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Discontinued Operations

6 Months Ended

Jun. 30, 2025

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Note 12 – 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.

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 six 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 the six months ended June 30, 2025 and 2024, SharpLink paid RSports $2,287 and $70,420, respectively, for use of accounting service personnel under the Post Closing Covenant Agreement (the “PCCA”); and RSports paid SharpLink $2,175 and $21,588 under the PCCA for the six months ended June 30, 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 June 30, 2025 and June 30, 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				For the Six Months Ended				For Six Months Ended
		June 30, 2025				June 30, 2024				June 30, 2025				June 30, 2024

Revenues		$	-			$	14,765			$	-			$	413,578

Cost of Revenues			708				4,078				(8,173	)			158,569

Gross Profit			(708	)			10,687				8,173				255,009

Operating Expenses
Selling, general, and administrative expenses			35,450				35,651				104,504				355,174

Operating Loss			(36,158	)			(24,964	)			(96,331	)			(100,165	)

Interest income			(28,000	)			(9,651	)			(39,000	)			88,510
Other (expense) income			13,966				503,320				27,970				501,320
Gain on sale of business			-				(0	)			-				14,670,811
Interest expense			-				-				-				(9,027	)
Total other income and expense			(14,034	)			493,669				(11,030	)			15,251,614

Income (loss) before income taxes			(50,192	)			468,705				(107,361	)			15,151,449

Income tax expense			2,000				15,000				3,000				586,577

Income (loss) from discontinued operations, net		$	(52,192	)		$	453,705			$	(110,361	)		$	14,564,872

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, 2025 and December 31, 2024:

		June 30,				December 31,
		2025				2024
Carrying amounts of major classes of assets included as part of discontinued operations:

Current assets
Cash		$	31,000			$	105,127
Restricted cash			16				-
Prepaid expenses and other current assets			250,181				164,661
Total current assets		$	281,197			$	269,788

		June 30,				December 31,
		2025				2024
Carrying amounts of major classes of liability included as part of discontinued operations:

Current Liabilities
Accounts payable and accrued expenses			970			$	10,020
Total current liabilities		$	970			$	10,020