SharpLink Gaming Inc

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THEthree and six months ended June 30, 2024 and 2023

Note1 – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by SharpLink Gaming, Inc. (the “Company,” “SharpLink,” “we” or “our”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the Company, the foregoing statements contain all adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial position of the Company as of* June 30, 2024* and* December 31, 2023*, as well as its results of operations and cash flows for thethree andsix months ended* June 30, 2024and2023*. The condensed consolidated balance sheet as of* December 31, 2023* has been derived from the audited consolidated financial statements as of that date. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts therein. Due to the inherent uncertainty involved in making estimates, actual results in future periods* may*differ from the estimates.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to rules and regulations of the SEC. Accordingly, the condensed consolidated financial statements donot include all information and footnotes required by GAAP for complete financial statement presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended* December 31, 2023*, which are included in the Company’s Annual Report on Form10-K filed with the SEC on* March 29, 2024.*

Nature of Business

SharpLink, a Delaware corporation, is an online performance marketing company that delivers unique fan activation solutions to its sportsbook and casino partners. Through its global affiliate marketing network, known as PAS.net, SharpLink drives qualified traffic and player acquisitions, retention and conversions to U.S. regulated sportsbooks and global casino gaming partners worldwide. In addition, SharpLink owns a performance marketing platform through which the Company owns and operates U.S. state-specific web domains designed to attract, acquire and drive local sports betting and casino traffic directly to its sportsbook and casino partners which are licensed to operate in each respective state.

Prior to the sale of SharpLink’s Sports Gaming Client Services and SportsHub Gaming Network (“SHGN”) business units in* January 2024*to RSports Interactive, Inc. (“RSports”), a Minnesota corporation, (the “Sale of Business”), the SHGN unit owned and operated an online gaming business that primarily facilitated daily and seasonal peer-to-peer fantasy contests for its end users. The SHGN business unit also operated a website that provided a variety of services to private fantasy league commissioners, including secure online payment options, transparent tracking and reporting of transactions, payment reminders, in-season security of league funds, and facilitation of prize payouts. SharpLink’s Sports Gaming Client Services game development business was engaged in the provision of fantasy and free-to-play sports game and mobile app development services to a marquis list of customers, which included several of the biggest names in sports and sports betting, including Turner Sports, NBA, NFL, PGA TOUR, NASCAR and BetMGM, among others.

On* January 18, 2024,the Company entered into a Purchase Agreement (the “PA”) with RSports to sell the Company’s Sports Gaming Client Services and SHGN business units. SeeNote*3** for further information regarding the sale of Sports Gaming Client Services and SHGN business units.

On* February 13, 2024,SharpLink Gaming Ltd. (“SharpLink Israel” and former parent company) completed its previously announced domestication merger (“Domestication Merger”), pursuant to the terms and conditions set forth in an Agreement and Plan of Merger (the “Domestication Merger Agreement”), dated June 14, 2023and amended July 24, 2023,among SharpLink Israel, SharpLink Merger Sub Ltd., an Israeli company and a wholly owned subsidiary of SharpLink Gaming, Inc. (“Domestication Merger Sub”) and SharpLink Gaming, Inc. (“SharpLink US”). The Domestication Merger was achieved through a merger of Domestication Merger Sub Ltd. with and into SharpLink Israel, with SharpLink Israel surviving the merger and becoming a wholly owned subsidiary of SharpLink US. The Domestication Merger was approved by the shareholders of SharpLink Israel at an extraordinary special meeting of shareholders held on December 6, 2023.SharpLink US’s Common Stock commenced trading on the Nasdaq Capital Market under the same ticker symbol, SBET, on February 14, 2024.*

As a result of the Domestication Merger, all SharpLink Israel ordinary shares outstanding immediately prior to the Domestication Merger automatically converted, on aone-for-one basis, into the right to receive, and become exchangeable for, shares of SharpLink US common stock, par value $0.0001 per share (“Common Stock”) and all preferred shares, options and warrants of SharpLink Israel outstanding immediately prior to the Domestication Merger converted into or exchanged for equivalent securities of SharpLink US on aone-for-one basis.

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The following represents the change in the par value based on the outstanding ordinary and preferred shares to common and preferred stock after the redomestication on* February 13, 2024:*

Principles of Consolidation

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

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 Note4.* During thethree* months ended* June 30, 2024,we realigned our organizational structure and resources to more closely align with our strategic priorities. As a result of the change, we haveone* reportable segment, consisting of Affiliate Marketing, for the purpose of making operational and resource decisions and assessing financial performance.See Note12** for operating segment.

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 and expenses within the condensed consolidated statements of operations.

Reverse Share Split

On* April 23, 2023,the Company effected aone*-for-ten (1:10) reverse share split of all the Company’s share capital and adopted amendments to its Memorandum of Association and Second Amended and Restated Articles of Association (“M&AA”), whereby the Company (i) decreased the number of issued and outstanding ordinary shares, nominal value NIS 0.60 per share, from 26,881,244 to 2,688,541; (ii) reduced the total number of the Company’s authorized shares under its M&AA from 92,900,000 shares of ordinary shares, nominal value NIS 0.06 (USD 0.02) per share, to 9,290,000 shares of ordinary shares, nominal value NIS 0.60 (USD 0.20) per share; and (ii) decreased by a ratio ofone-for-ten (1:10) the number of retrospectively issued and outstanding shares of ordinary shares. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retrospectively adjusted as of the earliest period presented in the financial statements to reflect the reverse stock split.

