Form 424B3 - Prospectus [Rule 424(b)(3)]

Prospectus Supplement No. 4		Filed pursuant to Rule 424(b)(3)
(To Prospectus dated May 10, 2023)		Registration Statement No. 333-271396

SharpLink Gaming Ltd.

This prospectus supplement updates, amends and supplements the prospectus dated May 10, 2023 (the “Prospectus”), which forms a part of our Registration Statement on Form S-1 (Registration No. 333-271396). Capitalized terms used in this prospectus supplement and not otherwise defined herein have the meanings specified in the Prospectus.

This prospectus supplement is being filed to update, amend, and supplement the information included in the Prospectus with the information contained in our Amendment No. 1 to the Annual Report on Form 10-K/A filed with the SEC on July 14, 2023, which is set forth below.

This prospectus supplement is not complete without the Prospectus. This prospectus supplement should be read in conjunction with the Prospectus, which is to be delivered with this prospectus supplement, and is qualified by reference thereto, except to the extent that the information in this prospectus supplement updates or supersedes the information contained in the Prospectus. Please keep this prospectus supplement with your Prospectus for future reference.

Our Ordinary Shares are traded on The Nasdaq Capital Market under the symbol “SBET.” On July 14, 2023, the last reported sale price of our Ordinary Shares was $2.90 per share.

Investing in shares of our Ordinary Shares involves risks that are described in the “Risk Factors” section beginning on page 10 of the Prospectus.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the Prospectus or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is July 17, 2023

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

(Amendment No. 1)

(Mark One)

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

For the fiscal year ended December 31, 2022

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

For the transition period from _______ to ________

Commission file number: 000-28950

SHARPLINK GAMING LTD.

(Exact name of registrant as specified in its charter)

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

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

Registrant’s telephone number, including area code: 612-293-0619

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

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that require a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D(b). ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was $21,461,158.

As of March 31, 2023, there were 26,880,250 Ordinary Shares, par value $0.02 per share, issued and outstanding.

EXPLANATORY NOTE

SharpLink Gaming Ltd. (“SharpLink” or the “Company”) is filing this Amendment No. 1 on Form 10-K/A (the “Amendment”) to address in its Annual Report on Form 10-K as of December 31, 2022 originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 5, 2023 (the “Original 10-K”). The Amendment is being filed solely to:

	1.	Emphasize the Company’s going concern status in the forefront of the MD&A and in Liquidity and Capital Resources discussion;
	2.	Include the unaudited financial statements of SportsHub Games Network, Inc. and Subsidiaries for the six months ended June 30, 2022 and 2021, and audited financial statements of SportsHub Games Network, Inc. and Subsidiaries for the years ended December 31, 2021 and 2020.

As previously disclosed, on September 7, 2022, SharpLink, SHGN Acquisition Corp., a Delaware corporation and wholly owned subsidiary of SharpLink (“Merger Subsidiary”), SportsHub Games Network Inc. (“SportsHub”) and Christian Peterson, an individual acting as the SportsHub stockholders’ representative entered into a Merger Agreement in which SharpLink acquired SportsHub. The Merger Agreement, as amended, contained the terms and conditions of the proposed acquisition by SharpLink of SportsHub.

On November 8, 2022, the Company furnished a Current Report on Form 6-K (the “6-K”) to the SEC to include, among other exhibits, Exhibit 99.2 for the Notice of and Proxy Statement for SharpLink Gaming Ltd. Extraordinary General Meeting of Shareholders to be held on December 14, 2022, to solicit its shareholders’ approval on the Merger Agreement. Exhibit 99.2 encompasses (i) the unaudited financial statements of SportsHub Games Network, Inc. and Subsidiaries for the six months ended June 30, 2022 and 2021, as Annex C, and (ii) the audited financial statements of SportsHub Games Network, Inc. and Subsidiaries for the years ended December 31, 2021 2020, as Annex D.

On December 14, 2022, The Company’s shareholders approved the Merger Agreement and the merger transaction was closed on December 22, 2022. To make it more convenient for the investors and shareholders to locate and access to the above-mentioned financial statements of SportsHub, the Company is including them at the end of SharpLink’s audited financial statements for the years ended December 31, 2022 and 2021 of this Amendment.

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Amendment also contains new certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which are attached hereto.

No other changes have been made to the Original 10-K. This Amendment does not reflect subsequent events occurring after the filing date of the Original 10-K or modify or update in any way disclosures made in the Original 10-K. This Amendment should be read in conjunction with the Original 10-K.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our Consolidated Financial Statements and the related notes included in Item 8 of this Form 10-K. This discussion contains forward-looking statements. Please see the explanatory note concerning “Forward-Looking Statements” in Part I of this Annual Report on Form 10-K and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements. The operating results for the periods presented were not materially affected by inflation.

Overview

Founded in 2019 and headquartered in Minneapolis, Minnesota, SharpLink is a leading business-to-business provider of performance marketing and advanced technology-enabled fan engagement and conversion solutions for the fast emerging U.S. sports betting and iGaming industries. Our base of marquis customers and trusted business partners comprise many of the nation’s leading sports media publishers, leagues, teams, sportsbook operators, casinos and sports technology companies, including Turner Sports, NASCAR, PGA TOUR, National Basketball Association (“NBA”), National Collegiate Athletic Association (“NCAA”), NBC Sports, BetMGM, Party Poker, World Poker Tour and Tipico, among numerous others.

We continue to make deliberate and substantial investments in support of our mission and long-term growth objectives. Our primary growth strategy is 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. We are endeavoring to achieve this through deployment of our proprietary conversion technologies, branded as our “C4” solutions, which are seamlessly integrated with fun, highly engaging fan experiences. Purpose built from the ground-up specifically for the U.S. market, SharpLink’s C4 innovations are designed to help unlock the lifetime value of sports bettors and online casino players. More specifically, C4:

	●	COLLECTS, analyzes and leverages deep learning of behavioral data relating to individual fans;

	●	CONNECTS and controls fan engagement with real-time, personalized betting offers sourced from U.S. sportsbooks and casinos in states where online betting has been legalized;

	●	CONVERTS passive fantasy sports and casual sports fans into sports bettors on a fully automated basis; and

	●	readily enables gaming operators and publishers to CAPITALIZE on acquiring and scaling sports betting and iGaming depositors, resulting in higher revenue generation and greatly enhanced user experiences.

We reach fans and cultivate audience growth and activation through our four primary operating segments: 1) Sports Gaming Client Services; 2) SportsHub Games Network/Fantasy Sports; 3) Direct to Player (“D2P”)/Affiliate Marketing Services – International; and 4) D2P/Affiliate Marketing Services – United States.

The Company previously owned and operated an enterprise telecom expense management business (“Enterprise TEM”) acquired in July 2021 in connection with SharpLink’s go-public merger with Mer Telemanagement Solutions. Beginning in 2022, we discontinued operations for this business unit and sought a buyer for the business. On December 31, 2022, we completed the sale of this business to Israel-based Entrypoint South Ltd.

SharpLink is guided by an accomplished, entrepreneurial leadership team of industry veterans and pioneers encompassing decades of experience in delivering innovative sports solutions to partners that have included Turner Sports, Google, Facebook, the National Football League (“NFL”), NCAA and NBA, among many other iconic organizations, with executive experience at companies which include ESPN, NBC, Sportradar, AOL, Cantor Gaming, Betfair and others.

As of March 2023, the Company’s state regulatory initiatives have resulted in SharpLink being licensed and/or authorized to operate in 24 U.S. states, the District of Columbia and Ontario, Canada, or nearly 100% of the legal online betting market in North America.

By leveraging our technology and building on our current client and industry relationships, SharpLink believes we are well positioned to earn a leadership position in the rapidly evolving sports betting and iGaming markets by driving down customer acquisition costs, materially increasing and enhancing player engagement and delivering users with high lifetime value to our proprietary web properties and to those of our gaming partners.

Going Concern

We will require additional capital to support our growth plans. If we do not raise sufficient capital, there is substantial doubt about our ability to continue as a going concern. In the pursuit of our long-term growth strategy and the development of our sports betting conversion, affiliate marketing services and related businesses, we have sustained continued operating losses. During the years ended December 31, 2022 and 2021, we had a net loss from continuing operations of $15,303,402 and $33,469,830, respectively, and cash used in operating activities from continuing operations of $6,510,965 and $5,854,995. To help fund our operations, we raised capital from banks and outside investors in the aggregate amounts of $2,675,343 and $15,678,085 for the years ended December 31, 2022 and 2021, respectively, in the form of a term loan in 2022 and the sale of Ordinary Shares and conversion of preferred stock and prefunded and regular warrants during 2021. Based on continued expected cash needs to fund our ongoing technology development initiatives and grow our Affiliate Marketing Services–United States operations, we may require additional liquidity to continue our operations for the next year. Subsequent to the end of 2022, in February 2023 we closed on a $4.4 million convertible debenture and signed a two-year $7.0 million revolving loan agreement with our commercial lender.

Until we can generate a sufficient amount of revenue to finance our capital needs, which we may never achieve, we expect to finance our cash needs primarily through public or private equity financings or conventional debt financings. 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.

Impact of COVID-19 On Our Business Operations

The worldwide outbreak of COVID-19 in early 2020 negatively affected economic conditions regionally as well as globally and caused a reduction in consumer spending. Efforts to contain the effect of the virus included business closures, travel restrictions, and restrictions on public gatherings and events. Many businesses eliminated non-essential travel and canceled in-person events to reduce instances of employees and others being exposed to public gatherings. Governments around the world, including governments in Europe and state and local governments in the U.S., restricted business activities and strongly encouraged, instituted orders or otherwise restricted individuals from leaving their home. To date, governmental authorities imposed or recommended various measures, including social distancing, quarantine, limitations on the size of gatherings, closures of work facilities, schools, public buildings and businesses, and cancellation of events, including sporting events, concerts, conferences and meetings. The suspension, postponement and cancellation of sporting events affected by COVID-19 had an adverse impact on the progression of SharpLink’s overall business plan and our revenue and the revenue of our clients.

Although many sports seasons and sporting events recommenced in 2021, the fluidity of this situation, potential for virus variants and potential setbacks associated therewith precludes any prediction as to the ultimate impact of COVID-19 and any emerging variants of coronavirus, which remains a material uncertainty and risk with respect to SharpLink’s business, performance, and financial results. The revenue of our clients, and our own revenue, continue to depend on sports events taking place and consumer participation and spending on entertainment and leisure activities, and any further setbacks with respect to COVID-19 and its variants could have a material adverse effect on our business, financial condition, results of operations and prospects.

Recent Developments

Merger with SportsHub Games Network Inc. (the “SportsHub Merger”)

SharpLink, SharpLink, SHGN Acquisition Corp., a Delaware corporation and wholly owned subsidiary of SharpLink (“Merger Subsidiary”), SportsHub and Christian Peterson, an individual acting as the SportsHub stockholders’ representative entered into the Merger Agreement on September 7, 2022. The Merger Agreement, as amended on November 2, 2022 by the Merger Agreement Amendment, contained the terms and conditions of the proposed business combination of SharpLink and SportsHub. Pursuant to the Merger Agreement, as amended, on December 22, 2022, SportsHub merged with and into Merger Subsidiary in accordance with the provisions of Delaware’s General Corporation Law, as amended, with Merger Subsidiary surviving as a wholly owned subsidiary of SharpLink. In association with the transaction, SharpLink issued, in aggregate, 4,319,263 ordinary shares to common and preferred stockholders of SportsHub, on a fully diluted basis. An additional aggregate amount of 405,862 ordinary shares are being held in escrow for SportsHub shareholders who have yet to provide the applicable documentation required in connection with the SportsHub Merger, 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 Merger Agreement.

NASDAQ Notice

On November 4, 2022, we received a deficiency notice from NASDAQ stating that we no longer comply with NASDAQ Marketplace Rule 5550(a)(2) because the bid price of our Ordinary Shares closed below the required minimum $1.00 per share for the previous 30 consecutive business days. The notice also indicated that, in accordance with Marketplace Rule 5810(c)(3)(A), we have a period of 180 calendar days, until May 3, 2023, to regain compliance with Rule 5550(a)(2). If at any time before May 3, 2023 the bid price of our Ordinary Shares closes at $1.00 per share or more for a minimum of 10 consecutive business days, NASDAQ will notify us that we have regained compliance with Rule 5550(a)(2). In the event we do not regain compliance with Rule 5550(a)(2) prior to the expiration of the 180-day period, we may then be eligible for additional time if we meet the continued listing requirements for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will be required to provide written notice of our intention to cure the deficiency during the second compliance period equal to an additional 180 calendar days. If we cannot demonstrate compliance by the end of the second compliance period, Nasdaq will notify us that our Ordinary Shares are subject to delisting.

On January 20, 2023, our shareholders authorized a reverse share split in a ratio of up to and including 20:1, which if effected, would increase the per share price of our Ordinary Shares to regain compliance with the minimum bid price requirements. The ratio and date of such reverse split, if effected, will be determined by our Board of Directors.

Sale of Legacy MTS Business

On December 31, 2022, SharpLink closed on the sale of its legacy MTS business (“Legacy MTS”) to Israel-based Entrypoint South Ltd., a subsidiary of Entrypoint Systems 2004 Ltd. In consideration of Entrypoint South Ltd. acquiring all rights, title, interests and benefits to Legacy MTS, including 100% of the shares of MTS Integratrak Inc., one of the Company’s U.S. subsidiaries, it will pay SharpLink an earn-out payment equal to three times Legacy MTS’ Earnings Before Interest, Taxes and Depreciation for the year ending December 31, 2023, up to a maximum earn-out payment of $1 million (adjusted to reflect net working capital as of the closing date).

2023 $7 Million Revolving Credit Line

On February 13, 2023, SharpLink, Inc., a Minnesota corporation and wholly owned subsidiary of the Company, entered into a Revolving Credit Agreement with Platinum Bank, a Minnesota banking corporation and executed a revolving promissory note of $7,000,000.

Assumption of Loans as a Result of Merger to SportsHub Games Network, Inc.

In connection with the SportsHub Merger that closed on December 22, 2022, on February 13, 2023, SharpLink, Inc (the “New Borrower”), as successor by merger to SportsHub (the “Existing Borrower”), LeagueSafe Management, LLC, a Minnesota limited liability company (“LeagueSafe”), and Virtual Fantasy Games Acquisition, LLC, a Minnesota limited liability company (“Virtual Fantasy”) entered into a consent, assumption and second amendment agreement with the Lender, to assume a term loan in the principal amount of up to $2,000,000 as set forth by the term loan agreement dated June 9, 2020, as amended. LeagueSafe and Virtual Fantasy were the Existing Borrower’s subsidiaries, and as a result of the merger, became the New Borrower’s subsidiaries.

In connection with the SportsHub Merger that closed on December 22, 2022, on February 13, 2023, the New Borrower, LeagueSafe and Virtual Fantasy entered into a consent, assumption and third amendment agreement with the Lender, to assume a revolving line of credit in the principal amount of up to $5,000,000 as set forth by the revolving credit loan agreement dated March 27, 2020, as amended.

2023 Convertible Debenture and Warrant Financing

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 in the aggregate principal amount of $4,400,000 for a purchase price of $4,000,000 on February 15, 2023. The Debenture will be convertible, at any time, and from time to time, at Alpha’s option, into Conversion Shares, at an initial conversion price equal to $0.70 per share, subject to adjustment as described in the Debenture. In addition, the Conversion Price of the Debenture is 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 $0.70 and the average of the five Nasdaq Official Closing Prices immediately preceding such date, provided there shall be no Reset Price below $0.30 per share, the Floor Price, unless waived in writing by the Company by notice to Alpha. If the Reset Price is below the Floor Price and the Company chooses not to waive the Floor Price, the Debenture shall be repayable in cash within 10 business days of such reset date. As part of the SPA, the Regular Warrants exercisable to purchase an aggregate of 2,666,667 ordinary shares have an exercise price of $4.50 per share were reduced from $4.50 per share to $.06 per share. (See Notes 10 and 18 to the Consolidated Financial Statements.)

