during the last two fiscal years to the Company’s then- NEOs: Name and Position Fiscal Year Salary ($) Bonus ($) Option Awards (1) ($) All Other Compensation (2) ($) Total ($) Rob Phythian 2023 300,000 70,470 105,958 12,000 488,428 President and Chief Executive Officer 2022 300,000 181,671 130,576 12,000 624,247 Robert DeLucia 2023 220,000 48,938 34,836 — 303,774 Chief Financial Officer (3) 2022 80,385 30,938 21,399 — 132,722 Brian Bennett 2023 — — — — — Former Chief Financial Officer (4) 2022 153,654 22,212 — — 175,866 Chris Nicholas 2023 240,000 67,860 31,067 — 338,927 Former Chief Operating Officer (5) 2022 240,000 89,137 113,336 — 442,473 David Abbott 2023 240,000 — 28,974 — 268,974 Former Chief Technology Officer (6) 2022 64,615 — 22,422 — 87,037 (1) Represents the share-based compensation expenses recorded in SharpLink’s consolidated financial statements for the year ended December 31, 2023 and 2022, based on the option’s fair value, calculated in accordance with accounting guidance for equity-based compensation. For a discussion of the assumptions used in reaching this valuation, NOTE 12 included in the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022. 54 (2) Other compensation represents reimbursement of up to $1,000 per month for private/social club dues for the CEO. (3) Mr. Robert DeLucia was named SharpLink Israel’s Chief Financial Officer in August 2022. (4) Mr. Brian Bennett joined SharpLink Israel as the Chief Financial Officer in August 2021 and resigned in August 2022. (5) Mr. Chris Nicholas joined SharpLink Israel in July 2021 and resigned in January 2024. (6) Mr. David Abbott joined SharpLink Israel in September 2022 and resigned in December 2023. Employment Agreements of Named Executive Officers Employment Agreements with Rob Phythian Phythian Employment Agreement with SharpLink Israel Under his employment agreement with SharpLink Israel, Mr. Phythian received an annual base salary of $300,000 and was eligible to receive an annual bonus, as determined by the SharpLink’s Board of Directors, of up to 25% of his base salary. Such annual bonus was updated by the annual bonus approved by our shareholders at the shareholders meeting on September 8, 2022. As approved, Mr. Phythian was also eligible to receive the following compensation: ● Annual Bonus: Mr. Phythian was eligible to receive a bonus based on annual bonus plans that were subject to approval by the Compensation Committee and Board of Directors and provided for payment of an aggregate bonus of up to 10 monthly base salaries (the “Annual Bonus”). The Annual Bonus consisted of: (i) a discretionary bonus based on the overall satisfaction from the CEO’s performance, including the criteria set forth in the compensation policy, in an amount of up to three monthly base salaries, which was subject to determination by the Compensation Committee and Board of Directors, and (ii) the remainder, which was based on one or more of the measurable criteria set forth in the SharpLink Israel’s compensation policy, with such targets and weights as determined by its Compensation Committee and Board of Directors, based on the Company’s long-term goals and budget. The Bonus earned was payable in accordance with SharpLink Israel’s compensation policy. ● Special Bonus: Mr. Phythian received a one-time special bonus of $68,000 due to his special contribution to the successful execution and consummation of an approximately $10 million round of financing with an institutional investor during November 2021. ● Option Grant: Mr. Phythian received options to acquire 45,000 ordinary shares , under SharpLink Israel’s 2021 Equity Incentive Plan (the “2021 Plan”), constituting approximately 1.6% of the outstanding share capital of the Company calculated on a fully-diluted basis. One-third of the option was vested and became exercisable on September 8, 2023, the first anniversary of September 8, 2022, the grant date, one-third of the option will vest and be exercisable on September 8, 2024, the second anniversary of the grant date and one-third of the option will vest and be exercisable on September 8, 2025, the third anniversary of the grant date, subject in all cases to Mr. Phythian’s continued services to SharpLink Israel. The exercise price per share of the option was $10.30, equal to the closing sale price of SharpLink Israel’s ordinary shares on the Nasdaq Capital Market on September 8, 2022, the grant date. The option will expire on the tenth anniversary of September 8, 2022. 55 Following the SharpLink Go-Public Merger in July 2021, Mr. Phythian received options to acquire 60,000 ordinary shares of SharpLink Israel under its 2021 Plan. One-third vested and are exercisable on the grant date, one third will vest and be exercisable on the first anniversary of the grant date and one third will vest and become exercisable on the second anniversary of the grant date, subject in all cases to Mr. Phythian’s continued services to SharpLink Israel. Notwithstanding the foregoing vesting schedule, the right to purchase all shares subject to the option would vest and become exercisable if Mr. Phythian’s employment was terminated 90 days prior to or six months following the completion of a change of control (as such term is defined in the 2021 Plan) of SharpLink Israel. The exercise price per share of the options is $67.40. The options will expire on the tenth anniversary of the date of grant. Mr. Phythian was not entitled to any additional remuneration for his services as a director of SharpLink Israel. Prior to receiving shareholder approval in September 2022 to increase the number of ordinary shares authorized to be granted under the 2021 Plan, and to provide for issuance of stock options to other employees of the Company, Mr. Phythian forfeited the 60,000 options. On February 27, 2023, Mr. Phythian received 17,500 options to acquire 17,500 ordinary shares, under SharpLink Israel’s 2021 Plan. Every 1/36 th of the total grant of 17,500 options vest and be exercisable monthly from March 27, 2023 to February 27, 2026 for 36 months, subject in all cases to Mr. Phythian’s continued services to SharpLink Israel. The 17,500 options consist of 16,528 non-qualified stock options and 972 incentive stock options. The non-qualified stock options will vest from March 27, 2023 to December 27, 2025. The incentive stock options will vest on January 27, 2026 and February 26, 2026. Mr. Phythian also received certain medical and fringe benefits, including 100% of the premiums payable for medical insurance benefits for Mr. Phythian and his immediate family during the time of his employment, reimbursement of up to $1,000 per month for private/social club dues, and reimbursement of travel and other expenses incurred in connection with the performance of his duties in accordance with SharpLink’s policies. Mr. Phythian was also entitled to receive an indemnification letter in the form identical to the form provided to SharpLink Israel’s other officers and directors and to be included in SharpLink Israel’s directors’ and officers’ liability insurance policy authorized in accordance with SharpLink Israel’s compensation policy. Upon termination of Mr. Phythian’s employment by either him or SharpLink Israel, regardless of the reason, Mr. Phythian was entitled to (i) any earned but unpaid bonus, payable at such times as such bonus would have otherwise been paid if employment had not been terminated (unless otherwise required by law), and (ii) all other benefits for which he may be eligible in accordance with the SharpLink’s policies then in effect that have vested as of the termination date. If Mr. Phythian’s employment was terminated by SharpLink without “Just Cause” or by Mr. Phythian for “Good Reason,” (as such terms are defined in Mr. Phythian’s employment agreement) then he was entitled to a payment equal to three months of base salary and continued health care coverage for such period, provided that such severance payment is subject to repayment if determined to violate the non-competition and non-solicitation covenants in the agreement. The payment of severance is conditioned upon Mr. Phythian’s execution of a separation agreement that contains a full release of any claims he may have of his employment termination date against SharpLink Israel. During the term of his employment and for a period of 24 months thereafter, referred to as the Restricted Period, Mr. Phythian was permitted, directly or indirectly, to provide services for or hold ownership of any entity that competed with the business of SharpLink Israel in the U.S., Canada, the United Kingdom and the European Union. In addition, during the restricted period, Mr. Phythian was not permitted to solicit or encourage any employee of SharpLink Israel to terminate his or her employment or any vendor or supplier to cease doing business with SharpLink Israel. 56 Phythian Employment Agreement with SharpLink US Following the completion of the domestication merger between SharpLink Israel and SharpLink US, Mr. Phythian entered into a new employment agreement with SharpLink US in February 2024 to serve as SharpLink US’ Chief Executive Officer. See NOTE 18 – SUBSEQUENT EVENTS included in the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022. Mr. Phythian’s new employment agreement (the “Phythian Agreement”) provides for an annual base salary of $285,000 (“Phythian Base Salary”) and an annual performance-based cash bonus up to 42.5% of the annual base salary, as determined and approved by the Compensation Committee. In addition, the Company shall directly pay or reimburse Mr. Phythian up to $10,000 annually for the following: i) premiums of a term life insurance policy and ii) if elected, executive health exams not covered by the Company’s prevailing benefits plan. In addition, the Company shall directly pay or reimburse Mr. Phythian up to $12,000 annually for payment of country club annual dues. Mr. Phythian was also granted 100,000 RSUs pursuant to the Plan, which shall vest in equal increments on March 31, 2024, June 30, 2024, September 30, 2024 and December 31, 2024. Mr. Phythian shall be eligible to be granted additional equity awards in accordance with the Company’s policies as in effect from time to time, as recommended and approved by the Compensation Committee. The Phythian Agreement is for an initial term of two years (“Phythian Initial Term”), subject to earlier termination, and will be automatically extended for successive one-year periods unless either party gives written notice of termination at least 120 days in advance of the expiration of the Phythian Initial Term or the then-current term, as applicable. The Phythian Agreement provides that if Mr. Phythian is terminated by the Company without cause or if he terminates his employment for good reason, he will be entitled to: i) continuation of the Phythian Base Salary at the rate in effect immediately prior to the termination date for 12 months following the termination date paid accordance with the Company’s normal payroll practices, but no less frequently than monthly; and ii) if Mr. Phythian elects to continue group health coverage under any Company group health plan pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall reimburse Mr. Phythian for a portion of his COBRA premiums, such that his unreimbursed cost of COBRA premiums does not exceed the cost to Mr. Phythian of such health plan premiums immediately prior to termination, for a period of up to one year after his termination (or until he is no longer eligible for COBRA continuation, if earlier). In addition, Mr. Phythian shall be entitled to severance, payable in a lump sum equal to 100% of the Phythian Base Salary. If employment is terminated by the Company for cause or by Mr. Phythian for other than good reason, Mr. Phythian will be entitled only to the accrued salary and bonus obligations through the date of termination. DeLucia Employment Agreements DeLucia Employment Agreement with SharpLink Israel Under his employment agreement with SharpLink Israel, Mr. DeLucia received an annual base salary of $220,000 and was eligible to receive an annual bonus, as determined by SharpLink’s Board of Directors, of up to 25% of his base salary. On the date of his hire by SharpLink Israel, August 22, 2022, Mr. DeLucia received a grant of options under the 2021 Plan to acquire 15,000 ordinary shares . Every 1/36 th of the total grant shall vest and be exercisable monthly from September 22, 2023 to August 22, 2026 for 36 months, subject in all cases to Mr. DeLucia’s continued services to SharpLink Israel. On February 27, 2023, Mr. DeLucia received a grant of options under the 2021 Plan to acquire 5,000 ordinary shares Every 1/36 th of the total grant shall vest and be exercisable monthly from March 27, 2023 to February 27, 2026 for 36 months, subject in all cases to Mr. DeLucia’s continued services to SharpLink. Mr. DeLucia also receives certain medical and fringe benefits, including 100% of the premiums payable for medical insurance benefits for Mr. DeLucia and his eligible family members during the time of his employment and reimbursement of travel and other expenses incurred in connection with the performance of his duties in accordance with SharpLink policies. Mr. DeLucia was also entitled to receive an indemnification letter in the form identical to the form provided to SharpLink Israel’s other officers and directors and to be included in SharpLink Israel’s directors’ and officers’ liability insurance policy authorized in accordance with SharpLink’s compensation policy. 