Discontinued Operations

In* June 2022,the Company’s Board of Directors approved management to enter into negotiations to sell Israel-based Mer Telemanagement Solutions Ltd. (“MTS” or “Enterprise TEM”). 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 June 30, 2024* and* December 31, 2023*. The results of operations and cash flows of MTS for all periods are separately reported as discontinued operations.

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In* December 2023,*the Company’s Board of Directors approved management to enter into a Letter of Intent with RSports to purchase the Company’s Sports Gaming Client Services and SportsHub Gaming Network businesses.

In* December 2023,the Company discontinued itsC4* technology due to the lack of market acceptance.C4 technology centered on cost effectively monetizing our own online audience and our customers’ respective online audiences of U.S. fantasy sports and casual sports fans and casino gaming enthusiasts by converting them into loyal online sports and iGaming bettors.

On* January 18, 2024,the Company entered into a PA with RSports to sell the Company’s Sports Gaming Client Services and SHGN business units to RSports. All of the membership interests of Sports Technologies, LLC, a Minnesota limited liability company, Holdings Quinn, LLC, a Delaware limited liability company and SHGN who owns all of the issued membership interests in SportsHub Reserve, LLC, (“SHReserve”), a Minnesota limited liability company; SportsHub PA, LLC, (“SHPA”), a Pennsylvania limited liability company, and SportsHub Holdings, LLC, (“SHHoldings”), a Minnesota limited liability company, and SportsHub Operations, LLC, (“SHOperations”), a Minnesota limited liability company (SHReserve, SHPA, SHHoldings and SHOperations, collectively, the “SHGN Subsidiaries”) were sold for $22,500,000 in an all-cash transaction. The amount of cash received from sale of business, net of cash transferred of $18,857,834, as reflected on the statement of cash flows, reflects the receipt of cash of $22,500,000, net of the cash transferred of $41,357,834. The majority of cash transferred of $41,357,834 was reflected in discontinued operations customer deposits liability and deferred revenue of $36,959,573 and $4,888,704, respectively.See Note3 for an amendment to the PA agreement and Note*4.

The Company has discontinued operations for the Sports Gaming Client Services and SportsHub Gaming Network businesses.See Note4.

The Company is in the process of closing its remaining legal entities in MTS in order to simplify its legal structure.

Recently Issued Accounting PronouncementsNot Yet Adopted**

In* November 2023,the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update2023*-07 – Segment Reporting (Topic ASC280) Improvements to Reportable Segment Disclosures. This Accounting Standards Update improves reportable segment disclosure requirements, primarily through enhanced disclosure about significant segment expenses. The enhancements under this update require disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, require disclosure ofother segment items by reportable segment and a description of the composition ofother segment items, require annual disclosures under ASC280 to be provided in interim periods, clarify use of more thanone measure of segment profit or loss by the CODM, require that the title of the CODM be disclosed with an explanation of how the CODM uses the reported measures of segment profit or loss to make decisions, and require that entities with a single reportable segment provide all disclosures required by this update and required under ASC280. ASU2023-07 is effective for public business entities for fiscal years beginning after* December 15, 2023and interim periods within fiscal years beginning after December 15, 2024,with early adoption permitted. The Company anticipates the adoption of ASC280* willnot have a material impact on its condensed consolidated financial statements.

In* December 2023,the FASB issued Accounting Standards Update2023*-09 – Income Taxes (Topic ASC740) Income Taxes. This Accounting Standards Update improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU2023-09 will become effective at the beginning of our2025 fiscal year. Early adoption is permitted for annual financial statements that havenot yet been issued or made available for issuance. We donot expect that this guidance will have a material impact upon our financial position and results of operations.

Note2 – Going Concern

During thethree and six months ended* June 30, 2024and2023*, the Company had net loss from continuing operations of $(916,664) and $(2,406,059) For thethree months ended* June 30, 2023,respectively, and $(2,677,475) and $(4,563,242) respectively; and cash used for operating activities from continuing operations of $(3,952,960) and $(2,832,754) for thesix* months ended* June 30, 2024and2023*, respectively.

In* January 2024,the Company completed the Sale of our Sports Gaming Client Services and SHGN business units for $22.5 million in an all cash transaction. In connection with the closing of the Sale of Business, SharpLink repaid in full all outstanding term loans and lines of credit with Platinum Bank, together with accrued but unpaid interest and all other amounts due in connection with such repayment under existing credit agreements, totaling an aggregate $14,836,625, and thereby terminated all existing credit facilities with Platinum Bank and discharged the debt on the Company’s balance sheet. In addition, the Company redeemed the outstanding convertible debenture issued to Alpha Capital Anstalt (“Alpha”) for 110% of the outstanding balance, plus accrued and unpaid interest, for $4,484,230 in aggregate, thereby satisfying all obligations under the debenture and discharging the debt on the balance sheet.See Note8*.

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We* mayneed to raise additional capital to fund the Company’s growth and future business operations. We cannot be certain that additional funding will be available on acceptable terms or at all. If we arenot* 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* mayhave to delay or reduce the scope of planned strategic growth initiatives. Moreover, any additional equity financing that we obtain maydilute the ownership held by our existing shareholders. The economic dilution to our shareholders will be significant if our stock price doesnot* materially increase, or if the effective price of any sale is below the price paid by a particular shareholder. Any debt financing could involve substantial restrictions on activities and creditors could seek additional pledges of some or all of our assets. If we fail to obtain additional funding as needed, we* may*be forced to cease or scale back operations, and our results, financial conditions and stock price would be adversely affected. As such, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period.

