Exhibit 99.2

NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS

Dear Shareholders:

We are pleased to invite you to attend the Extraordinary General Meeting of Shareholders (the “Meeting”) of SharpLink Gaming Ltd., which we refer to as “SharpLink,” “we” or the “Company,” to be held on Wednesday, December 14, 2022 at 4:00 PM Central Time at SharpLink’s corporate headquarters located at 333 Washington Avenue North, Suite 104, Minneapolis, Minnesota 55401, and thereafter as it may be adjourned or postponed from time to time.

At the Meeting, shareholders will be asked to adopt the following resolutions:

Our Board of Directors unanimously recommends that you vote FOR the foregoing proposals, each of which is more fully described in the accompanying proxy statement.

Shareholders of record at the close of business on Monday, November 14, 2022 are entitled to notice of and to vote at the Meeting or any adjournments or postponements thereof.

We expect that the proxy statement and the accompanying proxy card will be mailed to shareholders of record (as set forth above) on or about Friday, November 18, 2022.

The approval of the proposal submitted to shareholders requires the affirmative vote of holders of at least a majority of our Ordinary Shares represented at the Meeting, in person or by proxy, entitled to vote and voting on the matters presented for passage, as well as the support of the special majority as more fully described in the proxy statement.

We know of no other matters to be submitted at the Meeting other than as specified in this Notice of Extraordinary General Meeting of Shareholders. If any other business is properly brought before the Meeting, the persons named as proxies will vote in respect thereof in accordance with the recommendation of our Board of Directors.

Eligible shareholders may present proper proposals for inclusion in the Meeting by submitting their proposals to the Company no later than Tuesday, November 15, 2022. Should changes be made to any proposal or to the agenda of the Meeting after the mailing of this proxy statement, we will communicate the changes to our shareholders through the publication of a press release, a copy of which will be furnished to the United States Securities and Exchange Commission (the “SEC”) on Form 6-K, and available to the public on the SEC’s website at www.sec.gov.

You can vote either by mailing in your proxy, by Internet, by phone or in person by attending the Meeting. If voting by mail, the proxy must be received by our voting processing agency at least 48 hours prior to the appointed time of the Meeting or at our registered office in Minneapolis, Minnesota at least four (4) hours prior to the appointed time of the Meeting to be validly included in the tally of Ordinary Shares. If voting by Internet or phone, your vote must be received by 11:59 PM Eastern Time on Tuesday, December 13, 2022 to be validly included in the tally of the Ordinary Shares voted at the Meeting. If you attend the Meeting, you may vote in person and your proxy will not be used. Detailed proxy voting instructions are provided both in the proxy statement and on the enclosed proxy card. Shareholders wishing to express their position on an agenda item may do so by submitting a written statement to our office at the above address no later than Sunday, December 4, 2022. Any position statement received will be furnished to the SEC on Form 6-K, which will be available to the public at the aforementioned website.

Joint holders of Ordinary Shares should note that, pursuant to Article 28.6 of our Articles of Association, the right to vote at the Meeting will be conferred exclusively upon the senior owner among the joint owners attending the Meeting, in person or by proxy, and for this purpose, seniority will be determined by the order in which the names appear in our register of shareholders.

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE DATE AND SIGN THE PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE FOR WHICH NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES; OR YOU CAN VOTE VIA TELEPHONE OR INTERNET. YOU CAN LATER REVOKE YOUR PROXY, ATTEND THE MEETING AND VOTE YOUR SHARES IN PERSON. ALL PROXY INSTRUMENTS AND POWERS OF ATTORNEY MUST BE DELIVERED TO THE COMPANY NO LATER THAN FOUR HOURS PRIOR TO THE MEETING.

PROXY STATEMENT

EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS

This proxy statement is being furnished in connection with the solicitation of proxies on behalf of the Board of Directors of SharpLink Gaming Ltd. (“SharpLink,” “we” or the “Company”) to be voted at the Extraordinary General Meeting of Shareholders (the “Meeting”), and at any adjournment or postponement thereof, pursuant to the accompanying Notice of Extraordinary General Meeting of Shareholders of SharpLink. The Meeting will be held at 4:00 P.M. Central time on Wednesday, December 14, 2022 at SharpLink’s corporate headquarters located at 333 Washington Avenue North, Suite 104, Minneapolis, Minnesota 55401, and thereafter as it may be adjourned or postponed from time to time.

The agenda of the Meeting is as follows:

Our Board of Directors unanimously recommends that you vote FOR the foregoing proposals, which are more fully described below.

We are not aware of any other matters that will come before the Meeting. If any other matters properly come before the Meeting, the persons designated as proxies intend to vote on such matters in accordance with the judgement of the Board of Directors.

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE DATE AND SIGN THE PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE FOR WHICH NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES; OR YOU CAN VOTE VIA TELEPHONE OR INTERNET. YOU CAN LATER REVOKE YOUR PROXY, ATTEND THE MEETING AND VOTE YOUR SHARES IN PERSON. ALL PROXY INSTRUMENTS AND POWERS OF ATTORNEY MUST BE DELIVERED TO THE COMPANY NO LATER THAN FOUR HOURS PRIOR TO THE MEETING.

Proxy Procedure

Only holders of record of our ordinary shares, par value NIS 0.06 per share, (the “Ordinary Shares”) as of the close of business on Monday, November 14, 2022 are entitled to notice of, and to vote in person or by proxy, at the Meeting or any adjournments or postponements thereof. As of Thursday, November 3, 2022, there were 22,561,881 outstanding Ordinary Shares. For more information, see “Security Ownership of Certain Beneficial Owners” below.

Change or Revocation of Proxy

If you are a registered shareholder, your proxy may be revoked at any time prior to its exercise by notice in writing of the shareholder to us, delivered at our address above up to one hour prior to the Meeting and indicating that its/his/her proxy is revoked, or by timely submitting another proxy with a later date.  Attendance at the Meeting will not cause your previously granted proxy to be revoked unless you specifically so request.

If your shares are held in street name, you may change your vote by timely submitting new voting instructions to your broker, bank, trustee or nominee; or, if you have obtained a legal proxy from your broker, bank, trustee or nominee giving you the right to vote your shares, you may change your vote by attending the Meeting and voting in person.

Quorum

A quorum of shareholders is necessary to transact business at the Meeting. The presence of two or more shareholders holding in the aggregate more than 25% of the total voting power attached to our Ordinary Shares represented in person or by proxy at the Meeting, will constitute a quorum.  A meeting adjourned for lack of a quorum generally is adjourned to the same day in the following week at the same time and place or any time and place as the directors designate in a notice to the shareholders.  If a quorum is not present at the reconvened meeting within half an hour from the time appointed for holding the meeting, any two shareholders present in person or by proxy shall be a quorum.

Abstentions and broker non-votes will be counted towards the quorum.  Generally, broker non-votes occur when brokers that hold their customers’ shares in street name sign and submit proxies for such shares, but such shares are not voted with respect to a particular proposal(s) because (i) the broker has not received voting instructions from the beneficial owner and (ii) the broker lacks discretionary voting power to vote such shares.  Abstentions and broker non-vote will not otherwise be counted in the voting process. Thus, abstentions and broker non-votes will not affect the outcome of any of the matters being voted on at the Meeting.

Unsigned or unreturned proxies, including those not returned by banks, brokers or other record holders, will not be counted for quorum purposes.

Voting Standards

For more information concerning the majority vote required in connection with the proposal, see “Questions and Answers about the Transaction – How many votes are needed to approve the proposal?”

In tabulating the voting result for any particular proposal, shares that constitute broker non-votes and abstentions are not considered votes cast on that proposal.  Unsigned or unreturned proxies, including those not returned by banks, brokers, or other record holders, will not be counted for voting purposes.

Cost of Soliciting Votes for the Extraordinary General Meeting

We will bear the cost of soliciting proxies from our shareholders.  Proxies will be solicited by mail and may also be solicited in person, by telephone or electronic communication, by our directors, officers and employees or by the proxy solicitor retained by the Company.  We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their expenses in accordance with the regulations of the Securities and Exchange Commission (“SEC”) concerning the sending of proxies and proxy materials to the beneficial owners of our Ordinary Shares.

Adjournment and Postponement

Although we do not expect this to occur, our shareholders may also be asked to vote to adjourn or postpone the Meeting for the purpose of soliciting additional proxies in favor of any proposals on the agenda of the Meeting.

Our shareholders may communicate with the members of our Board of Directors by writing directly to the Board of Directors or specified individual directors to:

Corporate Secretary

SharpLink Gaming Ltd.

333 Washington Avenue North

Suite 104

Minneapolis, Minnesota 55401

Our Corporate Secretary will deliver any shareholder communications to the specified individual director, if so addressed, or to one of our directors who can address the matter.

Security Ownership of Certain Beneficial Owners

The following table sets forth certain information as of November 4, 2022, regarding the beneficial ownership by all directors and officers, as well as shareholders known to us to own beneficially more than 5% of our Ordinary Shares (on an as-converted basis, subject to the Beneficial Ownership Limitation). Beneficial Ownership Limitation is defined in our Articles as 9.99% of the number of our Ordinary Shares outstanding immediately after giving effect to the issuance of Ordinary Shares issuable upon conversion of Series B Preferred Shares held by the applicable shareholder and which also applies to the warrants held by Alpha Capital.

¹ Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.

² Percentages are calculated based on 22,561,881 Ordinary Shares, as of Thursday, November 3, 2022, currently issued and outstanding, less 900 Ordinary Shares held as treasury stock, in addition to 908,334 Ordinary Shares issuable to Alpha Capital Anstalt (“Alpha Capital”) upon exercise or conversion of prefunded warrants or preferred shares giving effect to the Beneficial Ownership Limitation. This represents a total number of 23,469,315 Ordinary Shares on an as-converted basis, subject to the Beneficial Ownership Limitation.

³ Beneficial ownership reflects the maximum number of Ordinary Shares that may be acquired by Alpha Capital pursuant to the Beneficial Ownership Limitation. Pursuant to the Company’s records, Alpha owns 1,415,128 Ordinary Shares, 124,810 Preferred B Shares, prefunded warrants to purchase 1,253,592 Ordinary Shares at an exercise price of $0.01 per share, and regular warrants to purchase 2,666,667 Ordinary Shares at an exercise price of $4.50 per share.

Annex A-1 – The Merger Agreement

* Certain exhibits and schedules to this Annex have been omitted in accordance with Regulation S-K Item 601(b)(2). The Registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.  

Annex A-2 – First Amendment to the Agreement and Plan of Merger

Annex B – Northland Capital Markets Fairness Opinion

Annex C – SportsHub Financial Statements for Six Months Ended June 30, 2022 and 2021

Annex D – SportsHub Financial Statements for Years Ended December 31, 2021 and 2020 

INTRODUCTION

As further discussed below, following the unanimous approval of the SharpLink Special Committee (“Special Committee”), Audit Committee (“Audit Committee”) and the SharpLink Board of Directors (“SharpLink Board”), SharpLink, SHGN Acquisition Corp., a Delaware corporation and wholly owned subsidiary of SharpLink (“Merger Subsidiary”), SportsHub Games Network, Inc., a Delaware corporation, (“SportsHub”) and Christian Peterson, an individual acting as the SportsHub stockholders’ representative (“Stockholders’ Representative”) entered into an Agreement and Plan of Merger, dated September 7, 2022 (the “Merger Agreement”). On November 2, 2022, the First Amendment to the Merger Agreement (the “Merger Agreement Amendment”) was entered into by the parties providing for potential adjustments to the share consideration issuable to Common Stockholders of SportsHub depending on the market price of SharpLink’s Ordinary Shares at Closing, as quoted on the Nasdaq Capital Market.

Pursuant to the Merger Agreement, as amended, the Merger Subsidiary will merge with and into SportsHub, with the Merger Subsidiary remaining as the surviving corporation and wholly owned subsidiary of SharpLink (the “Transaction” or “Merger”). SportsHub currently owns approximately 8.9 million Ordinary Shares of SharpLink and the Merger Agreement, as amended, provides that such SportsHub-owned SharpLink Ordinary Shares shall be distributed by SportsHub to SportsHub’s stockholders immediately prior to the consummation of the Merger. In addition, the Merger Agreement, as amended by the Merger Agreement Amendment, provides for the issuance of additional Ordinary Shares as consideration (the “Merger Consideration Shares”) equal to 3.67 million Ordinary Shares of SharpLink, allocable to SportsHub’s Common and Preferred stockholders based on Common and Preferred Exchange Ratios, subject to the following adjustments: (a) if the average closing sale price per share of SharpLink’s Ordinary Shares during the 45 calendar days immediately preceding the Closing (the “SharpLink Stock Price”) is less than $1.03, then the number of Merger Consideration Shares shall be increased up to a maximum of 1,055,125 SharpLink Ordinary Shares as set forth on Schedule 1.1 of Merger Agreement Amendment; and (b) if the SharpLink Stock Price is $1.51 or greater, then the number of Merger Consideration Shares shall be decreased up to a maximum of 450,072 SharpLink Ordinary Shares, as set forth on Schedule 1.1 of the Merger Agreement Amendment. The aggregate number of SharpLink’s Ordinary Shares to be issued to SportsHub shareholders by SharpLink upon consummation of the Transaction shall hereinafter be referred to the “Merger Consideration.”

In order to complete the Transaction, SharpLink’s shareholders are being asked to approve the consummation of the Transaction and the other transactions contemplated by the Merger Agreement.

To consummate the Transaction, the Proposal must be approved at the Meeting, or at any permitted adjournment thereof. In addition to the requirement of obtaining such shareholder approval, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived. The Proposal will become effective upon consummation of the Transaction.

You are cautioned not to rely on any information other than the information contained in this proxy statement. No one has been authorized to provide you with information that is different from that contained in this proxy statement. This proxy statement is dated November 8, 2022. You should not assume that the information contained in this proxy statement is accurate as of any other date. The mailing of this proxy statement to our shareholders will not create any implication to the contrary.

This proxy statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.

QUESTIONS AND ANSWERS ABOUT THE TRANSACTION

The following section provides answers to frequently asked questions about the Transaction and other matters relating to the Meeting. This section, however, provides only summary information. Please refer to the more detailed information contained elsewhere in this proxy statement and the documents referred to or incorporated by reference in this proxy statement. SharpLink urges its shareholders to read this document in its entirety prior to making any decision.

What is the Transaction?

SharpLink, Merger Subsidiary, SportsHub and 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, contains the terms and conditions of the proposed business combination of SharpLink and SportsHub. Pursuant to the Merger Agreement, as amended, SportsHub shall be merged with and into Merger Subsidiary in accordance with the provisions of Delaware’s General Corporation Law, as amended (“DGCL”), with Merger Subsidiary surviving as a wholly owned subsidiary of SharpLink (the “Surviving Corporation”). Within two business days following the satisfaction or waiver, if permissible, of the conditions set forth in the Merger Agreement, as amended, or on such other day as the Parties may mutually agree, a certificate of merger satisfying the applicable requirements of the DGCL (the “Certificate of Merger”) shall be delivered to the Secretary of State of the State of Delaware for filing in accordance with the DGCL. The Merger shall become effective upon the filing of the Certificate of Merger with the Delaware Secretary of State or at such later time as specified in the Certificate of Merger (the “Effective Time), provided that the agreed upon share distribution of SharpLink’s Ordinary Shares held by SportsHub prior to the closing of the Transaction to SportsHub’s stockholders has been effected.

SportsHub is SharpLink’s largest shareholder, holding approximately 8.9 million shares, or 39%, of SharpLink’s Ordinary Shares issued and outstanding as of Thursday, November 3, 2022. Pursuant to the terms and conditions set forth in the Merger Agreement, as amended, SportsHub will be required to distribute such shares to its stockholders immediately prior to the closing of the Merger (the “Share Distribution”). Upon closing of the Merger, the stockholders of SportsHub will receive an aggregate of 3.67 million Ordinary Shares of SharpLink (subject to certain adjustments as more fully described under the Amended Merger Agreement) in exchange for all outstanding capital stock of SportsHub. The approximate 12.6 million shares of SharpLink’s Ordinary Shares to be distributed or issued to the stockholders of SportsHub pursuant to the share distribution and the Merger Agreement, as amended, will be subject to a six-month lock-up period; thereafter, no more than 25% of each holder’s shares may be eligible for resale each month until restrictions no longer exist.

Pursuant to the terms of the Merger Agreement, SharpLink will issue 3.67 million Ordinary Shares of SharpLink to the stockholders of SportsHub, subject to adjustments on the SharpLink Stock Price as provided in Schedule 1.1 of the Merger Agreement Amendment. SportsHub is currently SharpLink’s largest shareholder, holding 39% of the Ordinary Shares issued and outstanding. Subject to adjustments on the SharpLink Stock Price as provided in Schedule 1.1 of the Merger Agreement Amendment following the closing of the Transaction, SportsHub shareholders will own 47.0% to 49.9% of the issued and outstanding shares of SharpLink. On a fully diluted and as converted basis, SportsHub shareholders will own 38.1% to 40.6% of SharpLink’s shares. After the closing of the transaction, SharpLink’s current shareholders will own 50.1% to 53.0% of the combined company’s outstanding share capital on an issued and outstanding basis. On a fully diluted and as-converted basis, existing SharpLink shareholders will own 59.4% to 61.9% of the combined company’s share capital, taking into account the Ordinary Shares reserved under SharpLink’s 2021 Equity Incentive Plan.

SharpLink currently qualifies as a foreign private issuer, as defined under the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act.  As a foreign private issuer, SharpLink is permitted by the SEC to file an annual report on Form 20-F and copies of certain home country materials on Form 6-K in lieu of filing annual, quarterly and current reports on Forms 10-K, 10-Q and 8-K; SharpLink is exempt from SEC proxy statement requirements and certain SEC tender offer requirements; SharpLink is permitted to sell securities outside the United States without resale restrictions under the U.S. Securities Act of 1933, as amended, or the Securities Act; U.S. holders of SharpLink’s restricted securities may resell such securities to persons outside the United States who receive such securities without resale restrictions under the Securities Act and SharpLink’s affiliates are exempt from Section 16 of the Exchange Act. However, based on the fact that SharpLink has minimal continuing operations located outside of the United States, as of June 30, 2022, SharpLink no longer met the definition of “foreign private issuer” (due to its ownership, asset and management structure and location), it will cease to qualify as a foreign private issuer under the Exchange Act; and will cease to be eligible for the foregoing exemptions and privileges effective January 1, 2023.  At that time, officers, directors and 10% shareholders will become subject to the beneficial ownership reporting, short-swing trading and other requirements of Section 16 of the Exchange Act.  We do not expect the loss of foreign private issuer status to have a negative impact on our shareholders, but we will likely incur significantly greater expenses in order to comply with the additional disclosure and other compliance regulations under the Exchange Act. 

For a more complete description of the Transaction, please see the section titled "The Merger Agreement” in this proxy statement.

Why are the two companies proposing to merge?

In 2015, SportsHub was founded by SharpLink’s Co-Founder and Chief Executive Officer, Rob Phythian (“Mr. Phythian”), to take advantage of prevailing consolidation opportunities present in the highly fragmented and growing Fantasy Sports and Free-to-Play (F2P) games development industry. Under Mr. Phythian’s leadership, SportsHub proceeded to implement a growth-through-acquisition strategy that resulted in seven businesses ultimately being acquired in less than five years, including Sports Technologies, WhatIfSports, LeagueSafe, National Fantasy Championships, CDM Sports, MFL10s and Fantasy National Golf Club (acquired in 2020). In 2019, the Board of Directors of SportsHub approved the spin-out of Sports Technologies Inc., founded and managed by Chris Nicholas (“Mr. Nicholas”) , to help form a new sports technology company called SharpLink, Inc. Thereafter, Mr. Phythian, who resigned as CEO and Chairman of the Board of SportsHub in tandem with the spin-off, and Mr. Nicholas, who now serves as SharpLink’s Chief Operating Officer and a member of its Board of directors, co-founded SharpLink. SharpLink was formed to pioneer sports betting conversion technologies purpose-built for the emerging U.S. sports betting and iGaming industries. As a result of the spin-out and formation of SharpLink, SportsHub became the largest shareholder in SharpLink. In addition, SportsHub became a valuable customer of SharpLink, working in close collaboration with SharpLink to support its fantasy sports business interests.

Both companies believe that the Transaction, if completed, will result in a combined company (the “combined company”) that will be well-positioned to realize material growth in SharpLink’s business, strengthen SharpLink’s annual financial performance and attract a greater institutional following within the general investment community. For a more complete discussion of SharpLink’s reasons to enter into the Transaction, please see “The Transaction - Reasons for the Transaction.”

What amount of cash resources will SharpLink have available at the closing of the Transaction?

The actual amount of SharpLink’s consolidated cash and cash equivalents will depend largely on the timing of the closing of the Transaction. However, as reflected in the pro forma financial statements as of six months ended June 30, 2022, included with this proxy statement under “Unaudited Pro Forma Condensed Combined Financial Information,” the combined companies would have had $5,639,000 in cash and cash equivalents on its balance sheet as of June 30, 2022.

Why am I receiving these materials?