57 Mr. DeLucia’s employment was not a guarantee of employment for a specific period of time. His employment with SharpLink was “at-will,” which means that SharpLink Israel or he may have terminated his employment for any reason or no reason, at any time. In the event Mr. DeLucia elected to resign his employment with SharpLink Israel, he agreed to provide SharpLink Israel with 14 days’ written notice of his termination of employment. During this notice period, SharpLink Israel was permitted to ask him to perform specific duties or no duties at all and was permitted to ask him not to attend work during all or part of the notice period. During the notice period, Mr. DeLucia would continue to receive the salary and benefits that he had been receiving immediately prior to such period, subject to any change generally made for other employees of the Company. Further, upon termination of his employment for any reason, Mr. DeLucia agrees to cooperate with SharpLink Israel with respect to those business-related matters of which he had knowledge and to assist with the orderly return of Company property and transition of his work to others, as directed by SharpLink Israel. DeLucia Employment Agreement with SharpLink US Following the completion of the domestication merger between SharpLink Israel and SharpLink US, Mr. DeLucia entered into a new employment agreement with SharpLink US in February 2024 to serve as SharpLink US’ Chief Financial Officer. See NOTE 18 – SUBSEQUENT EVENTS included in the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022. Mr. DeLucia’s employment agreement with SharpLink US (the “DeLucia Agreement”) provides for an annual base salary of $230,000 (“DeLucia Base Salary”) and an annual performance-based cash bonus up to 40% of his annual base salary, as determined and approved by the Compensation Committee. In addition, the Company shall directly pay or reimburse Mr. DeLucia up to $10,000 annually for the following: i) for the premiums of a term life insurance policy and, ii) if elected, executive health exams not covered by the Company’s prevailing benefits plan. In addition, Mr. DeLucia was granted 80,000 RSUs pursuant to the Plan, which shall vest in equal increments on March 31, 2024, June 30, 2024, September 30, 2024 and December 31, 2024. Mr. DeLucia shall be eligible to be granted additional equity awards in accordance with the Company’s policies as in effect from time to time, as recommended and approved by the Compensation Committee. The DeLucia Agreement is for an initial term of two years (“DeLucia Initial Term”), subject to earlier termination, and will be automatically extended for successive one-year periods unless either party gives written notice of termination at least 120 days in advance of the expiration of the DeLucia Initial Term or the then-current term, as applicable. The DeLucia Agreement provides that if Mr. DeLucia is terminated by the Company without cause or if he terminates his employment for good reason, he will be entitled to: i) continuation of the DeLucia Base Salary at the rate in effect immediately prior to the termination date for 12 months following the termination date paid accordance with the Company’s normal payroll practices, but no less frequently than monthly; and ii) if Mr. DeLucia elects to continue group health coverage under any Company group health plan pursuant to the COBRA, the Company shall reimburse Mr. DeLucia for a portion of his COBRA premiums, such that his unreimbursed cost of COBRA premiums does not exceed the cost to Mr. DeLucia of such health plan premiums immediately prior to termination, for a period of up to one year after his termination (or until he is no longer eligible for COBRA continuation, if earlier). In addition, Mr. DeLucia shall be entitled to severance, payable in a lump sum equal to 100% of the DeLucia Base Salary. If employment is terminated by the Company for cause or by Mr. DeLucia for other than good reason, the executive will be entitled only to the accrued salary and bonus obligations through the date of termination. 58 SharpLink Israel’s Employment Agreement with Chris Nicholas Under his employment agreement with SharpLink Israel, Mr. Nicholas received an annual base salary of $240,000 and was eligible to receive an annual bonus, as determined by the SharpLink Israel’s Board of Directors, of up to 25% of his base salary. Following the SharpLink Go-Public Merger in July 2021, Mr. Nicholas received a grant of options under the 2021 Plan to acquire 30,000 SharpLink ordinary shares. One third vested and were exercisable on the grant date, one third vested and became exercisable on the first anniversary of the grant date and one third vested and became exercisable on the second anniversary of the grant date, subject in all cases to Mr. Nicholas’s continued services to SharpLink Israel. Prior to receiving shareholder approval in September 2022 to increase the number of ordinary shares authorized to be granted under the 2021 Plan, and to provide for issuance of stock options to other employees of the Company, Mr. Nicholas forfeited the 30,000 options. On February 27, 2023, Mr. Nicholas received 7,500 options to acquire 7,500 ordinary shares, under the 2021 Plan. Every 1/36 th of the total grant shall vest and be exercisable monthly from March 27, 2023 to February 27, 2026 for 36 months, subject in all cases to Mr. Nicholas’s continued services to SharpLink Israel. Mr. Nicholas also received certain medical and fringe benefits, including 100% of the premiums payable for medical insurance benefits for Mr. Nicholas and his immediate family during the time of his employment and reimbursement of travel and other expenses incurred in connection with the performance of his duties in accordance with SharpLink Israel’s policies. Mr. Nicholas was also entitled to receive an indemnification letter in the form identical to the form provided to SharpLink Israel’s other officers and directors and to be included in SharpLink Israel’s directors’ and officers’ liability insurance policy authorized in accordance with SharpLink Israel’s compensation policy. On January 19, 2024 in connection with the Equity Sale of SharpLink Israel’s Sports Gaming Client Services and SportsHub Gaming Network business units, Mr. Nicholas tendered his resignation as an officer and director of SharpLink Israel. SharpLink Israel’s Employment Agreement with David Abbott Under his employment agreement with SharpLink Israel, Mr. Abbott, who served as SharpLink Israel’s Chief Technology Officer, received an annual base salary of $240,000 and was eligible to receive an annual bonus, as determined by SharpLink Israel’s Board of Directors, of up to 50% of his base salary. On the date of his hire by SharpLink Israel, September 26, 2022, Mr. Abbott received a grant of options under the 2021 Plan to acquire 15,000 SharpLink ordinary shares. Every 1/36 th of the total grant shall vest and be exercisable monthly from October 26, 2023 to September 26, 2026 for 36 months, subject in all cases to Mr. Abbott’s continued services to SharpLink Israel. On February 27, 2023, Mr. Abbott received a grant of options under the 2021 Plan to acquire 10,000 ordinary shares. Every 1/36 th of the total grant shall vest and be exercisable monthly from March 27, 2023 to February 27, 2026 for 36 months, subject in all cases to Mr. Abbott’s continued services to SharpLink Israel. Mr. Abbott also received certain medical and fringe benefits, including 100% of the premiums payable for medical insurance benefits for Mr. Abbott and his immediate family during the time of his employment and reimbursement of travel and other expenses incurred in connection with the performance of his duties in accordance with SharpLink Israel’s policies. Mr. Abbott was also entitled to receive an indemnification letter in the form identical to the form provided to SharpLink Israel’s other officers and directors and to be included in SharpLink Israel’s directors’ and officers’ liability insurance policy authorized in accordance with SharpLink Israel’s Compensation Policy. Mr. Abbott’s employment was not a guarantee of employment for a specific period of time. His employment with SharpLink Israel was “at-will,” which means that the Company or he may have terminated his employment for any reason or no reason, at any time. In the event Mr. Abbott elected to resign his employment with the Company, he had agreed to provide SharpLink with 14 days’ written notice of his termination of employment. During this notice period, SharpLink Israel was permitted to ask him to perform specific duties or no duties at all and may ask him not to attend work during all or part of the notice period. During the notice period, Mr. Abbott would continue to receive the salary and benefits that he had been receiving immediately prior to such period, subject to any change generally made for other employees of SharpLink Israel. Further, upon termination of his employment for any reason, Mr. Abbott had agreed to cooperate with SharpLink Israel with respect to those business-related matters of which he has knowledge and to assist with the orderly return of SharpLink Israel’s property and transition of his work to others, as directed by SharpLink Israel. On December 15, 2023, Mr. Abbott tendered his resignation as Chief Technology Officer of SharpLink Israel. 59 Equity Incentive Plan Information As of December 31, 2023, SharpLink Israel had two equity incentive plans under which ordinary shares of the Company were authorized for issuance to directors, officers or employees of the Company and its subsidiaries in exchange for consideration in the form of goods or services: the 2020 Stock Incentive Plan and the 2021 Equity Incentive Plan. On December 6, 2023, SharpLink Israel’s shareholders approved the new SharpLink Gaming, Inc. 2023 Incentive Plan in connection with approving the domestication merger. 2020 Stock Incentive Plan In December 2020, SharpLink, Inc.’s Board of Directors approved the 2020 Stock Incentive Plan (the “2020 Plan”). Equity instruments allowed to be granted under the plan include stock options, restricted stock awards, stock appreciation rights, performance units and stock bonuses. After giving effect to the reverse stock split effected in April 2023, the 2020 Plan allowed for grants of up to 40,000 shares of SharpLink, Inc. and the 2020 Plan expires on December 23, 2030. Prior to the MTS Merger, 36,000 stock options (adjusted for reverse stock splits effected in July 2021) had been granted under the 2020 Plan. Through the MTS Merger in July 2021, SharpLink Israel assumed the 2020 Plan and exchanged all outstanding stock options in SharpLink, Inc. for those in SharpLink Israel at an exchange rate of 1.3352 shares of SharpLink for one share of SharpLink, Inc. As a result, there were 480,664 stock options outstanding as of the closing date of the MTS Merger. To provide for adequate shares to be issued to Company’s employees, Mr. Rob Phythian, SharpLink’s CEO, and Mr. Chris Nicholas, SharpLink’s COO, forfeited an aggregate of 1,140,000 options, 360,000 of which were vested. As a result, 780,000 options were deemed to have been forfeited and 360,000 options were deemed to have expired. During 2021 and 2022, there were no grants under the 2020 Plan. There will be no future grants made through the 2020 Plan as the plan was succeeded by the 2021 Equity Incentive Plan. 2021 Equity Incentive Plan In July 2021, SharpLink Israel’s shareholders approved the 2021 Plan. The plan is the successor to the 2020 Plan. The Equity instruments allowed to be granted under the plan include stock options, warrants, stock appreciation rights, restricted stock awards, and restricted stock units. In September 2022, shareholders approved an amendment to the 2021 Plan, increasing the total number of equity instruments allowed for grants from 233,663 to 543,663 shares. The 2021 Plan expires on December 23, 2030. During 2023, there were 155,755 stock options granted under the 2021 Plan with a weighted average exercise price of $4.46 per share. The following table provides information about SharpLink’s Ordinary Shares that may be issued upon the exercise of options, warrants and rights under all our existing equity compensation plans as of December 31, 2023. 