On February 15, 2023, the Company also issued to Alpha the Warrant to purchase 8,800,000 ordinary shares of the Company at an initial exercise price of $0.875. 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 is subject to an initial reset immediately prior to the Company’s filing of a proxy statement that includes the Shareholder Approval Proposal to the lower of $0.875 and the average of the five Nasdaq Official Closing Prices immediately preceding such date the. 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 Warrants are 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 Warrants (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.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Our most critical estimates include those related to purchase accounting, intangibles and long-lived assets, goodwill and impairment, 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. Our actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting estimates affect the more significant judgments and estimates used in preparing our consolidated financial statements. Please see Note 1 to our consolidated financial statements, which are included in Item 8 “Financial Statements and Supplementary Data” of this Annual Report, for our Summary of Significant Accounting Policies. There have been no material changes made to the critical accounting estimates during the periods presented in the consolidated financial statements.

Purchase Accounting

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. Any unallocated purchase price amount is recognized as goodwill on the consolidated balance sheet if it exceeds the estimated fair value or 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 historical information and 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, especially 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.

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.

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.

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.

There is inherent uncertainty included in the assumptions used in goodwill impairment testing. A change to any of the assumptions could lead to a future impairment that could be material.

Stock-Based Compensation

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 expected 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. All option grants during the year ended December 31, 2022 and 2021 were granted under the 2021 plan subsequent to the MTS Merger. All option grants made under the SharpLink, Inc. 2020 plan were prior to the MTS Merger. SharpLink, Inc.’s underlying stock 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.

Discontinued Operations

In June 2022, the Company’s Board of Directors approved management to enter into negotiations to sell MTS. The Company negotiated a Share and Asset Purchase Agreement with the transaction completed on December 31, 2022. 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.

Revenue Recognition

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. Management judgment is required in determining whether the performance obligations will be recognized at a point in time or overtime and when the transfer of control of goods and services are made to entitle the Company to receive payment. The exercise of management judgment has a material impact on when revenue is recognized.

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. In addition, this segment provides sports betting data (e.g., betting lines) to sports media publishers in exchange for a fixed fee.

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 (a single performance obligation recognized at the end of the respective 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.

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 supports. 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.

Estimates

Going Concern

In the pursuit of SharpLink’s 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 year ending December 31, 2022, the Company had a net loss from continuing operations as of December 31, 2022 and 2021 of $15,303,402 and $33,469,830, respectively; and $6,490,519 and $5,854,995 of cash used in operating activities as of December 31, 2022 and 2021, respectively. To fund these planned losses from operations, the Company secured additional financing through a $3,250,000 term loan in January 2022, as described in Note 8 - Debt. To fund future operations, as described in Note 19, on February 13, 2023, the Company entered into a Revolving Credit Agreement with Platinum Bank and executed a revolving promissory note of $7,000,000. Moreover, on February 14, 2023, the Company entered into a Securities Purchase Agreement (the “SPA”) with Alpha Capital Anstalt (“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.

The Company is continually evaluating strategies to obtain the required additional funding for future operations. These strategies may include, but are not limited to, obtaining equity financing, issuing, or restructuring debt, entering into other financing arrangements, and restructuring of operations to grow revenues and decrease expenses. The Company may be unable to access further equity or debt financing when needed. 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.

Results of Operations

The following table provides certain selected financial information for the periods presented:

	December 31, 2022			December 31, 2021			Change			% Change
Revenues	$	7,288,029		$	2,635,757		$	4,652,272			176.51	%
Cost of Revenues		6,154,434			2,935,119			3,219,315			109.68	%
Gross profit		1,133,595			(299,362	)		1,432,957			478.67	%
Gross profit percentage		15.55	%		-11.35	%
Total operating expenses		16,610,112			33,195,352			(16,585,240	)		-49.96	%
Operating loss from continuing operations		(15,476,517	)		(33,494,714	)		(18,018,197	)		-53.79	%
Total other income (expenses)		184,481			29,055			155,426			534.94	%
Net loss before income taxes		(15,292,036	)		(33,465,659	)		18,173,623			-54.31	%
Provision for income taxes		11,366			4,171			7,195			172.50	%
Net loss from continuing operations		(15,303,402	)		(33,469,830	)		18,166,428			-54.28	%
Net income (loss) from discontinued ops, net of tax		70,024			(22,174,305	)		22,244,329			-100.32	%
Net loss	$	(15,233,378	)	$	(55,644,135	)	$	40,410,757			-72.62	%

Year Ended December 31, 2022 as Compared to Year Ended December 31, 2021

Revenues

For the year ended December 31, 2022, our revenues climbed 177% to $7,288,029 when compared to revenues of $2,635,757 reported for the year ended December 31, 2021. The improvement was largely attributed to additional revenue resulting from the Company’s merger and acquisition activities, namely the acquisition of FourCubed, which closed on December 31, 2021, and the merger with SportsHub, which closed on December 22, 2022.

On a segmented basis, revenues from SharpLink’s Sports Gaming Client Services division totaled $2,493,685, increased 3% from $2,424,229 on a comparable year-over-year basis. The SportsHub/Fantasy Sports group contributed $951,196 compared to $0 in the prior year due to the timing of the closing of its acquisition on December 22, 2022. The Affiliate Marketing Services – International segment, representing revenue contribution from the acquisition of FourCubed at December 31, 2021, was $3,427,698 compared to $0 in the prior year. The Affiliate Marketing – U.S. increased 96% to $415,450 for the year ended December 31, 2022, which compared to $211,528 for the same period in 2021. This increase was due to the addition of revenues generated by our new state-specific affiliate marketing sites, which were launched in November 2022 as part of our strategy to deliver unique fan activation solutions to our sportsbook and casino partners.

Gross Profit

Gross profit totaled $1,133,595 for the year ended December 31, 2022, which compared to a negative gross profit of $299,362 in the previous year – reflecting a 479% improvement. As a result, gross profit margin also improved, rising to 16% from a negative 11% on a comparable year-over-year basis. The increase was primarily attributable to higher revenues and the mix of higher margin products and services sold in 2022 as a direct result of our acquisition of FourCubed and merger with SportsHub.

Total Operating Expenses

For the year ended December 31, 2022, total operating expenses declined 50% to $16,610,112 compared to total operating expenses of $33,195,352 for the year ended December 31, 2021. The decrease was largely due to the commitment fee expense of $23,301,206 recorded in 2021. The non-cash commitment fee expense recorded in 2021 represented the change in fair value of the commitment fee associated with our go-public reverse acquisition of Mer Telemanagement Solutions Ltd., whereby SharpLink, Inc. sold to the holder of the Company’s preferred shares approximately 2.8 million shares of Series B Preferred Stock for $6.0 million and issued Series A-1 Preferred Stock equal to 3% of the Company’s issued and outstanding capital; this, in turn, required SharpLink, Inc. to transfer a variable number of shares outside of its control and classifying it as a liability. The decrease in the commitment fee expense was offset by a non-cash goodwill impairment of $4,726,000 recorded in 2022, which related to our client Entain plc’s loss of access to customers in Russia.

Operating Loss from Continuing Operations

Operating loss totaled $15,476,517 and $33,494,714 for the years ended December 31, 2022 and 2021, respectively, reflecting a 53% reduction in operating loss on a year-over-year basis. Operating losses declined in 2022 due to a combination of higher revenues and lower operating expenses recorded during the year for the aforementioned reasons.

Net Loss from Continuing Operations

For the reasons detailed above, after factoring total other income and expenses, net of $184,481 and income tax expense of $11,366, the net loss from continuing operations for the year ended December 31, 2022 totaled $15,303,402. This represented a 54% reduction from a net loss from continuing operations of $33,469,830 for the prior year after other income and expense, net of $29,055 and income tax expenses of $4,171.

Net Income (Loss) from Discontinued Operations

Net income from discontinued operations of SharpLink’s legacy MTS business totaled $70,024 for the year ended December 31, 2022, which compared to a net loss from discontinued operations of $22,174,305 for the prior year. The primary reason for the change was that the legacy MTS business recorded a goodwill impairment charge of $1,224,671 and $21,722,213 for the years ended December 31, 2022 and 2021, respectively.

Net Loss

For all of the aforementioned reasons, net loss declined 73% to $15,233,378, or $0.62 loss per basic and diluted share for continuing and discontinued operations for the year ended December 31, 2022, compared to a net loss of $55,644,135, or $3.94 loss per basic and diluted share for continuing and discontinued operations for the year ended December 31, 2021.

Cash Flows

Year ended December 31, 2022 as Compared to the Year ended December 31, 2021

As of December 31, 2022, cash on hand was $39,324,529, a 548% increase when compared to cash on hand of $6,065,461 as of December 31, 2021. For the years ended December 31, 2022 and 2021, restricted cash totaled $11,132,957 and $0, respectively. The increase in restricted cash resulted from the merger with SportsHub on December 22, 2022.

For the year ended December 31, 2022, cash used in operations totaled $5,937,385, as compared to net cash used in operations of $6,070,874 in the prior year. The increase in cash used in operating activities was primarily attributable to an increase in the accounting for depreciation and amortization, higher stock-based compensation expense, offset by a decline in goodwill and intangible asset impairment expenses.

For the year ended December 31, 2022, cash provided by the Company’s investing activities totaled $48,302,068 an increase of 1,095% when compared to cash used for investing activities of $4,411,720 for the previous year. The increase in cash generated in our investing activities resulted from cash and restricted cash acquired from the merger with SportsHub in December 2022 offset by payments made relating to the acquisition of FourCubed in 2021.

For the year ended December 31, 2022, cash provided by financing activities was $2,675,343, an 83% decrease from net cash provided by financing activities of $15,678,085 provided from financing activities during the year ended December 31, 2021. The year-over-year decrease was largely due to placement of Series B preferred stock, ordinary shares, prefunded warrants and regular warrants issued in connection with equity fundings during the year ended December 31, 2021. During 2022, the Company’s capital raising activities were limited to raising $3,250,000 through a term loan secured from our commercial lender, Platinum Bank, offset by debt repayments and debt issue costs.

Liquidity and Capital Resources

We will require additional capital to support our growth plans and such capital may not be available on reasonable terms or at all. If we do not raise sufficient capital, there is substantial doubt about our ability to continue as a going concern.

In the pursuit of our long-term growth strategy and the development of our sports betting conversion software, affiliate marketing services and related businesses, we have sustained continued operating losses. As of December 31, 2022, we had negative working capital of $5,000,468. For the year ended December 31, 2022, we incurred a loss from continuing operations of $15,303,402, inclusive of $4,726,000 for goodwill and intangible asset impairment charges. and cash used in operating activities from continuing operations of $6,490,519. To help fund our operations, we raised capital from banks and outside investors in the aggregate amounts of $2,675,343 and $15,678,085 for the years ended December 31, 2022 and 2021, respectively, in the form of a term loan in 2022 and the sale of Ordinary Shares and conversion of preferred stock and prefunded and regular warrants during 2021. Based on continued expected cash needs to fund our ongoing technology development initiatives and grow our Affiliate Marketing Services–United States operations, we may require additional liquidity to continue our operations for the next year. Subsequent to the end of 2022, in February 2023 we closed on a $4.4 million convertible debenture and signed a two-year $7.0 million revolving loan agreement with our commercial lender.

We have continued to realize losses from operations. However, with the revenue generated from our customers and our capital raise efforts, we believe that we will have sufficient access to cash to meet our anticipated operating costs and capital expenditure requirements through the end of 2023. Our primary need for liquidity is to fund working capital requirements of our business, capital expenditures, acquisitions, debt service, and for general corporate purposes. Our primary source of liquidity is funds generated by financing activities and from private placements. Our ability to fund our operations, to make planned capital expenditures and acquisitions, to service debt payments, and to repay or refinance indebtedness depends on our future operating performance and cash flows. Our future operating performance and cash flows are subject to prevailing economic conditions and financial, business and other factors, some of which are beyond our control.

If the Company is unable to generate significant sales growth in the near term and raise additional capital, there is a risk that the Company could default on its obligations; and could be required to discontinue or significantly curtail the scope of its operations if no other means of financing operations are available. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or any other adjustment that might be necessary should the Company be unable to continue as a going concern.

Off-Balance Sheet Arrangements

On December 31, 2022, we did not have any off-balance sheet arrangements. Additionally, we have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Contractual Obligations

Material contractual obligations arising in the normal course of business primarily consist of purchase obligations in the normal course of business, principal and interest payment obligations to our commercial lender and payments for lease obligations.

Inflation

Our opinion is that inflation did not have a material effect on our operations for 2022.

Climate Change

Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, 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. ASC 326 did not have a material impact on its consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies the guidance in Accounting Standards Codification Topic 820, Fair Value Measurement (“Topic 820”), when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2022-03, it does not expect ASU 2022-03 to have a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES

Exhibit Number		Description

3.1		Memorandum of Association (incorporated by reference to Exhibit 4.1 to Form F-3 filed with the SEC on July 27, 2021) (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 (incorporated by reference to Exhibit 4.2 to Form F-3 filed with the SEC on July 27, 2021)

4.1		Specimen of Ordinary Share Certificate (incorporated by reference to Exhibit 2.1 to the Annual Report on Form 20-F for the year ended December 31, 2017)

4.2		Form of Prefunded Warrant issued to Alpha Capital Anstalt (incorporated by reference to Exhibit 4.1 to the Report on Form 6-K submitted to the SEC on November 19, 2021)

4.3		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)

4.4		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)

2.4*		Description of the rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934

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 Brian Bennett, dated July 30, 2021 (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-4 filed with the SEC on February 3, 2022)

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)

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)

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)

10.35		8% Senior Convertible Debenture Due February 15, 2026 (incorporated herein by reference to Exhibit 10.20 to the Report on Form 8-K filed with the SEC on February 16, 2023)

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)

21.1*		List of Subsidiaries

23.1*		Consent of Cherry Bekaert, LLP

23.2*		Consent of RSM US LLP

31.1**		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended

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

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

*	Incorporated by reference to the Annual Report on Form 10-K filed with the SEC on April 5, 2023.
**	Filed herewith

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 LTD.

Dated: July 14, 2023	By:	/s/ Rob Phythian
		Rob Phythian
		Chief Executive Officer and Director

Dated: July 14, 2023	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 Director	July 14, 2023
Rob Phythian	(Principal Executive Officer)

/s/ Robert DeLucia	Chief Financial Officer	July 14, 2023
Robert DeLucia	(Principal Financial Officer)

/s/ Chris Nicholas	Chief Operator Officer and Director	July 14, 2023
Chris Nicholas

/s/ Joseph Housman	Chairman of the Board	July 14, 2023
Joseph Housman

/s/ Paul Abdo	Director	July 14, 2023
Paul Abdo

/s/ Thomas Doering	Director	July 14, 2023
Thomas Doering

/s/ Adrienne Anderson	Outside Director	July 14, 2023
Adrienne Anderson

/s/ Scott Pollei	Outside Director	July 14, 2023
Scott Pollei

INDEX TO FINANCIAL STATEMENTS

Contents		Page No.

Reports of Independent Registered Public Accounting Firm (PCAOB ID 00677 and PCAOB ID 49)		F-2

Consolidated Balance Sheets as of December 31, 2022 and 2021		F-6

Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021		F-7

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022 and 2021		F-8

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021		F-9

Notes to the Consolidated Financial Statements for the Years Ended December 31, 2022 and 2021		F-10

SportsHub Games Network, Inc. and Subsidiaries Consolidated Financial Statements for the Six Months Ended June 30, 2022 and 2021		F-52

Report of Independent Auditor of SportsHub Games Network, Inc. and Subsidiaries		F-54

SportsHub Games Network, Inc. and Subsidiaries Consolidated Financial Statement for the Years Ended December 31, 2022 and 2021		F-95

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

SharpLink Gaming, Ltd. and Subsidiaries

Minneapolis, Minnesota

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of SharpLink Gaming, Ltd. and Subsidiaries (the “Company”) as of December 31, 2022, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended 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, 2022, and the consolidated results of its operations and its cash flows for the year then ended 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.