You are receiving the notice and proxy statement and proxy card because you have been identified as a shareholder of SharpLink as of the record date, and you are entitled to vote at the Meeting to approve the matters described in this proxy statement. This proxy statement contains important information about the proposed Transaction and the Meeting and you should read it carefully and in its entirety. The enclosed proxy card allows you to authorize a proxy to vote your SharpLink Ordinary Shares without attending the Meeting. As promptly as practicable, please complete, sign, date and mail your proxy card in the pre-addressed postage-paid envelope provided or submit your vote via the Internet or by phone, as instructed on the proxy card.

What am I voting on?

The following matters are included on the agenda of the Meeting:

What is required to consummate the Transaction?

To consummate the Transaction, Proposal must be approved at the Meeting, or at any permitted adjournment thereof, by the requisite holders of SharpLink’s Ordinary Shares on the record date for the Meeting. In addition to the requirement of obtaining such shareholder approval, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived. For a more complete description of the closing conditions under the Merger Agreement, we urge you to read the section titled, “The Merger Agreement – Conditions to the Completion of the Transaction” in this proxy statement.

Are there any federal or state regulatory requirements that must be complied with or federal or state regulatory approvals or clearances that must be obtained in connection with the Transaction?

Neither SharpLink or SportsHub is required to make any filings or obtain any approvals or clearances from any antitrust regulatory authorities in the United States or other countries to consummate the Transaction. In the United States, SharpLink must comply with applicable federal and state securities laws, as well as Nasdaq rules and regulations in connection with the issuance of the shares in connection with the Transaction. In addition, in connection with the Transaction, SharpLink has applied for a tax ruling from the tax authorities in Israel indicating that the issuance MTS securities in connection with the Transaction will be exempt from withholding obligations.

What will happen to SportsHub’s outstanding stock options and warrants in the Transaction?        

As a result of the Transaction, SharpLink will assume all outstanding unexercised SportsHub options and warrants to purchase SportsHub’s common stock and each such SportsHub option and warrant will be converted into an option or warrant to purchase SharpLink’s Ordinary Shares, with the number of SharpLink’s Ordinary Shares subject to such option and warrant and the exercise price being appropriately adjusted to reflect the Exchange Ratio.

Will holders of SharpLink’s Ordinary Shares that will be issued in the Transaction be able to sell those SharpLink Ordinary Shares without restriction?

The SharpLink Ordinary Shares issued in the Transaction to SportsHub shareholders will be issued in transactions exempt from registration under the Securities Act of 1933, as amended, or the Securities Act, in reliance on Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder and may not be offered or sold by the holders of those shares absent registration or an applicable exemption from registration requirements. As a general matter, absent registration under the Securities Act, holders of such shares will not be able to transfer any of their shares until at least six months after receiving SharpLink Ordinary Shares, which is when the shares would first be eligible to be sold under Rule 144 promulgated under the Securities Act; thereafter, no more than 25% of each holder’s shares may be eligible for resale each month until restrictions no longer exist.

Holders of SharpLink Ordinary Shares prior to the closing of the Transaction shall not be subject to trading limitations as a result of the closing of the Transaction.

Who will be the directors and executive officers of the combined company immediately following completion of the Transaction?

At the closing of the Transaction, and immediately following the closing of the Transaction, the Board of the combined company and its committees and the executive management team of the combined company are expected to remain unchanged from the current SharpLink Board, SharpLink Board committees and SharpLink executive management team, as set forth in the table below:

Am I entitled to appraisal rights?

Holders of SharpLink’s Ordinary Shares are not entitled to appraisal rights in connection with the Transaction.

Have SportsHub stockholders adopted the Merger Agreement, as amended, and approved the Transaction?

Yes. Following execution of the Merger Agreement, as amended, the Merger Agreement and the Transaction were approved by the requisite majority of the SportsHub stockholders.

What are the material U.S. federal income tax consequences of the Transaction to SharpLink’s shareholders?

The Transaction is intended to qualify as a “reorganization” within the meaning of sections 368(a)(1)(A) and 368(a)(2)(D) of the U.S. Internal Revenue Code of 1986, as amended (the “IRC”). For U.S. federal income tax purposes, the holders of SportsHub common stock and SportsHub options and warrants to acquire SportsHub commons stock are not intended to be taxed on their deemed exchange of such common stock, options and warrants for SharpLink common stock, options and warrants in the Transaction. In addition, such holders are intended to take an exchanged basis in the common stock, options and warrants received in the Transaction equal to the SportsHub commons stock, options and warrants deemed exchanged in the Transaction for U.S. federal income tax purposes. Also, any holder’s holding period in such SharpLink common stock, options and warrants received in the Transaction is intended to include such holder’s holding period in the SportsHub common stock, options and warrants deemed exchanged in the Transaction.

Holders of SportsHub’s common stock, options and warrants are urged to work with their own legal and tax advisors to determine the tax consequences of the Transaction to them based on such holder’s own particular circumstances.

Do persons involved in the Transaction have interests that may conflict with mine as a SharpLink shareholder?

Yes. When considering the recommendation of the SharpLink Board, you should be aware that certain members of the SharpLink Board and executive officers of SharpLink have interests in the Transaction that may be different from, or in addition to, interests you may have as a SharpLink shareholder. The SharpLink Board was aware of these interests and considered them, among other matters, in its decision to approve the Merger Agreement, as amended.

More specifically, certain officers and directors of SharpLink are also direct or indirect shareholders in SportsHub, including Joseph Housman, Rob Phythian, Chris Nicholas, Tom Doering and Paul Abdo. In consideration of these officers’ and directors’ direct or indirect interests in SportsHub, the SharpLink Board created a special committee (the “Special Committee”), whose members are Adrienne Anderson and Scott Pollei, both outside directors with no direct or indirect interests in the Transaction. The Special Committee led the negotiations of the terms and conditions of the letter of intent, managed the negotiations of the terms and conditions of the Merger Agreement, as amended, and the Transaction, reviewed the independent fairness opinions completed and determined that the Transaction was fair to the independent SharpLink shareholders when compared to the SportsHub shareholders. In addition, the SharpLink Board was aware of these interests when it discussed and deliberated the execution of the letter of intent, and when it unanimously approved the execution of the Merger Agreement, as amended, and the Transaction and resolved to recommend that the SharpLink shareholders approve it.

Why is SharpLink seeking shareholder approval in connection with the Transaction?

For various reasons, including SportsHub’s ownership percentage of SharpLink and the resulting presumption that it is a “controlling shareholder” (as such term is defined in Chapter 5 of Part 6 of the Israeli Companies Law, 1999 (the “Companies Law”) of SharpLink and the Merger determined to be an “extraordinary transaction” (as such term is defined by the Companies Law) by our Audit Committee, and as five out of seven SharpLink Board members could be deemed to have a personal interest in the Transaction as noted above, we are required to obtain shareholder approval in order to be able to complete the Transaction.

 In addition, because the shares to be issued to SportsHub’s might be in excess of 20% of the Ordinary Shares of SharpLink outstanding before the issuance, we are required to obtain shareholder approval under Nasdaq Listing Rule 5635(a).

How many votes are needed to approve the proposal for the Transaction?

The approval of the consummation of the Transaction and the other transactions as contemplated by the Agreement and Plan of Merger, attached as Annex A-1 to the proxy statement and as amended by the First Amendment to the Agreement and Plan of Merger, attached as Annex A-2 to the proxy statement, providing for the terms and conditions of SharpLink’s acquisition of SportsHub, requires the affirmative vote of the holders of a majority of the Ordinary Shares represented at the Meeting, in person or by proxy, entitled to vote and voting on the matter, provided that at least one of the following “special majority” requirements is met: (i) the shares voting in favor of the matter include at least a majority of the shares voted by shareholders who are not controlling shareholders and who do not have a personal interest in the approval of the Transaction or (ii) the total number of shares voted against the Transaction by shareholders referenced under (i) does not exceed 2% of the outstanding voting power in the Company.

A “controlling shareholder” for purposes of the requisite majority is defined as a shareholder that has the ability to direct the activity of the company, other than an ability resulting only from serving as a director or having another position in the company. For purposes of approval of an “extraordinary transaction” with a “controlling shareholder”, a person is deemed to be a “controlling shareholder” if he holds, alone or together with others, 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company.

Under the Israeli Companies Law, a “personal interest” of a shareholder (i) includes a personal interest of the shareholder and any member of the shareholder’s family, family members of the shareholder’s spouse, or a spouse of any of the foregoing, or a personal interest of a company with respect to which the shareholder (or such family member) serves as a director or chief executive officer, owns at least 5% of the shares or has the right to appoint a director or chief executive officer, and (ii) excludes an interest arising solely from the ownership of our Ordinary Shares.

Under the Companies Law, in the case of a person voting by proxy for another person, “personal interest” includes a personal interest of either the proxy holder or the shareholder granting the proxy, whether or not the proxy holder has discretion how to vote. If you do not have a personal interest in this matter, you may assume that using the form of proxy enclosed herewith will not create a personal interest.

The Companies Law requires that each shareholder voting on the proposal presented under this proxy statement indicate whether or not the shareholder is a controlling shareholder or has a personal interest in the approval of the Proposal. Otherwise, the shareholder is not eligible to vote on this proposal and his or her vote will not be counted for the purposes of this proposal.

As a SharpLink shareholder, how does the SharpLink Board recommend that I vote?

After careful consideration, the SharpLink Board unanimously recommends that SharpLink shareholders vote “FOR” all proposals included on the agenda of the Meeting. This recommendation followed the unanimous recommendation and approval of the Merger Agreement, as amended, and the transactions contemplated thereby by the Special Committee and the Audit Committee (without the presence of Mr. Thomas Doering who, as noted above, may be deemed to have a “personal interest” in the approval of the Transaction).

What risks should I consider in deciding whether to vote in favor of the matters set forth above?

You should carefully review the section of this proxy statement titled “Risk Factors,” which sets forth certain risks and uncertainties related to the Transaction, risks and uncertainties to which the combined company’s business will be subject, and risks and uncertainties to which SportsHub, as an independent company, is subject.

When do you expect the Transaction to be consummated?

We anticipate that the Transaction will be consummated as promptly as practicable after the Meeting and following satisfaction or waiver of all closing conditions, but we cannot predict the exact timing. For a more complete description of the closing conditions under the Merger Agreement and Merger Agreement Amendment, please see the section titled “The Merger Agreement  — Conditions to the Completion of the Transaction.”

Who can I contact with questions on the proxy statement or on how to vote?

Shareholders with questions on the proxy statement or on how to vote can contact SharpLink’s investor relations representative via email at ir@sharplink.com or by calling 407-960-4636.

RISK FACTORS

In addition to the other information included in this proxy statement, including the matters addressed under the caption titled “Cautionary Statement Concerning Forward-Looking Statements,” you should carefully consider the following risk factors in determining how to vote at the Meeting. The following is not intended to be an exhaustive list of the risks related to the Transaction and you should read and consider the risk factors described under Part 1, Item 3, “Key Information – Risk Factors” of SharpLink’s Annual Report on Form 20-F for the year ended December 31, 2021, which is on file with the SEC and incorporated herein by reference.

Risks Related to the Transaction

SportsHub is not a publicly traded company, making it difficult to determine the fair market value of SportsHub and the fairness of the Transaction.

The outstanding capital stock of SportsHub is privately held and is not traded on any public market, which makes it difficult to determine the fair market value of SportsHub and its securities. Since the number of shares of SharpLink Ordinary Shares to be issued to SportsHub’s stockholders was determined based on negotiations between the parties, it is possible that the value of the SharpLink Ordinary Shares to be issued in connection with the Transaction will be greater than the fair market value of SportsHub’s common and preferred stock.

The conditions under the Merger Agreement, as amended by the Merger Agreement Amendment, to SharpLink’s consummation of the Transaction may not be satisfied at all or in the anticipated timeframe.

        The obligation of SharpLink to complete the Transaction is subject to certain conditions, including the approval by SharpLink’s shareholders of certain matters as set forth above, the accuracy of the representations and warranties contained in the Merger Agreement, as amended, subject to certain materiality qualifications, compliance by the parties with their respective covenants under the Merger Agreement, as amended by the Merger Agreement Amendment, no law or order preventing the Transaction and other customary closing conditions. These conditions are described in more detail under “The Merger Agreement – Closing Conditions.” SharpLink cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Transaction may not occur or will be delayed, and SharpLink and SportsHub each may lose some or all of the intended benefits of the Transaction.

The pendency of the Transaction or failure to consummate the Transaction could have an adverse effect on SharpLink’s financial results, future business and operations, as well as the market price of SharpLink’s Ordinary Shares.

The pendency of the Transaction, or the failure to consummate the Transaction, could disrupt SharpLink’s business. Among other things, the attention of SharpLink’s management may be directed toward the completion of the Transaction and related matters and may be diverted from other opportunities that might otherwise be beneficial to SharpLink. Should they occur, any of these matters could adversely affect SharpLink’s financial condition, results of operations or business prospects. 

The completion of the Transaction is subject to a number of closing conditions, including the approval by SharpLink’s shareholders. There can be no assurance that the conditions to the completion of the Transaction will be satisfied. If the Transaction is not completed, SharpLink will be subject to several risks, and its share price could be adversely affected, as follows:

In addition, if the Merger Agreement is terminated and the Board determines to seek another business combination, there can be no assurance that it will be able to find a transaction that is superior or equal in value to the Transaction.

SharpLink has incurred and expects to continue to incur substantial transaction-related costs in connection with the Transaction.

SharpLink has incurred, and expects to continue to incur, a number of non-recurring transaction-related costs associated with the Merger Agreement, completing the Transaction and combining the two companies, which cannot be accurately estimated at this time. These fees and costs have been, and will continue to be, substantial. Non-recurring transaction costs include, but are not limited to, fees paid to legal, financial and accounting advisors, filing fees and printing costs. Additional unanticipated costs may be incurred in the combined company’s business, which may be higher than expected and could have a material adverse effect on the combined company’s financial condition and operating results. 

Even if the Transaction is consummated, the combined company may fail to realize the anticipated benefits of the Transaction. 

The success of the Transaction will depend on the combined company’s ability to achieve its business objectives and raise the necessary capital to fund its operations. If the combined company is not able to achieve these objectives, the anticipated benefits of the Transaction may not be realized fully, may take longer to realize than expected, or may not be realized at all.

The post-closing ownership percentage of SharpLink’s shareholders may be adjusted in the event of any change in SharpLink’s share price or the value of SportsHub’s stock as more fully described in “First Amendment to the Agreement and Plan of Merger.” A reduction in the share price of SharpLink will cause a more substantial dilution of the holdings of other shareholders of SharpLink.

Pursuant to the terms of the Merger Agreement, SharpLink will issue 3.67 million Ordinary Shares of SharpLink to the stockholders of SportsHub, subject to adjustments on the SharpLink Stock Price as provided in Schedule 1.1 of the Merger Agreement Amendment. SportsHub is currently SharpLink’s largest shareholder, holding 38% of the Ordinary Shares issued and outstanding. Subject to adjustments on the SharpLink Stock Price as provided in Schedule 1.1 of the Merger Agreement Amendment following the closing of the Transaction, SportsHub shareholders will own 47.0% to 49.9% of the issued and outstanding shares of SharpLink. On a fully diluted and as converted basis, SportsHub shareholders will own 38.1% to 40.6% of SharpLink’s shares. After the closing of the transaction, SharpLink’s current shareholders will own 50.1% to 53.0% of the combined company’s outstanding share capital on an issued and outstanding basis. On a fully diluted and as-converted basis, existing SharpLink shareholders will own 59.4% to 61.9% of the combined company’s share capital, taking into account the Ordinary Shares reserved under SharpLink’s 2021 Equity Incentive Plan. 

Accordingly, the issuance of SharpLink’s Ordinary Shares to SportsHub’s stockholders in connection with the Transaction will reduce the relative voting power of each Ordinary Share held by current SharpLink shareholders. In addition, SharpLink shareholders may not realize a benefit from the Transaction commensurate with the ownership dilution they will experience in connection with the Transaction. 

If the combined company is unable to realize the full strategic and financial benefits anticipated from the Transaction, SharpLink shareholders will have experienced dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Transaction.

The post-closing ownership percentage of SharpLink’s shareholders provided in the Merger Agreement, as amended, may be adjusted for changes in the market price or value of either SharpLink’s Ordinary Shares. The price of SharpLink’s Ordinary Shares at the closing of the Transaction may vary from the price on the date of the Merger Agreement and the date of the Meeting.

Share price changes may result from a variety of factors (many of which are beyond our or SportsHub’s control), including, but not limited to, the following:

SharpLink’s share price has been volatile over the past years and has decreased from $0.95 on September 7, 2022 (the date of the Merger Agreement) to $0.69 as of November 3, 2022. As a result of the adjustment mechanism introduced by the Merger Agreement Amendment, if the Closing were to occur on November 3, 2022, the share consideration to be issued to the SportsHub stockholders in connection with the Transaction would have increased from 3.67 million Ordinary Shares to approximately 4.72 million Ordinary Shares, resulting in higher dilution of the percentage holdings of our other shareholders.

After the Transaction is consummated, the combined company plans to reincorporate in the U.S. and such reincorporation may result in taxes imposed on the combined company and its shareholders.

SharpLink is currently incorporated in Israel, and the post-Transaction combined company will continue to be incorporated in Israel, while all of its offices, management, most of it business partners and assets and all of its board members are expected to be located in the United States. Accordingly, SharpLink plans to reincorporate the combined company in the State of Delaware in the United States, while maintaining its Nasdaq listing. The reincorporation of the combined company will be subject to all corporate approvals, which will include an approval of the shareholders of the combined company.

There is no guarantee that the reincorporation will be completed, and if it does, the timing is uncertain on when it will occur.

While SharpLink plans to reincorporate the combined company in the State of Delaware in the United States, there can be no guarantee that the reincorporation will be effected. The reincorporation may not be completed as a result of failure to obtain shareholder, judicial and/or regulatory approvals or for other reasons. The reincorporation of the combined company will be subject to all corporate approvals, which may include an approval of the shareholders of the combined company. The registration statement/proxy statement may not be cleared by the SEC. Even the reincorporation will occur, it may be delayed as a result of technical or other reasons.

The SharpLink officers and directors have interests in the Transaction that are different from yours and that may influence them to support or approve the Transaction without regard to your interests.

As noted above, certain of the officers and directors of SharpLink own common stock of SportsHub, directly or indirectly and therefore may have interests in the Transaction that are different from yours. These interests, among others, may influence these officers and directors of SharpLink to support or approve the Transaction. For more information concerning the interests of SharpLink’s officers and directors, see the section titled "Interests of Certain Persons in the Transaction.”

The Transaction may be completed even though material adverse changes may result from the announcement of the Transaction, industry-wide changes and other causes.

In general, either party of the Merger Agreement can refuse to complete the Transaction if there is a material adverse change affecting the other party following September 7, 2022, the date of the Merger Agreement. However, some types of changes do not permit either party to refuse to complete the Transaction, even if such changes would have a material adverse effect on SharpLink or SportsHub, to the extent they resulted from the following (unless, in some cases, they have a disproportionate effect on SharpLink or SportsHub, as the case may be):

If adverse changes occur but SportsHub and SharpLink must still complete the Transaction, the combined company’s market price may suffer.

The market price of the combined company’s shares may decline as a result of the Transaction.

The market price of the combined company’s shares may decline as a result of the Transaction for a number of reasons, including, but not limited to, if:

Following consummation of the Transaction, SharpLink may become involved in securities litigation or shareholder derivative litigation in connection with the Transaction, this could divert the attention of SharpLink’s management and harm the combined company’s business and insurance coverage may not be sufficient to cover all related costs and damages. 

Securities litigation or shareholder derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction and the related disclosures. SharpLink may become involved in this type of litigation in connection with the Transaction and related disclosures, and the combined company may become involved in this type of litigation in the future. Litigation, whether with or without merit, often is expensive and diverts management’s attention and resources, which could adversely affect the business of the combined company. In addition, insurance coverage of SharpLink and its directors and officers may not be sufficient to cover related costs and expenses, while SharpLink may be liable to indemnify certain officers and directors for related costs and damages.

Risks Related to SportsHub’s Business

Competition within the global entertainment and gaming industries is intense and SportsHub’s existing and potential users may be attracted to competing forms of entertainment such as television, movies and sporting events, as well as other entertainment and gaming options on the Internet. If SportsHub’s offerings do not continue to be popular, its business could be harmed.

SportsHub operates in the global entertainment and fantasy sports industries with its business-to-consumer offerings. Its users face a vast array of entertainment choices. Other forms of entertainment, such as television, movies, sporting events and in-person casinos, are more well established and may be perceived by its users to offer greater variety, affordability, interactivity and enjoyment. SportsHub competes with these other forms of entertainment for the discretionary time and income of its users. If SportsHub is unable to sustain sufficient interest in its owned and operated real money fantasy sports game offerings in comparison to other forms of entertainment, including new forms of entertainment, its business model may not continue to be viable. 