2023 Equity Incentive Plan On June 12, 2023, the SharpLink US Board of Directors approved the SharpLink Gaming, Inc. 2023 Incentive Plan (“2023 Plan”) for submission to the shareholders at an Extraordinary General Meeting of Shareholders held on December 6, 2023. The shareholders approved the 2023 Plan in connection with approving the domestication merger. Becoming effective upon completion of the domestication merger on February 13, 2024, the 2023 Plan provides for the grant of incentive stock options, non-statutory stock options, SARs, restricted stock awards, RSU awards, performance awards and other awards. Subject to adjustment in accordance with the 2023 Plan and any adjustments as necessary to implement any capitalization adjustments, the aggregate number of shares that may be issued pursuant to awards under the plan shall not exceed 410,000 shares. Shares of SharpLink US Common Stock subject to awards granted under the 2023 Plan that expire or terminate without being exercised in full or that are paid out in cash rather than in shares do not reduce the number of shares available for issuance under the 2023 Plan. If any shares of SharpLink US Common Stock issued pursuant to a share award are forfeited back to or repurchased or reacquired by us for any reason, the shares that are forfeited or repurchased or reacquired will revert to and again become available for issuance under the 2023 Plan. Any shares reacquired in satisfaction of tax withholding obligations or as consideration for the exercise or purchase price of a stock award will not again become available for issuance under the 2023 Plan. 60 Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants or Rights Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans Equity Compensation Plan Approved by Shareholders: 2020 Stock Incentive Plan 43,063 $ 9.40 - 2021 Equity Incentive Plan 245,849 $ 10.00 297,814 2023 Incentive Plan - $ - - Equity Compensation Plan Not Approved by Shareholders: N/A N/A N/A In connection with the domestication merger completed in February 2024, all SharpLink Israel securities, including options issued under the 2020 Plan and 2021 Plan, converted on a one-for-one basis to SharpLink U.S. securities. Effective February 13, 2023, all options exercised under the 2020 Plan and 2021 Plan will be issued shares of Common Stock of SharpLink US. Stock Option Forfeitures by Co-Founders Prior to receiving shareholder approval in September 2022 to increase the number of ordinary shares authorized to be granted under the 2021 Plan, and to provide for issuance of stock options to employees of the Company, Mr. Rob Phythian, SharpLink’s CEO, Mr. Chris Nicholas, SharpLink’s COO, and Brian Bennett, SharpLink’s former CFO forfeited an aggregate 114,000 options, 36,000 of which were vested. As a result, 78,000 options were deemed to have been forfeited and 36,000 options were deemed to have expired. Outstanding Equity Awards The following table sets forth information regarding the options and unvested restricted shares held by each of the named executive officers as of December 31, 2023. Dollar amounts have been rounded up to the nearest whole dollar. Outstanding Equity Awards at Fiscal Year-End Options Name Number of Ordinary Shares Underlying Unexercised Options (Exercisable) Number of Ordinary Shares Underlying Unexercised Options (Unexercisable) Option Exercise Price Option Expiration Date Rob Phythian 8,011 - $ 9.40 12/27/2030 15,000 30,000 $ 11.70 9/12/2032 4,861 12,639 $ 4.40 2/24/2033 Chris Nicholas 8,011 - $ 9.40 12/27/2030 8,741 13,758 $ 6.40 11/08/2032 2,083 5,417 4,40 2/24/2033 Robert DeLucia 6,666 8,334 $ 12.00 8/21/2032 1,388 3,612 4.40 2/24/2033 David Abbott 5,833 9,167 $ 9.50 9/25/2032 2,500 7,500 $ 4.40 2/24/2033 61 Pay Versus Performance In accordance with the SEC’s disclosure requirements pursuant to Item 402(v) of Regulation S-K promulgated under the Exchange Act, provided below is the Company’s Pay Versus Performance disclosures as required by Item 402(v) for smaller reporting companies, we have included a table that compares the total compensation of our principal executive officer (“PEO”) and average other named executive officers (“Non-PEO NEOs”), as presented in the Summary Executive Compensation Table (“Summary Compensation Table”), to compensation actually paid. The table and disclosure below also compares compensation actually paid to our indexed total shareholder return and GAAP Net Income. This disclosure has been prepared in accordance with Item 402(v) and does not necessarily reflect value actually realized by the executives or how our Compensation Committee evaluates compensation decisions in light of Company or individual performance. In particular, our Compensation Committee has not used compensation actually paid as a basis for making compensation decisions, nor does it use GAAP Net Income for purposes of determining incentive compensation. Please refer to our Executive Compensation and Related Information on pages 51 to 63 for a discussion of our executive compensation program objectives and the ways in which we align executive compensation pay with performance. The table below shows for 2023 and 2022 the “total” compensation for Rob Phythian, our PEO and our other NEOs from the Summary Compensation Table above; the compensation actually paid to those officers calculated using rules required by the SEC; our total shareholder return; and our net income. Compensation actually paid does not represent the value of shares received by the officers during the year, but rather is an amount calculated under Item 402(v) of Regulation S-K. Year Summary Compensation Table Total for PEO ($) (1) Compensation Actually Paid to PEO ($) (1) (2) (3) Average Summary Compensation Table Total for Non-PEO NEOs ($) (1) Average Compensation Actually Paid to Non-PEO NEOs ($) (1) (2) (3) Value of Initial Fixed $100 Investment Based on Total Shareholder Return ($) Net Loss ($) 2023 488,428 627,976 911,675 1,009,670 4.82 (14,243,182 ) 2022 624,247 547,611 838,098 761,462 13.10 (15,233,378 ) (1) The individuals comprising SharpLink’s Non-PEO NEOs for each year presented are listed below: 2022 2023 Chris Nicholas, Chief Operating Officer Chris Nicholas, Chief Operating Officer Brian Bennett, Former Chief Financial Officer Robert DeLucia, Chief Financial Officer Robert DeLucia, Chief Financial Officer David Abbott, Chief Technology Officer David Abbott, Chief Technology Officer (2) The amounts shown for compensation actually paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized or received by the Company’s NEOs. These amounts reflect the Summary Compensation Table Total with certain adjustments as described in footnote 3 below. (3) Compensation actually paid reflects the exclusions and inclusions of certain amounts for the PEOs and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with ASC 718, Compensation – Stock Compensation. Amounts in the Exclusion of Stock Awards column are the totals from the Stock Awards columns set forth in the Summary Compensation Table, which reflect the fair market values of equity awards as of each grant date. 62 2023 - PEO 2022 - PEO 2023 - Non-PEO NEOs 2022 - Non-PEO NEOs Summary Compensation Table (“SCT”) Total Compensation $ 488,428 $ 624,247 $ 911,674 $ 838,098 Deduct equity awards reported in SCT $ (105,958 ) $ (130,576 ) $ (94,876 ) $ (157,157 ) Add year-end fair value of equity awards in covered fiscal year which are outstanding and unvested as of the end of the covered fiscal year $ 164,686 $ 53,940 $ 144,362 $ 70,034 Add the change in fair value as of the end of the covered fiscal year (from the end of the prior fiscal year) of any awards granted in prior years that remain outstanding and unvested as of the end of the covered fiscal year $ 80,821 $ - $ 48,510 $ 10,487 Add the fair value as of the vesting dates for awards that are granted and vested in the same covered fiscal year $ 11,509 $ - $ 9,698 $ 10,022 Add the change in fair value from the end of the prior fiscal year to the vest date for awards granted in prior years that vested in the covered year $ 51,814 $ 10,022 $ 73,488 $ - Deduct the fair value at the end of the prior fiscal year for awards granted in prior years that forfeited during the covered fiscal year $ - $ (1,225,725 ) $ - $ (912,256 ) Compensation Actually Paid $ 627,976 $ 547,611 $ 1,009,670 $ 761,462 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information as of March 27, 2024 regarding the beneficial ownership by our management and all shareholders known to us to own beneficially more than 5% of our Common Stock: Name (1) Number of Common Stock Beneficially Owned (2) Percentage of Outstanding Common Stock (3) Principal Shareholders Alpha Capital Anstalt (“Alpha”) (4) (5) (6) 328,332 9.99 % Executive Officers Rob Phythian, CEO (7) (8) 107,805 3.3 % Robert DeLucia, CFO (9) (10) 30,833 * Non-Employee Directors Leslie Bernhard (11) 10,000 * Robert Gutkowski (11) 10,000 * Obie McKenzie (11) 10,000 * All directors and executive officers as a group 168,638 5.1 % * Indicates less than 1%. 1 Unless otherwise indicated, such individual’s address is C/O SharpLink Gaming, Inc., 333 Washington Avenue North, Suite 104, Minneapolis, Minnesota 55401. 63 2 Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Common Stock relating to options currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them. 3 Percentages are calculated based on 3,286,608 shares of Common Stock issued and outstanding as of March 27, 2024, less 90 shares of Common Stock held as treasury stock. This represents a total number of 3,286,518. 4 Beneficial ownership reflects the maximum number of Common Stock that may be acquired by Alpha subject to the Beneficial Ownership Limitation. Pursuant to the Company’s records, Alpha owns of record (i) 156,207 shares of Common Stock, (ii) 12,481 Preferred B Shares, (iii) a prefunded warrant in the amount of 469,560 shares, and (iv) a warrant to purchase up to 254,233 shares of Common Stock at an exercise price of $4.0704 per share. 5 As of March 27, 2024, there were 7,202 Preferred A-1 Shares accrued as payment of quarterly dividends on the Preferred B Shares held by Alpha, but not yet issued. 6 Alpha’s address is Altenbach 8, 9490 Vaduz, Principality of Liechtenstein. 7 Includes 972 shares of Common Stock issuable upon exercise of options within 60 days. 8 Includes 20,000 Restricted Stock Units (“RSUs”) which vest on March 31, 2024. 9 Includes 1,112 shares of Common Stock issuable upon exercise of options within 60 days. 10 Includes 15,000 Restricted Stock Units (“RSUs”) which vest on March 31, 2024. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Director Independence The Board of Directors has reviewed the independence of our directors based on the listing standards of the Nasdaq Capital Market. Based on this review, the Board of Directors determined that each of Messrs. McKenzie and Gutkowski and Ms. Bernhard are independent within the meaning of the Nasdaq rules. In making this determination, our Board of Directors considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence. As required under applicable Nasdaq rules, we anticipate that our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present. 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 on the Board of Directors of SharpLink Israel. The Company paid $921,565 and $1,198,710 for the years ending December 31, 2023 and 2022, respectively for insurance coverage brokered by Brown. SharpLink Israel’s former director earned no commissions for the placement of these policies. 64 Connecticut Facility Lease SharpLink Israel leased office space in Collinsville, Connecticut from CJEM, LLC, an entity owned by Chris Nicholas, SharpLink Israel’s Chief Operating Officer and member of its Board of Directors, pursuant to a lease dated December 16, 2020. SharpLink Israel paid approximately $38,400 in each of 2023 and 2022 under such lease. The current term of the lease expired on December 31, 2023, and SharpLink Israel had the right to extend the Lease under the same terms for an additional three-year term through December 31, 2026. On January 18, 2024 with the completion of the Equity Sale to RSports, this lease obligation was transferred to RSports in accordance with the terms of the Purchase Agreement. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit and Tax Fees The following table sets forth, for each of the years indicated, the billed audit fees by Cherry Bekaert, LLP, our principal independent registered public accounting firm. All of such fees were pre-approved in advance by our Audit Committee. 2023 2022 Audit Fees $ 312,044 $ 400,000 Audit-Related Fees — — Tax Fees — — All Other Fees — — Total $ 312,044 $ 400,000 Pre-Approval Policies and Procedures Our Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our independent registered public accountants. Pre-approval of an audit or non-audit service may be given as a general pre-approval, as part of the Audit Committee’s approval of the scope of the engagement of our independent auditor, or on an individual basis. Any proposed services exceeding general pre-approved levels also require specific pre-approval by our Audit Committee. The policy prohibits retention of the independent public accountants to perform the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act or the rules of the SEC, and also requires the Audit Committee to consider whether proposed services are compatible with the independence of the public accountants. 