Note3 – Sale of Sports Gaming Client Services and SHGN

On* January 18, 2024,SharpLink Israel (“Parent Seller”) andSLG1* Holdings, LLC, a Delaware limited liability company and wholly owned subsidiary of SharpLink (“Subsidiary Seller”), SHGN (“SHGN,” and together with Parent Seller and Subsidiary Seller, the “Seller”), a Delaware corporation and wholly owned subsidiary of SharpLink, entered into a Purchase Agreement (the “PA”) with RSports Interactive, Inc., a Minnesota corporation (“Buyer”). The Subsidiary Seller owns all of the outstanding membership interests of Sports Technologies, LLC, a Minnesota limited liability company, Holdings Quinn, LLC, a Delaware limited liability company and SHGN owns all of the issued membership interests in SHReserve, a Minnesota limited liability company; SHPA, a Pennsylvania limited liability company, and SHHoldings, a Minnesota limited liability company, and SHOperations, a Minnesota limited liability company (collectively referred to as the “Targets”). The PA contemplated the sale of the Company’s Sports Gaming Client Services and SHGN business units to the Buyer, by selling all of the issued and outstanding membership interests of the Targets and the Acquired Subsidiaries for $22,500,000 in an all cash transaction SHHoldings LLC owns all of the membership interests in Virtual Fantasy Games Acquisitions, LLC, a Minnesota limited liability company; LeagueSafe Management, LLC, a Minnesota limited liability company and SportsHub Regulatory, LLC, a Minnesota limited liability company.

On* May 8, 2024,*SharpLink entered into an amended and fully restated Post Closing Assignment Agreement with RSports, whereby SharpLink and RSports have agreed to amend the PA to exclude the transfer/sale of SHGN and have agreed to the assignment/sale of the Acquired Subsidiaries membership interests in SHReserve and SHPA to be made directly to RSports upon and subsequent to the approval of a petition by the Pennsylvania Gaming Control Board. Based on this amended agreement, the sale of the business is an asset sale for legal and tax purposes instead of an equity sale.

Further, in connection with the Sale of Business, SharpLink entered into a Post Closing Covenant Agreement (the “PCCA”) with the Buyer defining the post-closing terms and conditions relating to certain transfers and assignments of assets subsequent to the closing of the Sale of Business, including:

In accordance with the terms of the PCCA, SharpLink will complete all post-closing covenants following the closing as reasonably possible, with the exception of Seller covenants that are dependent on governmental authorities or governmental orders for completion, in which case it will use diligent, good faith efforts to cause the same to be completed as soon as practical. The $14.6 million gain was calculated by measuring the difference between the fair value of consideration received less the carrying amount of assets and liabilities sold in accordance with ASC810. The gain is preliminary and subject to finalization of post-closing adjustments pursuant to the PA, the Post Closing Assignment Agreement and PCCA Agreement.

In the statement of cashflows for thesix months ended* June 30, 2024*, the net cash used in investing activities - discontinued operations is due to cash received from the sale of business of $22,500,000, net of the cash transferred of $41,357,834. The majority of the cash transferred of $41,357,834 was reflected in discontinued operations customer deposits liability and deferred revenue of $36,959,573 and $4,888,704, respectively.

During thethree andsix months ended* June 30, 2024*, SharpLink paid RSports $70,420 and $93,597, respectively, for use of accounting service personnel. RSports paid SharpLink $21,588 and $53,154 under the PCCA agreement for thethree andsix months ended* June 30, 2024,*respectively.

Note4 – Discontinued Operations

In accordance with ASC205-20 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 paragraph205-20-45-10. 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.

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Sale of Sports Gaming Client Services and SHGN

As disclosed inNote3,* due to the Sale of Business in January 2024,we ceased our Sports Game Client Services and SHGN segments. The historical results of these business segments have been reflected as discontinued operations in our consolidated financial statements for all periods prior to the closing date of the Sale of Business on January 18, 2024.*

Sale of MTS

In* June 2022,the Company’s Board of Directors authorized management to enter into negotiations to sell MTS. The Company negotiated a Share and Asset Purchase Agreement which was closed on December 31, 2022.The majority of the assets of the primary reporting unit within MTS were sold. The assets and liabilities remaining post transaction are in the process of winding down subsequent to the year ended December 31, 2022.Accordingly, the assets and liabilities of the MTS business were separately reported as assets and liabilities from discontinued operations as of June 30, 2024* and* June 30, 2023*. The results of operations and cash flows of MTS for all periods are separately reported as discontinued operations. During thethree months ended* June 30, 2024,the Company was notified by the Buyer of an earn-out payment due to SharpLink in connection with the sale and accrued $297,387 in an earn-out payment to be received from the Buyer. Payment was received by the Company in July 2024.*No further payment is expected.

During thethree months ended* June 30, 2024,*in accordance with the dissolution of certain MTS entities, the Company wrote-off $400,669 of aged liabilities in the statement of operations for discontinued operations. This write-off was recorded in the Other (expense) income line item below.

C4 Technology

In* December 2023,the Company discontinued itsC4* technology due to the lack of market acceptance.C4 technology centered on cost effectively monetizing our own online audience 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.