Retrospective Adjustments

We also have audited the adjustments to the consolidated financial statements as of December 31, 2021 and for the year then ended to retrospectively apply the change in accounting for discontinued operations, as described in Note 16. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2021 consolidated financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2021 consolidated financial statements taken as a whole.

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 audit. 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 audit 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 audit, 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 audit 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 audit 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 audit provides 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.

F-2

Revenue from Contracts with Customers

Critical Audit Matter Description

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.

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 judgements can have a material effect on the amount of revenue recognized on these contracts.

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 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.

Valuation of Acquired Intangible Assets

Critical Audit Matter Description

As described in Note 3 to the consolidated financial statements, on December 22, 2022, the Company acquired SportsHub Games Network, (“SHGN”), for total consideration of $6,758,137 including the assumption of $5,387,850 in debt. The transaction was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) 805.

The acquisition resulted in the recording of $7,358,703 of intangible assets, including developed technology, customer lists, goodwill, and tradenames. Significant estimation was required due to the application of the valuation models and assumptions used by management to measure the fair value of the intangible assets. Management estimated the fair value of these assets using valuation techniques, including income-based models and relief from royalty rate models, which required the use of significant estimates and assumptions related to cash flow forecasts, economic life analysis, discount rates, royalty rates, and customer attrition rates. These significant assumptions are forward-looking and could be affected by future economic and market conditions.

F-3

As discussed in Note 3, the Company’s purchase price allocation is disclosed as preliminary as of December 31, 2022.

How We Addressed the Matter in Our Audit

The determination of the acquisition date fair value of the intangible assets required the Company to make significant estimates and assumptions. As a result, testing these assumptions, which were used to calculate the fair values, involved a high degree of auditor judgment and effort, including involving the use of our valuation specialist. In addition, the fair values of these intangible assets were challenging to audit due to the sensitivity of the fair value determination to changes in these assumptions.

Our audit procedures included the following:

	●	Obtained an understanding of the internal controls and processes over the valuation of the intangible assets, including management’s controls over forecasts of future cash flows and selection of other significant assumptions.

	●	Evaluated the reasonableness of management’s forecasts by comparing the forecasts to actual historical results and trends.

	●	We compared the forecasts to internal forecasts and other information obtained while performing the audit.

	●	We reviewed the purchase agreement to ensure that all acquired assets and assumed liabilities were appropriately identified.

	●	We compared the revenue growth rates and profit margins to available external information.

	●	With the assistance of our fair value specialists, we performed the following:

○

We evaluated the reasonableness of the valuation methodologies selected and the mathematical accuracy of the calculation.We tested the source information underlying the determination of the discount rates, tested the mathematical accuracy of the calculations and compared those to the amounts selected by management.

/s/ Cherry Bekaert LLP

We have served as the Company’s auditor since 2022.

Raleigh, North Carolina

April 4, 2023

F-4

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

SharpLink Gaming Ltd.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of SharpLink Gaming Ltd. (the Company) as of December 31, 2021, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for the period ended December 31, 2021, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, except for effects of the adjustments, if any, as might have been determined necessary had we been engaged to audit the Company’s restatement to retrospectively apply discontinued operations, as described below, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Restatement for 2022 transactions requiring retrospective accounting treatment in 2021 financial statements

We were not engaged to audit the restatement of the 2021 financial statements and disclosures for discontinued operations, as discussed in Note 16 to the 2022 financial statements.

Emphasis of a Matter—Going Concern

The accompanying 2021 financial statements have been prepared assuming that the Company will continue as a going concern. As discussed at Note 2 to the 2021 financial statements, the Company has suffered recurring losses from operations and has negative cash flows from operations. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 2 to the 2021 financial statements. The 2021 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Except as discussed above, we conducted our audits in accordance with the auditing standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the 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 financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.

/s/ RSM US LLP

We have served as the Company’s auditor from 2021 to 2022.

Minneapolis, Minnesota

May 16, 2022

F-5

SHARPLINK GAMING LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2022 AND 2021

	December 31, 2022			December 31, 2021
Assets
Current Assets
Cash	$	39,324,529		$	6,065,461
Restricted cash		11,132,957			-
Accounts receivable, net of allowance		823,530			956,555
Contract assets		219,116			147,913
Prepaid expenses and other current asset		1,100,433			217,296
Current assets from discontinued operations		1,310,000			2,101,209
Total current assets		53,910,565			9,488,434

Investment, cost		200,000			200,000
Equipment, net		60,218			55,105
Right-of-use asset - operating lease		230,680			165,522
Intangibles
Intangible assets, net		3,727,933			5,551,540
Goodwill		6,916,095			3,511,167
Non-current assets from discontinued operations		-			1,588,058
Total assets	$	65,045,491		$	20,559,826

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued expenses	$	2,125,707		$	1,404,022
Contract liabilities		2,166,451			308,058
Due to Affiliate		-			93,954
Prize liability		6,061,434			-
Due to Seller		-			691,523
Customer deposits		42,171,589			-
Line of credit		4,120,651			-
Current portion of long-term debt		1,018,918			-
Current portion of lease liability		31,070			29,265
Current liabilities from discontinued operations		1,215,153			3,333,733
Total current liabilities		58,911,033			5,860,555

Long-Term Liabilities
Deferred tax liability		6,206			5,581
Debt, less current portion		2,931,698			-
Lease liability, less current portion		210,037			136,257
Non-current liabilities from discontinued operations		-			365,977
Total liabilities		62,058,974			6,368,370

Commitments and Contingencies		-			-
Stockholders’ Equity

Ordinary shares, $0.02 par value; authorized shares 92,900,000 issued and outstanding shares: 26,880,250 and 22,360,987, respectively		537,731			447,346
Series A-1 preferred stock, $0.02 par value; authorized shares: 2,600,000 issued and outstanding shares: 66,303 and 54,737, respectively liquidation preference: $138,414 and $118,741, respectively		1,326			1,094
Series B preferred stock, $0.02 par value; authorized shares: 3,700,000; issued and outstanding shares: 124,810 and 124,810, respectively; liquidation preference: $595,245 and $274,939, respectively		2,496			2,496
Preferred stock, value
Treasury stock, 900 ordinary shares at cost		(29,000	)		(29,000	)
Additional paid-in capital		76,039,604			72,101,783
Accumulated deficit		(73,565,641	)		(58,332,263	)
Total stockholders’ equity		2,986,517			14,191,456
Total liabilities and stockholders’ equity	$	65,045,491		$	20,559,826

See Accompanying Notes to Consolidated Financial Statements.

F-6

SHARPLINK GAMING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

	December 31,			December 31,
	2022			2021
Revenues	$	7,288,029		$	2,635,757
Cost of revenues		6,154,434			2,935,119
Gross profit		1,133,595			(299,362	)

Operating expenses
Selling, general, and administrative expenses		11,884,112			9,894,146
Commitment fee expense		-			23,301,206
Goodwill and intangible asset impairment expenses		4,726,000			-
Total operating expenses		16,610,112			33,195,352

Operating loss from continuing operations		(15,476,517	)		(33,494,714	)

Other income and (expense)
Interest income		72,000			29,055
Interest expense		(137,519	)		-
Other Income		250,000			-
Total other income and expense		184,481			29,055

Net loss before income taxes from continuing operations		(15,292,036	)		(33,465,659	)
Provision for income tax expenses		11,366			4,171
Loss from continuing operations		(15,303,402	)		(33,469,830	)
Income (loss) from discontinued operations, net of tax		70,024			(22,174,305	)
Net loss	$	(15,233,378	)	$	(55,644,135	)

Numerator for basic and diluted net loss per share:

Net loss from continuing operations available to ordinary shareholders	$	(15,312,264	)	$	(34,250,214	)

Net income (loss) from discontinued operations available to ordinary shareholders		70,024		$	(22,174,305	)
	$	(15,242,240	)	$	(56,424,519	)
Denominator for basic and diluted net loss per share:
Weighted average shares outstanding		24,879,602			14,300,311

Net loss per share - Basic and diluted
Net loss from continuing operations per share	$	(0.62	)	$	(2.40	)
Net income (loss) from discontinued operations per share		-			(1.54	)
Net loss per share	$	(0.62	)	$	(3.94	)

See Accompanying Notes to Consolidated Financial Statements.

F-7

SHARPLINK GAMING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

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

Balance, December 31, 2020 ¹		10,750,768	$	215,014		-		$	-			-		$	-		$	3,833,891		$	-		$	(5,266	)	$	(2,688,128	)	$	1,355,511

Net loss		-		-		-			-			-			-			-			-			-			(55,644,135	)		(55,644,135	)
Stock-based compensation expense		-		-		-			-			-			-			1,656,674			-			-			-			1,656,674
Stock option exercises		25,917		518		-			-			-			-			23,745			-			-			-			24,263
Collection of stock subscription		-		-		-			-			-			-			-			-			5,266			-			5,266
Series A Preferred Stock discount accretion		-		-		-			-			-			-			(373,560	)		-			-			-			(373,560	)
Series A Preferred Stock dividend accretion		-		-		-			-			-			-			(91,192	)		-			-			-			(91,192	)
Dividends on Series A Preferred Stock in common stock		51,832		1,165		-			-			-			-			93,535			-			-			-			94,700
Issuance of Series A-1 preferred stock in exchange for Series A preferred stock		-		-		1,230,956			24,619			-			-			1,704,482			-			-			-			1,729,101
Issuance of series A-1 preferred stock in exchange for commitment fee		-		-		700,989			14,020			-			-			4,752,707			-			-			-			4,766,727
Issuance of Series B preferred stock in Series A-1 preferred stock		-		-		-			-			3,692,865			73,857			25,037,622			-			-			-			25,111,479
Vesting of warrant upon Go Public Transaction		850,330		17,007		-			-			-			-			1,984,670			-			-			-			2,001,677
Conversion of Series A-1 preferred stock into ordinary shares		1,931,945		38,639		(1,931,945	)		(38,639	)		-			-			-			-			-			-			-
Conversion of Series B preferred stock into ordinary shares		3,568,055		71,361		-			-			(3,568,055	)		(71,361	)		-			-			-			-			-
Dividends on Series B preferred stock in Series A-1 preferred stock		-		-		54,737			1,094			-			-			(1,094	)		-			-			-			-
Issuance of ordinary shares in MTS Merger		3,162,951		63,258		-			-			-			-			22,075,774			(29,000	)		-			-			22,110,032
Issuance of ordinary shares in FourCubed Acquisition		606,114		12,122		-			-			-			-			1,594,080			-			-			-			1,606,202
Issuance of ordinary shares, prefunded warrants and regular warrants to institutional investor		1,413,075		28,262		-			-			-			-			9,810,449			-			-			-			9,838,711

Balance, December 31, 2021		22,360,987	$	447,346		54,737		$	1,094			124,810		$	2,496		$	72,101,783		$	(29,000	)	$	-		$	(58,332,263	)	$	14,191,456
Balance		22,360,987	$	447,346		54,737		$	1,094			124,810		$	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		-		-		11,566			232									(232	)
Issuance of ordinary shares for services		200,000		4,000		-			-			-			-			168,000			-			-			-			172,000
Issuance of ordinary shares in SportsHub Gaming Network Acquisition		4,319,263		86,385		-			-			-			-			1,283,902			-			-			-			1,370,287
																														-
Balance, December 31, 2022		26,880,250	$	537,731		66,303		$	1,326			124,810		$	2,496		$	76,039,605		$	(29,000	)	$	-		$	(73,565,641	)	$	2,986,517
Balance		26,880,250	$	537,731		66,303		$	1,326			124,810		$	2,496		$	76,039,605		$	(29,000	)	$	-		$	(73,565,641	)	$	2,986,517

Equity structure was adjusted for all periods presented using the exchange ratio established in the Go-Public Merger Agreement with Mer Telemanagement Solutions Ltd. to reflect the number of shares of the legal parent, SharpLink, Inc. (the accounting acquiree) issued in the MTS Merger (reverse acquisition). See Note 3 for a discussion of the MTS Merger.

See Accompanying Notes to Consolidated Financial Statements.

F-8

SHARPLINK GAMING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

	2022			2021
Includes cash flow activities from both continuing and discontinued operations
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations	$	(15,303,402	)	$	(33,469,830	)
Net income (loss) from discontinued operations, net of tax	$	70,024		$	(22,174,305	)
Net loss	$	(15,233,378	)	$	(55,644,135	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization		1,165,517			206,246
Amortization of loan costs		8,073			-
Amortization of prepaid stock issued for services		43,000			-
Deferred tax expense		625			1,172
Stock-based compensation expense		2,486,151			1,656,674
Commitment fee expense		-			23,301,206
Gain on disposal of equipment		2,594			-
Goodwill and intangible asset impairment expenses		4,726,000			-
Write off of amounts related to acquisition of FourCubed		(303,523	)		-
Advisory expenses in exchange for warrant		-			2,001,677
Changes in assets and liabilities
Accounts receivable		319,737			(175,645	)
Contract assets		(71,203	)		127,424
Prepaid expenses and other current assets		1,068,832			(203,585	)
Other long-term assets		-			-
Accrued expenses and other current liabilities		1,012,947			798,026
Other long-term liabilities		-			(98,360	)
Contract liabilities		(1,715,892	)		-

Net cash used for operating activities - continuing operations		(6,490,519	)		(5,854,995	)
Net cash used for operating activities - discontinued operations		553,133			(215,879	)
Net cash used for operating activities		(5,937,386	)		(6,070,874	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for equipment		(25,707	)		(58,807	)
Capital expenditures for internally developed software		(137,565	)		(201,436	)
Investment in Quintar		-			(200,000	)
Proceeds from the sale of equipment		4,493			-
Cash and restricted cash acquired in SportsHub Gaming Network Merger		48,859,270			-
Payments relating to the acquisition of FourCubed		(388,000	)		(5,883,477	)

Net cash generated by/(used) for investing activities - continuing operations		48,312,491			(6,343,720	)
Net cash generated by (used) for investing activities - discontinued operations		(10,423	)		1,932,000
Net cash generated by/(used) for investing activities		48,302,068			(4,411,720	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of stock subscription		-			5,266
Proceeds from debt		3,250,000			-
Repayments of debt		(549,225	)		-
Payments of debt issue costs		(25,432	)		-
Net advances to and proceeds from Affiliate		-			(190,155	)
Proceeds from issuance of Series B preferred stock		-			6,000,000
Proceeds from issuance of ordinary shares, prefunded warrants and regular warrants, net of issuance costs		-			9,838,711
Proceeds from the exercise of stock options		-			24,263

Net cash generated by financing activities - continuing operations		2,675,343			15,678,085
Net cash generated by financing activities - discontinued operations		-			-
Net cash generated by financing activities		2,675,343			15,678,085

Net change in cash and restricted cash		45,040,025			5,195,491

Cash and restricted cash, beginning of year		6,065,461			2,585,180
Less cash from discontinued operations		648,000			1,715,210
Cash and restricted cash, end of year	$	50,457,486		$	6,065,461

Reconciliation of Cash and Restricted Cash
Cash	$	39,324,529		$	6,065,461
Restricted cash		11,132,957			-
Total cash and restricted cash	$	50,457,486		$	6,065,461

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest		109,165			-
Cash paid for taxes		19,916			-

NON-CASH INVESTING ACTIVITIES:
Issuance of ordinary shares in MTS Merger		-			22,110,032
Issuance of ordinary shares in FourCubed Acquisition		-			1,606,602
Issuance of ordinary shares in SportsHub Gaming Network Merger		1,370,287			-
Issuance of ordinary shares for advisory services		172,000			-
Consideration due for FourCubed Acquisition		-			691,523

NON-CASH FINANCING ACTIVITIES:
Series A Preferred Stock discount accretion		-			373,560
Series A Preferred Stock dividend accretion		-			91,192
Dividends on Series A Preferred Stock in common stock		-			94,700
Issuance of Series A-1 preferred stock in ordinary shares		-			1,729,101
Issuance of Series A-1 preferred stock in exchange for commitment fee		-			4,766,727
Issuance of Series B preferred stock in exchange for commitment fee		-			25,111,479
Dividends on Series B preferred stock in Series A-1 preferred stock		8,862			315,632
Conversion of Series A-1 preferred stock into ordinary shares		-			6,495,828
Conversion of Series B preferred stock into ordinary shares		-			24,262,771
Dividend due to forgiveness of MTS intercompany loan		2,039,000			-

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 Consolidated Financial Statement

F-9

SHARPLINK GAMING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ENDED DECEMBER 31, 2022 AND 2021

Note 1 – Summary of Significant Accounting Policies

Nature of Business

SharpLink Gaming Ltd. (the “Company” or “SharpLink,” formerly Mer Telemanagement Services or “MTS”), is an Israeli-based corporation. SharpLink is a leading online technology company that connects sports fans, leagues and sports websites to relevant and timely sports betting and iGaming content. SharpLink uses proprietary, intelligent, online conversion technology and direct-to-player (“D2P”) performance marketing strategies to convert sports fans into sports bettors and online casino game players for licensed, online sportsbook and casino operators. Further, SharpLink, through its SportsHub Gaming Network (“SportsHub”) reporting unit, owns and operates an online gaming business that primarily facilitates daily and seasonal peer-to-peer fantasy contests for its end users. The Company also operates a website that provides 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.