65 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) 66 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) 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+* 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) 10.6+* 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) 10.7+* 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) 10.8+* 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) 10.9* 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) 10.10* 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) 67 10.11* Asset Purchase Agreement, dated December 31, 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) 10.12†* 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) 10.13* 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) 10.14* 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) 10.15††* 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) 10.16* 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) 10.17* 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) 10.18* 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) 10.19* 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) 10.20* 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) 10.21* 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) 10.22* 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) 68 10.23* 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) 10.24* 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) 10.25* 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) 10.26* 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) 10.27* 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) 10.28* 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) 10.29* 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) 10.30* 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) 10.31* 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) 10.32* 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) 10.33* 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) 10.34* 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* 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) 69 10.37* 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) 10.38* 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) 10.39* 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) 10.40* 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) 10.41* 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) 10.42* 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) 10.43* 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) 10.44* 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) 10.45* 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) 10.46* 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) 10.47* 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) 10.48* 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) 10.49* 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) 10.50* 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) 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 70 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** XBRL Instance Document 101.SCH** XBRL Taxonomy Extension Schema Document 101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF** XBRL Taxonomy Extension Definition Linkbase Document 101.LAB** XBRL Taxonomy Extension Labels Linkbase Document 101.PRE** XBRL Taxonomy Extension Presentation Linkbase 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. 71 PART IV 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 29, 2024 By: /s/ Rob Phythian Rob Phythian Chief Executive Officer and Director Dated: March 29, 2024 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 29, 2024 Rob Phythian (Principal Executive Officer) /s/ Robert DeLucia Chief Financial Officer March 29, 2024 Robert DeLucia (Principal Financial Officer) /s/ Leslie Bernhard Director March 29, 2024 Leslie Bernhard /s/ Robert Gutkowski Director March 29, 2024 Robert Gutkowski /s/ Obie McKenzie Director March 29, 2024 Obie McKenzie 72 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, 2023 and 2022 F-4 Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022 F-5 Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2023 and 2022 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 F-7 Notes to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022 F-8 F- 1 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, 2023 and 2022, 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, 2023 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, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, 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 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, 2023, 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, 2023 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, 2023. 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 29, 2024 F- 3 SHARPLINK GAMING, INC. CONSOLIDATED BALANCE SHEETS December 31, 2023 December 31, 2022 Assets Current Assets Cash $ 2,487,481 $ 1,381,344 Accounts receivable, net of allowance for credit losses of $ 0 415,119 440,873 Unbilled receivables 12,000 12,000 Prepaid expenses and other current assets 383,295 505,905 Current assets from discontinued operations 67,805,379 51,570,443 Total current assets 71,103,274 53,910,565 Equipment, net 8,792 21,881 Intangibles Intangible assets, net 168,112 838,463 Goodwill - 1,615,167 Assets from discontinued operations - 8,659,415 Total assets $ 71,280,178 $ 65,045,491 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable and accrued expenses $ 1,463,699 $ 1,466,381 Line of credit 6,345,978 - Current portion of long-term debt 645,571 620,173 Current portion of convertible debenture, net of discount of $ 283,335 and $ 0 , respectively, warrant discount of $ 831,746 and $ 0 , respectively, accrued interest of $ 299,648 and $ 0 , respectively 4,395,753 - Current liabilities from discontinued operations 66,396,883 56,824,479 Total current liabilities 79,247,884 58,911,033 Long-Term Liabilities Deferred tax liability 7,155 6,206 Debt, less current portion 1,424,908 2,063,243 Liabilities from discontinued operations - 1,078,492 Total liabilities 80,679,947 62,058,974 Commitments and Contingencies - - Stockholders’ Equity Series A-1 preferred stock, $ 0.20 par value; authorized shares: 260,000 ; issued and outstanding shares: 7,202 and 6,630 , respectively; liquidation preference: $ 116,997 and $ 138,414 , respectively 1,440 1,326 Series B preferred stock, $ 0.20 par value; authorized shares: 370,000 ; issued and outstanding shares: 12,481 ; liquidation preference: $ 529,122 and $ 595,245 2,496 2,496 Preferred stock, value 2,496 2,496 Ordinary shares, $ 0.20 par value; authorized shares 100,000,000 ; issued and outstanding shares: 2,863,734 and 2,688,541 , respectively 572,770 537,731 Treasury stock, 90 ordinary shares at cost ( 29,000 ) ( 29,000 ) Additional paid-in capital 77,909,981 76,039,604 Accumulated deficit ( 87,857,456 ) ( 73,565,641 ) Total stockholders’ equity (deficit) ( 9,399,769 ) 2,986,517 Total liabilities and stockholders’ equity $ 71,280,178 $ 65,045,491 See accompanying notes to these consolidated financial statements. F- 4 SHARPLINK GAMING, INC. CONSOLIDATED STATEMENTS OF OPERATIONS 2023 2022 For the Years Ended December 31, 2023 2022 Revenues $ 4,952,725 $ 3,489,948 Cost of revenues 3,420,062 2,173,835 Gross profit 1,532,663 1,316,113 Operating expenses Selling, general, and administrative expenses 7,961,133 10,872,951 Goodwill and intangible asset impairment expenses 2,464,732 4,726,000 Total operating expenses 10,425,865 15,598,951 Operating loss ( 8,893,202 ) ( 14,282,838 ) Other income and expense Interest income 53,493 33,402 Other (expense) income ( 12,606 ) 250,000 Interest expense ( 1,150,341 ) ( 109,165 ) Change in fair value of convertible debenture ( 1,230,234 ) - Total other income and expense ( 2,339,688 ) 174,237 Net loss before income taxes ( 11,232,890 ) ( 14,108,601 ) Income tax expense (benefit) 15,708 ( 12,955 ) Net loss from continuing operations ( 11,248,598 ) ( 14,095,646 ) Net loss from discontinued operations, net of tax ( 2,994,584 ) ( 1,137,732 ) Net loss $ ( 14,243,182 ) $ ( 15,233,378 ) Numerator for basic and diluted net loss per share: Net loss from continuing operations available to ordinary shareholders $ ( 11,299,092 ) $ ( 14,104,508 ) Net loss from discontinued operations available to ordinary shareholders ( 2,994,584 ) ( 1,137,732 ) Total Numerator for basic and diluted net loss per share ( 14,293,676 ) ( 15,242,240 ) Denominator for basic and diluted net loss per share: Weighted average shares outstanding 2,760,970 2,487,960 Net loss per share - Basic and diluted Net loss from continuing operations per share $ ( 4.09 ) $ ( 5.67 ) Net loss from discontinued operations per share ( 1.08 ) ( 0.46 ) Net loss per share $ ( 5.17 ) $ ( 6.13 ) See accompanying notes to these consolidated financial statements. F- 5 SHARPLINK GAMING, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 Shares Amount Shares Amount Shares Amount Capital stock deficit equity Ordinary Shares Series A-1 preferred stock Series B preferred stock Additional Paid-In Treasury Accumulated Total shareholders’ Shares Amount Shares Amount Shares Amount Capital stock deficit equity Balance, December 31, 2021 2,236,615 $ 447,346 5,474 $ 1,094 12,481 $ 2,496 $ 72,101,783 $ ( 29,000 ) $ ( 58,332,263 ) $ 14,191,456 Net loss - - - - - - - - ( 15,233,378 ) ( 15,233,378 ) Stock-based compensation expense - - - - - - 2,486,152 - - 2,486,152 Dividends on Series B preferred stock in Series A-1 preferred stock - - 1,156 232 - - ( 232 ) - - - Issuance of ordinary shares for services 20,000 4,000 - - - - 168,000 - - 172,000 Issuance of ordinary shares in SportsHub Gaming Network Acquisition 431,926 86,385 - - - - 1,283,902 - - 1,370,287 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 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 Balance 2,688,541 $ 537,731 6,630 $ 1,326 12,481 $ 2,496 $ 76,039,605 $ ( 29,000 ) $ ( 73,565,641 ) $ 2,986,517 Net Loss ( 14,243,182 ) ( 14,243,182 ) Stock-based compensation expense - - - - - - 634,367 - - 634,367 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 Warrants issued in conjunction with convertible debenture - - - - - - 1,174,229 - - 1,174,229 Deemed dividend on Series B preferred stock anti-dilutive provision - - - - - - 48,633 - ( 48,633 ) - 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 ) Balance 2,863,734 $ 572,770 7,202 $ 1,440 12,481 $ 2,496 $ 77,909,981 $ ( 29,000 ) $ ( 87,857,456 ) $ ( 9,399,769 ) See accompanying notes to these consolidated financial statements. F- 6 SHARPLINK GAMING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 2023 2022 Includes cash flow activities from both continuing and discontinued operations For the Year Ended December 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss from continuing operations $ ( 11,248,598 ) $ ( 14,095,646 ) Net income (loss) from discontinued operations, net of tax $ ( 2,994,584 ) $ ( 1,137,732 ) Net loss $ ( 14,243,182 ) $ ( 15,233,378 ) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 107,414 912,248 Change in fair value of convertible debenture 1,230,234 - OID and warrant amortization 459,148 - Amortization of loan costs 10,714 8,073 Accrued interest on convertible debenture 299,648 - Amortization of prepaid stock 129,000 43,000 Deferred tax expense ( 6,206 ) 81,323 Stock-based compensation expense 261,373 1,940,691 Loss on disposal of equipment 12,607 2,594 Goodwill and impairment expense 2,464,732 4,726,000 Write-off of amounts related to the Fourcubed acquisition - ( 303,523 ) Changes in assets and liabilities Accounts receivable 25,754 68,320 Prepaid expenses ( 6,390 ) ( 253,844 ) Accrued expenses and other current liabilities 1,344,158 37,819 Deferred revenue - ( 76,600 ) Net cash used in operating activities – continuing operations ( 7,910,996 ) ( 8,047,277 ) Net cash provided (used in) by operating activities - discontinued operations 8,493,883 2,109,891 Net cash provided by (used in) operating activities 582,887 ( 5,937,386 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for equipment ( 12,147 ) ( 13,048 ) Capital expenditures for software ( 273,999 ) ( 22,747 ) Proceeds from sale of equipment - 4,493 Cash payments relating to the acquisition of Fourcubed - ( 388,000 ) Net cash used for investing activities – continuing operations ( 286,146 ) ( 419,302 ) Net cash provided by (used in) investing activities - discontinued operations ( 745,951 ) 48,721,370 Net cash provided by (used in) for investing activities ( 1,032,097 ) 48,302,068 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from convertible debenture and purchase warrants 4,000,000 - Principal payments on convertible debenture ( 419,048 ) - Proceeds from line of credit 6,350,000 - Proceeds from issuance of long-term debt - 3,250,000 ) Principal payments on long-term debt ( 620,173 ) ( 549,225 ) Debt issuance fees ( 7,500 ) ( 25,432 ) Net cash generated by financing activities – continuing operations 9,303,279 2,675,343 Net cash generated by financing activities - discontinued operations 481,575 - Net cash generated by financing activities 9,784,854 2,675,343 Net change in cash 9,335,644 45,040,025 Cash and restricted cash, beginning of year including discontinued operations 51,105,486 6,065,461 Cash and restricted cash, end of year including discontinued operations 60,441,130 51,105,486 Less cash from discontinued operations ( 57,953,649 ) ( 49,724,142 ) Cash and restricted cash, end of year $ 2,487,481 $ 1,381,344 Reconciliation of Cash and Restricted Cash Cash $ 2,487,481 $ 1,381,344 Restricted cash - - Total cash and restricted cash, end of period $ 2,487,481 $ 1,381,344 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest 485,531 109,165 Cash paid for taxes 86,320 19,916 NON-CASH INVESTING ACTIVITIES: Issuance of ordinary shares in SportsHub Gaming Network Merger - 1,370,287 Issuance of ordinary shares for advisory services - 172,000 Shares issued for services provided 48,300 - NON-CASH FINANCING ACTIVITIES: Deemed dividends on Series B preferred stock 48,633 - 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 8,862 Dividend due to forgiveness of MTS intercompany loan - 2,039,000 Extension of maturity of operating lease liability 77,742 - NET ASSETS AND LIABILITIES ACQUIRED IN ACQUISITION OF SPORTSHUB GAMES NETWORK: Cash and Restricted Cash $ 48,859,270 Accounts receivable 186,712 Prepaids and other assets 1,916,932 Operating right-of-use asset 95,793 Equipment 11,953 Goodwill and intangible assets 7,358,703 Accounts payable and accrued liabilities ( 284,345 ) Customer obligations ( 42,600,997 ) Prize liabilities ( 5,056,120 ) Note payable ( 5,387,851 ) Other long-term liabilities ( 106,703 ) Deferred revenue ( 3,574,285 ) Deferred tax liability ( 48,775 ) Net assets acquired $ 1,370,287 See accompanying notes to these consolidated financial statements. F- 7 SHARPLINK GAMING, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 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 “Equity Sale”), 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 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. See Note 3 – Discontinued Operations for further information. All explanations and amounts relating to discontinued operations are referred throughout the consolidated financial statements to Note 3. 