The specific industries in which SportsHub operates are characterized by dynamic customer demand and technological advances, and there is intense competition among online gaming and entertainment providers. A number of established, well-financed companies producing fantasy sports games and contests and/or other interactive entertainment products and services compete with its offerings, and other well-capitalized companies may introduce competitive services. Such competitors may spend more money and time on developing and testing products and services, undertake more extensive marketing campaigns, adopt more aggressive pricing or promotional policies or otherwise develop more commercially successful products or services than SportsHub’s, which could negatively impact its business. SportsHub’s competitors may also develop products, features or services that are similar to SportsHub’s or that achieve greater market acceptance. Such competitors may also undertake more far-reaching and successful product development efforts or marketing campaigns or may adopt more aggressive pricing policies. Furthermore, new competitors, whether licensed or not, may enter the fantasy sports gaming industry. There has also been considerable consolidation among competitors in the sports entertainment and gaming industries and such consolidation and future consolidation could result in the formation of larger competitors with increased financial resources and altered cost structures, which may enable them to offer more competitive products, gain a larger market share, expand offerings and broaden their geographic scope of operations. If SportsHub is not able to maintain or improve its market share, or if its offerings do not continue to be popular, its business could suffer.

Economic downturns and political and market conditions beyond SportsHub’s control could adversely affect its business, financial condition and results of operations.

SportsHub’s financial performance is subject to global and U.S. economic conditions and their impact on levels of spending by users and advertisers. Economic recessions and rising inflationary concerns have had, and may continue to have, far reaching adverse consequences across many industries, including the global sports entertainment and fantasy sports industries, which may adversely affect SportsHub’s business and financial condition.  

In addition, changes in general market, economic and political conditions in domestic and foreign economies or financial markets, including fluctuation in stock markets resulting from, among other things, trends in the economy as a whole may reduce users’ disposable income and advertisers’ budgets. Any one of these changes could have a material adverse effect on SportsHub’s business, financial condition, results of operations or prospects.

Reductions in discretionary consumer spending could have an adverse effect on SportsHub’s business, financial condition, results of operations and prospects.

SportsHub’s business is particularly sensitive to reductions in discretionary consumer spending. Demand for entertainment and leisure activities, including fantasy sports and online gaming, can be affected by changes in the economy and consumer tastes, both of which are difficult to predict and beyond SportsHub’s control. Unfavorable changes in general economic conditions, including recessions, economic slowdowns, sustained high levels of unemployment, and rising prices or the perception by consumers of weak or weakening economic conditions, may reduce its users’ disposable income or result in fewer individuals engaging in entertainment and leisure activities, such as daily fantasy sports, sports betting and iGaming. As a result, SportsHub cannot ensure that demand for its offerings will remain constant. Adverse developments affecting economies throughout the world, including a general tightening of availability of credit, decreased liquidity in certain financial markets, increased interest rates, foreign exchange fluctuations, increased energy costs, acts of war or terrorism, transportation disruptions, natural disasters, declining consumer confidence, sustained high levels of unemployment or significant declines in stock markets, as well as concerns regarding pandemics, epidemics and the spread of contagious diseases, could lead to a further reduction in discretionary spending on leisure activities, such as fantasy sports and iGaming.

 For example, the outbreak of COVID-19, has 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 worldwide travel restrictions and restrictions on public gatherings. Many businesses were forced to eliminate non-essential travel and canceled in-person events to reduce instances of employees and others being exposed to large public gatherings, and state and local governments across the United States have restricted business activities and strongly encouraged, instituted orders or otherwise restricted individuals from leaving their home. 

The direct impact on SportsHub’s business beyond disruptions in normal business operations was primarily through the suspension, postponement and cancellation of major sports and sporting events. Although most major sports seasons and sporting events have largely returned to pre-COVID schedules, future outbreaks of COVID-19 or other variants could have a continued material adverse impact on economic and market conditions and exasperate the continued global economic slowdown.  The rapid development and fluidity of this situation precludes any prediction as to the ultimate impact of COVID-19, which remains a material uncertainty and risk with respect to SportsHub, its performance, and its financial results and could adversely affect its future financial results.  SportsHub’s revenue continues to depend on major sports seasons and sporting events, and it may not generate as much revenue as SportsHub would have without the cancellation or postponements in the wake of a reemergence of COVID-19. If a large number of SportsHub’s employees and/or a subset of its key employees and executives are impacted by COVID-19 or other variants, its ability to continue to operate effectively may be negatively impacted. The ultimate severity of the coronavirus outbreak is uncertain at this time and therefore SportsHub cannot predict the full impact it may have on its end markets and its operations; however, the effect on its results could be material and adverse. Any significant or prolonged decrease in consumer spending on entertainment or leisure activities could adversely affect the demand for SportsHub’s offerings, reducing its cash flows and revenues, and thereby materially harm its business, financial condition, results of operations and growth prospects.

SportsHub’s results of operations may fluctuate due to seasonality and other factors and, therefore, its periodic operating results will not be guarantees of future performance.

 SportsHub’s fantasy sports operations may fluctuate due to seasonal trends and other factors. SportsHub believes that significant sporting events such as the playoffs and championship games, tend to impact, among other things, revenues from operations, key metrics and customer activity, and as such, SportsHub’s historical revenues generally have been highest in the second half of the year when most of those games occur. A majority of its revenue is and will continue to be generated from real money contests relating to the National Football League and the National Basketball Association, each of which have their own respective off-seasons, which may cause decreases in its future revenues during such periods. SportsHub’s revenues may also be affected by the scheduling of major sporting events that do not occur annually, such as the World Cup, or the cancellation or postponement of sporting events and races. In addition, certain individuals or teams advancing or failing to advance and their scores and other results within specific tournaments, games or events may impact its financial performance.

SportsHub relies on information technology and other systems and services, and any failures, errors, defects or disruptions in its systems or services could diminish its brand and reputation, subject it to liability, disrupt its business, affect its ability to scale its technical infrastructure and adversely affect its operating results and growth prospects. SportsHub’s games and other software applications and systems, and the third-party platforms upon which they are made available, could contain undetected errors. 

SportsHub’s technology infrastructure is critical to the performance of its offerings and to user satisfaction. It devotes significant resources to network and data security to protect its systems and data. However, its systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to its business. SportsHub cannot assure you that the measures it takes to prevent or hinder cyber-attacks and protect its systems, data and user information and to prevent outages, data or information loss or fraud and to prevent or detect security breaches, including a disaster recovery strategy for server and equipment failure and back-office systems and the use of third parties for certain cybersecurity services, will provide absolute security. SportsHub has experienced, and it may in the future experience, website disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors and capacity constraints. To date, such disruptions have not had a material impact on SportsHub; however, future disruptions from unauthorized access to, fraudulent manipulation of, or tampering with its computer systems and technological infrastructure, or those of third parties, could result in a wide range of negative outcomes, each of which could materially adversely affect its business, financial condition, results of operations and prospects. 

Additionally, SportsHub’s products may contain errors, bugs, flaws or corrupted data, and these defects may only become apparent after their launch. If a particular product offering is unavailable when users attempt to access it or navigation through SportsHub’s offerings is slower than they expect, users may be unable to place their bets or set their line-ups in time and may be less likely to return to SportsHub’s products and services as often, if at all. Furthermore, programming errors, defects and data corruption could disrupt its operations, adversely affect the experience of its users, harm its reputation, cause its users to stop utilizing its offerings, divert its resources and delay market acceptance of its offerings, any of which could result in legal liability to SportsHub or harm its business, financial condition, results of operations and prospects. 

If SportsHub’s user base and engagement continue to grow, and the amount and types of offerings continue to grow and evolve, it will need more substantial technical infrastructure, including network capacity and computing power, to continue to satisfy its users’ needs. Such infrastructure expansion may be complex, and unanticipated delays in completing these projects or availability of components may lead to increased project costs, operational inefficiencies, or interruptions in the delivery or degradation of the quality of its offerings. In addition, there may be issues related to this infrastructure that are not identified during the testing phases of design and implementation, which may only become evident after SportsHub has started to fully use the underlying equipment or software, that could further degrade the user experience or increase its costs. As such, SportsHub could fail to continue to effectively scale and grow its technical infrastructure to accommodate increased demands. In addition, its business may be subject to interruptions, delays or failures resulting from adverse weather conditions, other natural disasters, power loss, terrorism, cyber-attacks, public health emergencies (such as the coronavirus) or other catastrophic events. 

SportsHub believes that if its users have a negative experience with its offerings, or if its brands or reputation are negatively affected, users may be less inclined to continue or resume utilizing its products or to recommend its offerings to other potential users. As such, a failure or significant interruption in SportsHub’s service could harm its reputation, business and operating results.

Despite SportsHub’s security measures, its information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise its networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disruption of its operations and the services it provides to users, damage to its reputation, and a loss of confidence in its products and services, which could adversely affect its business.

 SportsHub relies on encryption and authentication technology licensed from third parties in an effort to securely transmit confidential and sensitive information, including credit card numbers. Advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect transaction data or other confidential and sensitive information from being breached or compromised. In addition, websites are often attacked through compromised credentials, including those obtained through phishing and credential stuffing. SportsHub’s security measures, and those of its third-party service providers, may not detect or prevent all attempts to breach its systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by its websites, networks and systems or that SportsHub or such third parties otherwise maintain, including payment card systems, which may subject us to fines or higher transaction fees or limit or terminate its access to certain payment methods. SportsHub and such third parties may not anticipate or prevent all types of attacks until after they have already been launched. Further, techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against SportsHub or its third-party service providers.

 In addition, security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by SportsHub employees or by third parties. These risks may increase over time as the complexity and number of technical systems and applications it uses also increases. Breaches of its security measures or those of its third-party service providers or cybersecurity incidents could result in unauthorized access to SportsHub’s sites, networks and systems; unauthorized access to and misappropriation of user information, including users’ personally identifiable information, or other confidential or proprietary information of SportsHub or third parties; viruses, worms, spyware or other malware being served from its sites, networks or systems; deletion or modification of content or the display of unauthorized content on its sites; interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment of additional personnel and protection technologies, response to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; litigation, regulatory action and other potential liabilities. In the past, SportsHub has experienced social engineering, phishing, malware and similar attacks and threats of denial-of-service attacks, none of which to date has been material to its business; however, such attacks could in the future have a material adverse effect on its operations. If any of these breaches of security should occur and be material, SportsHub’s reputation and brand could be damaged, its business may suffer, it could be required to expend significant capital and other resources to alleviate problems caused by such breaches, and it could be exposed to a risk of loss, litigation or regulatory action and possible liability. SportsHub cannot guarantee that recovery protocols and backup systems will be sufficient to prevent data loss. Actual or anticipated attacks may cause it to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. While SportsHub maintains cybersecurity insurance coverage that it believes is adequate for its business, such coverage may not cover all potential costs and expenses associated with cybersecurity incidents that may occur in the future.

 In addition, any party who is able to illicitly obtain a user’s password could access the user’s transaction data or personal information, resulting in the perception that SportsHub’s systems are insecure. Any compromise or breach of its security measures, or those of its third-party service providers, could violate applicable privacy, data protection, data security, network and information systems security and other laws and cause significant legal and financial exposure, adverse publicity and a loss of confidence in its security measures, which could have a material adverse effect on its business, financial condition, results of operations and prospects. SportsHub devotes significant resources to protect against security breaches and it may need to continue to do so in the future to address problems caused by breaches, including notifying affected subscribers and responding to any resulting litigation, which in turn, diverts resources from the growth and expansion of its business.

SportsHub relies on third-party providers to validate the identity and identify the location of its users, and if such providers fail to perform adequately and provide accurate information, or if SportsHub does not maintain business relationships with them, its business, financial condition and results of operations could be adversely affected.

 There is no guarantee that the third-party geolocation and identity verification systems that SportsHub relies on will perform adequately or be effective. It relies on its geolocation and identity verification systems to ensure it is in compliance with certain laws and regulations, and any service disruption to those systems would prohibit it from operating its offerings and would adversely affect its business. Additionally, incorrect or misleading geolocation and identity verification data with respect to current or potential users received from third-party service providers may result in SportsHub inadvertently allowing access to its offerings to individuals who should not be permitted to access them, or otherwise inadvertently deny access to individuals who should be able to access its offerings, in each case based on inaccurate identity or geographic location determination. SportsHub’s third-party geolocation services provider relies on its ability to obtain information necessary to determine geolocation from mobile devices, operating systems and other sources. Changes, disruptions or temporary or permanent failure to access such sources by SportsHub’s third-party services providers may result in their inability to accurately determine the location of SportsHub’s users. Moreover, its inability to maintain its existing contracts with third-party services providers, or to replace them with equivalent third parties, may result in its inability to access geolocation and identity verification data necessary for its day-to-day operations. If any of these risks materializes, SportsHub may be subject to disciplinary action, fines and/or lawsuits; and its business, financial condition and results of operations could be adversely affected.

SportsHub relies on third-party payment processors to process deposits and withdrawals made by its users, and if it cannot manage its relationships with such third parties and other payment-related risks, its business, financial condition and results of operations could be adversely affected. 

SportsHub relies on a limited number of third-party payment processors to process deposits and withdrawals made by its users. If any of its third-party payment processors terminates its relationship with SportsHub or refuses to renew its agreement with SportsHub on commercially reasonable terms, SportsHub would need to find an alternate payment processor, and may not be able to secure similar terms or replace such payment processor in an acceptable time frame. Further, the software and services provided by its third-party payment processors may not meet its expectations, contain errors or vulnerabilities, be compromised or experience outages. Any of these risks could cause it to lose its ability to accept online payments or other payment transactions or make timely payments to its users, any of which could make its technology less trustworthy and convenient and adversely affect its ability to attract and retain its users.

 Nearly all of SportsHub’s payments are made by credit card, debit card or through other third-party payment services, which subjects it to certain regulations and to the risk of fraud. SportsHub may in the future offer new payment options to users that may be subject to additional regulations and risks. SportsHub is also subject to a number of other laws and regulations relating to the payments it accepts from its users, including with respect to money laundering, money transfers, privacy and information security. If it fails to comply with applicable rules and regulations, SportsHub may be subject to civil or criminal penalties, fines and/or higher transaction fees and may lose its ability to accept online payments or other payment card transactions, which could make its offerings less convenient and attractive to its users. If any of these events were to occur, SportsHub’s business, financial condition and results of operations could be adversely affected. 

For example, if SportsHub is deemed to be a money transmitter as defined by applicable regulation, it could be subject to certain laws, rules and regulations enforced by multiple authorities and governing bodies in the United States and numerous state and local agencies who may define money transmitter differently. For example, certain states may have a more expansive view of who qualifies as a money transmitter. Additionally, outside of the United States, SportsHub could be subject to additional laws, rules and regulations related to the provision of payments and financial services, and if it expands into new jurisdictions, the foreign regulations and regulators governing its business that it is subject to will expand as well. If SportsHub is found to be a money transmitter under any applicable regulation and it is not in compliance with such regulations, it may be subject to fines or other penalties in one or more jurisdictions levied by federal or state or local regulators, including state Attorneys General, as well as those levied by foreign regulators. In addition to fines, penalties for failing to comply with applicable rules and regulations could include criminal and civil proceedings, forfeiture of significant assets or other enforcement actions. SportsHub could also be required to make changes to its business practices or compliance programs as a result of regulatory scrutiny. 

Additionally, SportsHub’s payment processors require it to comply with payment card network operating rules, which are set and interpreted by the payment card networks. The payment card networks could adopt new operating rules or interpret or reinterpret existing rules in ways that might prohibit SportsHub from providing certain offerings to some users, be costly to implement or difficult to follow. SportsHub has agreed to reimburse its payment processors for fines they are assessed by payment card networks if it or its users violate these rules. Any of the foregoing risks could adversely affect SportsHub’s business, financial condition and results of operations.

SportsHub relies on other third-party sports data providers for real-time and accurate data for sporting events, and if such third parties do not perform adequately or terminate their relationships with SportsHub, its costs may increase and its business, financial condition and results of operations could be adversely affected.

SportsHub relies on third-party sports data providers such as Sportradar and the PGA Tour to obtain accurate information regarding schedules, results, performance and outcomes of sporting events. It relies on this data to determine when and how bets are settled or how users rank in their fantasy contests. SportsHub has experienced, and may continue to experience, errors in this data feed which may result in it incorrectly settling bets or ranking users in its contests. If it cannot adequately resolve the issue with its users, SportsHub’s users may have a negative experience with its offerings, it brand or reputation may be negatively affected and its users may be less inclined to continue or resume utilizing its products or recommend its offerings to other potential users. As such, a failure or significant interruption in its service may harm its reputation, business and operating results. 

Furthermore, if any of SportsHub’s sports data partners terminates its relationship with it or refuses to renew its agreement with it on commercially reasonable terms, SportsHub would need to find an alternate provider, and may not be able to secure similar terms or replace such providers in an acceptable time frame. Any of these risks could increase its costs and adversely affect its business, financial condition and results of operations. Further, any negative publicity related to any of its third-party partners, including any publicity related to regulatory concerns, could adversely affect its reputation and brand, and could potentially lead to increased regulatory or litigation exposure.

SportsHub relies on other third-party service providers and if such third parties do not perform adequately or terminate their relationships with SportsHub, its costs may increase and its business, financial condition and results of operations could be adversely affected.

SportsHub’s success depends in part on its relationships with other third-party service providers. For example, it relies on third parties for content delivery, load balancing and protection against distributed denial-of-service attacks. If those providers do not perform adequately, its users may experience issues or interruptions with their experiences. Furthermore, if any of SportsHub’s partners terminates its relationship with it or refuses to renew its agreement with it on commercially reasonable terms, SportsHub would need to find an alternate provider, and may not be able to secure similar terms or replace such providers in an acceptable time frame. SportsHub also relies on other software and services supplied by third parties, such as communications and internal software, and its business may be adversely affected to the extent such software and services do not meet its expectations, contain errors or vulnerabilities, are compromised or experience outages. Any of these risks could increase its costs and adversely affect its business, financial condition and results of operations. Further, any negative publicity related to any of its third- party partners, including any publicity related to regulatory concerns, could adversely affect SportsHub’s reputation and brand, and could potentially lead to increased regulatory or litigation exposure.

SportsHub incorporates technology from third parties into its offerings. It cannot be certain that its licensors are not infringing the intellectual property rights of others or that the suppliers and licensors have sufficient rights to the technology in all jurisdictions in which SportsHub may operate. Some of its license agreements may be terminated by its licensors for convenience. If SportsHub is unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against its suppliers and licensors or against SportsHub, or if it is unable to continue to obtain the technology or enter into new agreements on commercially reasonable terms, its ability to develop its offerings containing that technology could be severely limited and its business could be harmed.

If SportsHub fails to detect fraud or theft, including by its users and employees, its reputation may suffer which could harm its brand and reputation and negatively impact its business, financial condition and results of operations and can subject it to investigations and litigation. 

SportsHub has in the past incurred, and may in the future incur, losses from various types of financial fraud, including use of stolen or fraudulent credit card data, claims of unauthorized payments by a user and attempted payments by users with insufficient funds. Bad actors use increasingly sophisticated methods to engage in illegal activities involving personal information, such as unauthorized use of another person’s identity, account information or payment information and unauthorized acquisition or use of credit or debit card details, bank account information and mobile phone numbers and accounts. Under current credit card practices, SportsHub may be liable for use of funds on its products with fraudulent credit card data, even if the associated financial institution approved the credit card transaction. 

Acts of fraud may involve various tactics, including collusion. Successful exploitation of SportsHub’s systems could have negative effects on its product offerings, services and user experience and could harm its reputation. Failure to discover such acts or schemes in a timely manner could result in harm to its operations. In addition, negative publicity related to such schemes could have an adverse effect on its reputation, potentially causing a material adverse effect on its business, financial condition, results of operations and prospects. In the event of the occurrence of any such issues with SportsHub’s existing technology or product offerings, substantial engineering and marketing resources and management attention may be diverted from other projects to correct these issues, which may delay other projects and the achievement of its strategic objectives. 

In addition, any misappropriation of, or access to, users’ or other proprietary information or other breach of SportsHub’s information security could result in legal claims or legal proceedings, including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, including for failure to protect personal information or for misusing personal information, which could disrupt SportsHub’s operations, force it to modify its business practices, damage its reputation and expose it to claims from its users, regulators, employees and other persons, any of which could have an adverse effect on its business, financial condition, results of operations and prospects. 

Despite measures SportsHub has taken to detect and reduce the occurrence of fraudulent or other malicious activity on its offerings, SportsHub cannot guarantee that any of its measures will be effective or will scale efficiently with its business. Its failure to adequately detect or prevent fraudulent transactions could harm its reputation or brand, result in litigation or regulatory action and lead to expenses that could adversely affect its business, financial condition and results of operations.

If Internet and other technology-based service providers experience service interruptions, SportsHub’s ability to conduct its business may be impaired and its business, financial condition and results of operations could be adversely affected.