Summary Reconciliation of Discontinued Operations

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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* June 30, 2024* and* December 31, 2023*:

Note5 – Additional Balance Sheet Information

Equipment, net

Equipment consists of computers, furniture and fixtures and is presented net of accumulated depreciation from continuing operations for a net book value of $6,168 and $8,792 as of* June 30, 2024* and* December 31, 2023*, respectively. Depreciation expense from continuing operations for thethree months ended* June 30, 2024and2023* was $2,140 and $3,006, respectively, and$4,343 and $5,907, respectively, for thesix months ended* June 30, 2024and2023*. Depreciation expense for discontinued operations for thethree months ended* June 30, 2024and2023* was $0 and $2,381, respectively and was $1,044 and $9,507, respectively, for thesix months ended* June 30, 2024and2023.*

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Intangible assets, net

Intangible assets, net of accumulated amortization as of* June 30, 2024* and* December 31, 2023* consisted of the following:

Amortization expense from continuing operations on intangible assets for thethree andsix months ended* June 30, 2024was $1,230 and $2,461, respectively. Amortization expense from discontinued operations was $0 and $23,469 for thethree* andsix months ended* June 30, 2024,respectively. For thethree* andsix months ended* June 30, 2023*, amortization expense from continuing operations was*$25,198* and*$47,660* respectively. Amortization expense for the discontinued operations was $167,118 and*$328,679* for thethree andsix months ended* June 30, 2023,respectively. As of December 31, 2023*, the Company impaired, net $849,565 for the customer relationship and internally developed software in Affiliate Marketing Services due to the loss of future revenue by the exit of Affiliate Marketing Services' largest customer from the European market. The Company sold $150,000 of software in development to athird party during thefirst quarter of2024.

Note6 – Line of Credit

On* February 13, 2023,the Company entered into a Revolving Credit Agreement with Platinum Bank (the “Lender”) and executed a variable rate (9.0% as of December 31, 2023*) revolving promissory note of $7,000,000, expiring* February 26, 2025.As collateral, the Company granted a security interest in and to all of the Company’s right, title and interest in certain assets on account at Platinum Bank, together with all financial assets, security entitlements with respect to such financial assets, investment property, securities and other property, to secure the payment and performance of the Revolving Credit Agreement. There was $6,350,000 outstanding as of December 31, 2023*. In connection with the Sale of Business in* January 2024,*the revolving credit line was paid off.See Note3.

Note7 – Debt

On* January 31, 2022,FourCubed Acquisition Company, LLC (“FCAC”), a wholly owned subsidiary of the Company, entered into a $3,250,000 term loan agreement with Platinum Bank (the “Term Loan Agreement”). The Term Loan Agreement bears annual interest at a rate of 4% and requires a fixed monthly payment of $59,854, consisting of principal and interest, through the term loan’s maturity, which is January 31, 2027.*The Company capitalized $25,431 of loan initiation fees associated with the Term Loan Agreement which are presented net within debt on the condensed consolidated balance sheet and amortized on a method which approximates the effective interest method to interest expense on the condensed consolidated statement of operations.

On* January 18, 2024,in conjunction with the Sale of Business, the term loan was paid off.See Note3*.

Note8 - Convertible Debenture and Warrant

Convertible Debenture at Fair Value

The Company accounts for convertible debentures using an amortized cost model. The discount for warrants, the Original Issuance Discount (“OID”) and the initial allocation of fair value of compound derivatives reduce the initial carrying amount of the convertible notes. The carrying value is accredited to the stated principal amount at contractual maturity using the effective-interest method with a corresponding charge to interest expense. Debt discounts are presented on the condensed consolidated balance sheets as a direct deduction from the carrying amount of that related debt.

The Company made an irrevocable election at the time of issuance of the Debenture to record the Debenture at its fair value (the “Fair Value Option”) with changes in fair value recorded through the Company’s condensed consolidated statements of operations within other income (expense) at each reporting period. The Fair Value Option provides the Company with a measurement basis election for financial instruments on an instrument-by-instrument basis.

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On* February 14, 2023,the Company entered into the Securities Purchase Agreement (the “SPA”) with Alpha, a current shareholder of the Company, pursuant to which the Company issued to Alpha, an 8% Interest Rate,10% Original Issue Discount, Senior Convertible Debenture (the “Debenture”) in the aggregate principal amount of $4,400,000 for a purchase price of $4,000,000 on February 15, 2023.The Debenture is convertible, at any time, and from time to time, at Alpha’s option, into shares of Common Stock of the Company (the “Conversion Shares”), at an initial conversion price equal to $7.00 per share, subject to adjustment as described below and, in the Debenture, (the “Conversion Price”). In addition, the Conversion Price of the Debenture was subject to an initial reset immediately prior to the Company’s filing of a registration statement covering the resale of the underlying shares to the lower of $7.00 and the average of thefive* Nasdaq Official Closing Prices immediately preceding such date (the “Reset Price”). The registration statement on Form S-1 (fileNo.: 333-271396) was filed on* April 21, 2023,*and as a result, the Reset Price is now $4.1772. The initial adjustment of the Conversion Price to the Reset Price had a floor price of $3.00 (the “Floor Price”).

Commencing* November 1, 2023and continuing on thefirst* day of each month thereafter until the earlier of (i)* February 15, 2026 (the “Maturity Date”) and (ii) the full redemption of the Debenture (each such date, a “Monthly Redemption Date”), the Company will redeem $209,524 plus accrued but unpaid interest, and any amounts then owing under the Debenture (the “Monthly Redemption Amount”). The Monthly Redemption Amount will be paid in cash; provided, that the Company mayelect to pay all or a portion of a Monthly Redemption Amount in ordinary shares of the Company, based on a conversion price equal to the lesser of (i) the then Conversion Price of the Debenture and (ii)80% of the average of the VWAPs (as defined in the Debenture) for thefive* consecutive trading days ending on the trading day that is immediately prior to the applicable Monthly Redemption Date. The Company* may*also redeem some or all of the then outstanding principal amount of the Debenture at any time for cash in an amount equal to the then outstanding principal amount of the Debenture being redeemed plus accrued but unpaid interest, liquidated damages and any amounts then owing under the Debenture. These monthly redemption and optional redemptions are subject to the satisfaction of the Equity Conditions (as defined in the Debenture).