On July 26, 2021, SharpLink, Inc. completed its merger with Mer Telemanagement Solutions Ltd. (the “MTS Merger”), which changed its name to SharpLink Gaming Ltd. and commenced trading on NASDAQ under the ticker symbol “SBET.” As a result of the MTS Merger, SharpLink, Inc. shareholders own 86% of the Company, on a fully diluted and as-converted basis, and has majority of the voting shares. Additionally, immediately following the closing of the MTS Merger, legacy MTS directors and officers agreed to resign, pursuant to the Merger Agreement. SharpLink, Inc.’s executives became officers of the Company and new members were appointed to the board of directors. The MTS Merger represents a reverse acquisition in which SharpLink, Inc. is the accounting acquirer and legacy MTS is the accounting acquiree. The Company applied the acquisition method of accounting to the identifiable assets and liabilities of legacy MTS, which were measured at estimated fair value as of the date of the business combination.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of SharpLink Gaming Ltd. and its wholly owned subsidiaries. All intercompany accounts and transactions between consolidated subsidiaries have been eliminated in consolidation.

We operate in four 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 16.

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.

F-10

Purchase Accounting

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. 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.

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, 2022 and 2021. The results of operations and cash flows of MTS for all periods are separately reported as discontinued operations.

Restricted Cash

Restricted cash consists of funds held for payment of prize liabilities for its various daily and seasonal peer-to-peer fantasy games, as well as private fantasy league dues from customers who utilize the services offered via the Company’s secure online payment and league dues management website. The Company maintains separate accounts to segregate users’ funds from operational funds.

Concentrations of Credit Risk

Cash and restricted cash are deposited with major banks in the United States, Israel and Hong Kong. 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 and restricted cash on hand at December 31, 2022 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, 2022
Platinum Bank	$	46,023,871
Bank Vista		2,744,359
Silicon Valley Bank		503,103
Other		1,186,153
Total cash and restricted cash	$	50,457,486

The Company performs ongoing credit evaluations of its customers. In certain circumstances, the Company may require letters of credit, other collateral or additional guarantees.

F-11

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, 2022 and 2021 were $0 and $0, respectively. During the years ended December 31, 2022 and 2021, no amount of the allowance for credit losses balance was collected.

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 an 1.12% ownership interest in Quintar. SharpLink does not exercise significant control over Quintar due to its minority ownership role and the fact that SharpLink does not have a seat on Quintar’s Board of Directors, nor hold any special voting rights. As a result, of the Company’s lack of influence over Quintar and the fact that the valuation of Quintar is not easily determinable (privately held business with few transactions) the Company accounts for the Quintar investment through the cost method of accounting. The Company reviews the investment for impairment at each reporting period based on current conditions. This is informed by Quintar’s operating results and financing activities. No impairment was indicated related to the Quintar investment for the year ended December 31, 2022 and 2021.

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 for the years ended December 31, 2022 and 2021, was $25,345 and $28,891, respectively. Accumulated depreciation as of December 31, 2022 and 2021 was $100,733 and $86,989, 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 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. 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 option will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term.

Intangible and Long-Lived Assets

F-12

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 $137,565 and $201,436 of costs in the development of its software for the years ended December 31, 2022 and 2021, respectively.

In accordance with the approval by the Company’s Board of Directors to sell MTS in June 2022, management concluded that the intangible assets of customer relationships and developed technology and its goodwill were impaired and recorded an impairment charge for $1,224,671. The impairment charge was determined based on an assessment of the realization of assets, the ultimate disposition of liabilities and the related carrying value of assets. The impairment charge has been included in the Loss from Discontinued Operations, net of tax line item in the consolidated statement operations for the year ended December 31, 2022.

Goodwill and Impairment

The Company recorded goodwill impairment of $1,515,000, which was due to the loss of access to players in the Russian market due to the exit of FourCubed’s largest customer from that market (see Note 3 – Acquisitions – FourCubed – Purchase Price Allocation). 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.

F-13

During the year ended December 31, 2021, the Company recorded goodwill impairment of $21,722,213 in the Enterprise TEM reporting unit, which is included in the Enterprise TEM operating segment. The Enterprise TEM reporting unit had goodwill of $858,819 and a negative carrying amount of net assets as of December 31, 2021. There is inherent uncertainty included in the assumptions used in goodwill impairment testing. A change to any of the assumptions could lead to a future impairment that could be material.

Accounts Payable

The composition of accounts payable and accrued expenses are as follows:

	December 31, 2022		December 31, 2021
Accounts payable	$	851,031	$	813,621
Accrued wages and payroll expenses		338,166		181,360
Accrued bonus		358,836		117,370
Accrued interest		32,017		-
Other accrued expenses		545,657		291,671
	$	2,125,707	$	1,404,022

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.

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.

Severance Pay

Certain of the Company’s employees in Israel have 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 the 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 $342,000 and $366,000 for December 31, 2022 and 2021, respectively, is recorded in other current liabilities from discontinued operations in the consolidated balance sheet. The value of these deposits of $279,000 and $284,000 for December 31, 2022 and 2021, respectively, is recorded in current assets from discontinued operations in the consolidated balance sheet.

The deposited funds include profits accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to the Severance Pay Law or labor agreements.

F-14

Transactions with SportsHub

Prior to December 22, 2022 (see Note 3 – Acquisitions – SportsHub Games Network, Inc.), SportsHub owned approximately 40% of the outstanding ordinary shares of the Company. SportsHub has historically paid direct expenses incurred by the Company’s Sports Gaming Client Services business unit (“STI”), which includes salaries and related expenses for the employees of STI. SportsHub collects cash on behalf of STI’s revenue generating activities. The Company was allocated cost of revenue and selling, general, and administrative expenses totaling $285,673 from January 1, 2022 through December 22, 2022 and $284,625, for the year ended December 31, 2021, for costs incurred by SportsHub that were clearly applicable to the current and future revenue producing activities of the Company. Management has allocated these expenses using judgement based on the most reasonable method for the type of expense. Allocation methods were based on headcount, budgeting, salaries expense, and revenue depending on the nature of the expense.

Redeemable Preferred Stock Issued with a Commitment Fee

The Company considers guidance within ASC 470-20, Debt (ASC 470), ASC 480, and ASC 815 when accounting for a redeemable equity instrument issued with a freestanding-instruments (e.g. commitment fee), such as in the issuance upon the date the SharpLink stock is listed or quoted on any trading market (Going Public Transaction). In circumstances in which redeemable convertible preferred stock is issued with a commitment fee, the proceeds from the issuance of the convertible preferred stock are first allocated to the commitment fee at its full estimated fair value.

The Company accounts for the commitment fee as either equity instrument, liability, or derivative liability in accordance with ASC 480, Distinguishing Liabilities from Equity (ASC 480) and/or ASC 815, Derivatives and Hedging (ASC 815), depending on the specific terms of the agreement. The commitment fee, which required the Company to issue ordinary shares equal to 3% of the Company’s issued and outstanding capital immediately following the Going Public Transaction, required the Company to transfer a variable number of shares outside of its control, which is classified as a liability. Liability-classified instruments are recorded at their estimated fair values at each reporting period until they are exercised, terminated, reclassified, or otherwise settled. Changes in the estimated fair value of the commitment fee were recorded in Commitment Fee Expense in the consolidated statement of operations for the year ended December 31, 2021.

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.

In February 2021, the Company issued a warrant in exchange for advisory services, which vested upon the completion of the Going Public Transaction. The warrant was in the scope of ASC 718 and was recognized at its grant date fair value when the performance condition became probable of occurrence, which in the Company’s case was the completion of the Going Public Transaction. The grant date fair value was determined using a Black Scholes option-pricing model.

Through the MTS Merger, the Company assumed 83,334 warrants issued to a contractor who was formerly the Chief Executive Officer of MTS. The warrants were fully vested and recognized at their grant date fair values immediately prior to the consummation of the MTS Merger and have an exercise price of zero. The grant date fair values were determined using Black Scholes option-pricing models. The compensation expense related to these warrants was recognized in the MTS financial results immediately prior to the merger and thus is not included in the SharpLink consolidated statement of operations.

F-15

In November 2021, the Company issued warrants concurrent with a sale of ordinary shares to an institutional investor. Based on the terms of the agreements, the warrants were freestanding, equity-linked instruments that represented separate units of account. The Company allocated the value of net proceeds from the offering to the ordinary shares and warrants based on relative fair value on the grant date. The warrants’ grant date fair values were determined using Black Scholes option-pricing models. The value allocated to the warrants was recorded in Additional Paid-In Capital in the consolidated balance sheet.

Revenue

Advertising and Marketing Expenses

The Company incurred $459,976 in advertising and marketing expenses for the year ended December 31, 2022.

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. In addition, this segment provides sports betting data (e.g., betting lines) to sports media publishers in exchange for a fixed fee.

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 promotions where funds are issued to a user’s wallet account are recognized as marketing expenses, included in selling, general, and administrative expenses.

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.

F-16

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 (also known as common) had been issued if such additional ordinary 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, 2022, dividend accrued in Preferred Series A-1 stock of 66,303 shares, total issuable shares of Series B preferred stock of 124,810, total stock options of 2,889,124 and warrants of 4,003,593 were not included in the net loss per share calculation.

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.

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 purchase accounting, intangibles and long-lived assets, goodwill and impairment, 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.

F-17

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 Issued Accounting Pronouncements Not Yet Adopted

In June 2016, 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 will adopt ASC 326 on January 1, 2023 and does not expect ASC 326 to have a material impact on its consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies the guidance in Accounting Standards Codification Topic 820, Fair Value Measurement (“Topic 820”), when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2022-03, it does not expect ASU 2022-03 to have a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

Note 2 – Going Concern

In the pursuit of SharpLink’s 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 year ending December 31, 2022, the Company had a net loss from continuing operations as of December 31, 2022 and 2021 of $15,303,402 and $33,469,830, respectively; and $6,510,965 and $5,854,995 of cash used in operating activities as of December 31, 2022 and 2021, respectively. To fund these planned losses from operations, the Company secured additional financing through a $3,250,000 term loan in January 2022, as described in Note 8 - Debt. To fund future operations, as described in Note 19, on February 13, 2023, the Company entered into a Revolving Credit Agreement with Platinum Bank and executed a revolving promissory note of $7,000,000. Moreover, on February 14, 2023, the Company entered into a Securities Purchase Agreement (the “SPA”) with Alpha Capital Anstalt (“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.

The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

F-18

Note 3 – Acquisitions

Mer Telemanagement Solutions Ltd. (“MTS”)

Description of the Transaction

On July 26, 2021, Mer Telemanagement Solutions Ltd. (“MTS”), New SL Acquisition Corp., a wholly owned subsidiary of MTS (“Merger Sub”) and privately held SharpLink, Inc. (“SharpLink, Inc.”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub merged with and into SharpLink, Inc., with SharpLink, Inc. surviving as a wholly-owned subsidiary of legacy MTS (the “Reverse Merger” or “MTS Merger”). Following the MTS Merger, the Company changed its name from Mer Telemanagement Solutions Ltd. to SharpLink Gaming Ltd. (the “Company”). On a pro forma and fully-diluted basis for the Company, SharpLink, Inc. shareholders own approximately 86% of the Company, inclusive of a stock option pool of 10% of the fully-diluted outstanding share capital of the Company, and legacy MTS securityholders own approximately 14% of the fully-diluted outstanding capital of the Company.

As a result of the MTS Merger, each outstanding share of SharpLink, Inc. common stock was converted into the right to receive SharpLink Gaming Ltd. ordinary shares as calculated pursuant to the Exchange Ratio, as defined in the Merger Agreement. Each outstanding share of SharpLink, Inc. Series A preferred stock was converted into the right to receive SharpLink Gaming Ltd. Series A-1 preferred stock, calculated pursuant to the Exchange Ratio. Each outstanding share of SharpLink, Inc. Series A-1 preferred stock was converted into the right to receive SharpLink Gaming Ltd. Series A-1 preferred stock, calculated pursuant to the Exchange Ratio. Each outstanding share of SharpLink, Inc. Series B preferred stock was converted into the right to receive SharpLink Gaming Ltd. Series B preferred stock, calculated pursuant to the Exchange Ratio.

In connection with a closing condition of the Merger Agreement, a major shareholder of both legacy MTS and SharpLink, Inc., invested $6,000,000 in exchange for 3,692,865 shares of SharpLink Gaming Ltd. Series B preferred stock.

Identification of Accounting Acquirer

As a result of the MTS Merger, SharpLink, Inc. shareholders owned 86% of the Company on a fully diluted and as-converted basis, and held a majority of the voting shares. Additionally, immediately following the closing of the MTS Merger, legacy MTS directors and officers agreed to resign, pursuant to the Merger Agreement. SharpLink, Inc.’ executives became officers of the Company and new members were appointed to the board of directors. The MTS Merger represented a reverse acquisition in which SharpLink, Inc. was the accounting acquirer and legacy MTS was the accounting acquiree. The Company applied the acquisition method of accounting to the identifiable assets and liabilities of legacy MTS, which have been measured at estimated fair value as of the date of the business combination.

Purchase Price

The purchase price was based on the legacy MTS closing share price of $6.80 on July 26, 2021 and 2,492,162 and 670,789 of Ordinary Shares and Preferred Shares, respectively, outstanding as of July 26, 2021, as well as the fair value of 108,334 share options and warrants outstanding as of July 26, 2021. The following table represents the purchase consideration paid in the MTS Merger.

Schedule of Purchase Consideration


MTS issued and outstanding ordinary shares immediately prior to Merger		3,162,951
MTS share price on July 26, 2021	$	6.80
MTS ordinary shares fair value		21,508,067
MTS warrants and options fair value	$	601,965
Purchase consideration for accounting acquiree	$	22,110,032

F-19

The fair values of the MTS warrants and options, which are further disclosed in Notes 10 and 12, respectively, were determined using a Black Scholes option-pricing model with the following assumptions:

Schedule of Assumptions


MTS Warrants - $2.642 strike price
Fair value of ordinary shares	$	6.80
Exercise price	$	2.64
Expected volatility		54.7	%
Expected dividends		0.0	%
Expected term (in years)		3.0
Risk-free rate		0.38	%

Fair value per warrant	$	4.49
Warrants		58,334
Fair value	$	261,965

MTS Warrants - $0 strike price
Fair value of ordinary shares	$	6.80
Exercise price	$	0.00
Expected volatility		54.7	%
Expected dividends		0.0	%
Expected term (in years)		3.0
Risk-free rate		0.38	%

Fair value per warrant	$	6.80
Warrants		25,000
Fair value	$	170,000

MTS Options - $0 strike price
Fair value of ordinary shares	$	6.80
Exercise price	$	0.00
Expected volatility		54.7	%
Expected dividends		0.0	%
Expected term (in years)		3.0
Risk-free rate		0.38	%

Fair value per warrant	$	6.80
Warrants		25,000
Fair value	$	170,000

Purchase Price Allocation

The MTS assets and liabilities were measured at estimated fair values at July 26, 2021, primarily using Level 3 inputs. 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.