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, Ltd. (“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. See Note 18. 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: Schedule of Expected Change in Par Value Ordinary Shares Par value for ordinary shares at $ 0.20 as reported at December 31, 2023 $ 572,770 Par value for common stock at $ 0.0001 at December 31, 2023 286 Net change in par value -- will be reflected in additional paid-in capital $ 572,484 Preferred Shares Par value for Series A-1 preferred stock at $ 0.20 par value as reported at December 31, 2023 $ 1,440 Par value for Series B preferred stock at $ 0.20 par value as reported at December 31, 2023 2,496 Total $ 3,936 Par value for preferred stock at $ 0.0001 par value at December 31, 2023 2 Net change in par value -- will be reflected in additional paid-in capital $ 3,934 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 We operate in two reportable segments. 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. 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, 2023 and 2022 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 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 were sold for $ 22,500,000 in an all cash transaction. Ultimately, the Company has discontinued operations for the Sports Gaming Client Services, SportsHub Gaming Network and Enterprise TEM segments. See Note 3. F- 9 Business Combinations The purchase price of an acquired business is allocated to the assets acquired and liabilities assumed at their estimated fair values on the date of acquisition using the acquisition method of accounting. Any unallocated purchase price amount is recognized as goodwill on the consolidated balance sheet if it exceeds the estimated fair value and as a bargain purchase gain on the consolidated statement of operations if it is below the estimated fair value. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment, and the utilization of independent valuation experts as well as the use of significant estimates and assumptions with respect to the timing and amounts of future cash inflows and outflows, discount rates, market prices and asset lives, among other items. The judgments made in the determination of the estimated fair value assigned to the assets acquired and liabilities assumed, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization expense. Acquisition-related costs are expensed as incurred and changes in deferred tax asset valuation allowances and income tax uncertainties after the measurement period are recorded in Provision for Income Taxes. Restricted Cash Restricted cash consists of funds held for payment of prize liabilities for various daily and seasonal peer-to-peer fantasy games, as well as private fantasy league dues from customers who utilize the services previously offered via the Company’s secure online payment and league dues management website. 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, 2023 by banking institution and does not include any reduction for the FDIC insured limit of $ 250,000 . Schedule of Cash and Restricted Cash Bank December 31, 2023 Platinum Bank $ 145,436 Deerwood Bank 2,040,937 First Citizens 222,639 Other 78,469 Total $ 2,487,481 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. Allowance for credit losses as of December 31, 2023 and 2022 were $ 0 and $ 0 , respectively. During the years ended December 31, 2023 and 2022, there was no amount of the allowance for credit losses. The Company recognized unbilled revenue when revenue is recognized prior to invoicing. F- 10 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 years ended December 31, 2023 and 2022. The investment was sold as part of the Equity Sale 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, 2023 and 2022, was $ 10,289 and $ 10,479 , respectively. Accumulated depreciation from continuing operations as of December 31, 2023 and 2022 was $ 24,759 and $ 18,441 , 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 internally developed software, customer relationships, trade names and 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 ranges from three to ten years . 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 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 $ 273,999 and $ 23,048 of costs in the development of its software for continuing operations for the years ended December 31, 2023 and 2022, 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 – International 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 International 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. During the year ended December 31, 2022, the Company recorded $ 3,211,000 of impairment charges for customer relationship intangible asset due to the loss of access to players in the Russian Market caused by an exit of an Affiliate Marketing Services -- International customer from the Russian market. 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. The Company recorded goodwill impairment of $ 1,615,167 , which was due to the Company’s largest Affiliate Marketing Services – International 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. During the year ended December 31, 2022, the Company recorded $ 1,515,000 of goodwill impairment charges due to the loss of access to players in the Russian market caused by an exit of an Affiliate Marketing Services – International customer from the Russian market. 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. See Note 3 for discontinued operations impairment. F- 12 Accounts Payable The composition of accounts payable and accrued expenses from continuing operations are as follows: Schedule of Accounts Payable and Accrued Expenses December 31, 2023 December 31, 2022 Accounts payable $ 834,060 $ 689,159 Accrued wages and payroll expenses 63,359 115,739 Accrued bonus 305,747 208,964 Accrued interest 48,875 - Other accrued expenses 211,658 452,519 Accounts payable and accrued expenses $ 1,463,699 $ 1,466,381 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. Severance Pay Certain of the Company’s employees in Israel subscribed to Section 14 of Israel’s Severance Pay Law, 5723-1963 (“Section 14”). Pursuant to Section 14, the Company’s employees, covered by this section, are entitled to monthly deposits, at a rate of 8.33 % of their monthly salary, which are made on their behalf by the Company. Payments in accordance with Section 14 release the Company from any future severance liabilities in respect of those employees. Neither severance pay liability nor severance pay fund under Section 14 for such employees is recorded on the Company’s balance sheet. With regards to employees in Israel that are not subject to Section 14, the Company’s liability for severance pay is calculated pursuant to the local Severance Pay Law, based on the most recent salary of the relevant employees multiplied by the number of years of employment as of the balance sheet date. These employees are entitled to one-month salary for each year of employment or a portion thereof. The Company’s liability for these employees is fully provided for via monthly deposits with severance pay funds, insurance policies and an accrual. The value of the liability of $ 0 and $ 342,000 for December 31, 2023 and 2022, respectively, is recorded in other current liabilities from discontinued operations in the consolidated balance sheet. The value of these deposits of $ 0 and $ 279,000 for December 31, 2023 and 2022, respectively, is recorded in current assets from discontinued operations in the consolidated balance sheet. 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 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 – United States and the Affiliate Marketing Services – International operating segments generate 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 . The Sports Gaming Client Services operating segments’ 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. See Note 3. The Company’s SportsHub operating segment 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. See Note 3. F- 14 Advertising and Marketing Expenses The Company incurred $ 675,496 in advertising and marketing expenses for continuing operations and $ 176,224 for discontinued operations, respectively, for the year ended December 31, 2023. For the year ended December 31, 2022, the Company incurred $ 514,087 in marketing and advertising expenses for continuing operations and $ 13,093 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. 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. Since the Company had net losses for all the periods presented, basic and diluted loss per share are the same, and additional potential ordinary shares have been excluded, as their effect would be anti-dilutive. At December 31, 2023, dividend accrued in Preferred Series A-1 stock of 7,202 shares, total issuable shares of Series B preferred stock of 12,481 , total stock options of 414,819 and warrants of 1,158,015 were not included in the net loss per share calculation. At December 31, 2022, dividend accrued in Preferred Series A-1 stock of 6,630 shares, total issuable shares of Series B preferred stock of 12,481 shares, total stock options of 288,914 and warrants of 400,359 were not included in the net loss per share calculation. 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: Schedule of Loss Per Share and Weighted-average For the Year Ended December 31, 2023 2022 Net loss from continuing operations $ ( 11,248,598 ) $ ( 14,095,646 ) Less: deemed dividends on series B preferred stock ( 48,633 ) - Less: dividends on series B preferred stock ( 1,861 ) ( 8,862 ) Net loss from continuing operations available to ordinary shareholders ( 11,299,092 ) ( 14,104,508 ) Net loss from discontinued operations, net of tax, available to ordinary shareholders ( 2,994,584 ) ( 1,137,732 ) Net loss available to ordinary shareholders $ ( 14,293,676 ) $ ( 15,242,240 ) Basic and diluted weighted-average shares outstanding 2,760,970 2,487,960 Basic and diluted: Net loss from continuing operations per share $ ( 4.09 ) $ ( 5.67 ) Net loss from discontinued operations per share ( 1.08 ) ( 0.46 ) Net loss per share $ ( 5.17 ) $ ( 6.13 ) 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 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 the use of the acquisition method of accounting for business combinations, intangibles and long-lived asset impairments, goodwill and impairment, convertible debenture fair value, stock based compensation, discontinued operations and revenue recognition. 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 August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the ASU also simplify the guidance in ASC 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The Company adopted ASU 2020-06 on January 1, 2023 and was applied to the Company’s accounting for its convertible debenture and warrants. See Note 8. In June 2016 and subsequently amended in March 2022, the FASB issued ASC 326, Financial Instruments – Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments (“ASC 326”), which replaces the existing incurred loss model with a current expected credit loss (“CECL”) model that requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company would be required to use a forward-looking CECL model for accounts receivables, guarantees and other financial instruments. The Company adopted ASC 326 on January 1, 2023 and ASC 326 did not have a material impact on its consolidated financial statements as the Company has not had any historical credit losses. Recently Issued Accounting Pronouncements Not Yet Adopted 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. ASU 2023-07 is effective for public business entities for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations. 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. F- 16 Note 2 - Going Concern In the pursuit of SharpLink’s previous long-term growth strategy and 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, 2023 and 2022, the Company had a net loss from continuing operations of $ 11,248,598 and $ 14,095,646 , respectively; and cash provided by operating activities from continuing and discontinued operations of $ 582,887 and cash used for operating activities from continuing and discontinued operations $ 5,937,386 , for the years ended December 31, 2023 and 2022, respectively. Subsequent to December 31, 2023, the Company completed the Equity Sale 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 Equity Sale, 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. In addition, the Company redeemed the outstanding convertible debenture issued to 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 18 . 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. 