The Debenture initially accrues interest at the rate of 8% per annum for thefirst 12 months from the* February 15, 2023,at the rate of 10% per annum for the ensuing12* months, and thereafter until maturity, at the rate of 12%, Interest* maybe paid in cash or ordinary shares of the Company or a combination thereof at the option of the Company; provided that interest mayonly be paid in shares if the Equity Conditions (as defined in the Debenture) have been satisfied, including shareholder approval. The Debenture includes a beneficial ownership blocker of 9.99%. The Debenture provides for adjustments to the Conversion Price in connection with stock dividends and splits, subsequent equity sales and rights offerings, pro rata distributions, and certain Fundamental Transactions. In the event the Company, at any time while the Debentures is outstanding, issues or grants any right to re-price, ordinary shares or any type of securities giving rights to obtain ordinary shares at a price below the Conversion Price, Alpha shall be extended full-ratchet anti-dilution protection (subject to customary Exempt Transaction issuances), and such reset shallnot* be limited by the Floor Price.

At the time of execution, on* February 14, 2023,the Company recorded an initial debt discount of $400,000 based on the allocation of fair value for the Debenture, which will be amortized into interest expense over the term of the Debenture. For the period from February 14, 2023through December 31, 2023,*the Company recognized $(255,229) change in fair value of the convertible Debenture, which is reflected in other income and expense in the condensed consolidated statement of operations, and $16,667 for the amortization of the OID, which is included in interest expense on the condensed consolidated statement of operations.

Pursuant to Section8(a)(vi) of the Debenture, it is an event of default if the Company is party to a Fundamental Transaction or agrees to sell or dispose of all or in excess of 33% of its assets inone transaction or a series of related transactions. On* January 19, 2024,SharpLink and Alpha entered into a settlement agreement (the “Settlement Agreement”) whereby Alpha agreed to waive (i) the event of default under Section8*(a)(vi) of the Debenture in connection with the Sale of Business; and (ii) payment of the Mandatory Default Amount; and the parties agreed that the Company would pay 110% of the outstanding principal amount of the Debenture, plus accrued and unpaid interest, in the aggregate total amount of $4,484,230 (the “Debenture Redemption Amount”). On* January 19, 2024,*the Company paid Alpha the Debenture Redemption Amount. As a result, the Company’s obligations under the Debenture have been satisfied.

Purchase Warrant

On* February 15, 2023,the Company also issued to Alpha a warrant (the “Warrant”) to purchase 880,000 ordinary shares of the Company at an initial exercise price of $8.75 (the “Warrant Shares”, and, together with the Conversion Shares, and any other ordinary shares of the Company that mayotherwise become issuable pursuant to the terms of the Debenture and Warrant, the “Underlying Shares”). The Warrant is exercisable in whole or in part, at any time on or after February 15, 2023and before February 15, 2028.The exercise price of the Warrant was subject to an initial reset immediately prior to the Company’s filing of a proxy statement that included a shareholder proposal to approve the issuance of Underlying Share in excess of 19.99% of the issued and outstanding ordinary shares on the Closing Date (the “Shareholder Proposal”) to the lower of $8.75 and the average of thefive* Nasdaq Official Closing Prices immediately preceding such date. As a result, the exercise price has been reset to $4.0704, the average of thefive Nasdaq Official Closing Prices immediately preceding* April 14, 2023,*the date the Company filed its preliminary proxy statement which included the Shareholder Proposal. The Warrant includes a beneficial ownership blocker of 9.99%. The Warrant provides for adjustments to the exercise price, in connection with stock dividends and splits, subsequent equity sales and rights offerings, pro rata distributions, and certain Fundamental Transactions.

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In the event the Company, at any time while the Warrant is still outstanding, issues or grants any right to re-price ordinary shares or any type of securities giving rights to obtain ordinary shares at a price below exercise price, Alpha shall be extended full-ratchet anti-dilution protection on the Warrant (reduction in price, only,no increase in number of Warrant Shares, and subject to customary Exempt Transaction issuances), and such reset shallnot be limited by the Floor Price.

At the time of execution, the Company classified the Warrant as an equity contract and performed an initial fair value measurement. As the Warrant was issued with the sale of the Debenture, the value assigned to the Warrant was based on an allocation of proceeds, subject to the allocation to the Debenture. The Company recorded a debt discount for the Warrant of $1,174,229, based on the Black Scholes option-pricing model which was calculated independently of the fair value of the Debenture, and recorded the Warrant as additional paid-in capital in the condensed consolidated balance sheet as of* December 31, 2023*.

The Warrant provides that in the event of a Fundamental Transaction, SharpLink, at Alpha’s option, would repurchase the Warrant from Alpha on the terms set forth in Section3(e)(ii) of the2023 Warrant (the “Warrant Repurchase”). On* January 19, 2024,SharpLink and Alpha entered into a settlement agreement (the “Settlement Agreement”) whereby Alpha agreed to waive (i) the event of default under Section3*(e)(ii) of the Warrant in connection with the Sale of Business.

