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Discontinued Operations | 3 Months Ended
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Mar. 31, 2025
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | Note 3 – Discontinued Operations In accordance with ASC 205-20 Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major impact on an entity’s operations and financial results when the components of an entity meets the criteria in ASC paragraph 205-20-45-10. In the period in which the component meets the held for sale or discontinued operations criteria the major assets, other assets, current liabilities and non-current liabilities shall be reported as a component of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the income (loss) of continuing operations. Sale of SHGN and Sports Gaming Client Services On January 18, 2024, SharpLink Israel (“Parent Seller”) and SLG1 Holdings, LLC, a Delaware limited liability company and wholly owned subsidiary of SharpLink (“Subsidiary Seller”), SHGN Acquisition Corp. (“SHGN,” and together with Parent Seller and Subsidiary Seller, the “Seller”), a Delaware corporation and wholly owned subsidiary of SharpLink, entered into a Purchase Agreement (the “PA”) with RSports Interactive, Inc., a Minnesota corporation (“Buyer”). The Subsidiary Seller owns all of the issued and outstanding membership interests of Sports Technologies, LLC, a Minnesota limited liability company, SHGN and Holdings Quinn, LLC, a Delaware limited liability company (collectively referred to as the “Targets”). The PA contemplated the sale of the Company’s Sports Gaming Client Services and SportsHub Gaming Network business units to the Buyer, by selling all of the issued and outstanding membership interests of the Targets and the Acquired Subsidiaries for $22,500,000 in an all cash transaction. SHGN owns all of the membership interests in Virtual Fantasy Games Acquisitions, LLC, a Minnesota limited liability company; LeagueSafe Management, LLC, a Minnesota limited liability company; SportsHub Reserve, LLC, a Minnesota limited liability company; SportsHub PA, LLC, a Pennsylvania limited liability company; SportsHub Operations, LLC, a Minnesota limited liability company; SportsHub Holdings, LLC, a Minnesota limited liability company; SportsHub Regulatory, LLC, a Minnesota limited liability company; and SportsHub Player Reserve, LLC, a Minnesota limited liability company (collectively, the “Acquired Subsidiaries”). As a result of the Sale of Business, we ceased our Sports Game Client Services and SportsHub Gaming Network segments. The historical results of these business segments have been reflected as discontinued operations in our consolidated financial statements for all periods prior to the closing date of the Sale of Business on January 18, 2024. In connection with the Sale of Business, the Company entered into with the Buyer a Transition Services Agreement to provide for an orderly transfer and the continuity of business services. The Parent Seller would be able to use certain Buyer employees at an agreed upon hourly rate. The Buyer would be charged monthly amounts for business services such as accounting software, insurance and data services. On May 8, 2024, SharpLink entered into an amended and fully restated Post Closing Assignment Agreement with RSports, whereby SharpLink and RSports agreed to amend the PA to exclude the transfer/sale of SHGN and 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 Business is an asset sale for legal and tax purposes instead of an equity sale. Further, in connection with the Sale of Business, SharpLink entered into a Post Closing Covenant Agreement (the “PCCA”) with the Buyer defining the post-closing terms and conditions relating to certain transfers and assignments of assets subsequent to the closing of the Sale of Business, including:
| ● | Transferring control of all bank accounts held by the Targets to the Buyer;
| ● | Transferring or cooperating with the application process for all state gaming licenses held by the Targets in connection with the change of control to the Buyer;
| ● | Providing the Buyer with an accounting of all funds due to and from and any deferred revenue between Sports Technologies, LLC, SHGN and SharpLink, Inc.;
| ● | Assigning to Buyer or its affiliates, or cause the counterparty to consent to, all contracts assumed by the Buyer or its affiliates on or subsequent to the closing based upon change of control provisions; and
| ● | Assigning to Buyer or its affiliates all of its intellectual property rights purchased in the PA for the Acquired Subsidiaries or Targets.
In accordance with the terms of the PCCA, SharpLink will complete all post-closing covenants following the closing as reasonably possible, with the exception of Seller covenants that are dependent on governmental authorities or governmental orders for completion, in which case it will use diligent, good faith efforts to cause the same to be completed as soon as practical. The $14.6 million gain was calculated by measuring the difference between the fair value of consideration received less the carrying amount of assets and liabilities sold in accordance with ASC 810. In the statement of cashflows for the three months ended March 31 2024, the net cash used in investing activities - discontinued operations is due to cash received from the sale of business of $22,500,000, net of the cash transferred of $41,357,834. The majority of the cash transferred of $41,357,834 was reflected in discontinued operations customer deposits liability and deferred revenue of $36,959,573 and $4,888,704, respectively. During the three months ended March 31, 2025 and 2024, SharpLink paid RSports $0 and $34,059, respectively, for use of accounting service personnel under the PCCA agreement; and RSports paid SharpLink $0 and $39,957 under the PCCA agreement for the three months ended March 31, 2025 and 2024, respectively. Sale of MTS The Company negotiated a Share and Asset Purchase Agreement which was closed on December 31, 2022. The majority of the assets of the primary reporting unit within MTS were sold. Accordingly, the assets and liabilities of the MTS business were separately reported as assets and liabilities from discontinued operations as of March 31, 2025 and March 31, 2024. The results of operations and cash flows of MTS for all periods are separately reported as discontinued operations. Summary Reconciliation of Discontinued Operations
|  | For the Three Months Ended |  |  | For the Three Months Ended |
|  | March 31, 2025 |  |  | March 31, 2024 |
Revenues |  | $ | - |  |  | $ | 398,813 |
Cost of Revenues |  |  | (8,881 | ) |  |  | 154,491 |
Gross Profit |  |  | 8,881 |  |  |  | 244,322 |
Operating Expenses |  |  |  |  |  |  |  |
Selling, general, and administrative expenses |  |  | 69,054 |  |  |  | 319,523 |
Operating Loss |  |  | (60,173 | ) |  |  | (75,201 | )
Interest income |  |  | - |  |  |  | 98,161 |
Other (expense) income |  |  | 3,004 |  |  |  | (2,000 | )
Gain on sale of business |  |  | - |  |  |  | 14,670,811 |
Interest expense |  |  | - |  |  |  | (9,027 | )
Total other income and expense |  |  | 3,004 |  |  |  | 14,757,945 |
Income (loss) before income taxes |  |  | (57,169 | ) |  |  | 14,682,744 |
Income tax expense |  |  | 1,000 |  |  |  | 571,577 |
Income (loss) from discontinued operations, net |  | $ | (58,169 | ) |  | $ | 14,111,167 |
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 March 31, 2025 and December 31, 2024: Schedule of Major Classes of Assets and Liabilities
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
Carrying amounts of major classes of assets included as part of discontinued operations: |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |
Cash |  | $ | 60,016 |  |  | $ | 105,127 |
Prepaid expenses and other current assets |  |  | 158,661 |  |  |  | 164,661 |
Total current assets |  | $ | 218,677 |  |  | $ | 269,788 |
|  | March 31, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
Carrying amounts of major classes of liability included as part of discontinued operations: |  |  |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  |  | 930 |  |  | $ | 10,020 |
Total current liabilities |  | $ | 930 |  |  | $ | 10,020 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/360/tableOfContent + Details
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