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- 17 Equity 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 shares of common stock or 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 Equity Sale, 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 Equity Sale on January 18, 2024. See Note 18. In connection with the Equity Sale, 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. Sale of MTS In June 2022, the Company’s Board of Directors authorized management to enter into negotiations to sell 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. The assets and liabilities remaining post transaction are in the process of winding down subsequent to the year ended December 31, 2022. Accordingly, the assets and liabilities of the MTS business were separately reported as assets and liabilities from discontinued operations as of December 31, 2023 and December 31, 2022. The results of operations and cash flows of MTS for all periods are separately reported as discontinued operations. Prior to the sale of MTS on December 31, 2022, the Enterprise TEM operating segment’s performance obligations are satisfied either overtime (managed services and maintenance) or at a point in time (software licenses). Professional services rendered after implementation are recognized as performed. Software license revenue is recognized when the customer has access to the license and the right to use and benefit from the license. Many of the Enterprise TEM operating segment’s agreements include software license bundled with maintenance and support. The Company allocates the transaction price for each contract to each performance obligation identified in the contract based on the relative standalone selling price (SSP). The Company determines SSP for the purposes of allocating the transaction price to each performance obligation by considering several external and internal factors including, but not limited to, transactions where the specific element sold separately, historical actual pricing practices in accordance with ASC 606, Revenues from Contracts with Customers. The determination of SSP requires the exercise of judgement. For maintenance and support, the Company determines the SSP based on the price at which the Company sells a renewal contract. 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 Summary Reconciliation of Discontinued Operations Summary Reconciliation of Discontinued Operations For the Year Ended December 31, 2023 For the Year Ended December 31, 2022 Revenues $ 9,035,670 $ 7,532,081 Cost of Revenues 5,643,426 5,880,599 Gross (Loss) Profit 3,392,244 1,651,482 Operating Expenses Selling, general, and administrative expenses 6,843,856 2,534,234 Goodwill and intangible asset impairment expense 674,982 1,224,000 Total operating expenses 7,518,838 3,758,234 Operating Loss ( 4,126,594 ) ( 2,106,752 ) Interest income 1,778,999 44,598 Other (expense) income ( 100,648 ) 997,000 Interest expense ( 503,401 ) ( 20,281 ) Total other income and expense 1,174,950 1,021,317 Loss Before Income Taxes ( 2,951,644 ) ( 1,085,435 ) Provision for income tax expenses 42,940 52,297 Loss from discontinued operations $ ( 2,994,584 ) $ ( 1,137,732 ) 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, 2023 and December 31, 2022: Schedule of Major Classes of Assets and Liabilities December 31, 2023 December 31, 2022 Carrying amounts of major classes of assets included as part of discontinued operations: Current assets Cash $ 46,369,229 $ 38,591,185 Restricted cash 11,584,320 11,132,957 Accounts receivable, net of $ 0 allowance 738,739 526,657 Unbilled receivables 9,447 35,000 Contract assets 274,833 219,116 Deferred prize expense 340,781 356,158 Prepaid expenses and other current assets 439,697 709,370 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 $ 67,805,379 $ 51,570,443 Non-current assets Investment, cost - 200,000 Equipment, net - 38,337 Right-of-use asset – operating lease - 230,680 Intangible assets, net - 2,889,470 Goodwill - 5,300,928 Total non-current assets $ - $ 8,659,415 F- 19 December 31, 2023 December 31, 2022 Carrying amounts of major classes of liability included as part of discontinued operations: Current Liabilities Accounts payable and accrued expenses $ 1,123,105 $ 1,872,538 Contract liabilities 2,407,924 2,168,453 Prize liability 6,475,400 6,061,434 Customer obligations 50,249,095 42,171,589 Line of credit 5,000,000 4,120,651 Current portion of long-term debt 869,426 398,745 Current portion of lease liability 251,898 31,069 Deferred tax liability 20,035 - Total current liabilities $ 66,396,883 $ 56,824,479 Debt, less current portion - 868,455 Lease liability, less current portion - 210,037 Total liabilities $ 66,396,883 $ 57,902,971 Note 4 – Intangible Assets Intangible assets as of December 31, 2023 and 2022 consisted of the following: Schedule of Intangible assets Weighted-average amortization period Cost, Net of Accumulated (years) Impairment Amortization Net 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 Balance, December 31, 2022 Customer relationships 5 – 10 $ 933,000 $ 117,587 $ 815,413 Acquired technology 3 - 5 807,050 784,000 23,050 Software in development N/A - - - $ 1,740,050 $ 901,587 $ 838,463 The change in the gross carrying amount of intangible assets as of December 31, 2023 compared to December 31, 2022 was due to $ 273,999 of additional costs related to internally developed software that were capitalized during the year, offset by $ 849,565 of impairment charges of the customer relationship and internally developed software in Affiliate Marketing International, which was due to the loss of future revenue by the exit of Affiliate Marketing International’s largest customer from the European market in the 4 th quarter of 2023. The extent of impairment was determined based upon the projected performance of the asset group. Key management assumptions considered in the determination of the impairment were the ongoing customer relationships, customer attrition and operating margins. There is inherent uncertainty included in the assumptions used in intangible impairment testing. A change to any of the assumptions could lead to a future impairment that could be material. Amortization expense for the years ended December 31, 2023 and 2022 was $ 97,125 and $ 901,587 , respectively, for continued operations. Estimated future amortization expense related to the intangible assets placed into service is $ 6,588 per year through September 30, 2025. Note 5 – Goodwill Goodwill as of December 31, 2023 and 2022 consisted of the following: Schedule of Goodwill Affiliate Marketing Services -- International Total Balance as of December 31, 2021 3,130,167 3,130,167 Less: Impairment charges ( 1,515,000 ) ( 1,515,000 ) Balance as of December 31, 2022 1,615,167 1,615,167 Less: Impairment charges $ ( 1,615,167 ) $ ( 1,615,167 ) Balance as of December 31, 2023 $ - $ - 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 International’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 $ 6,350,000 outstanding as of as of December 31, 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 Equity Sale 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- 20 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 agreement bears annual interest at a rate of 4 % 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 agreement which are presented net within debt on the consolidated balance sheet and amortized on a method which approximates the effective interest method to interest expense on the consolidated statement of operations. The remaining principal balance outstanding on the term loan was $ 2,080,601 as of December 31, 2023, of which $ 645,571 is due within the next year. In addition to customary non-financial covenants, the term loan requires FCAC to maintain a minimum quarterly debt service coverage ratio, defined as adjusted EBITDA divided by debt service (interest expense and mandatory debt principal repayment) of 1.20. The Company was in compliance with the debt service coverage ratio as of December 31, 2023. On January 18, 2024, in conjunction with the Equity Sale, the term loan was paid off. A summary of the debt agreement is noted below: Schedule of Debt December 31, 2023 Note Payable – Bank, $ 3,250,000 principle, secured by assets of FCAC $ 2,080,601 Less unamortized debt issuance costs 10,122 Less current portion 645,571 Long-term debt $ 1,424,908 The outstanding amount of debt as of December 31, 2023, matures by year as follows: Schedule of Outstanding Amount of Debt Year Amount For the remaining three months ended December 31, 2023 2024 $ 645,571 2025 672,471 2026 700,256 2027 62,303 Total $ 2,080,601 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- 21 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 equity sales 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 Equity Sale; 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. See Note 18. F- 22 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 equity sales 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 Equity Sale 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 Equity Sale, 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 is valued at $ 260,111 and shall be subject to the repurchase terms set forth in the Settlement Agreement. See Note 18. F- 23 Note 9 - Fair Value The following provides a summary of the Convertible Debenture recorded at fair value as of December 31, 2023: Summary of Convertible Debenture recorded at Fair Value Principle amount of convertible debenture at issuance: $ 4,400,000 Principle payments made ( 419,048 ) Unamortized discount for warrants ( 831,746 ) Unamortized discount for OID ( 283,335 ) Accrued interest expense 299,648 Change in fair value 1,230,234 Balance of convertible debenture as of December, 2023: 4,395,753 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, 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 condensed consolidated statements of operations as other income (expense) for the 12 months ended December 31, 2023. 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. The Purchase Warrant fair value has not changed since the issuance date: Schedule of Consolidated Financial Assets and Liabilities Measured at Fair Value Convertible Debenture Purchase Warrant Level I $ - $ - Level II $ - $ - Level III $ 4,395,753 $ 1,174,229 Total $ 4,395,753 $ 1,174,229 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. Schedule of Significant Unobservable Inputs (level 3) and Related Expenses and Losses 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 payments ( 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: Schedule of CCC Spreads Issuance February 14, 2023 4.13 % Fair Value December 31, 2023 1.29 % F- 24 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 10 - 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- 25 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 year ended December 31, 2023 . A total of 66,303 shares at a value of $ 324,495 have been accrued in additional paid in capital as of the year ended December 31, 2022. 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. Upon the closing of the Going Public Transaction all outstanding shares of Series B 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 B Preferred Stock by 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, 2023 and 2022. As of December 31, 2023 and 2022, the Company had 7,202 and 6,630 shares of Preferred Series A-1 Stock and 12,481 and 12,481 shares of Series B Preferred Stock outstanding, respectively. Note 11 - 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 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- 26 Following is a summary of the Company’s warrant activity for the year ended December 31, 2023: Schedule of Warrant Activity Number of Shares Weighted Average Exercise Price Per Share Weighted Average 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 During the year ended December 31, 2022, there were no warrants exercised, issued or vested. The balance of outstanding warrants was 400,359 at December 31, 2022 and December 31, 2021. Note 12 - Stock Compensation Option 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 155,755 and 249,650 options for the year ended December 31, 2023 and 2022, respectively. To provide for adequate shares to issue to these employees during 2022, certain executives forfeited an aggregate 114,000 options, 36,000 of which were vested. As a result, 78,000 options are deemed to have been forfeited and 36,000 options are deemed to have expired. In accordance with the provisions of ASC 718, all unrecognized stock compensation associated with these forfeited or expired options must be expensed immediately and resulted in the recognition of $ 1,655,506 in the second quarter of 2022 which would have otherwise been recognized over approximately the next 18 months. The Company recognized stock compensation expense of $ 634,367 and $ 2,486,152 for the years ended December 31, 2023 and 2022, respectively, of which $ 372,994 and $ 548,459 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- 27 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: Schedule of Fair Values of Stock Options Granted Using Black-scholes Valuation Model Assumptions December 31, 2023 December 31, 2022 Expected volatility 53.5 - 116.6 % 51.1 - 53.7 % Expected dividends 0.0 % 0.0 % Expected term (years) 5.7 5.5 - 6.0 Risk-free rate 3.4 – 4.3 % 1.44 - 4.24 % Fair value of Ordinary Shares on grant date $ 1.70 – $ 4.03 $ 0.31 - $ 1.33 The summary of activity under the plans as of December 31, 2023 and 2022, and change during the 12 months ended December 31, 2023 and 2022 is as follows: Schedule of Stock Option Activity Weighted Weighted average average remaining Aggregate Options Shares exercise price contractual term intrinsic 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 660,594 $ 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. Options Shares Weighted average exercise price Weighted average grant date fair value Weighted average remaining contractual term Aggregate intrinsic value Outstanding as of December 31, 2021 1 178,357 $ 49.60 $ - - $ 830,250 Granted 2 249,650 $ 10.00 $ 5.20 - $ - Exercised - $ - $ - - $ - Forfeited ( 100,779 ) $ 54.60 $ 25.60 - $ - Expired ( 38,315 ) $ 63.70 $ - - $ - Outstanding as of December 31, 2022 288,914 $ 11.40 $ - 9.3 $ 7,750 Exercisable as of December 31, 2022 86,673 $ 14.60 $ - 8.7 $ 7,750 1 Equity structure was adjusted for all periods presented using the exchange ratio, 1.3352 , established in the Go-Public Merger Agreement with Mer Telemanagement