F-20

The fair value of the assets acquired and liabilities assumed as of July 26, 2021 were as follows:


Assets:
Cash		916,000
Restricted cash		1,016,000
Accounts receivable		356,000
Prepaid expenses and other current assets		322,000
Equipment		25,000
Other long-term assets		261,000
Intangible assets		483,000

Total Assets	$	3,379,000

Liabilities:
Accrued expenses		2,129,000
Deferred revenue		914,000
Other current liabilities		495,000
Other long-term liabilities		312,000

Total liabilities	$	3,850,000

Net assets acquired, excluding goodwill	$	(471,000	)

Goodwill		22,581,032

Purchase consideration for accounting acquiree	$	22,110,032

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


			Weighted Average
	Fair Value		Useful Life (Years)
Customer relationships	$	414,000		4
Developed technology		69,000		3
	$	483,000

The excess of the 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 MTS Merger in the go-public transaction. During the year ended December 31, 2021, $21,722,213 of the MTS goodwill was impaired. The goodwill created in the acquisition is not expected to be deductible for tax purposes.

The allocation of purchase price is subject to finalization during a period not to exceed one year from the acquisition date. Adjustments to the preliminary allocation of purchase price may occur related to finalization of income taxes.

Transaction Costs

SharpLink’s transaction costs incurred in connection with the MTS Merger were $3,084,341 for the year ended December 31, 2021. 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.

F-21

Results of the Legacy MTS Business Subsequent to the Acquisition

For the year ended December 31, 2021, the legacy MTS business had revenues and net loss of $1,517,001 and $22,173,554, respectively, which includes the impact of purchase accounting adjustments and goodwill impairment of $21,722,213. These results are included in the consolidated statements of operations for the period from July 26, 2021 through December 31, 2021. The financial results of the MTS business have been reflected as the Company’s Enterprise TEM segment from the date of acquisition.

FourCubed

Description of the Transaction

On December 31, 2021, SharpLink Gaming Ltd., through its wholly owned subsidiary FourCubed Acquisition Company, LLC, acquired certain business assets of FourCubed (“FourCubed Acquisition”) for total consideration of $6,886,523 in cash and 606,114 ordinary shares of SharpLink Gaming Ltd. with an acquisition date fair value of $1,606,202. Consideration of $6,195,000 was paid on the date of closing, $130,000 plus repayment of cash acquired of $311,523 is due within 45 days after closing and $250,000 is due within six months after closing and subject to indemnity claims. Subsequent to closing, the seller is able to earn up to an additional 587,747 ordinary shares of SharpLink Gaming Ltd. by maintaining employment and meeting certain performance conditions (“Earnout”).

Earnout

The Company accounts for an earnout as business combination consideration or compensation in accordance with ASC 805, Business Combinations, and/or ASC 718, Compensation – Stock Compensation, depending on the specific terms of the agreement.

Based on the terms of the agreement, the number of ordinary shares to be paid is fixed as of the agreement date and is paid in the form of ordinary shares in multiple tranches, contingent on continued employment and the achievement of performance milestones, such as business activities, revenue targets and gross margin targets.

In March 2022, the seller’s employment was terminated. No performance-based milestones were achieved prior to termination. As the earnout is contingent upon achieving specified milestones and continued employment, the Company does not expect to recognize compensation cost related to the earnout.

Purchase Price

The purchase price was based on the cash consideration paid and 606,114 ordinary shares issued and valued at the closing share price of $2.65 on December 31, 2021. The following table represents the purchase consideration to be paid in the FourCubed Acquisition.

Schedule of Purchase Consideration


Ordinary shares issued to seller		606,114
Ordinary share price on December 31, 2021	$	2.65
Consideration in ordinary shares		1,606,202
Cash paid to Seller		6,195,000
Due to Seller		691,523
Purchase consideration	$	8,492,725

Purchase Price Allocation

The FourCubed assets and liabilities were measured at estimated fair values at December 31, 2021, primarily using Level 3 inputs. 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 customer attrition rates, cost to recreate intellectual property 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.

F-22

The fair value of the assets acquired and liabilities assumed as of December 31, 2021 were as follows:


Assets:
Cash	$	311,523
Accounts receivable		424,593
Prepaid expenses and other current assets		9,468
Intangible assets		4,928,000

Total assets	$	5,673,584

Liabilities:
Accrued expenses	$	311,026

Total liabilities		311,026

Net assets acquired, excluding goodwill	$	5,362,558

Goodwill		3,130,167

Purchase consideration for accounting acquiree	$	8,492,725

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


			Weighted Average
	Fair Value		Useful Life (Years)
Customer relationships	$	4,144,000		10
Developed technology		784,000		1
	$	4,928,000

The excess of the consideration for the acquisition over the fair value of net assets acquired was recorded as goodwill, which is attributed to expected synergies and expanded market opportunities from combining the Company’s operations with FourCubed. The goodwill created in the acquisition is expected to be deductible for tax purposes.

FourCubed earns advertising commissions from online gambling sites for connecting individuals to the sites. FourCubed has one performance obligation: to make the connection between the individual and the online gambling site. FourCubed is compensated for that delivery through a cost per acquisition model (CPA) or revenue share model.

In February 2022, FourCubed was notified by Entain plc, a gaming operator from which FourCubed earned over 85 percent of its revenues, that it intends to exit the Russian market. FourCubed estimates that approximately 40 percent of its annual revenue, with an estimated operating income margin of 25 percent, is earned from players in the Russian market. The Company recorded $3,211,000 of impairment of the customer relationship and a goodwill impairment of $1,515,000, which was due to the loss of access to players in the Russian market due to the exit of FourCubed’s largest customer from that market. 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.

F-23

Transaction Costs

Transaction costs incurred in connection with the FourCubed Acquisition were $67,130 for the year ended December 31, 2021. 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 expected to be deductible for tax purposes.

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 4,319,263 ordinary shares to the equity holders of SportsHub, on a fully diluted basis. An additional aggregate of 405,862 ordinary shares are being held in escrow for SportsHub shareholders who have yet to provide the applicable documentation required in connection with the SportsHub Merger, 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 Merger Agreement.

	●	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 8,893,803 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.

Purchase Price

The purchase price is based on SharpLink’s closing share price of $0.29 on December 22, 2022 and 4,725,125 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

F-24

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:


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

			Weighted Average
	Fair Value		Useful Life (Years)
Customer relationships	$	1,550,000		5
Trade names		640,000		6
Acquired technology		200,000		5
	$	2,390,000

F-25

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 expected to be deductible for tax purposes.

As of December 31, 2022, the calculation and allocation of the purchase price to tangible and intangible assets and liabilities is preliminary, as the Company is still in the process of accumulating all of the required information to finalize the opening balance sheet and calculations of intangible assets.

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 had 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. The financial results of the SportsHub Acquisition have been included in the Company’s SportsHub segment from the date of acquisition.

Unaudited Pro Forma Information

The following unaudited supplemental pro forma financial information presents the financial results for the years ended December 31, 2022 and 2021 as if the MTS Merger, FourCubed and SportsHub Acquisition had occurred on January 1, 2021. The pro forma financial information includes, where applicable, adjustments for: (i) additional amortization expense of $486,141 and $1,324,900 that would have been recognized related to the acquired intangible assets in 2022 and 2021, respectively, (ii) transaction costs and other one-time non-recurring costs which reduced expenses by $5,468,201 in 2021, and (iii) additional interest expense of $94,685 and $119,095 in 2022 and 2021, respectively, from the new debt arrangement described in Note 8.

The pro forma financial information excludes adjustments for estimated cost synergies or other effects of the integration of MTS, FourCubed and SportsHub:

	2022			2021

Revenues	$	12,108,434		$	19,695,782

Loss from continuing operations		(28,420,775	)		(90,132,215	)
Less: dividends accrued on series B preferred stock		—			(782,887	)
Net loss from continuing operations available to ordinary shareholders		(28,420,775	)		(90,915,102	)

Net income (loss) from discontinued operations, net of tax, available to ordinary shareholders		70,024			(49,000	)
Net loss available to ordinary shareholders		(28,350,751	)		(90,964,102	)

Basic and diluted:
Net loss from continuing operations per share	$	(1.14	)	$	(6.36	)
Net loss from discontinued operations per share		—			—
Net loss per share	$	(1.14	)	$	(6.36	)

F-26

The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the SportsHub, MTS Merger and FourCubed Acquisition been completed as of the date indicated or the results that may be obtained in the future.

Note 4 – Leases

The Company leases certain office space under a long-term, non-cancelable operating lease agreement. The contract provides the Company the right to substantially all of the economic benefits from the use of the office space and the right to direct the use of the office space, thus it is considered to be or contain a lease. An operating right-of-use (“ROU”) asset and lease liability were recognized based on the present value of the future lease payments over the expected lease term.

The lease has an original term that expires in December 2023 with an option to extend the term for three years. The Company has included the optional renewal period in the lease term because the Company determined after considering all economic factors that the Company is reasonably certain to exercise the option to extend the lease. The agreement requires the Company to pay real estate taxes, insurance, and repairs. There was no allocation of consideration to any non-lease component as the amounts were not material.

The weighted-average discount rate is based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company estimates an applicable incremental borrowing rate. The Company determined the incremental borrowing rate based on the Company’s applicable borrowing rates under its current financing agreements as of the commencement date of the standard adoption.

Operating lease costs are recognized in the results of operations as a single lease cost in selling, general and administrative expenses. Total lease costs for the years ended December 31, 2022 and 2021 was $38,400 and the operating cashflows from operations leases for December 31, 2022 and 2021, was $38,400.

The following summarizes the weighted-average remaining lease term and weighted-average discount rate:

	2022			2021
Weighted-average remaining lease term
Operating leases		30 months			60 months

Weighted-average discount rate
Operating leases		5.67	%		6.00	%

Maturity of noncancelable operating leases with terms greater than one year as of December 31, 2022 are as follows:

Year Ending December 31,	Operating leases

2023	$	31,070
2024		72,720
2025		67,736
2026		94,675
Total lease payments	$	266,201
Less: interest		25,094

Present value of lease liability	$	241,107

F-27

Note 5 – Intangible Assets

Intangible assets as of December 31, 2022 and 2021 consist of the following:

Schedule of Intangible assets

	Weighted-average
	amortization period			Accumulated
	(years)	Cost		Amortization		Net

Balance, December 31, 2022
Customer relationships	5-10	$	2,643,000	$	280,636	$	2,362,364
Acquired technology	3-5		1,437,050		1,201,739		235,311
Internally developed software	5		749,147		288,530		460,617
Trade names	6		640,000		3,405		636,595
Software in development	N/A		33,046		—		33,046

		$	5,502,243	$	1,774,310	$	3,727,933

Balance, December 31, 2021
Customer relationships	9	$	4,304,000	$	131,429	$	4,172,571
Acquired technology	3		1,214,000		360,357		853,643
Internally developed software	5		654,022		142,050		511,972
Software in development	N/A		13,354		—		13,354

		$	6,185,376	$	633,936	$	5,551,440

The change in the gross carrying amount of intangible assets as of December 31, 2022 compared to December 31, 2021 was due to acquisition of intangible assets of $2,390,000 from the SportsHub Acquisition, $137,867 of additional costs related to internally developed software that were capitalized during the year, offset by $3,211,000 of impairment charges of the customer relationship from the acquisition of certain business assets of FourCubed, which was due to the loss of access to players in the Russian market caused by the exit of FourCubed’s largest customer from that market. The extent of impairment was determined based upon the projected performance of the asset group and the current valuation of the customer relationship intangible, as determined using the multi-period excess earnings valuation methodology. Key assumptions included in the valuation of the customer relationship included revenue growth attrition, operating margin and discount rate. 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, 2022 and 2021 was $1,140,472 and $241,253, respectively. Estimated future amortization expense related to the intangible assets placed into service is as follows:

	Amount

2023	$	724,564
2024		704,922
2025		673,281
2026		596,306
2027		526,949
Thereafter		465,665

Total	$	3,691,686

F-28

Note 6 – Goodwill

Changes in the carrying amount of goodwill for the years ended December 31, 2022 and 2021 were as follows:

Schedule of goodwill

	SportsHub Gaming		Sports Gaming Client Services		Affiliate Marketing Services - International			Total

Balance as of December 31, 2021	$	—	$	381,000	$	3,130,167		$	3,511,167
Goodwill		4,919,928		—		—			4,919,928
Less: Impairment charges		—		—		(1,515,000	)		(1,515,000	)
Balance as of December 31, 2022	$	4,919,928	$	381,000	$	1,615,167		$	6,916,095

Cumulative goodwill impairment charges	$	—	$	—	$	1,515,000		$	1,515,000

For the year ending December 31, 2022, the Company recorded goodwill impairment of $1,515,000, which was due to the loss of access to players in the Russian market due to the exit of FourCubed’s largest customer from that market (see Note 3 – Acquisitions – FourCubed – Purchase Price Allocation). 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. A change to any of the assumptions could lead to a future impairment that could be material.

Note 7 – Line of Credit

The Company, through the SportsHub Acquisition, has available a variable rate (8.25% as of December 31, 2022) bank line of credit for $5,000,000, expiring June 15, 2023. There was $4,120,651 outstanding as of December 31, 2022.

Note 8 – 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 a financial institution. The agreement bears annual interest at a rate of 4.0% and requires a fixed monthly payment of $59,854, consisting of principal and interest, through the term loan’s maturity, which is January 31, 2027. The Company capitalized $25,431 of loan initiation fees associated with the 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.

For the year ended December 31, 2022, FCAC paid $549,225 and $109,165 in principal and interest, respectively. The remaining principal balance outstanding on the term loan is $2,700,775 as of December 31, 2022, of which $620,173 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 1.25. As of December 31, 2022 FCAC was not in compliance with the quarterly debt service coverage ratio. The bank has waived this non-compliance in the quarterly debt service coverage ratio and has revised the quarterly debt service compliance ratio. Management believes it will be in compliance going forward.

F-29

Included in the SportsHub liabilities was a $2,000,000 term loan agreement with a financial institution. The agreement bears annual interest at a rate of 5.50% percent and requires a fixed monthly payment of $38,202, consisting of principal and interest, through the term loan’s maturity, which is December 9, 2025. Included in the term loan liability is $29,975 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.

A summary of the term loan agreements is noted below:

Schedule of Term Loan Agreements

	2022

Note Payable – Bank, $2,000,000 principle, secured by assets of SportsHub	$	1,267,200
Note Payable – Bank, $3,250,000 principle, secured by assets of FCAC		2,700,775
Note Payable – Bank		2,700,775
Total		3,967,975
Less unamortized debt issuance costs		17,359
Less current portion		1,018,918
Long-term debt	$	2,931,698

The outstanding amount of debt as of December 31, 2022 matures by year as follows:

Schedule of Outstanding amount of debt

Year	Amount
2023	$	1,018,918
2024		1,066,808
2025		1,119,689
2026		700,256
2027		62,304
Total	$	3,967,975

The term loan contains a parent company guaranty, which states that the Company will enter into a guaranty agreement in favor of FCAC, pursuant to which the Company will guarantee the repayment of the loan, not later than 30 days following the Company’s redomicile to the United States.

Note 9 – Convertible Preferred Stock

On December 23, 2020, the SharpLink, Inc. board authorized the establishment and designation of 9,000 shares of 8% convertible preferred stock (“Series A preferred stock”) at $0.01 par value. Additionally, the SharpLink, Inc. board reserved 4,150,000 shares of common stock issuable upon the conversion of the shares of Series A preferred stock. On December 23, 2020, SharpLink, Inc. entered into a securities purchase agreement with an investor to issue 2,000 shares of Series A preferred stock for $2,000,000 (“First Tranche”).

Terms of the Series A preferred stock are as follows:

Voting – Series A preferred stock shall have no voting rights, however, without the affirmative vote of the majority of the outstanding shares of Series A preferred stock, SharpLink, Inc. cannot (a) alter or change adversely the powers, preferences or rights given to the Series A 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 A preferred stock, or € enter into any agreement with respect to any of the above.