 A substantial portion of SportsHub’s network infrastructure is provided by third parties, including Internet service providers and other technology-based service providers. SportsHub requires technology-based service providers to implement cyber-attack-resilient systems and processes. However, if Internet service providers experience service interruptions, including because of cyber-attacks, or due to an event causing an unusually high volume of Internet use (such as a pandemic or public health emergency), communications over the Internet may be interrupted and impair SportsHub’s ability to conduct its business. Internet service providers and other technology-based service providers may in the future roll out upgraded or new mobile or other telecommunications services, such as 5G or 6G services, which may not be successful and thus may impact the ability of SportsHub’s users to access its offerings in a timely fashion or at all. In addition, its ability to process e-commerce transactions depends on bank processing and credit card systems. To prepare for system problems, SportsHub continuously seeks to strengthen and enhance its current facilities and the capabilities of its system infrastructure and support. Nevertheless, there can be no assurance that the Internet infrastructure or its own network systems will continue to be able to meet the demand placed on it by the continued growth of the Internet, the overall online gaming industry and its users. Any difficulties these providers face, including the potential of certain network traffic receiving priority over other traffic (i.e., lack of net neutrality), may adversely affect SportsHub’s business, and it exercises little control over these providers, which increases its vulnerability to problems with the services it provides. Any system failure as a result of reliance on third parties, such as network, software or hardware failure, including as a result of cyber-attacks, which causes a loss of SportsHub users’ property or personal information or a delay or interruption in SportsHub’s online services and products and e-commerce services, including its ability to handle existing or increased traffic, could result in a loss of anticipated revenue, interruptions to its offerings, cause it to incur significant legal, remediation and notification costs, degrade the customer experience and cause users to lose confidence in its offerings, any of which could have a material adverse effect on its business, financial condition, results of operations and prospects.

SportsHub’s growth will depend on its ability to attract and retain users, and the loss of its users, failure to attract new users in a cost-effective manner, or failure to effectively manage its growth could adversely affect its business, financial condition, results of operations and prospects.

SportsHub’s ability to achieve growth in revenue in the future will depend, in large part, upon its ability to attract new users to its real money fantasy sports and simulation games, retain existing users of its offerings and reactivate users in a cost-effective manner. Achieving growth in its community of users may require SportsHub to increasingly engage in sophisticated and costly sales and marketing efforts, which may not make sense in terms of return on investment. SportsHub has used and expects to continue to use a variety of free and paid marketing channels, in combination with compelling offers and exciting games to achieve its objectives, including the use of social media and digital marketing campaigns. If the search engines on which SportsHub relies modify their algorithms, change their terms around fantasy sports and iGaming, or if the prices at which it may purchase listings increase, then its costs could increase, and fewer users may click through to its websites. If links to SportsHub’s websites and mobile apps are not displayed prominently in online search results, if fewer users click through to its websites, if its other digital marketing campaigns are not effective, or if the costs of attracting users using any of its current methods significantly increase, then its ability to efficiently attract new users could be reduced, its revenue could decline and its business, financial condition and results of operations could be harmed.

        In addition, SportsHub’s ability to increase the number of users of its offerings will depend on continued user adoption of fantasy sports, sports betting and iGaming. Growth in these industries and the level of demand for and market acceptance of its offerings will be subject to a high degree of uncertainty. SportsHub cannot assure that consumer adoption of its offerings will continue or exceed current growth rates, or that the industries in which it operates will continue to increase widespread acceptance.

SportsHub’s business is subject to a variety of U.S. and foreign laws, many of which are unsettled and still developing and which could subject it to claims or otherwise harm its business. Any change in existing regulations or their interpretation, or the regulatory climate applicable to its products and services, or changes in tax rules and regulations or interpretation thereof related to its products and services, could adversely impact its ability to operate its business as currently conducted or as SportsHub seeks to operate in the future, which could have a material adverse effect on its financial condition and results of operations.

SportsHub is generally subject to laws and regulations relating to fantasy sports, sports betting and iGaming in the jurisdictions in which it conducts its business or in some circumstances, in the jurisdictions in which it offers its services or in which its services are available, as well as the general laws and regulations that apply to all e-commerce businesses, such as those related to privacy and personal information, tax and consumer protection. These laws and regulations vary from one jurisdiction to another and future legislative and regulatory action, court decisions or other governmental action, which may be affected by, among other things, political pressures, attitudes and climates, as well as personal biases, may have a material impact on SportsHub’s operations and financial results. In particular, some jurisdictions have introduced regulations attempting to restrict or prohibit online gaming, while others have taken the position that online gaming should be licensed and regulated and have adopted or are in the process of considering legislation and regulations to enable that to happen. Additionally, some jurisdictions in which SportsHub may operate could presently be unregulated or partially regulated and therefore more susceptible to the enactment or change of laws and regulations.

In May 2018, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act of 1992 (“PASPA”) as unconstitutional. This decision has the effect of lifting federal restrictions on sports betting and thus allowing states to determine the legality of sports betting for themselves. Since the repeal of PASPA, several states (and Washington D.C.) have legalized online sports betting. To the extent new real money gaming or sports betting jurisdictions are established or expanded, SportsHub cannot guarantee that it will be successful in penetrating such new jurisdictions or expanding its business or user base in line with the growth of existing jurisdictions. If it is unable to effectively develop and operate directly or indirectly within these new jurisdictions or if its competitors are able to successfully penetrate geographic jurisdictions that SportsHub cannot access or where it faces other restrictions, there could be a material adverse effect on its business, operating results and financial condition. SportsHub’s failure to obtain or maintain the necessary regulatory approvals in jurisdictions, whether individually or collectively, would have a material adverse effect on its business. See “About SportsHub Games Network, Inc. — Government Regulations.” To expand into new jurisdictions, SportsHub may need to be licensed and obtain approvals of its product offerings. This is a time-consuming process that can be costly. Any delays in obtaining or difficulty in maintaining regulatory approvals needed for expansion within existing jurisdictions or into new jurisdictions can negatively affect its opportunities for growth, including the growth of its customer base, or delay its ability to recognize revenue from its offerings in any such jurisdictions.

Future legislative and regulatory action, and court decisions or other governmental action, may have a material impact on its operations and financial results. Governmental authorities could view SportsHub as having violated local laws, despite its efforts to obtain all applicable licenses or approvals. There is also a risk that civil and criminal proceedings, including class actions, brought by or on behalf of prosecutors or public entities or incumbent monopoly providers, or private individuals, could be initiated against SportsHub, Internet service providers, credit card and other payment processors, advertisers and others involved in the fantasy sports, sports betting and iGaming industries. Such potential proceedings could involve substantial litigation expense, penalties, fines, seizure of assets, injunctions or other restrictions being imposed upon SportsHub or its licensees or other business partners, while diverting the attention of key executives. Such proceedings could have a material adverse effect on its business, financial condition, results of operations and prospects, as well as impact its reputation.

There can be no assurance that legally enforceable legislation will not be proposed and passed in jurisdictions relevant or potentially relevant to SportsHub’s business to prohibit, legislate or regulate various aspects of the fantasy sports, iGaming and sports betting industries (or that existing laws in those jurisdictions will not be interpreted negatively). Compliance with any such legislation may have a material adverse effect on its business, financial condition and results of operations, either as a result of SportsHub’s determination that a jurisdiction should be blocked, or because a local license or approval may be costly for SportsHub or its business partners to obtain and/or such licenses or approvals may contain other commercially undesirable conditions.

SportsHub’s growth prospects depend on the legal status of real-money gaming and sports betting in various jurisdictions, predominantly within the United States, and legalization may not occur in as many states as it expects, or may occur at a slower pace than it anticipates. Additionally, even if jurisdictions legalize real money gaming, this may be accompanied by legislative or regulatory restrictions and/or taxes that make it impracticable or less attractive to operate in those jurisdictions, or the process of implementing regulations or securing the necessary licenses to operate in a particular jurisdiction may take longer than SportsHub anticipates, which could adversely affect its future results of operations and make it more difficult to meet its expectations for financial performance. 

Government may legalize real money gaming in a manner that is unfavorable to it. As a result, it may encounter legal, regulatory and political challenges that are difficult or impossible to foresee and which could result in an unforeseen adverse impact on planned revenues or costs associated with the new opportunity. For example, certain states that have established state-run monopolies may limit opportunities for private sector participants like SportsHub. As most state product taxes apply to various measures of modified gross profit, tax rates, whether federal- or state-based, that are higher than SportsHub expects will make it more costly and less desirable for it to launch in a given jurisdiction, while tax increases in any of its existing jurisdictions may adversely impact its profitability.

Therefore, even in cases in which a jurisdiction purports to license and regulate fantasy sports, sports betting and/or iGaming, the licensing and regulatory regimes can vary considerably in terms of their business-friendliness and at times may be intended to provide incumbent operators with advantages over new licensees. Therefore, some “liberalized” regulatory regimes are considerably more commercially attractive than others.

Negative events or negative media coverage relating to, or a declining popularity of, daily fantasy sports, sports betting, the underlying sports or athletes, online sports betting or iGaming in particular, or other negative coverage may adversely impact SportsHub’s ability to retain or attract users, which could have an adverse impact on its business. 

Public opinion can significantly influence SportsHub’s business. Unfavorable publicity regarding it, for example, its product changes, product quality, litigation, or regulatory activity, or regarding the actions of third parties with whom it has relationships or the underlying sports (including declining popularity of the sports or athletes) could seriously harm SportsHub’s reputation. In addition, a negative shift in the perception of fantasy sports, sports betting and iGaming by the public or by politicians, lobbyists or others could affect future legislation of sports betting and iGaming, which could cause jurisdictions to abandon proposals to legalize sports betting and iGaming, thereby limiting the number of jurisdictions in which SportsHub can operate. Furthermore, illegal betting activity by athletes could result in negative publicity for its industry and could harm its brand reputation. Negative public perception could also lead to new restrictions on or to the prohibition of iGaming or sports betting in jurisdictions in which SportsHub currently operates. Such negative publicity could also adversely affect the size, demographics, engagement and loyalty of its customer base and result in decreased revenue or slower user growth rates, which could seriously harm its business.

Continued growth and success will depend on the performance of SportsHub’s current and future employees, including certain key employees. Recruitment and retention of these individuals is vital to growing its business and meeting its business plans. The loss of any of its key executives or other key employees could harm its business.

SportsHub depends on a limited number of key personnel to manage and operate its business, including Christian Peterson, SportsHub’s current president. The departure, death or disability of any one of its key personnel or other extended or permanent loss of any of their services, or any negative market or industry perception with respect to any of them or their loss, could have a material adverse effect on SportsHub’s business.

In addition, certain of SportsHub’s other employees have made significant contributions to its growth and success. SportsHub believes its success and its ability to compete and grow will depend in large part on the efforts and talents of its employees and on its ability to retain highly skilled personnel. The competition for these types of personnel is intense and SportsHub competes with other potential employers for the services of its employees. As a result, it may not succeed in retaining the key personnel that it needs. Employees, particularly software developers and engineers, are in high demand, and SportsHub devotes significant resources to identifying, hiring, training, successfully integrating and retaining these employees. SportsHub cannot provide assurance that it will be able to attract or retain such highly qualified personnel in the future. In addition, the loss of employees or the inability to hire additional skilled employees as necessary could result in significant disruptions to its business, and the integration of replacement personnel could be time-consuming and expensive and cause additional disruptions to its business.

Failure to protect or enforce SportsHub’s intellectual property rights or the costs involved in such enforcement could harm its business, financial condition and results of operations. 

SportsHub relies on trademark, copyright, patent, trade secret and domain-name-protection laws to protect its proprietary rights. In the United States and internationally, it has filed various applications to protect aspects of its intellectual property, and currently hold a number of issued patents in multiple jurisdictions. In the future, SportsHub may acquire additional patents or patent portfolios, which could require significant cash expenditures. However, third parties may knowingly or unknowingly infringe SportsHub’s proprietary rights, third parties may challenge proprietary rights held by it, and pending and future trademark and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which SportsHub operates or intends to operate its business. In any of these cases, it may be required to expend significant time and expense to prevent infringement or to enforce its rights. There can be no assurance that others will not offer products or services that are substantially similar to SportsHub’s and compete with its business. 

SportsHub’s insurance may not provide adequate levels of coverage against claims.

  SportsHub maintains insurance that it believes is customary for businesses of its size and type. However, there are types of losses it may incur that cannot be insured against or that it believes are not economically reasonable to insure. Moreover, any loss incurred could exceed policy limits and policy payments made to SportsHub may not be made on a timely basis. Such losses could adversely affect its business prospects, results of operations, cash flows and financial condition.

Risks Related to SharpLink’s Business

Unless the context otherwise requires, all references in this section to “we,” “us,” “the Company” or “our” refer to SharpLink and its subsidiaries prior to the consummation of the Transaction and the combined company and its subsidiaries after the consummation of the Transaction.

SharpLink Gaming has a history of losses and may not be able to achieve or sustain profitability in the future.

SharpLink has a history of incurring net losses and it may not achieve or maintain profitability in the future. SharpLink experienced net losses of $11,844,362 and $21,089,284 for the six months ended June 30, 2022 and June 30, 2021 after factoring non-cash expenses largely associated with commitment fee expenses booked in the six-month period ended June 30, 2021 and non-cash expenses associated with goodwill and intangible asset impairment charges booked in the six months ended June 30, 2022. As of June 30, 2022, SharpLink had an accumulated deficit of $70,176,625. SharpLink cannot predict when or whether it will reach or maintain profitability. SharpLink also expects its operating expenses to increase in the future as it continues to invest for its future growth, which will negatively affect its results of operations if its total revenue does not increase. 

If SharpLink is unable to increase its revenues or its operating costs are higher than expected, it may not be able to achieve profitability and its operating results may fluctuate significantly.

SharpLink may not be able to accurately forecast its revenues or future revenue growth rate. Many of its expenses, particularly personnel costs and occupancy costs, are relatively fixed, but SharpLink may experience higher than expected operating costs, including increased selling and marketing costs, investments in geographic expansion, acquisition costs, communications costs, travel costs, software development costs, third-party technology licensing fees, professional fees and other costs. As a result, SharpLink may not be able to adjust spending quickly enough to offset any unexpected increase in expenses or revenue shortfall. Increased competition could lead to significant price pressure for the products and services SharpLink provides, which could make profitability even more challenging.

Such competition may also cause SharpLink to lose access to certain data if a third party is granted exclusivity of such data. If operating costs exceed SharpLink’s expectations and cannot be adjusted accordingly, the Company’s results of operations and financial position could be materially and adversely affected. Additionally, SharpLink may not be able to sustain its current revenue and any revenue growth. Reduced demand, whether due to a weakening of the global economy, reduction in consumer spending, competition or other reasons, may result in decreased revenues and growth, and a material adverse effect on its operating results.

SharpLink will require additional capital to support its growth plans and such capital may not be available on reasonable terms or at all. If it does not raise sufficient capital, there is a substantial doubt about SharpLink’s ability to continue as a going concern.

In the pursuit of SharpLink’s long-term growth strategy and the development of its sports betting conversion and lead generation software and related businesses, the Company has sustained continued operating losses. During the six months ending June 30, 2022, the Company had a net loss from continuing operations of $10,588,708 and cash used in operating activities of $3,484,288. To fund these planned losses from operations, SharpLink raised capital from outside investors in the aggregate amount of $18,000,000 during 2020 and 2021 in the form of Ordinary Shares, preferred stock and warrants. Additionally, in 2022 it secured additional financing through a $3,250,000 term loan. Based on continued expected cash needs to grow its Affiliate Marketing Services–United States operations, there is a substantial doubt about SharpLink’s ability to continue as a going concern and it will require additional liquidity to continue its operations for the next 12 months.

Until SharpLink can generate a sufficient amount of revenue to finance its capital needs, which it may never achieve, it expects to finance its cash needs primarily through public or private equity financings or conventional debt financings. SharpLink cannot be certain that additional funding will be available on acceptable terms or at all. If SharpLink is not able to secure additional funding when needed to support its business growth and to respond to business challenges, track and comply with applicable laws and regulations, develop new technology and services or enhance its existing offering, improve its operating infrastructure, enhance its information security systems to combat changing cyber threats and expand personnel to support its business, it may have to delay or reduce the scope of planned strategic growth initiatives. Moreover, any additional equity financing that SharpLink obtains 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 a pledge of some or all of SharpLink’s assets. If we fail to obtain additional funding as needed, SharpLink may be forced to cease or scale back operations, and our results, financial conditions and stock price would be adversely affected.

SharpLink’s indebtedness could adversely affect its business.

As of June 30, 2022, SharpLink had approximately $3.0 million of total long-term debt (net of loan origination fees). The Company may also incur additional indebtedness in the future. For example, if the Transaction with SportsHub is approved and consummated, SharpLink’s consolidated debt obligations will increase by approximately $5.6 million. The Company’s indebtedness could have adverse consequences, including, but not limited to: 

SharpLink’s debt obligations require it to use a portion of its operating cash flow to pay interest and principal on indebtedness instead of for other corporate purposes, including funding future expansion of the business, acquisitions, and ongoing capital expenditures, which could impede the Company’s growth. If the Company’s operating cash flow and capital resources are insufficient to service its debt obligations, the Company may be forced to sell assets, seek additional equity or debt financing or restructure its debt, which could harm its long-term business prospects. SharpLink’s failure to comply with the covenants contained in the terms of its indebtedness could result in an event of default which, if not cured or waived, could result in the acceleration of the debt.

COVID-19 adversely affected SharpLink’s business, financial condition, results of operations and prospects, including as a result of the reduction in the quantity of global sporting events, closures or restrictions on business operations of SharpLink’s clients and a decrease in consumer spending, and it may continue to experience such effects in the future.

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 its revenue and the revenue of its 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, which remains a material uncertainty and risk with respect to SharpLink’s business, performance, and financial results. The revenue of its clients, and its 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 could have a material adverse effect on its business, financial condition, results of operations and prospects.

SharpLink’s sports betting conversion solution is still in the early stage of development and commercialization. Failure to successfully develop, test and commercially expand such service offering could have a material adverse effect on its business, financial condition, results of operations and prospects.

SharpLink’s Affiliate Marketing Services – United States and its sports betting conversion solution, known as C4, is critical to its overall business strategy and its ability to achieve and maintain profitability. While SharpLink’s sports betting conversion solution has been launched, it is still in the early stages of development, has had only limited functionality testing and development, and is commercialized with only one sportsbook and with bets that have been generally limited to American football and auto racing. Successful development and testing depend on a number of circumstances, many of which are not in SharpLink’s control, including without limitation, the ability to attract and retain developers, the interest of third parties in pilot testing or early adoption and the response to any unexpected errors or issues.

In addition, even if development and testing of the SharpLink C4 solution is generally successful, there can be no assurance that the Company will be able to sell such service to prospective clients on commercially reasonable terms, if at all. If SharpLink is unable to successfully develop and test the C4 solution to work seamlessly with other sportsbooks and media organizations on a wide variety of sports and bet types, or if SharpLink’s sports betting conversion solution fails to attract clients on commercially reasonable terms and/or meet client expectations it may not experience any meaningful commercial success with respect to its C4 betting conversion solution, which would materially and adversely affect its business, financial condition, results of operations and prospects.

SharpLink relies on relationships with sports leagues, sports media organizations and sportsbooks and loss of existing relationships or failure to renew or expand existing relationships may cause loss of a competitive advantage or require SharpLink to modify, limit or discontinue certain offerings, which could materially and adversely affect its business, financial condition, results of operations and prospects.

SharpLink relies on relationships with sports leagues, sports media organizations and sports betting bookmakers, and the future success of its business may depend, in part, on its ability to obtain, retain and expand such relationships. SharpLink’s arrangements with sports leagues, sports media organizations and sportsbooks may not continue to be available to the Company on commercially reasonable terms, or at all. In addition, the industries SharpLink operates in are highly competitive. It is common for multiple competitors to provide services to clients simultaneously and SharpLink expects this to continue. In the event that SharpLink loses existing arrangements or cannot renew and expand existing arrangements, it may be required to discontinue or limit its offerings or services, which could materially and adversely affect its financial condition and business operation.

SharpLink operates in a competitive market and may lose clients and relationships to both existing and future competitors.

The markets for sports data-related solutions and marketing services are competitive and rapidly changing. The sports betting and sports media industries are particularly competitive and fast growing. Competition in these markets may increase further if economic conditions or other circumstances, including as a result of COVID-19, cause consumer bases and consumer spending to decrease and service providers to compete for fewer consumer resources. SharpLink’s existing and future competitors have, or may in the future have or obtain, greater name recognition, larger customer bases, better technology or data, lower prices, exclusive or better access to data, greater user traffic or greater financial, technical or marketing resources than SharpLink has. SharpLink’s competitors may be able to undertake more effective marketing campaigns, obtain more data, adopt more aggressive pricing policies, make more attractive offers to potential employees, subscribers, sports betting operators, sports leagues, sports media organizations, distribution partners and content providers or may be able to respond more quickly to new or emerging technologies or changes in user requirements. If SharpLink’s competitors develop technology before it does, its business and profitability could be materially and adversely affected. If SharpLink is unable to maintain or develop relationships with sports leagues, sports media organizations and sportsbooks, the Company’s revenues will fail to grow or may even decline, in each case having a material adverse effect on its business, financial condition, results of operations and prospects.

SharpLink’s revenue prospects may be materially and adversely affected if the Company is unable to acquire companies, including SportsHub, with complementary technology or that operate in the same or complementary industries; and any such acquisition efforts may divert management’s attention from other critical activities.

SharpLink may seek to grow revenue in part through acquisition of companies with similar or complementary technology or that operate in similar or complementary industries, such as SportsHub. The market for acquisitions is highly competitive and subject to several factors, including without limitation, general economic conditions and tax or other regulatory changes. Furthermore, acquisitions require a significant amount of management time and resources, both in terms of execution and integration of any acquisition target. In addition, SharpLink’s competitors have been and may continue to also pursue acquisitions and have or may have better capital resources than SharpLink, stronger name recognition in the acquisition market and a longer history of successful transactions. SharpLink’s revenue prospects may be materially and adversely affected if SharpLink is unable to make successful acquisitions, and in particular, consummating the Merger. Further, pursuing such activities may divert attention from other critical activities of its business plan, such as development, testing and commercialization of products and services.