Solutions Ltd. to reflect the number of shares of SharpLink, Inc. (the accounting acquiree) issued in the reverse acquisition. Unamortized stock compensation expense of $ 630,473 and $ 1,009,269 as of December 31, 2023 and 2022 will be amortized through 2026 for 166,544 of unvested options and has a weighted average recognition period of three years . Note 13 - Operating Segments The Company has two reportable operating segments: Affiliate Marketing Services – United States and Affiliate Marketing Services – International. The Affiliate Marketing Services – United States segment operates a performance marketing platform which owns and operates state-specific web domains designed to attract, acquire and drive local sports betting and casino traffic directly to the Company’s sportsbook and casino partners which are licensed to operate in each respective state. The Company earns a commission from sportsbooks and casino operators on new depositors directed to them via our proprietary D2P websites in America. In addition, this segment provides sports betting data (e.g., betting lines) to sports media publishers in exchange for a fixed fee. The Affiliate Marketing Services – International segment is a global affiliate marketing network, focused 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. F- 28 Any intercompany revenues or expenses are eliminated in consolidation. A measure of segment assets and liabilities has not currently been provided to the Company’s chief operating decision maker and is therefore not presented below. Summarized financial information for the Company’s reportable segments for the 12-month periods ended December 31, 2023 and 2022 are shown below: Schedule of Companies Reportable Segments For the year ended December 31, 2023: Affiliate Marketing Services -- International Affiliate Marketing Services -- US Total Revenue $ 4,198,279 $ 754,446 $ 4,952,725 Cost of revenues 2,890,460 529,602 3,420,062 Operating loss ( 8,169,390 ) ( 723,812 ) ( 8,893,202 ) Net income (loss) after taxes $ ( 10,182,525 ) $ ( 1,066,073 ) $ ( 11,248,598 ) For the year ended December 31, 2022: Affiliate Marketing Services - International Affiliate Marketing Services - US Total Revenue $ 3,427,698 $ 62,250 $ 3,489,948 Cost of revenues 2,127,555 46,280 2,173,835 Operating loss ( 14,133,416 ) ( 149,422 ) ( 14,282,838 ) Net income (loss) after taxes $ ( 13,951,510 ) $ ( 144,136 ) $ ( 14,095,646 ) Summarized revenues by country in which the Company operated for the years ended December 31, 2023 and 2022 are shown below: Schedule of Revenues by Country For the year ended December 31, 2023: Affiliate Marketing Services - International Affiliate Marketing Services - US Total United States $ - $ 754,446 $ 754,446 Rest of the World 4,198,279 - 4,198,279 Revenue $ 4,198,279 $ 754,446 $ 4,952,725 For the year ended December 31, 2022: Affiliate Marketing Services - International Affiliate Marketing Services - US Total United States $ - $ 62,250 $ 62,250 Rest of the World 3,427,698 - 3,427,698 Revenue $ 3,427,698 $ 62,250 $ 3,489,948 F- 29 The Company does not have material tangible long-lived assets in foreign jurisdictions. The Company’s Affiliate Marketing Services – International 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: Schedule of Percentage of Consolidated Revenues Derived from Large Customers December 31, 2023 December 31, 2022 Customer A 38 % 70 % Customer B 35 % 165 % Percentage of consolidated revenues 35 % 165 % Note 14 - Revenue Recognition For the year ended December 31, 2023 and 2022, the Company has recognized its revenue at a point in time. The Company combines its revenue into the following categories: Schedule of Revenue Recognition For the year ended December 31, 2023 Affiliate Marketing Services - International Affiliate Marketing Services - US Total Services and other 4,198,279 754,446 4,952,725 Total 4,198,279 754,446 4,952,725 For the year ended December 31, 2022 Affiliate Marketing Services - International Affiliate Marketing Services - US Total Services and other 3,427,698 62,250 3,489,948 Total $ 3,427,698 $ 62,250 $ 3,489,948 The Company’s assets and liabilities related to its contracts with customers were as follows: Schedule of Contract Assets and Liabilities December 31, 2023 December 31, 2022 Accounts receivable $ 415,119 $ 440,873 Unbilled revenue 12,000 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- 30 Two customers had amounts due to the Company of $ 210,604 and $ 352,873 for December 31, 2023 and 2022, respectively. Note 15 -- Income Taxes Deferred tax assets and liabilities as of December 31, 2023 and 2022 consisted of the following: Schedule of Deferred Tax Assets and Liabilities 2023 2022 Deferred tax assets Net operating losses $ 5,786,541 $ 3,855,779 Research and development tax credit 30,429 30,429 Nonqualified stock options 76,059 66,209 Equipment 1,402 601 Goodwill 590,235 269,101 Section 174 Capitalizations 70,437 - Intangible Assets 1,043,615 840,034 Accrued expended and other 103,947 78,560 Gross deferred tax assets 7,702,665 5,140,713 Valuation allowance ( 7,709,820 ) ( 5,146,919 ) Net deferred tax assets $ ( 7,155 ) $ ( 6,206 ) As of December 31, 2023, 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, 2023, the Company has a federal tax net operating loss carryforward of $ 25,376,067 , 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 $ 457,567 . The state net operating loss carryforwards will begin to expire in 2035 and are available to offset future taxable income or reduce taxes payable through 2040. The Company also has net operating loss carryforwards in foreign jurisdictions of approximately $ 29,000,000 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 $ 30,429 as of December 31, 2023, that will be available to offset future tax liabilities. Research and development tax credits will begin to expire in 2029. The Company completed a Section 382 study for the availability of SharpLink, Inc.’s Net Operating Loss (“NOL”) carryforward back to inception in 2019. Various ownership changes were considered in this analysis through December 31, 2023 and determined only one change resulted in a greater than 50% ownership change, on July 27, 2021. The amount of SharpLink, Inc.’s NOL carryforward subject to Section 382 limitations is $ 5.9 million. The resulting annual base limitation on the carryforwards utilization is $1.4M, this limitation does not include potential net unrealized built in gain or loss from IRC Section 382(h) and Notice 2003-65. The Company anticipates the amount of NOL carryforward available to offset the 2024 Q1 gain is $ 4.9 million, without regards to potential net unrealized built in gain or loss from IRC Section 382(h) and Notice 2003-65, that adjustment is anticipated to increase the available NOL. The rest of the NOL carryforward limited by Section 382 is carried forward indefinitely. The availability of historic SHGN NOLs were not part of the analysis since the NOL carryforwards reported in disc ops are expected to remain with SHGN as part of the future transaction. F- 31 The provision for (benefit from) income taxes charged to income for the years ended December 31, 2023 and 2022 consist of the following: Schedule of Income Tax Expenses Benefits 2023 2022 US current tax expense $ 15,708 $ ( 12,955 ) Foreign current tax expense — — Provision for income tax expenses (benefit) $ 15,708 $ ( 12,955 ) A reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows: Schedule of Effective Tax Rate 2023 2022 Income tax benefit at federal statutory rate $ ( 2,358,907 ) 21.0 % $ ( 2,908,680 ) 21.0 % State and local income taxes net of federal tax benefit ( 141,084 ) 0.5 % ( 59,374 ) 0.5 % Meals and entertainment, non-deductible expenses and tax-exempt income 21,510 - 0.1 % 25,826 - 0.1 % Incentive stock option expense 69,214 - 0.1 % 52,306 - 0.1 % Nondeductible goodwill impairment — - 8.2 % — 0.0 % Nondeductible Debt Expenses 417,696 - 8.8 % — 0.0 % NQO Cancelations 6,690 0.0 % 499,435 0.0 % Financial Statement True Up 2,866 0.0 % — 0.0 % Misc Other Adjustments 43,145 0.0 % — 0.0 % Change in valuation allowance 1,954,578 - 4.3 % 2,377,532 - 4.3 % Provision for income tax expenses (benefit) $ 15,708 - 0.0 % $ ( 12,955 ) 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. It is difficult to predict the final timing and resolution of any particular uncertain tax position. Based on the Company’s assessment of many factors, including past experience and complex judgements about future events, the Company does not currently have any uncertain tax positions or anticipate significant changes in its uncertain tax positions over the next 12 months. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as additional income tax expense. During the years ended December 31, 2023 and 2022, 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, 2023. F- 32 Note 16 – Acquisitions SportsHub Games Network, Inc. (“SportsHub”) Description of the Transaction On December 22, 2022 (the “Close Date”), SharpLink, through its wholly owned subsidiary, SHGN Acquisition Corp (“Acquirer” or the “Merger Subsidiary”) acquired all of the outstanding capital stock of SportsHub, via an Agreement and Plan of Merger, dated as of September 6, 2022 (“Merger Agreement”). In accordance with the terms of the Equity Purchase Agreement between the Acquirer, the Acquiree and an individual acting as the SportsHub stockholders’ representative (“the Stockholder Representative”): ● SharpLink issued an aggregate of 431,926 Ordinary Shares to the equity holders of SportsHub, on a fully diluted basis, including 377,985 Ordinary Shares actually issued on December 22, 2022 and an additional aggregate of 53,941 shares being held in escrow as well as shares held in escrow for indemnifiable losses and for the reimbursement of expenses incurred by the Stockholder Representative in performing his duties pursuant to the SportsHub Merger Agreement. An additional aggregate of 40,585 Ordinary Shares were reserved for future issuance, including 23,714 Ordinary Shares reserved for SportsHub shareholders who had yet to provide the applicable documentation required in connection with the SportsHub Acquisition and were issued in June 2023 when the documentation was available. 13,975 ordinary shares underlying the options and 2,896 Ordinary Shares underlying the warrants remain unissued until the options and/or warrants are exercised. ● SportsHub has merged with and into the Merger Subsidiary, with the Merger Subsidiary remaining as the surviving corporation and wholly owned subsidiary of SharpLink. ● SportsHub, which owned 889,380 Ordinary Shares of SharpLink prior to the merger, distributed those shares to SportsHub’s stockholders immediately prior to the consummation of the Merger. These shares were not part of the purchase consideration. ● SharpLink assumed $ 5,387,850 of SportsHub’s debt as purchase consideration. Identification of Accounting Acquirer The transaction was accomplished through a direct acquisition, whereby SHGN Acquisition Corp effectively acquired all of the outstanding capital stock of SportsHub, as a result of which SHGN Acquisition Corp obtained control over SportsHub. Therefore, SHGN Acquisition Corp has been determined to be the acquirer in the transaction, and SportsHub the acquiree. Determining the Acquisition Date The Acquirer obtained control of Acquiree following the exchange of consideration on December 22, 2022. Thus, the closing date of December 22, 2022 was the acquisition date. F- 33 Purchase Price The purchase price is based on SharpLink’s closing share price of $ 2.90 on December 22, 2022 and 472,513 of Ordinary Shares as well as the fair value of Seller’s term loan of $ 1,267,199 and line of credit of $ 4,120,651 . The following table represents the purchase consideration paid in the SportsHub Acquisition: Schedule of Purchase Consideration Description Amount Fair Value of Equity Consideration $ 1,370,287 Fair Value of Seller Platinum Line of Credit and Loan 5,387,850 Total Purchase Price $ 6,758,137 Purchase Price Allocation The SportsHub Acquisition assets and liabilities were measured at fair values as of December 22, 2022, primarily based on the valuation determined by an independent valuation, which were based on income-based method and relief from royalty method. Estimates of fair value represent management’s best estimate of assumptions about future events and uncertainties, including significant judgments related to future cash flows, discount rates, competitive trends, margin and revenue growth assumptions, including royalty rates and customer attrition rates and others. Inputs used were generally obtained from historical data supplemented by current and anticipated market conditions and growth rates expected as of the acquisition date. The fair value of the assets acquired and liabilities assumed as of December 22, 2022 were as follows: Schedule of Fair Value of Assets Acquired and Liabilities Assumed Assets: Cash $ 38,255,266 Restricted cash 10,604,004 Accounts receivable 186,712 Prepaid expenses and other current assets 1,916,932 Equipment 11,953 Other long-term assets 95,793 Intangible assets 2,390,000 Total Assets $ 53,460,660 Liabilities: Accrued expenses $ 284,345 Deferred tax liabilities 48,775 Deferred revenue 3,574,285 Other current liabilities 47,657,117 Other long-term liabilities 106,705 Total liabilities $ 51,671,227 Net assets acquired, excluding goodwill $ 1,789,433 Goodwill 4,968,703 Purchase consideration for accounting acquiree $ 6,758,137 The fair value, as determined by assumptions that market participants would use in pricing the assets, and weighted average useful life of the identifiable intangible assets are as follows: Schedule of Fair Value Assumption Asset Fair Value Weighted Average Useful Life (Years) Customer relationships $ 1,550,000 5 Trade names 640,000 6 Acquired technology 200,000 5 $ 2,390,000 F- 34 The excess of consideration for the acquisition over the fair value of net assets acquired was recorded as goodwill and derived from the market price of the shares at the time of the SportsHub Acquisition. The goodwill created in the acquisition is not deductible for tax purposes. Transaction Costs SharpLink’s transaction costs incurred in connection with the SportsHub Acquisition were $ 83,866 for the year ended December 31, 2022. These costs were primarily comprised of professional fees, recorded in selling, general and administrative expenses in the consolidated statement of operations. The transaction costs are not expected to be deductible for tax purposes. Results of the SportsHub Subsequent to the Acquisition The SportsHub Acquisition generated revenues and net income of $ 951,194 and $ 42,908 respectively, which includes the impact of purchase accounting adjustments. These results are included in the consolidated statements of operations for the period from December 22, 2022 through December 31, 2022, which is reflected in net loss from discontinued operations. The financial results of the SportsHub Acquisition have been included in the Company’s SportsHub segment from the date of acquisition. See Note 3. 