Pursuant to Section5(1) of the Warrant, Alpha further agreed to waive its right to elect that, in connection with and at the closing of the Sale of Business, the Warrant shall be repurchased by the Company as set forth in Section3(e) of the2023 Warrant. The parties agreed in the Settlement Agreement that the Warrant Repurchase for its Black Scholes value shall take place upon the earlier of (a)* June 30, 2024; (b) the Company raising a gross amount ofnot* less than $3,000,000 whether by equity or debt; and (c) the Company entering into a “Fundamental Transaction” as defined in the2023 Warrant. The parties further agree in the Settlement Agreement value of the2023 Warrant for purposes of the Warrant Repurchase at $900,000, which was based on a Black Scholes model.

On* March 6, 2024,SharpLink entered into an Exchange Agreement (the “Exchange Agreement”) with Alpha to change the Warrant Repurchase of $900,000. Pursuant to the terms and conditions set forth in the Exchange Agreement, the Company agreed to exchange the2023* Warrant to purchase 880,000 ordinary shares of common stock for (i)156,207 shares of Common Stock (the “Shares”), (ii) a pre-funded warrant in the amount of 469,560 shares of Common Stock (the “Pre-Funded Warrant”) and (iii) the unexchanged balance of the2023 Warrant Repurchase (the “Warrant Repurchase Balance”). The Warrant Repurchase Balance of 254,233 warrants is valued at $170,636 and shall be subject to the repurchase terms set forth in the Settlement Agreement. The Pre-Funded Warrant and the Warrant Repurchase Balance were valued using Black Scholes option-pricing model. As part of this transaction, the Company recorded a deemed dividend of $44,619 as presented in the statement of stockholders’ equity for thesix months ended* June 30, 2024*.

On* June 30, 2024,SharpLink negotiated an Amendment to the Exchange Agreement (the "Amendment") to reduce the strike price per warrant of the unexchanged balance of the2023* Warrants Repurchase Balance from $4.07 to $0.0001 and to remove the re-purchase option. The modification to the Exchange Agreement was valued on* June 29, 2024,the day before the modification, using Black Scholes option-pricing model. The Company recorded a fair value adjustment of $17,996 on the condensed consolidated statements of operations for thesix* months ended* June 30, 2024*and removed the remaining accrued warrant liability of $152,386 through an adjustment to additional paid in capital.

The fair value of the Warrant Repurchase balance and the Pre-Funded Warrant are estimated on the following dates using the Black Scholes option pricing model with the following assumptions:

Note9 - Fair Value

In accordance with fair value accounting guidance, the Company determines fair value based on the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

As disclosed inNote8**, SharpLink entered into a Settlement Agreement on* January 19, 2024for the2023* Warrant for purposes of the Warrant Repurchase at $900,000. On* March 6, 2024,SharpLink entered into an Exchange Agreement (the “Exchange Agreement”) with Alpha to change the Warrant Repurchase of $900,000. Pursuant to the terms set forth in the Exchange Agreement, the Company agreed to exchange the2023* Warrant for (i)156,207 shares of Common Stock (the “Shares”), (ii) a pre-funded warrant in the amount of 469,560 shares of Common Stock (the “Pre-Funded Warrant”) and (iii) the remaining unexchanged balance of the2023 Warrant Repurchase (the “Warrant Repurchase Balance”).

On* June 30, 2024,SharpLink negotiated an Amendment to the Exchange Agreement (the "Amendment") to reduce the strike price per warrant of the unexchanged balance of the2023* Warrants Repurchase Balance from $4.07 to $0.0001 and to remove the re-purchase option. The fair value of the warrant liability waszero as of* June 30, 2024.*

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As disclosed inNote8**, the Debenture and the Warrant were reported at fair value at issuance.

The following table sets forth the Company’s consolidated financial assets and liabilities measured at fair value by level within the fair value hierarchy on* December 31, 2023*

The following table presents a reconciliation of the beginning and ending balances of the Debenture measured at fair value on a recurring basis that uses significant unobservable inputs (Level3) and the related expenses and losses recorded in the consolidated statement of operations during thetwelve months ended* December 31, 2023*:

The fair value of the Debenture was determined using a Monte Carlo Simulation (“MCS”) which incorporates the probability and timing of the consummation of a Fundamental Transaction event and conversion of the Debenture as of the valuation date.

The MCS implied a discount rate at issuance that resulted in a total value to the debenture and warrants that equated to the transaction proceeds. This discount rate was 50.0% at issuance and was calibrated to the* December 31, 2023* valuation date by comparing the B rated commercial paper credit spread at both dates. B spreads are as follows:

At inception, the Company valued the Debenture using a Monte Carlo Simulation model using the value of the underlying stock price of $3.50, exercise price of $8.75, expected dividend rate of 0%, risk-free interest rate of 3.96% and volatility of 40.0%. The Company estimated the term of the warrant to be 2.9 years. On* December 31, 2023,*the Company valued the Debenture using a Monte Carlo Simulation model using the expected dividend rate of 0% and the risk-free interest rate of 5.60%. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors.

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Note10 - Warrants

In conjunction with the Convertible Debenture and Warrant issuance on* February 14, 2023,266,667 warrants that were previously issued to Alpha on November 19, 2021were revalued on February 14, 2023,reducing the exercise price from $45.00 per warrant share to $0.60 per warrant share. The Company performed a Black Scholes model for the re-pricing of the warrants using the value of the underlying stock price of $5.10 stock price, exercise price of $0.60, expected dividend rate of 0%, risk-free interest rate of 4.04% and volatility of 52.57% and remaining term of 2.9 years. These same assumptions were applied to the 880,000 warrants. The value allocated to the warrants on November 19, 2021was $11,435 and was recorded in additional paid-in capital. The fair value of the re-priced warrants on February 15, 2023was $1,218,205, an increase of $1,206,771. The incremental value of the warrants was recorded in Additional Paid-In Capital as of December 31, 2023*as a deemed dividend.