SharpLink’s business may be materially and adversely affected if it is unable to keep pace with or adapt to rapidly changing technology, evolving industry standards and changing regulatory requirements, or if SharpLink does not invest in product development and provide services that are attractive to its clients.

SharpLink’s future business and financial success will depend on its ability to continue to anticipate the needs of its clients or potential clients in order to successfully introduce new and upgraded products and services and to successfully implement its current and future geographic and product expansion plans. To be successful, SharpLink must be able to quickly adapt to changes in technology, industry standards and regulatory requirements by continually enhancing its technology, services and solutions. Developing new services and upgrades to services, as well as integrating and coordinating current services, imposes burdens on its product development team, management and researchers. These processes are costly and time intensive, and its efforts to develop, integrate and enhance its products and services may not be successful. In addition, successfully scaling up and launching and selling a new or upgraded product or service puts additional strain on its sales and marketing resources. Investing resources towards increasing the depth of its coverage within existing markets imposes additional burdens on its personnel and capital resources. If SharpLink is unable to manage its expansion efforts effectively, in obtaining greater market share or in obtaining widespread adoption of its current or future products and services, SharpLink may not be able to offset the expenses associated with the launch and marketing of the new or upgraded service, which could have a material adverse effect on its financial results.

If SharpLink is unable to develop new or upgraded products and services or decides to combine, shift focus from, or phase out a product or service, then its clients may choose a competitive product or service over SharpLink, its revenues may decline, and its ability to achieve or maintain profitability may be reduced. If SharpLink incurs significant costs in developing new or upgraded services or combining and coordinating existing services, if the Company is not successful in marketing and selling these new services or upgrades, or if its clients fail to accept these new or combined and coordinating services, then there could be a material adverse effect on SharpLink’s results of operations and it may never achieve profitability. If SharpLink eliminates or phases out a service and is not able to offer and successfully market and sell an alternative service, its revenue may decrease, which could have a material adverse effect on its results of operations.

The loss or significant reduction in business from one or more of SharpLink’s large clients could materially and adversely affect its business, financial condition and results of operations.

A material portion of SharpLink’s revenue is concentrated in some of its largest clients, and SharpLink does not have long-term contracts that require these clients to continue to use its services. SharpLink’s revenue growth depends on its ability to obtain new clients and achieve and sustain a high level of renewal rates with respect to its existing clients. Failure to achieve one or more of these objectives could have a material adverse effect on its business, financial condition and operating results.

SharpLink’s operations are subject to seasonal fluctuations that may impact results of operations and cash flow.

Although the sporting calendar is year-round, there is seasonality in sporting events that may impact its operations and operations of sports leagues, sports media organizations and sports betting bookmakers. Certain sports only hold events during portions of the calendar year, such as the NFL, which plays games in the fall and winter months. Sports off-seasons cause decreases in SharpLink’s revenues and revenues of its clients, and factors such as playoffs, championships or similar events are unknown and may not yield consistent sources of revenue for SharpLink and its clients. Further, SharpLink’s revenue and the revenue of its clients may also be affected by the scheduling of major sporting events that do not occur annually, such as the Olympics or World Cup, or the cancellation or postponement of sporting events and races, such as postponements resulting from the COVID-19 pandemic. Such fluctuations and uncertainties may have a material adverse effect on its financial condition or results of operation.

SharpLink’s business and operating results and operating results of its clients and vendors may be significantly impacted by general economic, political and social conditions, pandemics, wars or terrorist activity, severe weather events and other natural disasters, and the health of the sports, entertainment and sports betting industries.

SharpLink’s business and operating results and the business and operating results of its clients and vendors are subject to global economic conditions and their impact on levels of consumer spending. Economic recessions have had, and may continue to have, far reaching adverse consequences across many industries, including the global sports, entertainment and sports betting industries, and may have a material adverse effect on its business and financial condition and the business and financial condition of its clients and vendors. If the U.S. or international economies experience another recession or any of the relevant regional or local economies suffer a continued downturn, SharpLink may experience a material adverse effect on its business, financial condition, results of operations and prospects.

Adverse developments affecting financial markets and economies throughout the world, including fluctuation in stock markets resulting from, among other things, trends in the economy as a whole, a general tightening of availability of credit, decreased liquidity in certain financial markets, increased interest rates, foreign exchange fluctuations, increased energy costs, acts of war or terrorism, transportation disruptions, severe weather events and other natural disasters, declining consumer confidence, sustained high levels of unemployment or significant declines or volatility in stock markets, as well as concerns regarding pandemics, epidemics and the spread of contagious diseases, may further reduce spending on sporting events, sports betting and marketing services and may negatively affect the sports, entertainment and sports betting industries. Any one of these developments could have a material adverse effect on SharpLink’s business, financial condition, results of operations and prospects.

SharpLink depends on a limited number of customers for a substantial portion of our Affiliate Marketing Services -- International revenue, and the loss of customers, unfavorable changes to terms in customer contracts or unfavorable changes in the markets served by our customers due to geopolitical, regulatory or other facts could materially and adversely affect our revenue, profitability and financial condition.

Our Affiliate Marketing Services – International business segment generates revenue by delivering a broad base of players to iGaming operators, which are our customers. The loss of any of our key operators, or a significant reduction in sales or contracted rates to any key operator, or unfavorable changes in contracts with operators due to geopolitical, regulatory or other factors, could significantly reduce our revenue, margins and earnings and adversely affect our business. Entain plc, an operator, is our largest customer, comprising approximately 40% of our Affiliate Marketing Services – International business segment’s revenue for the six months ended June 30, 2022. The contract with this customer requires a nominal notice period to terminate the contract. If notice were provided, our revenues would decline from then-current net gaming revenue rates to approximately one-third the then-current rate.

The impact to gross margin percentage would be a similar reduction to that of revenue percentage as we pay our sub-affiliates based on a percentage of the then-current net gaming revenue and any reduction in our revenue would be a corresponding reduction in our cost of revenue. This customer also has the unilateral right to cease offering services in the markets in which it operates which would result in the loss of revenue to us. In response to a removal of service offerings in various markets, our Affiliate Marketing Services – International segment has the ability to market its user base to other operators who continue to offer service to the various markets. If we are required to change service providers, we expect to incur switching costs which could include lost revenues during the transition period and additional player promotions to incentive players to migrate to a new platform once the platform previously used is no longer available.

On February 24, 2022, Russia launched an invasion in Ukraine.   In connection with the status of international relations with Russia, particularly in light of Russian’s invasion of Ukraine, the U.S. government and the European Union have adopted sanctions on certain industry sectors and parties in Russia. The United States and other countries may implement additional actions, including trade actions, tariffs, export controls and sanctions against other countries or localities, including potentially against certain Russian government, government-related or other entities or individuals related to actions in Ukraine, which along with any retaliatory measures could increase costs, adversely affect our operations or adversely affect our ability to meet contractual and financial obligations.   These potential sanctions and export controls, as well as any responses from Russia, could adversely affect us and/or the Company’s supply chain, business partners or customers. While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity. For example, Entain plc, the largest customer of our Affiliate Marketing Services – International business segment, informed SharpLink in February 2022 it had elected to exit the Russian market in response to Russia’s conflict with Ukraine, resulting in the loss of approximately 40% of the annual revenue historically generated from this customer.

SharpLink’s recruitment and retention of qualified personnel and key employees, including members of its senior management team, are vital to growing its business and meeting its business plans. The loss of any of its key executives or other key employees could harm its business.

SharpLink depends on a limited number of key employees to manage and operate its business. SharpLink believes a significant portion of its success is owed to its co-founders, Rob Phythian and Chris Nicholas, and their longstanding relationships with sports leagues, sports media companies and fantasy sports companies. The leadership of Mr. Phythian, Mr. Nicholas, and SharpLink’s other current executive officers and key employees has been critical and the departure of Mr. Phythian, Mr. Nicholas, or any one of its other executive officers or other key employees, or other extended or permanent loss of any of their services, or any negative market or industry perception with respect to any of them or their loss, could have a material adverse effect on its business. SharpLink may not be able to attract or retain such highly qualified personnel in the future, and SharpLink does not expect that it would be able to replace their longstanding industry relationships. In addition, the loss of employees or the inability to hire qualified personnel that are knowledgeable regarding the sports betting and online gaming industries could result in significant disruptions to its business, and the integration of replacement personnel could be time-consuming and expensive and cause additional disruptions to its business.

The sports betting and online gaming industries require specific knowledge that is not easily transferable from other industries and finding suitable replacements for specialized roles can be challenging in a limited talent pool. The prevailing tight labor market in the United States has also made hiring more difficult and the costs of hiring more expensive, including for technical workers. If SharpLink does not succeed in attracting, hiring, and integrating qualified personnel, or retaining and motivating existing personnel, it may be unable to grow effectively and its business, financial condition, results of operations and prospects could be materially and adversely affected. In addition, the effects of inflation of compensation and related employee costs may have a material adverse effect on our financial condition and results of operations.

Risks Related to Legal Matters and Regulations Affecting SharpLink’s Business

SharpLink and its clients are subject to complex laws and regulations, which are subject to change and interpretation, and which could subject it to claims or otherwise harm SharpLink and its clients. Any change in existing regulations or their interpretation, or the regulatory climate and requirements applicable to SharpLink or its clients’ businesses, could have a material adverse impact on its business, prospects, financial condition and results of operations.

SharpLink and its clients are generally subject to laws and regulations relating to sports betting, online gaming, marketing and advertising in the jurisdictions in which SharpLink and its clients conduct their respective businesses, as well as the general laws and regulations that apply to all e-commerce and online businesses, such as those related to privacy and personal information, tax and consumer protection. The laws and regulations applicable to SharpLink and its clients vary from one jurisdiction to another and may be affected by, among other things, political pressures and changes in legislative or governmental priorities. Some jurisdictions have introduced regulations attempting to restrict or prohibit sports betting, online gaming and advertising, while others have taken the position that sports betting or online gaming should be licensed and regulated and have adopted or are in the process of considering legislation and regulations to enable sports betting or online gaming in their jurisdictions.

There can be no assurance that legally enforceable legislation will not be proposed and passed in jurisdictions relevant or potentially relevant to SharpLink’s business and/or the business of its clients. In addition, future regulatory action, court decisions or other governmental action may have a material impact on SharpLink and/or its clients’ operations and financial results. Governmental authorities could view SharpLink, or its clients, as having violated applicable laws or regulations, despite SharpLink or its clients’ efforts to obtain and maintain all applicable licenses or approvals. There are also risks that civil and criminal proceedings, including class actions brought by or on behalf of prosecutors or public entities or incumbent providers, or private individuals, could be initiated against SharpLink, its clients, Internet service providers, payment processors, advertisers and others involved in sports betting and online gaming industries. Changes in applicable law and other regulatory, court or other proceedings could prohibit or impose significant restrictions being imposed upon SharpLink or its clients or other business partners. These events could also involve substantial and unexpected compliance and litigation expense, penalties, fines, seizure of assets and injunctions, while diverting the attention of SharpLink’s management team. Any such proceedings or any change in laws or regulations or their interpretation applicable to SharpLink or its clients could have a material adverse effect on its business, prospects, financial condition and results of operations. 

Failure to obtain or maintain the required regulatory approvals and licenses in the various jurisdictions that SharpLink operates or intends to operate, whether individually or collectively, could have a material adverse effect on its business. 

SharpLink is currently licensed and/or authorized to operate in 23 U.S. state jurisdictions that have adopted legislation permitting online sports betting. Any of the Company’s licenses to operate legally in the industry could be revoked, suspended or conditioned at any time. Any of SharpLink’s future license applications may also be denied or conditioned. The loss of a license in one jurisdiction could trigger the loss of a license or affect the Company’s eligibility for such a license in another jurisdiction, and any of such losses, or potential for such loss, could cause SharpLink to cease offering some or all of the Company’s offerings in the impacted jurisdictions. As laws and regulations change, SharpLink may need to obtain and maintain licenses or registrations in additional jurisdictions. In addition, once licensed, SharpLink may be subject to various ongoing requirements, including supervision by the respective governmental agency of certain transfers of ownership and acquisitions. 

In addition, SharpLink intends to expand into new jurisdictions and will generally be required to obtain approval and licensures required by such states and jurisdictions. This is a time-consuming process that can be extremely costly. Any delays in obtaining or difficulty in maintaining regulatory approvals or licenses needed for expansion can negatively affect its opportunities for growth, including the growth of its client base, or delay its ability to recognize revenue from its offerings in any such jurisdictions. If SharpLink is unable to effectively develop and operate directly or indirectly within these new jurisdictions or if its competitors are able to successfully penetrate geographic jurisdictions that they cannot access or where they face other restrictions, there could be a material adverse effect on its business, operating results and financial condition. Likewise, SharpLink’s failure to obtain or maintain the required regulatory approvals and licenses in the various jurisdictions that it operates or intend to operate, whether individually or collectively, could have a material adverse effect on its business, prospects, financial condition and results of operations. 

The legal sports betting market in the United States may not continue to expand.

The legal sports betting market in the United States has increased significantly in recent years after the U.S. Supreme Court’s 2018 ruling that the federal restrictions on sports betting under PASPA were no longer enforceable, thus giving individual states the power to legalize sports betting. SharpLink’s growth strategy significantly depends on additional states legalizing sports betting. However, additional states may not adopt laws allowing sports betting as SharpLink’s management team expects. Moreover, states that have legalized sports betting may eliminate, narrow, or otherwise detrimentally changed their laws allowing legal sports betting. A failure for the legal sports betting market to expand or a contraction of the market would have a material adverse effect on SharpLink’s business, prospects, financial condition and results of operations.

SharpLink’s collection, storage and use of personal data are subject to applicable data protection and privacy laws, and any failure to comply with such laws may harm its reputation and business or expose SharpLink to fines and other enforcement action.

In the ordinary course of business, SharpLink collects, stores, uses and transmits certain types of information that are subject to different laws and regulations. In particular, data security and data protection laws and regulations relating to personal and consumer information that SharpLink is or may become subject to often vary significantly by jurisdiction and are evolving significantly as legislators and regulators continue to grapple with policy considerations surrounding the collection and use of data. Compliance with such data protection and privacy laws will require significant time and expense, particularly as SharpLink continues to expand its business across multiple jurisdictions.

For example, California has enacted the California Consumer Privacy Act, or CCPA, which became effective on January 1, 2020. The CCPA requires new disclosures to California consumers, imposes new rules for collecting or using information, requires companies to comply with data subject access and deletion requests, and affords California consumers new abilities to opt out of certain disclosures of personal information. It remains unclear what, if any, regulations will be implemented pursuant to the law or how it will be interpreted. The Stop Hacks and Improve Electronic Data Security Act, otherwise known as the SHIELD Act, is a New York State bill, the data protection portions of which became effective on March 23, 2020. The SHIELD Act requires companies to adopt reasonable safeguards to protect the security, confidentiality, and integrity of private information. A company should implement a data security program containing specific measures, including risk assessments, employee training, vendor contracts, and timely data disposal. The effects of the CCPA and the SHIELD Act potentially are significant and may require SharpLink and its clients to modify data collection or processing practices and policies and to incur substantial costs in an effort to comply.

In addition, the new EU-wide General Data Protection Regulation, or GDPR, became applicable on May 25, 2018, replacing the data protection laws of each EU member state. The GDPR implemented more stringent operational requirements for processors and controllers of personal data, including, for example, expanded disclosures about what and how personal information is to be used, limitations on retention of information, increased requirements to erase an individual’s information upon request, mandatory data breach notification requirements and higher standards for data controllers to demonstrate that they have obtained valid consent from individuals to process their personal data (or reliance on another appropriate legal basis) for certain data processing activities. It also significantly increased penalties for noncompliance, including where the Company may act as a data processor.

Although SharpLink continues to review and improve its policies and procedures with respect to data protection and privacy to ensure compliance with applicable laws, rules and regulations, if SharpLink’s privacy or data security measures fail to comply with applicable current or future laws and regulations, SharpLink may be subject to fines, litigation, regulatory investigations, enforcement notices requiring it to change the way it uses personal data or its marketing practices or other liabilities, such as compensation claims by individuals affected by a personal data breach, as well as negative publicity and a potential loss of business. Compliance with data protection and privacy laws and regulations will become more complex, time intensive and costly as SharpLink grows, particularly when it begins to rely on the movement of data across national boundaries.

SharpLink may face claims for data rights infringement, which could subject it to monetary damages.

Although SharpLink has generally adopted measures to avoid potential infringement of third-party data rights in the course of its operations, ownership of certain data rights is not always clear in certain jurisdictions SharpLink may operate in, particularly in “gray” jurisdictions which are presently unregulated or partially regulated. Should SharpLink face claims for illegal data rights sources or should SharpLink inadvertently infringe on another company’s data rights in any jurisdiction, SharpLink could be subject to claims of infringement, which could be time consuming and expensive to litigate or settle, divert the attention of management and materially disrupt the conduct of SharpLink’s business, and SharpLink may not prevail. Any such clams, which could include a claim for injunctive relief and damages, if successful, could have a material adverse effect on its business, prospects, financial condition and results of operations.

The operation of SharpLink’s Affiliate Marketing Services – International segment are in non-U.S. jurisdictions, which subjects the Company to the economic, political, regulatory and other risks of international operations.

SharpLink conducts business in numerous countries that carry high levels of currency, political, compliance and economic risk. Operations in these countries can present many risks, including volatility in gross domestic product and rates of economic growth, financial and governmental instability, fluctuations of currency exchange rates, and the imposition of exchange and capital controls. 

Instability and uncertainties arising from the global geopolitical environment and the evolving international and domestic political, regulatory and economic landscape, including the potential for changes in global trade policies, including sanctions and trade barriers, and trends such as populism, economic nationalism and negative sentiment toward multinational companies, as well as the cost of compliance with increasingly complex and often conflicting regulations worldwide, can impair the Company’s flexibility in modifying its product offerings, marketing, hiring or other strategies for growing its businesses, as well as its ability to improve productivity and maintain acceptable operating margins.

The United States and other countries may implement actions, including trade actions, tariffs, export controls, and sanctions, against other countries or localities, including against certain Russian government, government-related or other entities or individuals related to actions in Ukraine, which along with any retaliatory measures could increase costs, adversely affect our operations, or adversely affect our ability to meet contractual and financial obligations. In addition, in connection with the current status of international relations with Russia, particularly in light of Russian’s invasion of Ukraine, the U.S. government has adopted sanctions on certain industry sectors and parties in Russia. The governments of other jurisdictions in which the Company operates, such as the European Union, may also implement additional sanctions or other restrictive measures. These potential sanctions and export controls, as well as any responses from Russia, have adversely affect us and our supply chain, business partners or customers. For example, Entain plc, the largest customer of our Affiliate Marketing Services – International business segment, elected to exit the Russian market in February 2022 in response to Russia’s conflict with Ukraine, resulting in the loss of approximately 40% of the annual revenue historically generated from this customer. Consequently, during the six months ended June 30, 2022, SharpLink recorded impairment of $3,211,000 related to the Entain relationship and $1,515,000 related to goodwill stemming from the loss of access to customers in Russia.

While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity.

SharpLink has acquired, and in the future may acquire or merge with, other businesses. SharpLink’s business may suffer if it is unable to successfully integrate acquired businesses into the Company or otherwise manage the growth associated with multiple acquisitions.

As part of its growth strategy, SharpLink has made, and intends to continue to pursue, mergers and acquisitions as opportunities arise to add new or complementary businesses, products, brands or technologies, including the recent acquisition of certain business assets of FourCubed Management, LLC and 6t4 Company, completed on December 31, 2021 and the potential merger with SportsHub, if approved by shareholders and consummated. In some cases, the costs of the Company’s mergers and acquisitions may be substantial, including as a result of professional fees and due diligence efforts. There is no assurance that the time and resources expended on pursuing a particular acquisition will result in a completed transaction, or that any completed transaction will ultimately be successful. In addition, SharpLink may be unable to identify suitable acquisition or strategic investment opportunities or may be unable to obtain any required financing or regulatory approvals, and therefore may be unable to complete such acquisitions or strategic investments on favorable terms, if at all.

SharpLink may decide to pursue acquisitions with which its investors may not agree, and SharpLink cannot assure investors that any acquisition or investment will be successful or otherwise provide a favorable return on investment. In addition, acquisitions and the integration thereof require significant time and resources and place significant demands on Company management, as well as on our operational and financial infrastructure. In addition, if SharpLink fails to successfully close transactions or integrate new teams, or integrate the products and technologies associated with these acquisitions into the Company, the Company’s business could be seriously harmed. Acquisitions may expose the Company to operational challenges and risks, including, but not limited to:

SharpLink’s merger and acquisition strategy may not succeed if it unable to remain attractive to target companies or expeditiously close transactions. Moreover, issuing ordinary or preferred shares, or other securities, to fund an acquisition would cause economic dilution to existing shareholders.

SharpLink has begun the process of redomestication to become a U.S. company, which, if completed, would subject the Company to additional risks.