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 on the Board of Directors of SharpLink Israel. The Company paid $ 921,565 and $ 1,198,710 for the years ending December 31, 2023 and 2022, 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 an executive of the Company. The Company paid rent expense of $ 38,400 in years ending December 31, 2023 and 2022. 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. Equity Sale of Sports Gaming Client Services and SportsHub Gaming Network Businesses On January 18, 2024, SharpLink Gaming Ltd. (“SharpLink,” the “Company” or “Parent Seller”), an Israeli limited liability company, 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 contemplates the sale of the Company’s Sports Gaming Client Services and SportsHub Gaming Network to the Buyer, by selling all of the issued and outstanding shares of common stock or membership interests of the Targets and the Acquired Subsidiaries (as defined below) for $ 22,500,000 in an all cash transaction (the “Equity Sale”). F- 35 Retirement of Debt Platinum Bank Term Loans and Lines of Credit In connection with the closing of the Equity Sale, on January 18, 2024 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. Redemption of Debenture and Settlement of Event of Default On January 19, 2023, SharpLink and Alpha entered into a Settlement Agreement whereby Alpha agreed to waive (i) the event of default under Section 8(a)(vi) of the Debenture and Section 3(e)(ii) of the 2023 Warrant in connection with the Equity Sale; and (ii) payment of the Mandatory Default Amount; and the parties agreed that the Company will 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. Pursuant to Section 5(1) of the 2023 Warrant, Alpha further agreed to waive its right to elect that, in connection with and at the closing of the Equity Sale, the 2023 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 is valued at $ 260,111 and shall be subject to the repurchase terms set forth in the Settlement Agreement. Executive Employment Agreements On February 16, 2024, the Board approved and adopted the Company’s 2024 Executive Compensation Plan, which describes SharpLink’s compensation philosophy and policies as applicable to the named executive officers for 2024, and explains the structure and rationale associated with each material element of the executives’ compensation. In accordance with the 2024 Executive Compensation Plan, on February 16, 2024, the Board approved, and the Company entered into, executive employment agreements with Rob Phythian, its Chairman and Chief Executive Officer, and with Robert DeLucia, its Chief Financial Officer, effective as of February 14, 2024. Phythian Employment Agreement Mr. Phythian’s employment agreement (the “Phythian Agreement”) provides for an annual base salary of $ 285,000 (“Phythian Base Salary”) and an annual performance-based cash bonus up to 42.5 % of the annual base salary, as determined and approved by the Compensation Committee. In addition, the Company shall directly pay or reimburse Mr. Phythian up to $ 10,000 annually for the following: i) premiums of a term life insurance policy and ii) if elected, executive health exams not covered by the Company’s prevailing benefits plan. In addition, the Company shall directly pay or reimburse Mr. Phythian up to $ 12,000 annually for payment of country club annual dues. Mr. Phythian was also granted 100,000 RSUs pursuant to the Plan, which shall vest in equal increments on March 31, 2024, June 30, 2024, September 30, 2024 and December 31, 2024. Mr. Phythian shall be eligible to be granted additional equity awards in accordance with the Company’s policies, as in effect from time to time, as recommended and approved by the Compensation Committee. The Phythian Agreement is for an initial term of two years (“Phythian Initial Term”), subject to earlier termination, and will be automatically extended for successive one-year periods unless either party gives written notice of termination at least 120 days in advance of the expiration of the Phythian Initial Term or the then-current term, as applicable. F- 36 The Phythian Agreement provides that if Mr. Phythian is terminated by the Company without cause or if he terminates his employment for good reason, he will be entitled to: i) continuation of the Phythian Base Salary at the rate in effect immediately prior to the termination date for 12 months following the termination date paid accordance with the Company’s normal payroll practices, but no less frequently than monthly; and ii) if Mr. Phythian elects to continue group health coverage under any Company group health plan pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall reimburse Mr. Phythian for a portion of his COBRA premiums, such that his unreimbursed cost of COBRA premiums does not exceed the cost to Mr. Phythian of such health plan premiums immediately prior to termination, for a period of up to one year after his termination (or until he is no longer eligible for COBRA continuation, if earlier). In addition, Mr. Phythian shall be entitled to severance, payable in a lump sum equal to 100 % of the Phythian Base Salary. If employment is terminated by the Company for cause or by Mr. Phythian for other than good reason, Mr. Phythian will be entitled only to the accrued salary and bonus obligations through the date of termination. DeLucia Employment Agreement Mr. DeLucia’s employment agreement (the “DeLucia Agreement”) provides for an annual base salary of $ 230,000 (“DeLucia Base Salary”) and an annual performance-based cash bonus up to 40 % of his annual base salary, as determined and approved by the Compensation Committee. In addition, the Company shall directly pay or reimburse Mr. DeLucia up to $ 10,000 annually for the following: i) for the premiums of a term life insurance policy and, ii) if elected, executive health exams not covered by the Company’s prevailing benefits plan. In addition, Mr. DeLucia was granted 80,000 RSUs pursuant to the Plan, which shall vest in equal increments on March 31, 2024, June 30, 2024, September 30, 2024 and December 31, 2024. Mr. DeLucia shall be eligible to be granted additional equity awards in accordance with the Company’s policies, as in effect from time to time, as recommended and approved by the Compensation Committee. The DeLucia Agreement is for an initial term of two years (“DeLucia Initial Term”), subject to earlier termination, and will be automatically extended for successive one-year periods unless either party gives written notice of termination at least 120 days in advance of the expiration of the DeLucia Initial Term or the then-current term, as applicable. The DeLucia Agreement provides that if Mr. DeLucia is terminated by the Company without cause or if he terminates his employment for good reason, he will be entitled to: i) continuation of the DeLucia Base Salary at the rate in effect immediately prior to the termination date for 12 months following the termination date paid accordance with the Company’s normal payroll practices, but no less frequently than monthly; and ii) if Mr. DeLucia elects to continue group health coverage under any Company group health plan pursuant to the COBRA, the Company shall reimburse Mr. DeLucia for a portion of his COBRA premiums, such that his unreimbursed cost of COBRA premiums does not exceed the cost to Mr. DeLucia of such health plan premiums immediately prior to termination, for a period of up to one year after his termination (or until he is no longer eligible for COBRA continuation, if earlier). In addition, Mr. DeLucia shall be entitled to severance, payable in a lump sum equal to 100 % of the DeLucia Base Salary. If employment is terminated by the Company for cause or by Mr. DeLucia for other than good reason, the executive will be entitled only to the accrued salary and bonus obligations through the date of termination. Regaining Compliance with Nasdaq Continued Listing Standards On May 23, 2023, the Listing Qualifications staff (the “Staff”) of The Nasdaq Stock Market, LLC (“Nasdaq”) had notified SharpLink that it did not comply with the minimum $ 2,500,000 stockholders’ equity requirement for continued listing set forth in Nasdaq Listing Rule 5550(b)(1) (the “Rule”); however, on August 9, 2023, the Staff granted the Company’s request for an extension until November 20, 2023 to comply with this requirement. On November 21, 2023, the Company received a delist determination letter from the Staff advising the Company that the Staff had determined that SharpLink did not meet the terms of the extension. Specifically, the Company did not complete its proposed transactions and was unable to file a Current Report Form 8-K on or before the November 20, 2023 deadline previously required by the Staff, evidencing compliance with the Rule. As reported on a Form 8-K filed with the SEC on December 12, 2023, SharpLink submitted a hearing request with the Nasdaq Hearings Panel (the “Panel”) on November 28, 2023, relating to the Staff’s determination to delist the Company’s securities from Nasdaq due to the Company’s failure to meet the minimum $ 2.5 million shareholders’ equity requirement for continued listing as defined by the Rule. On November 28, 2023, the Company was notified by Nasdaq that an oral hearing (the “Hearing”) had been scheduled for February 20, 2024; and, the delisting action referenced in the Staff’s determination letter, dated November 21, 2023, had been stayed, pending a final determination by the Panel. F- 37 On January 24 2024, SharpLink filed a Current Report on Form 8-K with the SEC, disclosing details of the sale of its Equity Sale. The Company further disclosed that it used a portion of the proceeds from the Equity Sale to retire approximately $ 19.4 million, in aggregate, in outstanding debt obligations, thereby significantly strengthening its balance sheet. As a result of the Equity Sale, the Company’s total stockholders’ equity now exceeds $ 2.5 million as of the date of the above referenced Form 8-K filing. As a result of the Equity Sale, the Company believes that it has regained compliance with all applicable continued listing requirements and has requested that the Staff determine whether the Hearing should be cancelled. On February 7, 2024, SharpLink received formal notification from Nasdaq that the Company’s previously announced deficiency under the Rule has been cured, and the Company has regained compliance with all applicable continued listing standards. Therefore, the Hearing before the Nasdaq Hearings Panel, originally scheduled for February 20, 2024, has been cancelled. SharpLink’s Common Stock continues to be listed and traded on Nasdaq. Domestication Merger of SharpLink Israel and SharpLink US On February 13, 2024, SharpLink Israel completed the 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. The Domestication Merger Agreement was filed with the SEC on October 25, 2023 as Annex A to the Definitive Proxy Statement on Schedule 14A of SharpLink Israel (the “Proxy Statement”). Prior to the Domestication Merger, ordinary shares of SharpLink Israel, par value NIS 0.60 per share, were registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and listed on the Nasdaq Capital Market under the symbol “SBET.” 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. As of the close of business on February 12, 2024, SharpLink Israel had 3,130,401 ordinary shares issued and outstanding. In connection with the Domestication Merger, SharpLink Israel obtained a tax ruling from the Israel Tax Authorities exempting shareholders who are part of the “interested public” (as such term is defined in the ruling) from tax withholding under Israeli law in connection with the exchanges of shares. For more information concerning the tax ruling and the Israeli tax treatment of shareholders that are not covered by the tax ruling, see the Current Report on Form 8-K filed by SharpLink Israel with the SEC on February 2, 2024. SharpLink US’s Common Stock commenced trading on the Nasdaq Capital Market under the symbol “SBET,” the same symbol under which the ordinary shares of SharpLink Israel previously traded, on February 14, 2024. The new CUSIP number for SharpLink US’s Common Stock is 820014108. F- 38