Dividends – Holders of each share of Series A preferred stock shall be entitled to receive cumulative dividends 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 A preferred stock and on each conversion date in cash, or at SharpLink, Inc.’s option, in duly authorized, validly issued, fully paid and non-assessable shares of common stock, or a combination thereof.

F-30

Liquidation – Upon any liquidation, dissolution or winding-up of SharpLink, Inc., whether voluntary or involuntary, Series A preferred stock holders shall be entitled to receive out of the assets an amount equal to the Stated Value of $1,000 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 preferred stock before any distribution or payment shall be made to the holders of any Junior Securities.

Conversion – Each share of Series A 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 common stock determined by dividing the stated value of such share of Series A preferred stock by the conversion price, $2.1693 per share. The conversion price would be reduced if SharpLink, Inc. issues common stock at a price lower than the conversion price, or issues an instrument granting the holder rights to purchase common stock at a price lower than the conversion price. Upon the closing of the Going Public Transaction all outstanding shares of Series A preferred stock shall automatically be converted into that number of shares of common stock, subject to a beneficial ownership limitation of 9.99%, determined by dividing the stated value of such share of Series A preferred stock by the conversion price.

Second Tranche – Immediately prior to completing the Going Public Transaction, SharpLink, Inc. shall sell to the current Series A preferred stock shareholder not less than $5,000,000 of preferred stock.

Commitment Fee –Immediately following the Second Tranche, SharpLink, Inc. shall issue preferred stock equal to the greater of either 15% of the aggregate of the First and Second Tranche or 3% of the Company’s issued and outstanding capital.

Redemption – SharpLink, Inc. shall redeem all of the outstanding shares of Series A preferred stock if SharpLink, Inc. has not completed the Going Public Transaction by December 23, 2021. SharpLink, Inc. would be required to redeem at the aggregate stated value, plus accrued but unpaid dividends, all liquidated damages. Interest shall accrue at the lesser of 12% per annum or the maximum rate permitted by applicable law until the amount is paid in full. SharpLink, Inc. accretes the carrying value of the Series A preferred stock to the full redemption value ratably until December 23, 2021.

On June 15, 2021, SharpLink, Inc. entered into the first amendment to the securities purchase agreement, which amended the following terms:

Second Tranche – Amended to provide that immediately prior to completing the Going Public Transaction, SharpLink, Inc. shall sell to the current Series A preferred stock shareholder Series B preferred stock for $6,000,000.

Commitment Fee – Amended to provide that immediately following the Second Tranche, SharpLink, Inc. shall issue Series A-1 preferred stock equal to 3% of the issued and outstanding capital of the Company.

On July 23, 2021, SharpLink, Inc. entered into the second amendment to the securities purchase agreement, which amended the following terms:

On July 26, 2021, the Company’s board authorized the establishment and designation of 525,016 shares of Series A-1 Convertible preferred stock (“Series A-1 preferred stock”) at $0.01 par value.

F-31

Terms of the Series A-1 preferred stock are as follows:

Voting – Series A-1 preferred stock shall have no voting rights, 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, (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 A-1 preferred stock, €(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 $2.1693 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 common stock determined by dividing the stated value of such share of Series A-1 preferred stock by the conversion price, $2.1693 per share. The conversion price would be reduced if the Company issues common stock at a price lower than the conversion price, or issues an instrument granting the holder rights to purchase common stock 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 common stock, 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.

Redemption – The Company shall redeem all of the outstanding shares of Series A-1 preferred stock if the Company has not completed the Going Public Transaction by July 26, 2022. The Company would be required to redeem at the aggregate stated value, plus accrued but unpaid dividends, all liquidated damages. Interest shall accrue at the lesser of 12% per annum or the maximum rate permitted by applicable law until the amount is paid in full.

On July 26, 2021, the Company’s board authorized the establishment and designation of 2,765,824 shares of Series B convertible preferred stock (“Series B preferred stock”) at $0.01 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.

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 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.

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 $2.1693 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.

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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 common stock determined by dividing the stated value of such share of Series B preferred stock by the conversion price. The conversion price would be reduced if the Company issues common stock at a price lower than the conversion price or issues an instrument granting the holder rights to purchase common stock 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 common stock, 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.

Redemption – The Company shall redeem all of the outstanding shares of Series B preferred stock if the Company has not completed the Going Public Transaction by July 26, 2021. The Company would be required to redeem at the aggregate December 31, 2022, and 2021 stated value, plus accrued but unpaid dividends, all liquidated damages. Interest shall accrue at the lesser of 12% per annum or the maximum rate permitted by applicable law until the amount is paid in full.

On July 26, 2021, SharpLink, Inc. completed its merger with Mer Telemanagement Solutions Ltd. (“MTS”) (the “MTS Merger”) and changed its name to SharpLink Gaming Ltd. and commenced trading on NASDAQ under the ticker symbol “SBET.” The MTS Merger was effectuated by a share exchange in which MTS issued shares to SharpLink, Inc. shareholders, resulting in SharpLink, Inc. shareholders owning approximately 86% of the capital stock of SharpLink Gaming Ltd., on a fully-diluted, as-converted basis. The exchange ratio used to determine the number of shares issued to SharpLink, Inc. shareholders was 1.3352, which was calculated pursuant to the terms of the Merger Agreement.

At the Company’s Extraordinary General Meeting of Shareholders held on July 21, 2021, the Company’s shareholders approved an Amended and Restated Articles of Association, which was effected upon consummation of the MTS Merger. The Amended and Restated Articles of Association increased the registered share capital to 92,900,000 ordinary shares, 800,000 shares of Series A preferred stock, 2,600,000 shares of Series A-1 preferred stock and 3,700,000 shares of Series B preferred stock, each at a par value of $0.02, reflecting the reverse stock split at a ratio of 1-to-2, which became effective on July 26, 2021 immediately prior to the effectiveness of the MTS Transaction.

The terms of the Series A preferred stock, Series A-1 preferred stock and Series B preferred stock authorized by the Company are consistent with the terms of the SharpLink, Inc. Series A preferred stock, Series A-1 preferred stock and Series B preferred stock.

The Company’s equity structure was adjusted for all periods presented in the consolidated statements of shareholders’ equity using the exchange ratio established in the Merger Agreement to reflect the number of shares of the legal parent (the accounting acquiree) issued in the reverse acquisition. Ordinary share par value and additional paid-in capital was adjusted for all periods presented in the consolidated statements of shareholders’ equity to reflect the new par value of ordinary shares after the 1-to-2 reverse stock split.

The MTS Merger represented a Going Public Transaction. Immediately prior to the MTS Merger, the outstanding shares of the SharpLink, Inc. Series A preferred stock were exchanged for 1,230,956 shares of Series A-1 preferred stock in the Company. Additionally, the holder of the Series A preferred stock received 700,989 shares of Series A-1 preferred stock in the Company to settle the commitment fee and 3,692,862 shares of Series B preferred stock in the Company in exchange for $6,000,000 to settle the second tranche commitment.

Subsequent to the July 2021 MTS Merger, the holder of the Series A-1 preferred stock and Series B preferred stock converted 1,931,945 and 3,568,055 shares, respectively, to ordinary shares of the Company, each at a 1:1 ratio. Subsequent to the conversion, the holder maintained 124,810 shares of Series B preferred stock through the year ended December 31, 2021, which accrued dividends in Series A-1 preferred stock amounting to 54,737 outstanding as of December 31, 2021. During 2022, the Series B preferred stock accrued additional dividends in Series A-1 preferred stock of 11,566, for total shares outstanding of 66,303 Preferred Series A-1 and 124,810 shares of Series B Preferred Stock as of December 31 2022.

F-33

Note 10 – Warrants

Warrant – Advisory Services

On February 1, 2021, SharpLink, Inc. issued a common stock purchase warrant (“warrant”) in exchange for advisory services, which gave the holder the right to purchase up to 636,867 shares of SharpLink, Inc.’s common stock.

The terms of the warrant are as follows:

Voting and Dividends – This warrant does not entitle the holder to any voting rights, dividends or other rights as a shareholder of SharpLink, Inc. prior to the exercise of the warrant.

Exercisability and Termination Dates – The warrant will vest and become exercisable by the holder immediately prior to the Going Public Transaction. If the Going Public Transaction does not occur by August 1, 2022, the warrant will terminate and shall no longer be exercisable by the holder. In the instance that a Going Public Transaction is consummated prior to the initial termination date, the warrant shall be vested, fully exercisable and the termination date shall be extended 5 years from the exercisability date.

Exercise Price – The exercise price per share of common stock under this warrant shall be $0.01.

The warrant is in the scope of ASC 718, Compensation – Stock Compensation, as a share-based payment issued to nonemployees in exchange for services. Compensation costs for a nonemployee share-based payment award with a performance condition, such as the Going Public Transaction, is recognized when the performance condition becomes probable of occurrence, which in SharpLink, Inc.’s case is when the Going Public Transaction is completed. On July 26, 2021, SharpLink, Inc. completed its merger with Mer Telemanagement Solutions Ltd. The warrant vested and became fully exercisable into 850,330 ordinary shares in the Company immediately prior to the MTS Merger. The warrant’s grant date fair value of $2,001,677 was recognized upon the completion of the Going Public Transaction using a Black Scholes option-pricing model with the following assumptions:

Schedule of Warrant Assumptions

Fair value of ordinary shares on grant date	$	2.36
Exercise price	$	0.01
Expected volatility		58.2	%
Expected dividends		0.0	%
Expected term (in years)		5.00
Risk-free rate		0.42	%

SharpLink, Inc.’s underlying stock was not publicly traded on the issuance date of the warrant but its fair value was estimated using a straight-line calculation, with the benefit of hindsight, between the fair values determined as of December 31, 2021 and July 26, 2021 of $0.63 per share and $6.80 per share, respectively. SharpLink, Inc.’s underlying stock fair value was determined on December 31, 2021 using recent equity financings and on July 26, 2021 using the Company’s publicly traded share price. The Company determined that the straight-line calculation provides the most reasonable basis for the valuation of the warrant issued on February 1, 2021, because the Company did not identify any single event that occurred during this interim period that would have caused a material change in value.

The Company estimates the volatility of its underlying stock by using an average of the calculated historical volatility of a group of comparable publicly traded stock. The expected dividend yield is calculated using historical dividend amounts and the stock price at the warrant issuance date. The risk-free rate is based on the United States Treasury yield curve in effect at the time of the grant. The expected term is estimated based on contractual terms.

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Warrants - MTS

Prior to the MTS Merger, the MTS shareholders approved the issuance of a warrant to the former MTS CEO to acquire 58,334 ordinary shares, at an exercise price of $2.642, which vested and became immediately exercisable upon the consummation of the MTS Merger. The warrant was granted on July 21, 2021 and expires three years after the grant date. The grant date fair value was recognized as an expense upon vesting, which occurred immediately prior to the MTS Merger. The compensation expense related to this warrant was recognized in the MTS financial results immediately prior to the merger and thus is not included in the SharpLink consolidated statement of operations. This warrant does not entitle the holder to any voting rights, dividends or other rights as a shareholder of SharpLink prior to the exercise of the warrant.

Prior to the MTS Merger, the MTS shareholders approved the issuance of a warrant to the former MTS CEO to acquire 25,000 ordinary shares, with a $0 exercise price, which vested and became immediately exercisable upon the consummation of the MTS Merger. The warrant was granted on July 21, 2021 and expires three years after the grant date. The grant date fair value was recognized as an expense upon vesting, which occurred immediately prior to the MTS Merger. The compensation expense related to this warrant was recognized in the MTS financial results immediately prior to the merger and thus is not included in the SharpLink consolidated statement of operations. This warrant does not entitle the holder to any voting rights, dividends or other rights as a shareholder of SharpLink prior to the exercise of the warrant.

Prefunded Warrants and Regular Warrants

On November 16, 2021, the Company entered into a Securities Purchase Agreement with an existing institutional investor pursuant to which the Company agreed to issue and sell, in a registered direct offering, an aggregate of 1,413,075 of the Company’s ordinary shares at an offering price of $3.75 per share. In addition, the Company sold to the same investor certain prefunded ordinary share purchase warrants (“Prefunded Warrants”) to purchase 1,253,592 ordinary shares. The Prefunded Warrants were sold at an offering price of $3.74 per warrant share and are exercisable at a price of $0.01 per share. In a concurrent private placement, the Company agreed to issue to the same institutional investor, for each ordinary share and Prefunded Warrant purchased in the offering, an additional ordinary share purchase warrant, each to purchase one ordinary share (“Regular Warrants”). The Regular Warrants are initially exercisable six months following issuance and terminate four years following issuance. The Regular Warrants have an exercise price of $4.50 per share and are exercisable to purchase an aggregate of 2,666,667 ordinary shares.

The terms of the Prefunded Warrants are as follows:

Voting and Dividends – This warrant does not entitle the holder to any voting rights, dividends or other rights as a shareholder of the Company prior to the exercise of the warrant.

Vesting Date – November 19, 2021

Termination Date – When the warrant is exercised in full.

The terms of the Regular Warrants are as follows:

Voting and Dividends – This warrant does not entitle the holder to any voting rights, dividends or other rights as a shareholder of the Company prior to the exercise of the warrant.

Vesting Date – May 19, 2022

Termination Date – November 19, 2025

The Prefunded Warrants and Regular Warrants do not require a cash settlement for the warrants. Based on the terms of the agreements, the warrants were freestanding, equity-linked instruments that represented separate units of account. The Company allocated the value of net proceeds from the offering to the ordinary shares and warrants based on relative fair value. The value allocated to the warrants was recorded in Additional Paid-In Capital in the consolidated balance sheets.

F-35

The fair value of the Prefunded Warrants and Regular Warrants was determined using a Black Scholes option-pricing model with the following assumptions:

Schedule of Warrants Assumptions

Prefunded Warrants
Fair value of ordinary shares	$	3.25
Exercise price	$	0.01
Expected volatility		50.5	%
Expected dividends		0.0	%
Expected term (in years)		4.00
Risk-free rate		1.03	%
Schedule of assumptions
Regular Warrants
Fair value of ordinary shares	$	3.25
Exercise price	$	4.50
Expected volatility		50.5	%
Expected dividends		0.0	%
Expected term (in years)		4.00
Risk-free rate		1.03	%

The fair value of ordinary shares was based on the Company’s publicly traded ordinary share price. The Company estimates the volatility of its underlying stock by using an average of the calculated historical volatility of a group of comparable publicly traded stock and the Company’s publicly traded ordinary shares. The expected dividend yield is calculated using historical dividend amounts and the stock price at the warrant issuance date. The risk-free rate is based on the United States Treasury yield curve in effect at the time of the grant. The expected term is estimated based on contractual terms.