The Company has filed a Registration Statement on Form S-4 (the “Registration Statement”) to redomicile SharpLink from Israel to the State of Delaware in the United States and intends to continue the process in the fourth quarter of 2022. Risks related to the redomestication are described in more detail in the Registration Statement and include:

Moreover, we have made investments, and will continue to make investments, in the redomestication process, though we may be unable to complete the process of redomestication to Delaware.

Risks Related to the Technology, Intellectual Property and Infrastructure of SharpLink’s Business

SharpLink’s failure to protect or enforce its proprietary and intellectual property rights, including SharpLink’s unregistered intellectual property, and the costs involved in such protection and enforcement, could harm its business, financial condition, results of operations and prospects.

SharpLink relies on trademark, trade secret, confidentiality and other intellectual property protection laws to protect its rights. Circumstances outside SharpLink’s control could pose a threat to its intellectual property rights. Effective intellectual property protection may not be available in the U.S. or other countries in which SharpLink intends to operate its business. Also, the efforts SharpLink has taken to protect its intellectual property rights may not be sufficient or effective, and any significant impairment of its intellectual property rights could harm its business or ability to compete. For example, it may not always have been possible or commercially desirable to obtain registered protection for SharpLink’s products, software, databases or other technology and, in such situations, SharpLink rely on laws governing protection of unregistered intellectual property rights, confidentiality and/or contractual exclusivity of and to underlying data and technology to prevent unauthorized use by third parties.

        As such, if SharpLink is unable to protect its proprietary offerings via relevant laws or contractual exclusivity, technology and features, competitors may copy them. Additionally, protecting intellectual property rights is costly and time-consuming. Any unauthorized use of SharpLink’s intellectual property or disclosure of its confidential information or trade secrets could make it more expensive to do business, thereby harming its operating results. Furthermore, if SharpLink is unable to protect its intellectual property rights or prevent unauthorized use or appropriation by third parties, the value of its brand and other intangible assets may be diminished, and competitors may be able to mimic its product offerings and services more effectively. Any of these events could seriously harm SharpLink’s business, financial condition, results of operations and prospects.

        SharpLink currently does not hold any patents, which means its technology, products and services are susceptible to copying. The fact that the Company does not currently hold any patents also means third parties may claim patent rights over SharpLink’s technology, products and services and may bring infringement proceedings in respect of the same. Any pending and future trademark or patent applications may not be approved. In any of these cases, SharpLink may be required to expend significant time and expense to prevent infringement of or to enforce its rights, and the Company may fail to enforce its rights which may have a material adverse effect on its business. Notwithstanding SharpLink’s intellectual property rights, there can be no assurance that others will not offer products or services that are substantially similar to SharpLink’s and compete with its business.

SharpLink may face claims for intellectual property infringement, which could subject it to monetary damages or limit SharpLink in using some of its technologies or providing certain solutions.

        Although SharpLink has generally adopted measures to avoid potential infringement of third-party intellectual property rights in the course of its operations, SharpLink may not be successful in ensuring all components of its solutions have proper authorization. Additionally, the legal position in all jurisdictions in relation to the ownership and permitted use of sports data and databases is subject to change. This area may receive additional focus in the U.S. after the overturning of federal restrictions on sports betting under PASPA, thus giving individual states the power to legalize sports betting.

        SharpLink cannot be certain that its current uses of data from publicly available sources (including third-party websites) or otherwise, which are not known to infringe or misappropriate third-party intellectual property today, will not result in claims for infringement or misappropriation of third-party intellectual property in the future. Intellectual property infringement claims or claims of misappropriation against SharpLink could subject it to liability for damages and restrict it from providing solutions or require changes to certain solutions and technologies. Claims of infringement or misappropriation of a competitor’s or other third-party’s intellectual property rights, regardless of merit, could be time consuming and expensive to litigate or settle, divert the attention of management and materially disrupt the conduct of its business, and it may not prevail. Any such clams, which could include a claim for injunctive relief and damages, if successful, could have a material adverse effect on its business, prospects, financial condition and results of operations.

SharpLink relies on information technology and other systems and platforms, including its data center, Amazon Web Services and certain other third-party platforms. Failures, errors, defects or disruptions therein could diminish SharpLink’s brand and reputation, subject it to liability, disrupt its business, affect its ability to scale its technical infrastructure and have a material adverse effect on its operating results and growth prospects. SharpLink’s product offerings and other software applications and systems, and certain third-party platforms that SharpLink uses could contain undetected errors or errors that the Company fails to identify as material.

SharpLink’s technology infrastructure, including Amazon Web Services and certain other third-party platforms, is critical to the performance of its product and service offerings and its client satisfaction. Consequently, SharpLink may be subject to service disruptions as well as failures to provide adequate support for reasons that are outside of its direct control. The performance and availability of Amazon Web Services with the necessary speed, data capacity and security for providing reliable access and services can affect the delivery, availability, and performance of its services. Decisions by the owners and operators of the data centers where its cloud infrastructure, Amazon Web Services, is deployed to terminate its contracts, discontinue services to SharpLink, shut down operations or facilities, increase prices, change service levels, limit bandwidth or prioritize the traffic of other parties could also affect the delivery, availability and performance of its services. 

SharpLink devotes significant resources to network and data security to protect its systems and data. However, its systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to its business. SharpLink cannot assure you that absolute security will be provided by the measures it takes to: prevent or hinder cyber-attacks and protect its systems, data and user information; to prevent outages, data or information loss and fraud; and to prevent or detect security breaches. Such measures include a disaster recovery strategy for server and equipment failure, back-office systems and the use of third parties for certain cybersecurity services. SharpLink may experience website disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors and capacity constraints. To date, such disruptions have not had a material impact on SharpLink, individually or in the aggregate; however, future disruptions from unauthorized access to, fraudulent manipulation of, or tampering with its computer systems and technological infrastructure, or those of third parties, could result in a wide range of negative outcomes, each of which could have a material adverse effect on its business, financial condition, results of operations and prospects.

Additionally, SharpLink’s service and product offerings may contain errors, bugs, flaws or corrupted data that it has not detected, and these defects may become apparent only after their launch and could result in a vulnerability that could compromise the security of its systems. Additionally, SharpLink has detected certain errors, bugs and flaws in its product and service offerings, and have judged them to be immaterial. If SharpLink has misjudged the materiality of such errors, bugs and flaws, SharpLink’s business could be harmed. If a particular product offering is slower than SharpLink expects, clients may be unable to use its product and services offerings as desired and may be less likely to continue to use its product and services offerings, if at all. Furthermore, programming errors, defects and data corruption could disrupt its operations, adversely affect the experience of its clients and their customers, harm its reputation, cause its clients to stop utilizing its product and service offerings, divert its resources or delay market acceptance of its product and service offerings, any of which could result in legal liability to it or harm its business, financial condition, results of operations and prospects. Insufficient business continuity management could diminish its brand and reputation, subject it to liability, disrupt its business and adversely affect its operating results and growth prospects, and failure of planned availability and continuity solutions and disaster recovery when activated in response to an incident could result in system interruptions and degradation of service.

As SharpLink continues to grow and expand its business, SharpLink will need an increasing amount of technical infrastructure, including network capacity and computing power, to continue to satisfy its needs. Such infrastructure expansion may be complex, and unanticipated delays in completing these projects or availability of components may lead to increased project costs, operational inefficiencies, or interruptions in the delivery or degradation of the quality of SharpLink’s product and service offerings. In addition, there may be issues related to this infrastructure that are not identified during the testing phases of design and implementation, which may become evident only after SharpLink has started to fully use the underlying equipment or software, that could further degrade the user experience or increase its costs. As such, SharpLink could fail to continue to effectively scale and grow its technical infrastructure to accommodate increased demands. In addition, a lack of resources (e.g., hardware, software, personnel and service providers) could result in an inability to scale its services to meet business needs, system interruptions, degradation of service or operational mistakes. SharpLink’s business also may be subject to interruptions, delays or failures resulting from adverse weather conditions, other natural disasters, power loss, terrorism, cyber-attacks, public health emergencies (such as the COVID-19 pandemic) or other catastrophic events.

SharpLink believes that if its clients or their customers have a negative experience with respect to its product and service offerings, or if SharpLink’s brand or reputation is negatively affected, clients may be less inclined to continue or resume utilizing its product and service offerings or to recommend its product and service offerings to other potential clients. As such, a failure or significant interruption in its service could harm its reputation, its business, financial condition, results of operations and prospects.

Despite SharpLink’s security measures, its information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disruption of its operations and the services it provides to clients, damage to its reputation, and a loss of confidence in its products and services, each of which could adversely affect its business, financial condition, results of operations and prospects.

The secure maintenance and transmission of information is a critical element of SharpLink’s operations. SharpLink’s information technology and other systems that maintain and transmit information, or the systems of third-party service providers and business partners, may be compromised by a malicious third-party penetration of its network security, or the network security of a third-party service provider or business partner, or impacted by intentional or unintentional actions or inactions by its employees, or the actions or inactions of a third-party service provider or business partner. As a result, SharpLink’s information may be lost, disclosed, accessed or taken without consent. SharpLink has experienced attempts to breach its systems and other similar incidents in the past. The data industry is a particularly popular target for malware attacks. SharpLink expects that it will continue to be subject to attempts to gain unauthorized access to or through its information systems or those it develops for its clients, including phishing attacks by computer programmers and hackers who may develop and deploy viruses, worms or other malicious software programs. To date these attacks have not had a material impact on SharpLink’s operations or financial results, but it cannot provide assurance that it will not have a material impact in the future, including by overloading its systems and network and preventing SharpLink’s product offering from being accessed by legitimate users through the use of ransomware or other malware.

SharpLink relies on encryption and authentication technology licensed from third parties in an effort to securely transmit confidential and sensitive information. Advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect transaction data or other confidential and sensitive information from being breached or compromised. In addition, websites are often attacked through compromised credentials, including those obtained through phishing and credential stuffing. SharpLink’s security measures, and those of its third-party service providers, may not detect or prevent all attempts to breach its systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by its websites, networks and systems; or that SharpLink or such third parties otherwise maintain, including certain confidential information, which may subject the Company to fines or higher transaction fees or limit or terminate its access to such confidential information. SharpLink and such third parties may not anticipate or prevent all types of attacks until after they have already been launched. Further, techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against SharpLink or its third-party service providers.

Furthermore, security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by SharpLink’s employees or by third parties. In addition, any party which is able to illicitly obtain a user’s password could access the user’s transaction data or personal information, resulting in the perception that SharpLink’s systems are insecure. These risks may increase over time as SharpLink increases the number of clients and the complexity and number of technical systems and applications SharpLink and its employees use. Breaches of its security measures or those of its third-party service providers or cybersecurity incidents may result in: unauthorized access to its sites, networks and systems; unauthorized access to and misappropriation of information, including personally identifiable information, or the other confidential or proprietary information of SharpLink or third parties; viruses, worms, spyware, ransomware or other malware being served from SharpLink’s sites, networks or systems; deletion or modification of content or the display of unauthorized content on SharpLink’s sites; interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment of additional personnel and protection technologies, response to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; or litigation, regulatory action and other potential liabilities. In addition, the sports betting and online gaming industries have experienced and may continue to experience social engineering, phishing, malware and similar attacks and threats of denial-of-service attacks. To date, SharpLink has not experienced a security breach material to its business; however, such breaches could in the future have a material adverse effect on its operations. If any of these breaches of security should occur and be material, SharpLink’s reputation and brand could be damaged, its business may suffer, it could be required to expend significant capital and other resources to alleviate problems caused by such breaches, and SharpLink could be exposed to a risk of loss, litigation or regulatory action and possible liability. SharpLink cannot guarantee that recovery protocols and backup systems will be sufficient to prevent data loss. Actual or anticipated attacks may cause SharpLink to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.

Any compromise or breach of SharpLink’s security measures, or those of its third-party service providers, could violate applicable privacy, data protection, data security, network and information systems security and other laws and cause significant legal and financial exposure, adverse publicity and a loss of confidence in its security measures, which could have a material adverse effect on its business, financial condition, results of operations and prospects. SharpLink continues to devote significant resources to protect against security breaches or it may need to in the future to address problems caused by breaches, including notifying affected users and responding to any resulting litigation, which in turn, diverts resources from the growth and expansion of its business.

SharpLink uses third-party open source software components and failure to comply with the terms of the underlying open-source software licenses could restrict its ability to provide its product and service offerings.

SharpLink uses software components licensed to it by third-party authors under "open source” licenses, which SharpLink refers to as Open Source Software. Use and distribution of Open Source Software may entail greater risks than use of third-party commercial software, as licensors of Open Source Software generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the licensed code. In addition, the public availability of Open Source Software may make it easier for others to compromise SharpLink’s product and service offerings. 

Some licenses for Open Source Software contain requirements that SharpLink makes available source code for modifications or derivative works that SharpLink creates, or grants other licenses to its intellectual property, if SharpLink uses such Open Source Software in certain ways. If SharpLink combines its proprietary software with Open Source Software in a certain manner, it could, under certain licenses for Open Source Software, be required to release the source code of its proprietary software to the public. This would allow SharpLink’s competitors to create similar offerings with lower development effort and time and ultimately could result in a loss of its competitive advantages. Alternatively, to avoid the public release of the affected portions of SharpLink’s source code, it could be required to expend substantial time and resources to re-engineer some or all of its proprietary software.

Although SharpLink periodically reviews its use of Open Source Software to avoid subjecting its product and service offerings to conditions SharpLink does not intend, the terms of many licenses for Open Source Software have not been interpreted by U.S. or foreign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on SharpLink’s ability to provide or distribute its product or service offerings. From time to time, there have been claims challenging the ownership of Open Source Software against companies that incorporate Open Source Software into their solutions. SharpLink could be subject to lawsuits by parties claiming ownership of what it believes to be Open Source Software. Moreover, SharpLink cannot assure you that its processes for controlling its use of Open Source Software in its product and service offerings will be effective. If SharpLink is held to have breached or failed to fully comply with all the terms and conditions of an Open Source Software license, SharpLink could face infringement or other liability, or be required to seek costly licenses from third parties to continue providing its product and service offerings on terms that are not economically feasible, to find replacement software, to discontinue or delay the provision of its product and service offerings if replacement cannot be accomplished on a timely basis or to make generally available, in source code form, its proprietary software, any of which could have a material adverse effect on its business, financial condition, results of operations and prospects.

Risks Related to the Combined Company

Maintaining and improving the combined company’s financial controls and the requirements of being a public company may strain the combined company’s resources, divert management’s attention and affect its ability to attract and retain qualified board members.

        As a public company, the combined company will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and Nasdaq rules. The requirements of these rules and regulations will impact the combined company’s legal and financial compliance costs, make some activities more difficult, time-consuming or costly and place strain on its personnel, systems and resources. As noted above, on January 1, 2023, the Company will cease to be a “foreign private issuer.” Therefore, under the Exchange Act, the combined company will be required to file annual, quarterly and current reports with respect to its business and financial condition commencing January 1, 2023, which will impose additional work and expense on the combined company, including in connection with the consolidation of SportsHub’s assets, liabilities and results of operations into the combined company’s financial statements on a quarterly and timely basis.

In addition, the Sarbanes-Oxley Act requires, among other things, that the combined company maintain effective disclosure controls and procedures and internal control over financial reporting. Ensuring that the combined company will have adequate internal financial and accounting controls and procedures in place is a costly and time-consuming effort that needs to be re-evaluated frequently. We do not expect that the combined company will have an internal audit group, and the combined company may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Implementing any appropriate changes to the combined company’s internal controls may require specific compliance training for the combined company’s directors, officers and employees, entail substantial costs, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of the combined company’s internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase the combined company’s operating costs and could materially impair its ability to operate its business. Moreover, effective internal controls are necessary for the combined company to produce reliable financial reports and are important to help prevent fraud.

        In accordance with Nasdaq rules, unless it is eligible for an exemption, the combined company will be required to maintain a majority of independent directors on the board. The various rules and regulations applicable to public companies make it more difficult and more expensive for the combined company to maintain directors’ and officers’ liability insurance, and the combined company may be required to accept reduced coverage or incur substantially higher costs to maintain coverage. If the combined company is unable to maintain adequate directors’ and officers’ insurance, its ability to recruit and retain qualified officers and directors will be significantly curtailed.

We expect that the rules and regulations applicable to public companies will result in the combined company incurring substantial legal and financial compliance costs. These costs will decrease the combined company’s net income or increase its net loss and may require it to reduce costs in other areas of its business.

If securities or industry analysts do not publish research or publish unfavorable research about the combined company’s business, its share price and trading volume could be adversely affected.

The trading market for the combined company’s securities will depend in part on the research and reports that securities or industry analysts publish about the combined company. The combined company may never obtain sufficient research coverage by securities and industry analysts. If no sufficient securities or industry analysts commence coverage of the combined company, the trading price for the combined company’s shares could be negatively impacted. If the combined company obtains sufficient securities or industry analyst coverage and if one or more of the analysts who covers it downgrades the combined company’s shares or publishes inaccurate or unfavorable research about the combined company’s business, its share price would likely decline. If one or more of these analysts ceases coverage of the combined company or fails to publish reports regularly, demand for the combined company’s shares could decrease, which could cause its share price and trading volume to decline.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on the combined company’s share price.

Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC require an annual management assessment of the effectiveness of our internal control over financial reporting. If the combined company fails to maintain the adequacy of its internal control over financial reporting as such standards are modified, supplemented or amended from time to time, it may not be able to ensure that it can conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC. If the combined company cannot in the future favorably assess the effectiveness of its internal controls over financial reporting, investor confidence in the reliability of its financial reports may be adversely affected, which could have a material adverse effect on the combined company’s share price.

The combined company’s securities could be delisted from Nasdaq if it does not comply with Nasdaq’s continued listing standards.

If the combined company’s securities are delisted by Nasdaq, its securities may be eligible to trade on the OTC Bulletin Board or another over-the-counter market. Any such alternative would likely result in it being more difficult for the combined company to raise additional capital through the public or private sale of equity securities and for investors to dispose of or obtain accurate quotations as to the market value of, the combined company’s securities. In addition, there can be no assurance that the combined company’s securities would be eligible for trading on any such alternative exchange or markets.

The combined company does not anticipate paying any cash dividends on the combined company’s Ordinary Shares in the foreseeable future.

        Neither SharpLink nor SportsHub have ever declared or paid cash dividends on their respective share capital. Neither SharpLink nor SportsHub anticipate paying any cash dividends on the combined company’s Ordinary Shares in the foreseeable future. It is anticipated that the combined company will retain all available funds and any future earnings to fund the development and growth of its business. As a result, capital appreciation, if any, of the combined company’s Ordinary Shares will be the combined company’s shareholders’ sole source of gain for the foreseeable future.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This proxy statement, including information set forth or incorporated by reference in this document, contains statements that constitute forward-looking information statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the expected timetable for completing the Transaction, the satisfaction or waiver of any conditions to the Transaction, anticipated benefits, growth opportunities and other events relating to the Transaction, SharpLink’s, SportsHub’s and the combined company’s plans, objectives and expectations for future operations, including its projected results of operations and statements contained in “Questions and Answers About the Transaction” and “The Transaction” and in statements containing words such as "believes,” "estimates,” "anticipates,” "intends,” "continues,” "contemplates,” “expects,” “may,” “will,” “could,” “should,” or ”would” or other similar words or phrases. These statements, which are based on information currently available to SharpLink, are not guarantees and involve risks and uncertainties that could cause actual results to materially differ from those expressed in, or implied by, these statements, including those described under “Risk Factors” and in SharpLink’s filings with the United States Securities and Exchange Commission that are incorporated herein by reference. We cannot guarantee any future results, including with respect to the Transaction. Readers should not place undue reliance on forward-looking statements. These forward-looking statements speak only as of the date on which the statements were made and we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statement included in this proxy statement or elsewhere, except as required by law.

INDUSTRY AND OTHER DATA

We obtained the industry, market and competitive position data in this proxy statement from our own internal estimates and research as well as from industry and general publications and research, surveys and studies conducted by third parties. While we believe that the statistical data, market data and other industry data and forecasts are reliable, we have not independently verified the data. Information that is based on estimates, forecasts, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information based on various factors, including those discussed in the section titled “Risk Factors.”

THE TRANSACTION

This section and the sections titled “The Merger Agreement” and “First Amendment to Agreement and Plan of Merger” in this proxy statement describe the material aspects of the Transaction, including the Merger Agreement. Although SharpLink believes that this description covers the material terms of the Transaction and the Merger Agreement, it may not contain all of the information that is important to you. You should read carefully this entire proxy statement for a more complete understanding of the Transaction and the Merger Agreement, including the Merger Agreement attached as Annex A-1 and the Merger Agreement Amendment attached as Annex A-2, and the other documents to which you are referred herein. See the section titled “Where You Can Find More Information” in this proxy statement.

Historical Background of SharpLink Gaming Ltd.

The Company was incorporated as a public limited liability company under the laws of the State of Israel in December 1995 as Mer Telemanagement Solutions Ltd. (“MTS”). The Company operates under such law and associated legislation of an Israeli business. In July 2021, MTS completed a merger between New SL Acquisition Corp., its wholly owned subsidiary, and SharpLink, Inc. (the “MTS Merger”). In the MTS Merger, SharpLink, Inc. was treated as the acquirer for accounting purposes because, among other reasons, its pre-merger shareholders held a majority of the outstanding shares of the Company immediately following the merger. After the merger, the Company changed its name from Mer Telemanagement Solutions Ltd. to SharpLink Gaming Ltd. and its NASDAQ ticker symbol from MTSL to SBET.