On* June 14, 2023,the Company filed a registration statement on Form S-1 (file number:333-272652) with the SEC to register 266,667 ordinary shares issuable upon exercise of the purchase warrants issued to Alpha in November 2021.The registration statement on Form S-1 was deemed effective on September 29, 2023.On January 19, 2024,*Alpha exercised the purchase warrants in full for 266,667 ordinary shares with the Company receiving $160,000.

In conjunction with the Amendment to the Exchange Agreement on* June 30, 2024,254,233 warrants that were previously issued to Alpha on February 14, 2023were revalued on June 29, 2024,reducing the exercise price from $4.07 per warrant share to $0.0001 per warrant share. The Company performed a Black Scholes model for the re-pricing of the warrants using the value of the underlying stock price of $0.60 stock price, exercise price of $0.0001, expected dividend rate of 0%, risk-free interest rate of 4.33% and volatility of 88.06% and remaining term of 3.63 years. The fair value of the re-priced warrants on June 29, 2023was $152,386, a decrease of $17,996. The incremental value of the warrants was recorded as change in fair value on the condensed consolidated statements of operations as of June 30, 2024.As a result of the removal of the repurchase option, the remaining warrant liability of $152,386 was removed as an adjustment to additional paid in capital as of June 30, 2024.*

Following is a summary of the Company’s warrant activity for thesix months ended* June 30, 2024*:

Following is a summary of the Company’s warrant activity for thesix months ended* June 30, 2023*:

Note11 - Stock Compensation

Stock Options

Option awards are generally granted with an exercise price equal to the market price of the Company’s Common Stock at the date of grant; those options generally vest based onthree years of continuous service and haveten-year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control, as defined in the plans.

The Company granted 0 and 169,309 options for thesix months ended* June 30, 2024and2023*, respectively. The Company recognized stock compensation expense for stock options of $85,204 and$319,664 for thesix months ended* June 30, 2024and2023*, respectively, of which $12,041 and $183,186 of expense are recorded in discontinued operations. The Company recognized stock compensation expense for stock options of $43,052 and $167,630 for thethree months ended* June 30, 2024and2023*, respectively, of which $0 and $95,210 of expense are recorded in discontinued operations.

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The fair value of each option award is estimated on the date of grant using a Black Scholes option-pricing model. The Company uses historical option exercise and termination data to estimate the term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issue date. The expected volatility is determined using the volatility of peer companies. The Company’s underlying stock has been publicly traded since the date of the MTS Merger. Subsequent to the MTS Merger, option grants made under the SharpLink, Inc.2021 Plan utilized the publicly traded stock price of the Company on the day of the option award. All option grants made under the SharpLink, Inc.2020 Stock Incentive Plan were prior to the MTS Merger. The underlying SharpLink, Inc. stock under that plan wasnot publicly traded, but was estimated on the date of the grants using valuation methods that consider valuations from recent equity financings as well as future planned transactions. All option grants made under the SportsHub Games Network Inc.2018 Incentive Plan were prior to the SportsHub Acquisition. The underlying SportsHub stock under that plan wasnot 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.

The fair value of each stock option grant is estimated on the date of grant using the Black Scholes option pricing model with the following assumptions:

The summary of activity under the plans as of* June 30, 2024*, and change during thesix months ended* June 30, 2024*, is as follows:

The summary of activity under the plans as of* June 30, 2023*, and change during thesix months ended* June 30, 2023*, is as follows:

Unamortized stock compensation expense of $270,105 will be amortized through2026 for 52,428 of unvested options and has a weighted average recognition period of 8.3 years.

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Restricted Stock Units

For thesix months ended* June 30, 2024*, the Company’s Compensation Committee recommended to the Board of Directors and the Board approved the granting of certain restricted stock units (“RSU”) to members of the senior leadership team and the Board of Directors. The aggregate fair value of RSU awards was $419,200 and valued at the closing price of the Company’s Common Stock on the date of grant. The RSUs vest at quarterly intervals over the remainder of2024. There wereno RSU's granted in2023. The following is a summary of RSU activity:

The Company recognized $212,800 as part of the total stock compensation expense related to RSU awards for thesix months ended* June 30, 2024*. The total unrecognized compensation cost related to unvested RSUs as of* June 30, 2024* was $206,400.

Note12 - Operating Segments

As of* June 30, 2024,*the Company hasone reportable operating segment: Affiliate Marketing Services.

During thethree months ended* June 30, 2024*, we realigned our organizational structure and resources to more closely align with our strategic priorities. As a result of the change, we haveone reportable segment, consisting of Affiliate Marketing, for the purpose of making operational and resource decisions and assessing financial performance. The Chief Operating Decision Maker is the Company's CEO.

The Affiliate Marketing Services segment operates a global affiliate network and performance marketing platform which owns and operates web domains designed to attract, acquire and retain sports betting and casino traffic directly to the Company’s licensed sportsbook and casino partners.. The Company earns a commission from sportsbooks and casino operators (cost per acquisition or a portion of net gaming revenues) on new depositors referred to them. .

Summarized revenues by country in which the Company operated for thethree andsix months ended* June 30, 2024and2023* are shown below:

For thethree months ended June 30, 2024:**

For thesix months ended June 30, 2024:**

For thethree months ended June 30, 2023:**

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For thesix months ended June 30, 2023:**

The Company doesnot have material tangible long-lived assets in foreign jurisdictions.

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

Note13 - Revenue Recognition

For thesix months ended* June 30, 2024and2023*, the Company has recognized its revenue at a point in time. The Company’s only revenue stream is services.