For the year ended December 31, 2022, there have been no issuances of new warrants, no conversion of outstanding warrants, and all warrants outstanding are fully vested:

Schedule of Warrant Outstanding

	Warrant - advisory services						Warrants - MTS				Prefunded warrants				Regular warrants
	Outstanding			Vested			Outstanding		Vested		Outstanding		Vested		Outstanding		Vested
Beginning balance, December 31, 2021		—			—			83,334		83,334		1,253,592		1,253,592		2,666,667		—
Issued and vested		—			—			—		—		—		—		—		—
Acquired		—			—			—		—		—		—		—		—
Converted to ordinary shares		—			—			—		—		—		—		—		—
Ending balance, December 31, 2022		—			—			83,334		83,334		1,253,592		1,253,592		2,666,667		—

Beginning balance, December 31, 2020		—			—			—		—		—		—		—		—
Issued and vested		1			1			—		—		1,253,592		1,253,592		2,666,667		—
Acquired		—			—			83,334		83,334		—		—		—		—
Converted to ordinary shares		(1	)		(1	)		—		—		—		—		—		—
Ending balance, December 31, 2021		—			—			83,334		83,334		1,253,592		1,253,592		2,666,667		—

F-36

Note 11 – Fair Value

In accordance with fair value accounting guidance, the Company determines fair value based on the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The inputs used to measure fair value are classified into the following hierarchy:

Level 1: Unadjusted quoted prices in active markets for identical instruments that are accessible as of the measurement date

Level 2: Other significant pricing inputs that are either directly or indirectly observable

Level 3: Significant unobservable pricing inputs, which result in the use of management’s own assumptions

Assumptions Used in Determining Fair Value of the Commitment Fee at December 31, 2021

The commitment fee, which required the Company to sell to the Series A preferred stock shareholder 3,692,862 shares of Series B preferred stock for $6,000,000 and to issue Series A-1 preferred stock equal to 3% of the Company’s issued and outstanding capital immediately following the Second Tranche (collectively, the commitment fee and second tranche), required the Company to transfer a variable number of shares outside of its control and is classified as a liability. Liability-classified instruments are recorded at their estimated fair values at each reporting period until they are exercised, terminated, reclassified, or otherwise settled. The Company utilized a Monte Carlo simulation to value the commitment fee. The Company selected this model as it believes it is reflective of all significant assumptions that market participants would likely consider in negotiating the transfer of the commitment fee. Such assumptions include, among other inputs, stock price volatility, risk-free rate, probability of completing a Going Public Transaction, conversion price of the preferred stock and the underlying stock price. The Company’s underlying stock fair value was determined using a straight-line calculation, consistent with the method described for the Warrant – Advisory Services in Note 10. Immediately prior to the MTS Merger, the holder of the Series A preferred stock received 700,989 shares of Series A-1 preferred stock in the Company to settle the commitment fee. The change in the commitment fee was $23,301,206 for the year ended December 31, 2021 and is recorded in commitment fee expense in the consolidated statement of operations. The value of the exchange of the Series A preferred stock for the commitment fee was determined using the quoted-market price of the Company’s stock on the MTS Merger date, $6.80 per ordinary share, on the settlement date of July 26, 2021.

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Significant inputs and assumptions used in the valuation model as of December 31, 2021, were as follows:

Probability of a Going Public Transaction		50.0	%
Volatility		58.5	%
Stock price of public company at the time of measurement	$	0.63
Date of a Going Public Transaction		April 30, 2021
Pro-forma common shares outstanding at Going Public Transaction date		52,077,000

The change in the commitment fee between December 31, 2020 and 2021 consisted of the following:

Schedule of Commitment Fee

Schedule of commitment fee
Beginning balance, December 31, 2020	$	577,000

Commitment fee expense		23,301,206
Issuance of Series A-1 and B preferred stock in exchange for commitment fee		(23,878,206	)

Ending balance, December 31, 2021	$	—

Note 12 – Stock Compensation

During 2020, SharpLink, Inc. approved and adopted the 2020 Stock Incentive Plan (the “2020 plan”), which permits the grant of stock options to its employees, directors and consultants for up to 400,000 shares of SharpLink, Inc. common stock. In connection with the MTS Merger, the Company adopted the 2021 Equity Incentive Plan (the “2021 plan”) and reserved 2,336,632 ordinary shares of the Company for issuance. The Company believes that awards under the 2020 and 2021 plans better align the interests of its employees with those of its stockholders. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock 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 plan.

The Company granted 360,000 options under the 2020 plan for the year ended December 31, 2021. In connection with the MTS Merger, the outstanding options were adjusted by the Exchange Ratio of 1.3352 pursuant to the Merger Agreement. The Company granted 2,493,500 and 1,312,000 options under the 2021 plan for the year ended December 31, 2022 and 2021, respectively. To provide for adequate shares to issue to these employees, certain executives forfeited an aggregate 1,140,000 options, 360,000 of which were vested. As a result, 780,000 options are deemed to have been forfeited and 360,000 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. As of December 31, 2022, the Company has reserved 5,436,632 ordinary shares of the Company for issuance. The Company recognized stock compensation expense of $2,486,151 and $1,656,674 for the years ended December 31, 2022 and 2021, respectively.

Schedule of estimates the volatility
	2022			2021

Expected volatility		51.1 - 53.7	%		51.0 - 51.8	%
Expected dividends		0.0	%		0.0	%
Expected term (years)		5.5 - 6.0			5.5 - 6.0
Risk-free rate		1.44 - 4.24	%		0.79 - 1.24	%
Fair value of Ordinary Shares on grant date		$0.31 - $1.33			$1.05 - $3.29

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The summary of activity under the plans as of December 31, 2022, and change during the year ended December 31, 2022 is as follows:

Schedule of Stock Option Activity

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		1,783,567		$	4.96	$	-		-	$	830,250
Granted ²		2,496,500		$	1.00	$	0.52		-	$	-
Exercised		-		$	-	$	-		-	$	-
Forfeited		(1,007,796	)	$	5.46	$	2.56		-	$	-
Expired		(383,147	)	$	6.37	$	-		-	$	-

Outstanding as of December 31, 2022		2,889,124		$	1.14	$	-		9.3	$	7,750
Exercisable as of December 31, 2022		866,727		$	1.46	$	-		8.7	$	7,750

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. See Note 3 in the consolidated financial statements accompanying this Annual Report on Form 10-K for a discussion of the MTS Merger.

Unamortized stock compensation expense of $1,009,269, and $2,375,624, as of December 31, 2022 and 2021 will be amortized through 2025 for 2,022,403 of unvested stock options as of December 31, 2022.

The summary of activity under the plans as of December 31, 2021, and change during the year ended December 31, 2021 is as follows:

Options	Shares			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value
Outstanding as of December 31, 2020		480,664		$	0.94		-	$	-
Granted		1,337,000		$	6.21		-	$	-
Exercised		(25,917	)	$	0.94		-	$	-
Forfeited		(8,180	)	$	2.04		-	$	-

Outstanding as of December 31, 2021		1,783,567		$	4.96		9.4	$	830,250
Exercisable as of December 31, 2021		658,290		$	3.78		9.3	$	571,099

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Note 13 – Revenue Recognition

During the year ended December 31, 2022, the Company combined its revenue into the following categories:

Schedule of Revenue Recognition


	Affiliate Marketing Services - U.S.		Affiliate Marketing Services - International		Sports Gaming Client Services		SportsHub Gaming Network		Total
Software-as-a-service	$	353,200	$	-	$	2,493,685	$	-	$	2,493,685
Fee revenue		-		-		-		951,196		951,196
Services and other		62,250		3,427,698		-		-		3,843,148
Total	$	415,450	$	3,427,698	$	2,493,685	$	951,196	$	7,288,029

During the twelve months ended December 31, 2021, the Company combined its revenue into the following categories:


	Affiliate Marketing Services - U.S.		Affiliate Marketing Services -International		Sports Gaming Client Services		SportsHub Gaming Network		Total
Software-as-a-service	$	211,528	$	-	$	2,424,229	$	-	$	2,625,737
Services and other		-		-		-		-		-
Total	$	211,528	$	-	$	2,424,229	$	-	$	2,635,757
Revenue	$	211,528	$	-	$	2,424,229	$	-	$	2,635,757

The Company’s license contracts contain promises to transfer multiple products to the customer. Judgment is required to determine whether each product is considered to be a distinct performance obligation that should be accounted for separately under the contract. We have elected to utilize the “Right to invoice” practical expedient under ASC 606 which allows us to recognize revenue for our performance under the contract for the value which we have provided to the customer during a period of time in our contract with them.

Determining whether licenses are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment. In some arrangements, such as the Company’s license arrangements, the Company has concluded that the individual licenses are distinct from each other. In others, like the Company’s SaaS arrangements, the software development and final product are not distinct from each other because they are highly integrated and therefore the Company has concluded that these promised goods are a single, combined performance obligation.

The Company is required to estimate the total consideration expected to be received from contracts with customers. In certain circumstances, the consideration expected to be received is fixed based on the specific terms of the contract or based on the Company’s expectations of the term of the contract. Generally, the Company has not experienced significant returns from or refunds to customers. These estimates require significant judgment and the change in these estimates could have an effect on its results of operations during the periods involved.

F-40

For the year ended December 31, 2022:


	Affiliate Marketing Services - U.S.		Affiliate Marketing Services - International		Sports Gaming Client Services		SportsHub Gaming Network		Total
Point in time	$	62,250	$	3,427,698	$	-	$	808,418	$	4,298,366
Over time		353,200		-		2,493,685		142,778		2,989,663
Total	$	415,450	$	3,427,698	$	2,493,685	$	951,196	$	7,288,029

For the year ended December 31, 2021:


	Affiliate Marketing Services - U.S.		Affiliate Marketing Services - International		Sports Gaming Client Services		SportsHub Gaming Network		Total
Over time		211,528		-		2,424,229		-	$	2,635,757
Total	$	211,528	$	-	$	2,424,229	$	-	$	2,635,757

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 has an enforceable right to payment upon invoicing and records contract liabilities when revenue is recognized subsequent to invoicing. The Company recognized unbilled revenue when revenue is recognized prior to invoicing.

The Company recognized contract assets related to direct costs incurred to fulfill the contracts. These costs are primarily labor costs associated with the development of the software. The Company defers these costs and amortizes them into cost of revenues over the period revenues are recognized.

The activity in the contract assets for the years ending December 31, 2022 and 2021 are as follows:

Schedule of Contract Assets

	Amount
Balance as of December 31, 2021	$	147,913
Labor costs expensed		(483,524	)
Labor costs deferred		554,727
Balance as of December 31, 2022	$	219,116

The Company’s assets and liabilities related to its contracts with customers were as follows:


	2022			2021

Accounts receivable	$	776,530		$	793,795
Unbilled revenue (reported in accounts receivable)		47,000			162,760
Contract assets		219,116			147,913
Contract liabilities		(2,166,451	)		(308,058	)

The activity in the contract liabilities for the years ending December 31, 2022 and 2021 are as follows:

Schedule of Contract Liabilities

	Amount
Balance as of December 31, 2021	$	(308,058	)
SportsHub acquired balance		(3,574,285	)
Revenue recognized or reclassified		2,846,755
Deferred revenue		(1,130,863	)
Balance as of December 31, 2022	$	(2,166,451	)

F-41

All contract liabilities at December 31, 2022 and 2021 were recognized as revenue or expected to be recognized within the next fiscal year. All other activity in contract liabilities is due to the timing of invoice in relation to the timing of revenue as described above.

Contracted but unsatisfied performance obligations were approximately $850,000 and 3,246,000 as of December 31, 2022 and 2021, respectively, of which the Company expects to recognize the entire amount in revenue over the next year.

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.

The Company had two customers that accounted for approximately 45% of revenue in 2022. There was $572,621 due from these customers at December 31, 2022.

The Company had four customers that accounted for approximately 49% of revenue in 2021. There was $456,460 due from these customers at December 31, 2021.

Note 14 – Segment Information

The Company has four operating segments: Affiliate Marketing Services – United States, Affiliate Marketing Services – International, Sports Gaming Client Services and SportsHub Games Network. Each operating segment is also a reportable segment. The Enterprise Telecom Expense Management (“Enterprise TEM”) business unit is reflected in discontinued operations (see Note 16). The Enterprise TEM and Affiliate Marketing Services – International segments are a result of the MTS Merger and FourCubed Acquisition, respectively, in 2021. The Enterprise TEM segment will not be presented going forward due to its sale on December 31, 2022.

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 an iGaming and affiliate marketing network, focused on delivering quality traffic and player acquisitions, retention and conversions to global iGaming operator partners worldwide in exchange for a commission (cost per acquisition or portion of net gaming revenues) paid to the Company by the partners for the new players referred to them.

The Sports Gaming Client Services segment provides its clients with development, hosting, operations, maintenance, and service of free-to-play games and contests. These relationships can be either software-as-service (“SaaS”) arrangements that are hosted by SharpLink and accessed through its clients’ websites or other electronic media; or software licenses that allow the client to take the software on premise.

The SportsHub Games Network segment owns and operates a variety of real-money fantasy sports and sports simulation games and mobile apps on its platform; and is licensed or authorized to operate in every state in the United States where fantasy sports play is legal and in which SportsHub has elected to operate based on the financial viability of operating there.

The Enterprise TEM segment is a global provider of solutions for telecommunications expense management, enterprise mobility management, call usage and accounting software. The segment’s TEM solutions allow enterprises and organizations to make smarter choices with their telecommunications spending at each stage of the service lifecycle, including allocation of cost, proactive budget control, fraud detection, processing of payments and spending forecasting. The Enterprise TEM segment is reflected as discontinued operations in 2022 and 2021 and was sold in December 2022. (See Note 16.)

F-42

Any intercompany revenues or expenses are eliminated in consolidation. All of the Company’s operating revenues and expenses, other than those excluded from Adjusted EBITDA as detailed below, are allocated to the Company’s reportable segments. The Company defines and calculates Adjusted EBITDA as net loss before the impact of interest income or expense, income tax provision, and depreciation and amortization, and further adjusted for stock compensation expense, transaction expenses, commitment fee expense and impairment expense, as described in the reconciliation below.

A measure of segment assets and liabilities has not been currently provided to the Company’s chief operating decision maker and is therefore not presented below.

Summarized financial information for the Company’s reportable segments as of and for the years ended December 31, 2022 and 2021 is shown below:


2022
	Affiliate Marketing Services - United States			Affiliate Marketing Services - International			Sports Gaming Client Services			SportsHub Gaming Network		Enterprise TEM		Total

Revenue	$	415,450		$	3,427,698		$	2,493,685		$	951,196	$	-	$	7,288,029
Cost of revenues		141,736			2,127,555			3,119,178			765,965		-		6,154,434
Income (loss) from operations		(9,471,593	)		(5,026,352	)		(1,027,484	)		48,912		-		(15,476,517	)
Income from discontinued operations		-			-			-			-		70,024		70,024
Net income (loss)	$	(9,183,309	)	$	(5,135,517	)	$	(1,027,484	)	$	42,908	$	70,024	$	(15,303,402	)


2021
	Affiliate Marketing Services - United States			Affiliate Marketing Services - International		Sports Gaming Client Services			SportsHub Gaming Network		Enterprise TEM			Total

Revenue	$	211,528		$	-	$	2,424,229		$	-	$	-		$	2,635,757
Cost of revenues		64,070			-		2,871,049			-		-			2,935,191
Income (loss) from operations		(32,773,402	)		-		(696,428	)		-		-			(33,469,830	)
Loss from discontinued operations		-			-		-			-		(22,174,305	)		(22,174,305	)
Net income (loss)	$	(32,774,152	)	$	-	$	(696,427	)	$	-	$	(22,174,305	)	$	(55,644,135	)

F-43

Summarized revenues by country in which the Company operated for the years ended December 31, 2022 and 2021 is shown below:

Schedule of Revenue by Country


December 31, 2022	Affiliate Marketing Services - United States		Affiliate Marketing Services - International		Sports Gaming Client Services		SportsHub Gaming Network		Enterprise TEM		Total

United States	$	415,450	$	-	$	2,493,685	$	951,196	$	-	$	3,860,331
Rest of World		-		3,427,698		-		-		-		3,427,698
Revenues	$	415,450	$	3,427,698	$	2,493,685	$	951,196	$	-	$	7,288,029

December 31, 2021

United States	$	211,528	$	-	$	2,424,229	$	-	$	-	$	2,635,757
Rest of World		-		-		-		-		-		-
Revenues	$	211,528	$	-	$	2,424,229	$	-	$	-	$	263,577

The Company does not have material tangible long-lived assets in foreign jurisdictions.

The Company’s Affiliate Marketing Services International and Sports Gaming Client Services segment derives a significant portion of its revenues from several large customers. The table below presents the percentage of consolidated revenues derived from the two segments:

Schedule of consolidated revenues
	2022			2021

Customer A		35	%		15	%
Customer B		10	%		10	%
Customer C		*-	%		10	%
Customer D		*-	%		14	%

*	Revenue from customer was less than 10% for the years ended December 31, 2022 and 2021.