Founded in 2019 and headquartered in Minneapolis, Minnesota, 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 to convert sports fans into sports bettors for licensed, online sportsbook operators. SharpLink’s intelligent C4 Sports Betting Conversion technology, which is deployed by the Affiliate Marketing Services – United States segment, delivers and determines the best sportsbook betting offers and experience for each identified user. Using sophisticated, AI-enabled behavioral modeling and tracking technologies, and by analyzing user’s past and present behaviors, we serve sports fans with personalized betting offers specifically tied to each fan’s favorite sports, teams and players. Additionally, through its Sports Gaming Clients Services segment, SharpLink specializes in helping sports media companies develop strategies, products and innovative solutions to drive deep customer engagement with highly interactive sports games and mobile applications. The Company’s Affiliate Marketing Services – International business segment generates revenue by delivering a broad base of casino game players to iGaming operators, which are our customers. SharpLink is run by industry veterans with several successful exits in the sports gaming and iGaming sectors.

In addition to the three operating segments mentioned above, the Company operates its Enterprise TEM business, which refers to the Company’s legacy MTS business. In June 2022, the Company’s Board of Directors approved management to enter into negotiations to sell the MTS business. The Company is currently engaged in negotiations with an unaffiliated third party relating to the sale of its Enterprise TEM business, which transaction the Company expects to be completed by the end of 2022.

Background of the Transaction

The following chronology sets forth a summary of the material events leading up to the execution of the Merger Agreement.

The Board of Directors of SharpLink held a regular meeting on September 28, 2021. Among other items considered by the SharpLink Board at such meeting, the Board considered and discussed a proposal by management to merge SportsHub into SharpLink in a non-cash, stock-only transaction. Mr. Phythian presented details relating to the strategic reasoning for the proposed merger and the resulting benefits the combined company could potentially realize through a merger of the businesses, which included, among others, the following key considerations:

Five members of SharpLink’s Board of Directors – Messrs. Phythian, Nicholas, Housman, Abdo and Doering – directly or indirectly own shares of SportsHub’s outstanding capital stock. In consideration of evaluating and negotiating a possible transaction in which SharpLink and SportsHub would enter into a possible strategic business combination, the Board established a special committee of the Board (the “Special Committee”) comprised of Adrienne Anderson and Scott Pollei, both Outside Directors who are disinterested parties with respect to SportsHub and the potential Transaction. The SharpLink Board further delegated to the Special Committee all the power and authority of the SharpLink Board, to the fullest extent permitted by law, to (i) evaluate, review and consider a potential Transaction; (ii) determine if the terms of any such Transaction are in the best interests of SharpLink and its shareholders; (iii) take actions on behalf and in the bests interests of the shareholders with respect to such potential Transaction, including but not limited to review, discussion, consideration, deliberation, examination, investigation, analysis, assessment, evaluation, exploration, response and negotiation of the terms and conditions of a potential Transaction; and (iv) submit its recommendations to the SharpLink Board. The SharpLink Board also granted to the Special Committee the authority to engage additional legal counsel, financial advisors, consultants and agents as the Special Committee deemed appropriate to supports its due diligence and ultimate recommendations to the Board.

Between mid-October and mid-November of 2021, the Special Committee began its evaluation of SportsHub and oversaw negotiations with SportsHub in connection with a non-binding letter of intent between the companies, which was signed on December 2, 2021. As contemplated by the December 2021 letter of intent, the parties agreed that SharpLink would acquire SportsHub in a merger transaction in which all outstanding capital stock of SportsHub would be exchanged for 3.67 million ordinary shares of SharpLink. The December 2021 letter of intent contained other provisions customary for similar merger transactions.

For purposes of the assessment, discussion and negotiations of the relative valuation of each company in the proposed Transaction, on November 24, 2021, the Special Committee engaged the investment banking firm of Northland Capital Markets (“Northland”) to perform a financial analysis regarding SharpLink, SportsHub and their respective securities in connection with the proposed Transaction and to render a fairness opinion on the terms and conditions of the draft definitive merger agreement with SportsHub.

On December 13, 2021, the SharpLink Board met to review and consider the proposed transaction with SportsHub. In addition to the SharpLink Board members, also present were Brian Bennett, SharpLink’s former Chief Financial Officer, representatives of Northland and a representative from SharpLink’s U.S. counsel, Fredrikson & Byron, P.A. During the meeting, Mr. Bennett reviewed the history of the proposed Transaction, including the origin of discussions with SportsHub’s leadership, the formation of the Special Committee and the engagement of Northland. Northland then followed by reviewing the scope of its engagement and materials it reviewed to conducts its analysis, which included drafts of the definitive merger agreement, financial statements of the respective parties and financial projections for both companies. Northland also reported that it had analyzed data regarding the value of SharpLink, including its recent stock trading history, the value of other comparable companies, a number of qualitative factors in connection with the proposed Transaction, including both benefits and various risks. Northland then turned to review its conclusions regarding its financial analysis of the transaction and concluded that, based on its preliminary analysis, Northland believed that the consideration to be paid to the SportsHub shareholders in connection with the proposed Transaction would be fair, from a financial point of view, to the Company. The Board then discussed certain terms of the proposed Transaction, as well as process and timing considerations as the parties moved towards finalizing the definitive Merger Agreement and ancillary documents.

On December 20, 2021, the SharpLink Board met to discuss, among other matters, the proposed definitive Merger Agreement and the fact that SharpLink was also advancing towards closing on another acquisition and was in the process of preparing documentation relating to the filing of a Form S-4 with the U.S. Securities and Exchange Commission necessary to secure shareholder approval to domicile SharpLink in the United States. Because it then appeared unlikely that SportsHub would be able to satisfy certain conditions to closing the proposed transaction, including the timely completion of the audit of SportsHub’s 2020 financial statements and preparation of its interim 2021 financial statements, the Board of SharpLink determined to forego the proposed acquisition of SportsHub so that SharpLink could focus its attention on other corporate matters, including a plan to redomicile the Company in the United States.

On May 2, 2022, senior members of SharpLink’s management team provided the Special Committee with a proposed revised letter of intent relating to the acquisition of SportsHub, along with a detailed comparison to the original letter of intent and SportsHub’s cap table. The primary change included in the revised letter of intent compared to the original letter of intent was the elimination of variable number of shares to a fixed number of shares. The original letter of intent included the issuance of a variable number of shares based on a base business value of $15 million (less any assumed debt) and a 45-calendar day trailing average closing stock price. The revised letter of intent provided for the issuance to the SportsHub stockholders of a fixed number of 3,000,000 Ordinary Shares as consideration in connection with the Transaction. The Special Committee members, Mr. Pollei and Ms. Anderson, held a telephonic conference that afternoon to discuss the merits of the revised terms and conditions proposed in the revised letter of intent and agreed to pursue the Merger under the revised terms and conditions.

On May 24, 2022, Special Committee members presented SportsHub’s Board of Directors with an offer to merge SportsHub into SharpLink in exchange for 3,000,000 SharpLink Ordinary Shares. The SportsHub Board reviewed the offer and agreed to move forward with the revised letter of intent provided that SharpLink agreed to increase the number of SharpLink Ordinary Shares to be issued as consideration from 3,000,000 to 3,500,000. The SportsHub Board believed that 3,500,000 shares was more consistent with the intent of the original letter of intent that was signed by both parties on December 2, 2021. The SportsHub Board also noted that several other aspects of the proposed merger would still need to be discussed and agreed upon, including the provisions for lock-up/leak-out clauses and discussions surrounding adding a member to the SharpLink Board of Directors and the appropriate treatment of the existing SportsHub stock option pool.

On June 3, 2022, the Special Committee held a telephonic meeting to discuss the counteroffer, and both agreed that the proposed counteroffer was acceptable.

On June 6, 2022, all members of SharpLink’s Board of Directors met via video conference to discuss the counteroffer. In view of the Special Committee’s recommendation to proceed with the Merger based on the terms and conditions as set forth in SportsHub’s counteroffer, the Board approved the counteroffer providing for Merger Consideration of 3,500,000 shares of SharpLink’s Ordinary Shares and approved the reengagement of Northland for the purpose of reviewing the revised terms of the Merger and revise their Fairness Opinion, accordingly. In addition, the SharpLink Board reviewed SportsHub’s request for a designated board seat on SharpLink’s Board and unanimously opposed the provision of the Board seat.

On June 13, 2022, the Special Committee was informed by SharpLink’s management that SportsHub’s legal counsel was working on addressing a liquidation preference right held by preferred stockholders of SportsHub, which resulted in SportsHub requesting an additional 170,000 shares of SharpLink’s Ordinary Shares allocatable to SportsHub’s preferred stockholders. Following its review and discussion of the request, the Special Committee determined that the Merger would not move forward without the additional allocation of shares to SportsHub’s preferred stockholders in consideration of their liquidation preference right and that the issuance of 170,000 shares of SharpLink’s Ordinary Share to SportsHub’s preferred stockholders was a fair and reasonable request. As a result, the Special Committee recommended to the SharpLink Board that a Board meeting be scheduled to approve the new provision.

On June 28,2022, all members of SharpLink’s Board met via video conference to discuss and approve the issuance of an additional 170,000 shares of SharpLink’s Ordinary Shares to the preferred stockholders of SportsHub; and unanimously approved the provision.

On July 1, 2022, the Special Committee received a final, revised letter of intent from SportsHub, which included the issuance, in aggregate, of 3,670,000 shares of SharpLink’s Ordinary Shares as total Merger Consideration.

On July 8, 2022, the SharpLink Board of Directors was provided a signed letter of intent by the Special Committee and directed the Special Committee members to work with SharpLink’s management team and legal counsel to prepare the Agreement and Plan of Merger.

Through July and August, the Special Committee worked in collaboration with the management team and SharpLink’s legal counsel to draft and finalize the Agreement and Plan of Merger.

On August 29, 2022, all members of SharpLink’s Board met via video conference to review the final Agreement and Plan of Merger and the preliminary Fairness Opinion prepared by Northland.

On September 2, 2022, the Special Committee formally convened via telephonic conference and determined that the proposed transaction was fair to the independent SharpLink shareholders when compared to the SharpLink shareholders who also held SportsHub securities. Following discussion with management and based on the opinion from Northland, the Special Committee unanimously adopted the following resolutions:

The SharpLink Audit Committee then met to discuss the proposed merger and its structure, including whether or not it entails or includes a “distribution” and noted that the consideration is in accordance with the Northland fairness opinion and present market terms. The Audit Committee also considered and discussed the fact that certain SharpLink officers and directors have personal interests in SportsHub through direct or indirect ownership of preferred and/or common stock in SportsHub and therefore may be a deemed to have a personal interest in the transaction. Following the discussion and in light of the recommendation of the Special Committee, as required under the Israeli Companies Law, 1999, the SharpLink Audit Committee unanimously adopted the following resolutions:

Later that same day, the SharpLink Board held a meeting with management and its legal counsel. At the meeting, the Special Committee and members of the management team provided an overview of the accounting, tax and legal due diligence of SportsHub. At the Meeting, SharpLink’s U.S. counsel presented a detailed summary of the key provisions of the Transaction documents. In addition, representatives of Northland discussed the proposed Transaction and reviewed various analyses and other materials that were presented to the Board, and then delivered to the SharpLink Board its opinion, to the effect that and subject to various assumptions, qualifications and limitations set forth in its opinion, as of that date, the consideration being paid by SharpLink in the Transaction is, from a financial point of view, fair and reasonable to SharpLink and its shareholders.

Thereafter, the Board thereafter unanimously determined that the Merger Agreement and the transactions contemplated thereby are fair to, advisable and in the best interest of the Company and its shareholders, and accordingly, the Board approved the Merger Agreement and the Transaction. The Board further resolved that that the Merger and contemplated transactions do not include a “distribution” (as such term is defined by the Companies Law) and to recommend to the SharpLink shareholders to approve the Merger Agreement and the Transaction. All members of the SharpLink Board participated in the discussion and adoption of the resolutions as a majority of the members of the SharpLink Board could be deemed to have a personal interest in the Transaction and the Transaction is therefore (among other reasons) presented to the SharpLink shareholders for approval.

On September 6, 2022, SharpLink distributed on the wire a press release and furnished the SEC with a copy of the press release on Form 6-K, announcing its intent to acquire SportsHub.

On October 16, 2022, the Special Committee was notified by SharpLink’s management that SportsHub’s Board of Directors had expressed concerns about the decline in the stock price of SharpLink’s Ordinary Shares from $1.03 at the time the Merger Agreement was signed to $0.71 on October 14, 2022, and the impact it would have on the SportsHub shareholders.

On October 17, 2022, the Special Committee convened a meeting with SharpLink’s management via video conference to discuss the decline in SharpLink’s stock price and its impact on the Merger. Prior to the call, SharpLink’s CFO, Robert DeLucia, provided the Special Committee with an Excel spreadsheet illustrating the impact of the share price decline on the Merger. To address the issue, Mr. DeLucia proposed that the Merger Agreement be amended to provide for a collar and ceiling to the issuance of shares to SportsHub’s common stockholders. The proposal provided for the issuance of additional shares if the SharpLink Stock Price was between $1.02 and $0.80, which results in the value of the Transaction being at approximately $8.78 million (which includes $5 million of assumed debt). Further, he proposed that if the SharpLink Stock Price increased to the range between $1.79 and $2.00, the number of Ordinary Shares to be issued as consideration in the Transaction would be reduced.

On October 18, 2022, the Special Committee met via telephonic conference to discuss the proposed amendment and the impact of “sliding scale” of share issuance to the overall Merger. The Special Committee agreed and resolved to recommend to SharpLink’s Board that the collar provision be approved, providing for additional share issuance if the SharpLink Stock Price was between $1.02 and $0.80, but recommended that the range of stock prices triggering a decrease in the consideration be revised to a range of $1.51 to $1.71.

On October 28, 2022, all members of the SharpLink Board were provided with a copy of the Merger Agreement Amendment and convened via video conference to discuss and review the Special Committee’s recommendations. The Merger Agreement Amendment was unanimously approved by the Board.

On November 2, 2022, the Merger Agreement Amendment was signed by SharpLink and SportsHub.

Reasons for the Transaction

The Special Committee, Audit Committee and Board considered the following factors in reaching their conclusion to approve the Merger Agreement and to recommend that the SharpLink shareholders approve the Transaction:

In the course of its deliberations, the Special Committee, Audit Committee and the SharpLink Board also considered a variety of risks and other countervailing factors related to entering into the Transaction, including:

The foregoing information and factors considered by the Special Committee, Audit Committee and the SharpLink Board are not intended to be exhaustive but are believed to include all of the material factors considered by these organs. In view of the wide variety of factors considered in connection with its evaluation of the Transaction and the complexity of these matters, these organs did not find it useful and did not attempt to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of these organs may have given different weights to different factors. The Special Committee, Audit Committee and the SharpLink Board conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, the SharpLink management team and the legal, financial and other advisors of SharpLink, and considered the factors overall to be favorable to, and in support of, its unanimous determination.

Fairness Opinion of Northland Capital Partners

SharpLink’s Special Committee retained Northland to provide a fairness opinion in connection with the Merger between SharpLink and SportsHub. In selecting Northland, the Special Committee considered, among other things, Northland’s qualifications, expertise and reputation, as well as Northland’s knowledge of SharpLink and SportsHub, the businesses of SharpLink and SportsHub and the industries in which SharpLink and SportsHub operate.

On September 2, 2022, Northland rendered its final oral opinion to the SharpLink Board, which was subsequently confirmed in a letter dated September 6, 2022, stating that, as of the date of the letter and subject to and based on the assumptions made, procedures followed, matters considered, limitations of the review undertaken and qualifications in such letter, the consideration to be paid by SharpLink to the equityholders of SportsHub pursuant to the Merger Agreement is fair, from a financial point of view. The opinion addressed only the Merger Consideration to be paid by SharpLink in the Merger. Northland was not asked to consider, and the opinion does not address, the Share Distribution.

The full text of Northland’s written opinion letter, dated September 6, 2022, is attached as Annex  B to this proxy statement. You should read Northland’s opinion letter carefully and in its entirety for a discussion of, among other things, the scope of the review undertaken, and the assumptions made, procedures followed, matters considered and qualifications and limitations of the review undertaken by Northland in connection with its opinion. This summary is qualified in its entirety by reference to the full text of the opinion letter. Northland’s opinion letter was directed to SharpLink’s Special Committee and the SharpLink Board and addressed only the fairness of the Merger Agreement, from a financial point of view, as of the date of the opinion. It does not constitute a recommendation to the SharpLink Board in connection with the Transaction or a recommendation to any holder of SharpLink’s securities as to how to vote or act in connection with the Transaction or any other matter.

In connection with reviewing the Transaction and rendering its opinion, Northland has informed SharpLink that, among other things, it has reviewed:

In addition, Northland held discussions with certain members of the respective management teams of SharpLink and SportsHub and certain of their respective representatives and advisors regarding the business, operations, financial condition and prospects of SportsHub, the Transaction and related matters. Northland also compared the financial and operating performance of SportsHub with that of companies with publicly traded equity securities that it deemed to be relevant. Northland also conducted such other analyses, examinations, and inquiries and considered such other financial, economic and market criteria as it deemed necessary and appropriate in arriving at its opinion.

With the consent of the SharpLink Board, Northland assumed and relied upon the accuracy and completeness of all of the financial and other information furnished to, discussed with or otherwise made available to Northland or that was publicly available. Northland was not engaged to, and did not independently attempt to, verify any of such information. In addition, SharpLink’s and SportsHub’s respective management teams advised Northland, and Northland has assumed, with the permission of the SharpLink Board, that the financial projections provided to Northland were reasonably prepared in good faith on bases reflecting the best available information, estimates and judgments of SharpLink’s and SportsHub’s respective management team as to the future financial results and condition of SportsHub and SharpLink. Northland also relied upon information provided by SportsHub’s management as to the reasonableness of the financial projections (and the assumptions and bases therefor) provided to Northland. Northland was not engaged to assess the reasonableness or achievability of the projections or the assumptions on which they were based. Northland expressed no view as to such projections or assumptions and did not undertake any obligation to update its analysis or opinion in the event of any material changes to such projections or estimates. Northland did not conduct a physical inspection, valuation, or appraisal of any of the assets or properties of SportsHub, and Northland was not furnished with any such valuation or appraisal. Northland considered using a discounted cash flow analysis to imply a value for SportsHub, but, after consulting with the Special Committee and SharpLink’s Chief Financial Officer, ultimately did not use such an analysis due to limited relevant long-term projections and estimates.

Northland was not asked to, nor did Northland, offer any opinion as to the material terms of the Merger Agreement or the form of the Transaction. Northland was not requested to opine as to, and its opinion did not address, the basic business decision to proceed with or effect the Transaction. In rendering its opinion, Northland assumed, with the consent of the SharpLink Board, that the final executed form of the Merger Agreement would not differ in any material respect from the drafts that Northland examined, and that the conditions to the Transaction set forth in the Merger Agreement will be satisfied or waived and that Transaction will be consummated in a manner consistent with that contemplated by the Merger Agreement. Northland also assumed that all regulatory approvals and consents necessary for the consummation of the Transaction would be obtained without any adverse effect on SharpLink or SportsHub or alter the terms of the Transaction.

Northland’s opinion was based on financial, market, economic and other conditions existing on, and information made available to Northland as of September 2, 2022 and does not address any matters subsequent to such date. Northland’s opinion was limited to the fairness of the Merger Consideration to be paid by SharpLink, from a financial point of view, as of the date of the opinion. Northland’s opinion does not address SharpLink’s underlying business decision to effect the Transaction or any other terms of the Merger Agreement. Although subsequent developments may affect Northland’s opinion, Northland does not have any obligation to update, revise or reaffirm its opinion. Northland’s opinion was approved by the Northland Fairness Opinion Committee.

Summary Financial Analyses

The following is a summary of the material financial analyses performed by Northland in arriving at its opinion. None of the analyses performed by Northland were necessarily assigned a greater significance by Northland than any other, nor does the order of analyses described represent relative importance or weight given to those analyses by Northland. The summary text describing each financial analysis does not purport to constitute a complete description of Northland’s financial analyses, including the methodologies and assumptions underlying the analyses, and, if viewed in isolation, could create a misleading or incomplete view of the financial analyses performed by Northland. The summary text set forth below does not represent and should not be viewed by anyone as constituting or purporting to constitute the conclusions reached by Northland with respect to any of the analyses performed by it in connection with its opinion.

Analysis of Selected Publicly Traded Companies

As part of its financial analyses, Northland reviewed and compared certain publicly available financial data, ratios and trading multiples for publicly traded companies within the sports gaming, betting, eSports, and diversified media industries that Northland determined, based on its professional judgment, that their businesses, size, financial information, product mix and operating profiles were reasonably comparable to those of SportsHub for purposes of this analysis, including the following eight companies (collectively, the “Selected Publicly Traded Companies”):

Financial data of the Selected Publicly Traded Companies were based on publicly available information, including information from public filings, third party equity research reports and publicly available research analysts’ estimates and forward-looking metrics (such estimates and metrics based on information available via S&P Capital IQ). Northland reviewed data, including implied market capitalization, current prevailing equity values (“Price”), based on consensus estimates obtained via S&P Capital IQ for each of the Selected Publicly Traded Companies and SharpLink.