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

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 condensed consolidated balance sheet. The Company recognized unbilled revenue when revenue is recognized prior to invoicing.

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within30 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally donot 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, andnot to facilitate financing arrangements.

Note14 – Income Taxes

On a quarterly basis, we estimate our annual effective tax rate and record a quarterly income tax provision based on the anticipated rate. As the year progresses, we refine our estimate based on the facts and circumstances, including discrete events, by each tax jurisdiction. The effective tax rate for thesix-month periods ended* June 30, 2024* was (0.3%) and (0.31%), respectively. The Company has NOLs available to offset80% of the current year taxable income and the gain, net of tax is classified as discontinued operations in the financial statements. The Company is in the process of dissolving certain legal entities to simply its legal structure. The tax impact of these legal entities being dissolved isnot expected to be significant.

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We follow the authoritative guidance on accounting for and disclosure of uncertainty in tax positions which requires us to determine whether a tax position of the Company is more likely thannot to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more likely thannot threshold, the uncertain tax benefit amount recognized in the financial statements is reduced to the largest benefit that has a greater than50% likelihood of being realized upon the ultimate settlement with the relevant taxing authority. Interest and penalties related to uncertain tax positions are included in the provision for income taxes in the condensed consolidated statements of operations. In accordance with the Sale of Business (See Note3**), management performed an evaluation of the technical merits of the Israeli Controlled Foreign Corporate Rules to determine the taxability of the gain from the Sale of Business from an Israeli tax perspective. This analysis also considered the results of the U.S. income tax. Management determined that the technical merits for uncertain tax exposure resulting from the gain for Israeli tax purposes didnot exceed the more-likely-than-not threshold and hasnot recorded any income tax liability at* June 30, 2024*. Management’s determination is based on known facts and circumstances and requires judgment of a complex set of rules and regulations. If facts and circumstances change, such as closing, liquidating or selling of the businesses’ equity that is remaining, including events outside the Company’s control, this could have a material impact on the management’s determination.

Note15 – Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) available to common shareholders, adjusted for preferred stock discount accretion and dividends accrued on preferred stock, by the weighted-average number of common stock 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 common stock that would have been outstanding if potential shares of common stock had been issued if such additional common stock were dilutive.

As the Company had a net loss from continuing operations and net income from discontinued operations for thethree andsixmonths ended* June 30, 2024*, the following presents dilutive and anti-dilutive securities. For continuing operations, since there was a net loss, all securities presented below were excluded from weighted average shares outstanding. For discontinued operations, dilutive securities presented below were included in the net income per share calculation and the anti-dilutive securities were excluded in weighted average shares outstanding:

As the Company had net loss from continuing operations and discontinued operations for thethree andsix months ended* June 30, 2023*, the following anti-dilutive securities outstanding as of* June 30, 2023* were excluded in weighted average shares outstanding:

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The calculation of the net income (loss) per share and weighted-average shares of the Company’s common stock outstanding for the periods presented are as follows:

Note16 – Related Party Transactions

The Company uses Brown & Brown (“Brown”), which acquired Hays Companies, as an insurance broker. Brown is considered a related party as an executive of Brown previously served on the Board of Directors of SharpLink Israel. The Company paid $203,765 and $486,111 for thesix months ended* June 30, 2024and2023*, respectively, for insurance coverage brokered by Brown. SharpLink Israel’s former director earnedno commissions for the placement of these policies.

The Company leased office space in Canton, Connecticut from CJEM, LLC (CJEM), which is owned by a former executive of the Company. The Company paid rent expense of $3,200 and $19,200 for thesix months ended* June 30, 2024and2023*, respectively. For thethree month period* June 30, 2024and2023,* the Company paid rent expense of $0 and $9,600, respectively,

Note17 – Subsequent Events

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On* July 11, 2024,SharpLink received a letter from Nasdaq Listing Qualifications indicating that the Company isno* longer in compliance with the minimum bid price requirement for continued listing set forth in Listing Rule5550(a)(2), which requires listed securities to maintain a minimum bid price of*$1.00* per share. The rules also provide SharpLink a compliance period of180 calendar days to regain compliance. According to the Letter, the Company has until* January 7, 2025to regain compliance with the minimum bid price requirement. SharpLink can regain compliance if at any time during this180*-day period, the closing bid price of its Common Stock is at least*$1.00* for a minimum often consecutive business days, in which case SharpLink will be provided with written confirmation of compliance by Nasdaq and this matter will be closed. In the event that the Company fails to regain compliance after the initial180-day period, SharpLink* maythen be eligible for additional time if it meets 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 its intention to cure the deficiency during thesecond* compliance period equal to an additional180 calendar days. If SharpLink cannot demonstrate compliance by the end of thesecond compliance period, Nasdaq will notify SharpLink that its Common Stock is subject to delisting. The Letter hasno immediate effect on SharpLink’s listing or the trading of its Common Stock, and during the grace period, as* may*be extended, the Company’s Common Stock will continue to trade on The Nasdaq Capital Market under the symbol “SBET.”

On* July 18, 2024,SharpLink announced that its Board of Directors (“Board”) has initiated a formal review process to evaluate strategic alternatives for the Company. The Board and management team are taking a measured approach to considering multiple proposals that have been received by the Company and other proposals it expects to receive. SharpLink has been exploring strategic alternatives that include, but arenot* limited to, a sale, merger, strategic business combination or other transaction. SharpLink hasnot set a deadline or definitive timetable for completion of the strategic alternatives review process and there can beno assurance that this process will result in the Company pursuing a transaction or any other strategic outcome.