Note 15 – Income Taxes

Deferred tax assets and liabilities from continuing operations as of December 31, 2022 and 2021 consist of the following:


	2022			2021
Deferred tax assets
Net operating losses	$	4,891,195		$	8,927,213
Research and development tax credit		95,597			30,429
Nonqualified stock options		100,373			334,519
Equipment		8,885			1,256
Goodwill		285,511			14,088
Bad debts		—			120,608
Intangible Assets		713,206			—
Accrued expenses and other		117,511			425,327
Business interest expense		—			—

Gross deferred tax assets		6,212,278			9,853,440
Valuation allowance		(6,218,484	)		(9,728,975	)
Net deferred tax assets	$	(6,206	)	$	124,465

Deferred tax liabilities
Intangible assets		—			(130,046	)
Goodwill		—			—

Deferred tax liabilities		—			(130,046	)

Net deferred tax liability	$	(6,206	)	$	(5,558	)

F-44

As of December 31, 2022, 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, 2022, the Company has a federal tax net operating loss carryforward of $21,500,845, 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 $376,018. 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 $30,000,000. For the Enterprise TEM division that is classified in discontinued operations (see Note 16), the net operating losses carryforwards have been discontinued due to the sale of MTS on December 31, 2022.

The foreign net operating losses related to operations in Israel and Hong Kong that can be carried forward indefinitely. The Company has US federal and state research and development tax credits of $95,597 as of December 31, 2022, that will be available to offset future tax liabilities. Research and development tax credits will begin to expire in 2029. A company’s ability to utilize a portion of its net operating loss carryforwards to offset future taxable income may be subject to certain limitations under Section 382 of the Internal Revenue Code due to changes in the equity ownership of the Company. The Company has not completed a formal Section 382 analysis. In addition, future changes in ownership as defined in Section 382 of the Internal Revenue Code could put limitations on the availability of the net operating loss carryforwards. The Company has deferred assets of $6,683 related to discontinued operations.

The provision for (benefit from) income taxes charged to income for the years ended December 31, 2022 and 2021 consist of the following:


	2022		2021

US current tax expense	$	10,718	$	2,999
Foreign current tax expense		—		—
US deferred tax expense (benefit)		648		1,172

Provision for income tax expenses (benefit)	$	11,366	$	4,171

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


	2022					2021

Income tax benefit at federal statutory rate	$	(3,288,865	)	21.0	%	$	(11,678,252	)	21.0	%
State and local income taxes net of federal tax benefit		(83,610	)	0.5	%		(267,103	)	0.5	%
Rate differentials		—		0.0	%		(4,020	)	0.0	%
Meals and entertainment, non-deductible expenses and tax-exempt income		(44,073	)	-0.1	%		72,503		-0.1	%
Incentive stock option expense		61,851		-0.1	%		59,055		-0.1	%
Nondeductible goodwill impairment		167,130		-8.2	%		4,551,259		-8.2	%
Nondeductible commitment fee		—		-8.8	%		4,893,253		-8.8	%
PPP loan forgiveness income		—		0.0	%		—		0.0	%
NQO Cancellations		680,002		0.0	%		—		0.0	%
Financial Statement True Up		(5,919	)	0.0	%		—		0.0	%
Change in provision for uncertain tax positions		—		0.0	%		1,177		0.0	%
Change in valuation allowance		2,524,850		-4.3	%		2,376,299		-4.3	%

Provision for income tax expenses (benefit)	$	11,366		0.0	%	$	4,171		0.0	%

F-45

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 anticipate significant changes in its uncertain tax positions over the next 12 months.

The following presents the change in accrued uncertain tax positions:



Beginning balance, December 31, 2021	$	131,100
Uncertain tax position additions		0
Removal for amount related to discontinued operations		(131,100	)
Ending balance, December 31, 2022	$	0

The Company recognizes interest and penalties accrued related to unrecognized tax benefits as additional income tax expense. During the years ended December 31, 2022 and 2021, 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, 2022. The balance from the prior year relates to the MTS discontinued operations and will not be reported in continuing operations.

Note 16 – Discontinued Operation

In accordance with ASC 205-20 Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major impact on an entity’s operations and financial results when the components of an entity meets the criteria in ASC paragraph 205-20-45-10. In the period in which the component meets the held for sale or discontinued operations criteria the major assets, other assets, current liabilities and non-current liabilities shall be reported as a component of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the income (loss) of continuing operations.

F-46

In June 2022, the Company’s Board of Directors approved management to enter into negotiations to sell MTS. The Company negotiated a Share and Asset Purchase Agreement with the transaction completed 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 are separately reported as assets and liabilities from discontinued operations as of December 31, 2022 and December 31, 2021. The results of operations and cash flows of MTS for all periods are separately reported as discontinued operations.

The Company’s Enterprise TEM operating segment entered into contracts with customers to license the rights to use its software products and to provide maintenance, hosting and managed services, support and training to customers. Certain software licenses require customization. The Company sells its products directly to end-users and indirectly through resellers and operating equipment managers, who are considered end users. In June 2022, the Company’s Board of Directors approved management to enter into negotiations to sell MTS. The Company negotiated a Share and Asset Purchase Agreement with the transaction completed 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 supports. 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 accordance with the approval by the Company’s Board of Directors to sell MTS, management undertook an impairment assessment of MTS’ intangible assets and goodwill. Management concluded that the intangible assets of customer relationships and developed technology and its goodwill were impaired and recorded an impairment charge of $1,224,671 in the results for the twelve months ended December 31, 2022, as adjusted post-sale transaction. The impairment charge was determined based on an assessment of the realization of assets, the ultimate disposition of liabilities and the related carrying value of assets. The impairment charge has been included in the Income from Discontinued Operations, net of tax line item in the consolidated statement operations for the year ended December 31, 2022.

A reconciliation of the major classes of line items constituting the loss from discontinued operations, net of income taxes as presented in the consolidated statements of operations for the twelve months ended December 31, 2022 and 2021 is summarized in the table below.

	2022			2021
Revenues	$	3,734,000		$	1,515,848
Cost of Revenues		1,900,000			933,986
Gross Profit		1,834,000			581,862

Operating Expenses
Selling, general, and administrative expenses		1,515,000			1,032,042
Goodwill and intangible asset impairment expenses		1,224,000			21,722,213

Total operating expenses		2,739,000			22,754,255

Operating Loss from Discontinued Operations		(905,000	)		(22,172,393	)

Other Income and Expense
Interest income		6,000			-
Gain on disposal of subsidiary		997,000			-
Total other income and expense		1,003,000			-

Net Income Before Income Taxes from discontinued operations		98,000			(22,172,393	)
Provision for income tax expenses for discontinued operations		27,976			1,912
Net Income (Loss)	$	70,024		$	(22,174,305	)

F-47

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, 2022 and December 31, 2021. Included in total assets as of December 31, 2022 and 2021 is a deferred tax asset of $6,683 and $7,474, respectively, each of which had a full valuation allowance, for a net effect of zero.

	December 31, 2022		December 31, 2021
Carrying amounts of major classes of assets included as part of discontinued operations:

	December 31, 2022		December 31, 2021
Current Assets
Cash	$	648,000	$	690,181
Restricted cash		-		1,025,029
Accounts receivable, net of allowance		191,000		137,405
Prepaid expenses and other current assets		187,000		248,594
Equipment, net		5,000
Other assets		279,000
Total current assets	$	1,310,000	$	2,101,209
Non-current assets
Equipment, net		-	$	16,505
Other assets		-		283,632
Intangibles and goodwill		-		1,287,921
Total non-current assets	$	-	$	1,588,058

	December 31, 2022		December 31, 2021
Carrying amounts of major classes of liability included as part of discontinued operations

	December 31, 2022		December 31, 2021
Current liabilities
Accrued expenses	$	374,879	$	1,902,477
Contract liabilities		2,000		896,933
Other current liabilities		838,274		534,323
Total current liabilities	$	1,215,153	$	3,333,733

Non-current liabilities
Other long-term liabilities		-		365,977
Total liabilities	$	1,215,213	$	3,699,710

Total assets and liabilities of discontinued operations are presented as current assets from discontinued operations and current liabilities from discontinued operations as of December 31, 2022 on the consolidated balance sheets. Included in the consolidated statement of cash flows for the years ended December 31, 2022 and 2021 were the following, respectively: net cash generated by (used for) operating activities – discontinued operations of $533,133 and ($215,879), net cash generated by (used for) investing activities – discontinued operations of ($10,423) and $1,932,000, net cash generated by financing activities, zero and zero, respectively.

F-48

Note 17 – Loss Per Share

The calculation of loss per share and weighted-average shares of the Company’s ordinary shares outstanding for the periods presented are as follows:

	December 31, 2022			December 31, 2021
Net loss from continuing operations	$	(15,303,402	)	$	(33,469,830	)
Less: discount accretion on series A preferred stock		—			(373,560	)
Less: dividend accretion on series A preferred stock		—			(91,192	)
Less: dividends on series B preferred stock		(8,862	)		(315,632	)
Net loss from continuing operations available to ordinary shareholders		(15,312,264	)		(34,250,214	)

Net income (loss) from discontinued operations, net of tax, available to ordinary shareholders		70,024			(22,174,305	)
Net loss available to ordinary shareholders	$	(15,242,240	)	$	(56,424,519	)

Basic and diluted weighted-average shares outstanding		24,879,602			14,300,311

Basic and diluted:
Net loss from continuing operations per share	$	(0.62	)	$	(2.40	)
Net income (loss) from discontinued operations per share		—			(1.54	)
Net loss per share	$	(0.62	)	$	(3.94	)

The MTS Merger was accounted for as a reverse acquisition. In accordance with ASC 805, Business Combinations, the equity structure in the consolidated financial statements following a reverse acquisition reflects the equity structure of the legal acquirer (MTS), including the equity interests issued by the legal acquirer to effect the business combination. For periods prior to the MTS Merger date, the weighted-average number of ordinary shares outstanding represents the legal acquiree’s (SharpLink, Inc.) historical weighted-average number of ordinary shares multiplied by the exchange ratio calculated pursuant to the MTS Merger Agreement of 1.3352.

The redeemable convertible preferred stock is a participating security, whereby if a dividend is declared to the holders of ordinary shares, the holders of preferred stock would participate to the same extent as if they had converted the preferred stock to ordinary shares.

For the periods presented, the following securities were not required to be included in the computation of diluted shares outstanding:

	2022		2021
Stock options		2,889,124		1,783,567
Series A-1 preferred stock		66,303		54,737
Series B preferred stock		124,810		124,810
Earnout		—		587,747
MTS warrants		83,334		83,334
Prefunded warrants		1,253,592		1,253,592
Regular warrants		2,666,667		2,666,667
Total		7,083,830		6,554,454
Diluted shares outstanding		7,083,830		6,554,454

F-49

Note 18 – Related Party Transactions

Through December 21, 2022, SportsHub Games Network (“Affiliate”) owned approximately 40% of the outstanding ordinary shares of the Company. The Affiliate has historically paid direct expenses incurred by the Company’s subsidiary, STI, which includes salaries and related expenses for the employees of STI. The Affiliate collects cash on behalf of the STI’s revenue generating activities. The excess of revenue collected by the Affiliate over the expenses paid by the Affiliate is recorded as a distribution to the Affiliate. Distribution per share has been excluded from disclosure within the consolidated statement of shareholders’ equity as only the Affiliate received the distribution. The Company has generated a payable to the Affiliate for expenses paid on behalf of STI in excess of cash collected by the Affiliate on behalf of STI’s revenue generating activities, which is recorded in Due to Affiliate in the consolidated balance sheet.

Alpha Capital Anstalt (“Alpha”) is an investor in the Company, which owns ordinary shares, Series A-1 preferred stock, Series B preferred stock, regular warrants and prefunded warrants. Alpha has a voting interest in the Company of less than 10%, but has an ownership interest in the Company that exceeds 10%. The Company has entered into financing arrangements with Alpha, as disclosed in Notes 9 and 10 to the consolidated financial statements. In February 2023, the Company entered into a convertible note financing arrangement with Alpha for $4.4 million. See Note 19.

The Company uses Hays Companies (“Hays”) as an insurance broker. Hays is considered a related party as an executive of Hays serves on the board of directors for the Company. The Company paid $1,198,710 and $728,986 for the years ending December 31, 2022 and 2021, respectively for insurance coverage brokered by Hays. The Company’s 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, 2022 and 2021.

Note 19 – Subsequent Events

On January 20, 2023, the Company held an Extraordinary General Meeting of Shareholders and approved a reverse share split of the Company’s ordinary shares, par value NIS 0.06 per share, by a ratio of up to and including 20:1, to be effective at the ratio and on a date to be determined by the Company’s Board of Directors; and amendments to the Company’s Amended and Restated Articles and Memorandum of Association to effect such reverse share split. As of the date of this Annual Report on Form 10-K, the Company’s Board of Directors has not effected a reverse stock split.

On February 13, 2023, SharpLink, Inc. (the “Borrower”), a Minnesota corporation and wholly owned subsidiary of the Company, entered into a Revolving Credit Agreement (the “2023 Revolving Credit Agreement”) with Platinum Bank, a Minnesota banking corporation (the “Lender”) and executed a revolving promissory note of $7,000,000 (the “2023 Revolving Note”).

The 2023 Revolving Credit Agreement provides for a two-year revolving line of credit (the “2023 Credit Line”) in the original principal amount of $7,000,000. The annual rate of interest to accrue on the outstanding principal balance of the 2023 Credit Line shall be annum interest rate equal to the prime rate plus 50 basis points, with such rate to be adjusted on and effective as of the same day the prime rate changes. The Borrower is subject to normal and customary representations and covenants, including the delivery of audited annual financial statements within 120 days of its fiscal year end.

As previously disclosed, on December 22, 2022, the Company consummated a transaction with SHGN Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Company, and SportsHub Games Network, Inc., a Delaware corporation. As a result, SportsHub Games Network, Inc. merged with and into SHGN Acquisition Corp., with SHGN Acquisition Corp. remaining as the surviving corporation and wholly owned subsidiary of the Company. After the merger, SHGN Acquisition Corp. (“New Borrower”) entered the following agreements with the Lender to assume the loans of SportsHub Games Network, Inc. (“Existing Borrower”).

●

On February 13, 2023, the New Borrower as successor by merger to Existing Borrower, LeagueSafe Management, LLC, a Minnesota limited liability company (“LeagueSafe”), Virtual Fantasy Games Acquisition, LLC, a Minnesota limited liability company (“Virtual Fantasy,” and together with LeagueSafe, collectively, the “Guarantors”) entered into a consent, assumption and second amendment agreement with the Lender. LeagueSafe and Virtual Fantasy were the Existing Borrower’s subsidiaries, and as a result of the merger, became the New Borrower’s subsidiaries.

F-50

	●	On February 13, 2023, the New Borrower also executed an amended and restated term promissory note payable to the Lender in the principal amount of $1,267,199, which amended and restated the term promissory note dated as of June 9, 2020, executed by the Existing Borrower and payable to the Lender in the original principal amount of $2,000,000.

	●	On February 13, 2023, the New Borrower, LeagueSafe and Virtual Fantasy (together with LeagueSafe, the “Pledgors”) entered into a consent, assumption and third amendment agreement with the Lender.

	●	On February 13, 2023, the New Borrower also executed an amended and restated revolving promissory note payable to the Lender in the principal amount of $5,000,000, which amended and restated the term promissory note dated as of June 9, 2020, executed by the Existing Borrower and payable to the Lender in the original principal amount of $5,000,000.

On February 15, 2023, the Company also issued to Alpha the Warrant to purchase 8,800,000 ordinary shares of the Company at an initial exercise price of $0.875. 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 is subject to an initial reset immediately prior to the Company’s filing of a proxy statement that includes the Shareholder Approval Proposal to the lower of $0.875 and the average of the five Nasdaq Official Closing Prices immediately preceding such date the. 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 Warrants are 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 Warrants (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.

On March 10, 2023, Silicon Valley Bank (“SVB”) was placed into the hands of receivers at the FDIC. On this date, SharpLink had approximately $336,000 USDs held in SVB. The FDIC has insured depositors up to $250,000 held in their account. Since that date, SVB has announced they have been acquired and have resumed most normal operations. As of March 30, 2022, we had approximately $140,000 held in SVB.

F-51