Based on its professional judgement and experience, Northland determined that the operations, size, businesses, product mix and financial information of such companies were similar to that of SportsHub for purposes of this analysis. The multiples for each of the above-mentioned financial metrics for each of the Selected Publicly Traded Companies were calculated using their respective closing prices on September 2, 2022 and were based on the most recent publicly available information and information available via S&P Capital IQ on that date. Financial data for the companies used to compare to the Selected Publicly Traded Companies was based on estimates of SharpLink’s management and SportsHub’s projections. Based on its professional judgement and experience, Northland applied a 25% private company discount to the equity value of the Selected Publicly Traded Companies.

The following summarizes the results of these analyses with respect to the financial results and metrics of the Selected Publicly Traded Companies after applying the discounted multiples as set forth above, including:

Northland then applied the low to high LTM revenue and EBITDA multiples and the calendar years 2022 and 2023 estimated revenue and EBITDA multiples described above, derived from the Selected Publicly Traded Companies, to corresponding data of SportsHub. This analysis indicated approximate implied aggregate enterprise value reference ranges for SportsHub of $2.4 million to $21.9 million based on EV/ LTM Revenue of $5.7 million, $2.7 million to $17.2 million and $2.6 million to $15.8 million based on calendar year 2022 and calendar year 2023 estimated revenues of $6.3 million and $6.8 million, respectively, and $6.1 million to $12.2 million based on EV/LTM EBITDA of $0.6 million, $1.9 million to $16.0 million and $5.1 million to $17.7 million based on calendar year 2022 and calendar year 2023 estimated EBITDA of $0.5 million and $1.5 million, respectively, as compared to the Pre-Transaction Enterprise Value of $8.1 million. Northland reviewed and used unaudited financial statements of SportsHub as of and for the six months ended June 30, 2022. SportsHub anticipates its auditors will complete a review of those financial statements prior to closing the Transaction. Northland was not asked to analyze, and its opinion does not account for alternate results that may differ from the unaudited financial statements that were supplied to Northland.

No company used in the Selected Publicly Traded Companies’ analysis is identical to SportsHub. Northland made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics of SportsHub and of each Selected Publicly Traded Company. In evaluating the Selected Publicly Traded Companies, Northland made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters which are beyond SharpLink’s and SportsHub’s control, such as the impact of competition on SportsHub and the sports gaming, betting, eSports and diversified media industries generally, industry growth and the absence of any adverse material change in SportsHub’s financial condition and prospects or those of SportsHub or the sports gaming, betting, eSports and diversified media industries or the financial markets in general.

Based on its professional judgment and experience, Northland reviewed and compared certain publicly available transaction valuation metrics that Northland determined, based on its professional judgment and consideration paid in such transactions, including implied enterprise value, EV / Revenue and EV / EBITDA. The information and financial data of the selected precedent transactions were based on the most recent publicly available information and S&P Capital IQ.

The following summarizes the results of these analyses with respect to comparable transactions:

Northland then applied the low to high last twelve months revenue and EBITDA multiples described above derived from the Selected Precedent Transactions to the corresponding data of SportsHub. This analysis indicated an approximate implied aggregate enterprise value reference range for the companies of approximately $5.5 million to $32.8 million and $2.4 million to $12.7 million, based on revenue and EBITDA, respectively. Northland then applied the low to high next twelve months revenue and EBITDA multiples described above derived from the Selected Precedent Transactions to the corresponding data of SportsHub. This analysis indicated an approximate implied aggregate enterprise value reference range for the companies of approximately $7.7 million to $18.8 million and $10 million to $13.5 million, based on revenue and EBITDA multiples respectively. At the direction of SharpLink’s Special Committee, Northland used SportsHub’s 2023 projected estimates rather than next twelve month estimates. Northland was not asked to analyze, and its opinion does not account for alternate implied values that may differ from using different period than those supplied to Northland.

No transaction used in the Selected Precedent Transactions’ analysis is identical to the Transaction. In evaluating the Selected Precedent Transactions, Northland made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters which are beyond SharpLink’s and SportsHub’s control, such as the impact of competition on the companies and the sports gaming, betting, eSports and diversified media industries generally, industry growth and the absence of any adverse material change in SportsHub’s financial condition and prospects or those of SportsHub or the sports gaming, betting, eSports, and diversified media industries or the financial markets in general.

Miscellaneous

The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. In arriving at its opinion, Northland did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Rather, Northland made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses.

The credit, financial, and stock markets have from time-to-time experienced unusual volatility, and Northland was not asked to and expressed no opinion or view as to any potential effects of such volatility on the Transaction and did not address potential developments in any such markets. In addition, Northland was not asked to and expressed no opinion or view as to any potential effects of the COVID-19 pandemic on the Transaction, SharpLink or SportsHub.

SharpLink agreed to pay Northland a cash fee of $250,000. In addition, SharpLink has agreed to reimburse certain of Northland’s expenses related to its engagement and to indemnify Northland against certain liabilities that may arise from services provided in connection with rendering its opinion.

Northland, as a customary part of its investment banking business, is continually engaged in performing financial analyses regarding businesses and their securities in connection with acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions for estate, corporate and other purposes.

Shareholders are urged to review the section entitled “Risk Factors — Risks Related to SportsHub’s Business” in this proxy statement for a description of the risks relating to SportsHub’s business. Shareholders should also read the section entitled “Forward-Looking Statements” in this proxy statement for additional information regarding the risks inherent in forward-looking information.

THE MERGER AGREEMENT

The following is a summary of the material terms of the Merger Agreement, which is attached as Annex A-1 to this proxy statement and is incorporated by reference. The Merger Agreement has been attached to this proxy statement at Annex A-1 to provide you with information regarding its terms. It is not intended to provide any other factual information about SharpLink, the Merger Subsidiary or SportsHub. The following description does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement and its ancillary documents. You should refer to the full text of the Merger Agreement and the ancillary documents for details of the Transaction and the terms and conditions of the Merger Agreement.

Structure

Under the Merger Agreement, at the Effective Time, SportsHub will merge with and into the Merger Subsidiary, with the Merger Subsidiary surviving as a wholly owned subsidiary of SharpLink.

Completion and Effectiveness of the Transaction

The Transaction will be completed as promptly as practicable after all of the conditions to completion of the Transaction are satisfied or waived, including the approval of the shareholders of SharpLink. SharpLink and SportsHub are working to complete the Transaction as quickly as practicable. The Transaction is anticipated to close during the fourth quarter of 2022. However, SharpLink and SportsHub cannot predict the exact timing of the completion of the Transaction because it is subject to various conditions.

Merger Consideration

SportsHub is currently SharpLink’s largest shareholder, holding approximately 8.9 million shares, or 40%, of SharpLink’s Ordinary Shares currently issued and outstanding as of Thursday, November 3, 2022. As used in this proxy statement, the term “SportsHub-Owned SharpLink Shares” means the SharpLink Ordinary Shares owned by SportsHub as of the effective time of the Merger. Pursuant to the terms and conditions set forth in the Merger Agreement, SportsHub will be required to distribute the SportsHub-Owned SharpLink Shares to its stockholders immediately prior to the Effective Time of the Merger. Upon consummation of the Merger and in exchange for all outstanding capital stock of SportsHub, SharpLink will issue an aggregate 3.67 million Ordinary Shares to the holders of SportsHub common and preferred stock, including options and warrants to purchase SportsHub common stock, (subject to adjustments pursuant to the Merger Agreement Amendment attached as Annex A-2 to this proxy statement). The approximate 12.6 million shares of SharpLink’s Ordinary Shares to be distributed or issued to the stockholders of SportsHub pursuant to the share distribution and Merger Agreement, as applicable, will be subject to a six-month lock-up period; thereafter, no more than 25% of the holders’ shares may be eligible for resale each month until the restrictions no longer exist.

Exchange Ratios

As provided in the Merger Agreement, the term “Common Exchange Ratio” refers to the number of Merger Consideration Shares and SportsHub-Owned SharpLink Shares allocable to each outstanding share of SportsHub Common Stock (assuming the issuance of all shares of SportsHub Common Stock underlying outstanding options and warrants), and the term “Preferred Exchange Ratio” refers to the number of Merger Consideration Shares and SportsHub-Owned SharpLink Shares allocable to each outstanding share of SportsHub Preferred Stock, including any shares of SportsHub Preferred Stock underlying options and warrants.

SportsHub Stock Purchase Rights

At the Effective Time, each then outstanding SportsHub option or warrant to purchase SportsHub common or preferred stock (including without limitation, all outstanding stock options issued pursuant to SportsHub equity incentive plans), whether vested or unvested, shall, as part of the Merger, be assumed by SharpLink in accordance with the terms of such SportsHub option or warrant was issued.

All rights with respect to SportsHub Common Stock under outstanding SportsHub Options shall thereupon be converted into rights with respect to SharpLink’s Ordinary Shares. Accordingly, from and after the effective time of the Merger, (i) each SportsHub Option assumed by SharpLink may be exercised solely for SharpLink Ordinary Shares, (ii) the number of SharpLink Ordinary Shares subject to each such assumed SportsHub Option shall be equal to the number of shares of SportsHub Common Stock that were subject to such SportsHub Option immediately prior to the Effective Time multiplied by the Common Exchange Ratio, (iii) the per share exercise price for the SharpLink Ordinary Shares issuable upon exercise of each such assumed SportsHub Option shall be determined by dividing the exercise price per share of SportsHub Common Stock subject to such SportsHub Stock Purchase Right, as in effect immediately prior to the Effective Time, by the Common Exchange Ratio, and rounding the resulting exercise price to the nearest whole cent, (iv) all restrictions on the exercise of each such assumed SportsHub Stock Purchase Right shall continue in full force and effect, and (v) the term, exercisability, vesting schedule and other provisions of such SportsHub Option shall otherwise remain unchanged; provided, however, that each such assumed SportsHub stock option and warrant shall, in accordance with its terms, be subject to further adjustment as appropriate to reflect any stock split, reverse stock split, stock dividend, recapitalization or other similar transaction effected by SharpLink after the effective time of the Merger.

Representations and Warranties

The Merger Agreement contains customary representations and warranties made by SharpLink, the Merger Subsidiary and SportsHub relating to their respective businesses, as well as other facts pertinent to the Transaction. These representations and warranties are subject to materiality, knowledge and other similar qualifications. The representations and warranties of each of SharpLink, the Merger Subsidiary and SportsHub have been made solely for the benefit of the other parties and those representations and warranties should not be relied on by any other person. In addition, those representations and warranties may be intended not as statements of actual fact, but rather as a way of allocating risk among the parties, may have been modified by the disclosure schedules delivered in connection with the Merger Agreement, are subject to the materiality standard described in the Merger Agreement, which may differ from what may be viewed as material by you, and were made only as of the date of the Merger Agreement or another date as is specified in the Merger Agreement.

SportsHub made a number of representations and warranties to SharpLink and the Merger Subsidiary, including representations and warranties relating to the following matters:

Significant portions of SportsHub’s representations and warranties are qualified as to “materiality” or “material adverse effect.” Under the Merger Agreement, a material adverse effect with respect to SportsHub means any change, development or effect that, individually or in the aggregate, is or would reasonably be expected to be materially adverse:

provided, however, that a material adverse effect with respect to SportsHub shall not include any change, development or effect that is caused by:

SharpLink and Merger Subsidiary made a number of representations and warranties in the Merger Agreement, including representations and warranties relating to the following subject matters:

Significant portions of SharpLink’s representations and warranties are also qualified as to “materiality” or “material adverse effect.” Under the Merger Agreement, a material adverse effect with respect to SharpLink means any change, development or effect that, individually or in the aggregate, is or would reasonably be expected to be materially adverse: (i) to the business, results of operation, financial condition or prospects of SharpLink considered as a whole, (ii) to SharpLink’s ability to perform any of its material obligations under the Merger Agreement or (iii) to consummate the Merger; provided, however, that a “material adverse effect” with respect to SharpLink shall not include any change, development or effect that is caused by the following:

Except (in the case of the first three bulleted items above), to the extent disproportionately affecting SharpLink and its subsidiaries, taken as a whole, relative to other similarly situated companies in the industries in which SharpLink and its subsidiaries operate.

Covenants; Conduct of Business Pending the Transaction

Except as expressly contemplated by the Merger Agreement, unless SharpLink shall otherwise consent in writing, during the period from the date of the Merger Agreement to the Effective Time, SportsHub has agreed to conduct its operations according to its ordinary and usual course of business, consistent with past practice and in a manner that preserves the accuracy of its representations and warranties. SportsHub will use its commercially reasonable efforts to preserve substantially intact its business, to keep available the services of its officers and key employees and to maintain satisfactory relationships with licensors, licensees, suppliers, contractors, distributors, consultants, customers, and others having relationships with SportsHub. SportsHub will promptly advise SharpLink of any change in the management, present or planned business, prospects, properties, liabilities, results of operations or financial condition of SportsHub. SportsHub will, prior to distributing or otherwise circulating any notices, directives, or other communications directed to all or groups of stockholders, customers, vendors, employees, distributors or others associated with the Company relating to the transactions contemplated hereby or to the operation of SportsHub after consummation of such transactions, consult with SharpLink and give SharpLink reasonable opportunity to comment thereon.

Without limiting the generality of the foregoing, and except as otherwise expressly provided in or contemplated by the Merger Agreement, from the execution date of the Merger Agreement until the earlier of the termination of the Merger Agreement or the Effective Time, SportsHub will not, without the prior written consent of SharpLink, do any of the following:

In addition, subject to certain limited exceptions set forth in the Merger Agreement, SportsHub has agreed to:

SharpLink has agreed that during the period from the date of the Merger Agreement to the Effective Time, except as expressly contemplated by Merger Agreement or unless SportsHub shall otherwise consent in writing, during the period from the date of the Merger Agreement to the Effective Time, SharpLink shall (i) maintain its existence in good standing under applicable law and (ii) comply in all material respects with all applicable laws wherever its business is conducted, including the timely filing of all reports, forms or other documents with the SEC required pursuant to the Securities Act or the Exchange Act.

Each of the parties have further mutually agreed that, during the period commencing on the execution date of the Merger Agreement and ending at the earlier of the date of termination of the Merger Agreement and the Effective Time, it will:

Indemnification for Breaches of the Merger Agreement

Each of SharpLink and Merger Subsidiary, on the one hand (the “SharpLink Indemnified Parties”), and SportsHub’s stockholders on the other hand, have agreed to indemnify each other for any breach of their respective representations, warranties and covenants under the Merger Agreement. In addition, SportsHub’s stockholders, severally and not jointly, have agreed to indemnify SharpLink with respect to claims based on (i) SharpLink’s failure to obtain necessary third-party consents and approvals to consummate the Merger, (ii) demands by its stockholders for appraisal rights under the Delaware General Corporation Law, and (iii) misstatements or inaccuracies in certain capitalization schedules and stockholder lists to be provided at the closing.

The indemnification obligations of SportsHub’s stockholders are subject to certain limitations, as follows:

Other than with respect to a claim of fraud or intentional misrepresentation, the rights of indemnification for breaches of the Merger Agreement provided therein are the sole and exclusive remedy of the parties.

Joinder Agreements

As a condition to SharpLink’s obligations to consummate the Merger, each SportsHub stockholder is required to execute and deliver a joinder agreement in which such stockholder will, among other things, agree to:

The form of Joinder Agreement is attached as Exhibit A to the Merger Agreement.

Indemnification of SportsHub Officers and Directors

For the period of six years following the effective time of the Merger, SharpLink shall indemnify and hold harmless each person who is now, or has been at any time prior to the execution date of Merger Agreement or who becomes prior to the effective time of the Merger, an officer or director of SportsHub or any of its subsidiaries (the “Company Indemnified Parties”) against (i) all losses, claims, damages, costs, expenses, liabilities or judgments or amounts that are paid in settlement (the “Company Indemnified Liabilities”) of or in connection with any claim, legal proceeding or investigation by reason of the fact that such person is or was a director or officer of SportsHub, whether pertaining to any matter existing or occurring at or prior to the Effective Time and whether asserted or claimed prior to, or at or after the effective time and (ii) all Company Indemnified Liabilities based on, or relating to the Merger Agreement or the Transaction thereby contemplated (to the extent that such losses, claims, damages, costs, expenses, liabilities or judgments or amounts arose from or are related to the Merger Agreement or the Transaction thereby contemplated), in each case to the fullest extent a corporation is permitted by law to indemnify its own directors and officers.

In addition, for a period of six years following the Effective Time, the Certificate of Incorporation and Bylaws of the Surviving Corporation will contain provisions with respect to exculpation and indemnification that are at least as favorable to the Company Indemnified Parties as those contained in the Certificate of Incorporation and Bylaws of the Company as in effect on the date hereof, which provisions will not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of Company Indemnified Parties.

Prior to the Effective Time, SportsHub shall, and if it is unable to, SharpLink shall cause the Surviving Corporation as of the Effective Time to, obtain, in respect of acts or omissions occurring prior to or at the Effective Time (including such acts or omissions in connection with the Merger Agreement and the transactions contemplated hereby), and pay all premiums and other costs with respect to policies of directors’ and officers’ liability insurance (which may take the form of an extended reporting period, endorsement or policy) covering the Company and other persons currently covered by SportsHub’s existing directors’ and officers’ liability insurance policies, for a period of six years after the effective time of the Merger; provided that SportsHub shall first consult with SharpLink and shall obtain and pay for such policies only on terms reasonably acceptable to SharpLink. From and after the Effective Time, the Surviving Corporation will not take any action to cancel such policies. If the Company and the Surviving Corporation for any reason fail to obtain such insurance policies as of the Effective Time, the Surviving Corporation shall, and SharpLink shall cause the Surviving Corporation to, continue to maintain in effect for a period of at least six years from and after the Effective Time the directors’ and officers’ liability insurance in place as of the date hereof with terms, conditions, retentions and limits of liability that are at least as favorable to the insureds as provided in SportsHub’s existing policies as of the date hereof, or the Surviving Corporation shall, and SharpLink shall cause the Surviving Corporation to, use reasonable best efforts to purchase comparable directors’ and officers’ liability insurance for such six-year period with terms, conditions, retentions and limits of liability that are at least as favorable to the insureds as provided in SportsHub’s existing policies as of the execution date of the Merger Agreement.

Tax Matters

The Stockholder Representative shall cause, as applicable, SportsHub to prepare and timely file, all tax returns for all taxable periods ending on or prior to the closing date (the “Pre-Closing Tax Periods”) that are required to be filed by SportsHub after the closing date. SportsHub stockholders shall pay or cause to be paid all taxes due with respect to the Pre-Closing Tax Periods. A copy of each such tax return will be provided to SharpLink within 14 days prior to the due date (including extensions) for the filing thereof, and SharpLink will have the right to review and comment on each such tax return and require reasonable changes.

SharpLink shall cause, as applicable, the Surviving Corporation to prepare and file any required tax returns for taxable periods that begin before the Closing Date and end after the Closing Date (a “Straddle Period”). SharpLink shall pay or cause to be paid with such tax returns all taxes due in connection therewith relating to Business operations during Post-Closing Tax Periods and the SportsHub stockholders shall pay all taxes due in connection therewith relating to business operations during Pre-Closing Tax Periods. A copy of each such tax return will be provided to the Stockholder Representative within 14 days prior to the due date (including extensions) for the filing thereof, and the Stockholder Representative will have the right to review and comment on each such tax return. Any taxes relating to Straddle Periods will be apportioned between the pre-closing date period and post-closing date period in accordance with the provisions set forth in the Merger Agreement.

Additional covenants relating to tax matters include:

Conditions to the Completion of the Transaction

The respective obligations of SharpLink, Merger Subsidiary and SportsHub to complete the Transaction contemplated by the Merger Agreement are subject to the satisfaction or waiver of various conditions that include, in addition to customary closing conditions, the following:

The respective obligations of SharpLink and Merger Subsidiary to consummate the Merger shall be subject to the fulfillment at or prior to the Closing of the following additional conditions, any or all of which may be waived by SharpLink, in whole or in part, to the extent permitted by applicable law:

The respective obligations of SportsHub to consummate the Merger shall be subject to the fulfillment at or prior to the Closing of the following additional conditions, any or all of which may be waived by SportsHub, in whole or in part, to the extent permitted by applicable law:

Termination of the Merger Agreement and Termination Fee

The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval by the SportsHub stockholders, only:

The Merger Agreement may also be terminated by SportsHub at any time prior to the date its stockholders have approved the Merger if, (i) SportsHub has determined that a bona fide, unsolicited, written proposal for a proposed acquisition constitutes a “superior proposal,” (ii) SportsHub’s board of directors, after taking into account any modifications to the terms of Merger Agreement and the Merger offered by SharpLink and Merger Subsidiary following receipt of a notice of superior proposal, continues to believe that such proposed acquisition constitutes a “superior proposal” and (iii) immediately prior to or substantially concurrently with the termination of the Merger Agreement, SportsHub enters into a definitive agreement for the transaction contemplated by such superior proposal. Upon a termination in such circumstances, pursuant to this Section 8.1(f), the Company shall immediately prior to or substantially concurrently with such termination pay Parent an amount equal to the greater of five percent of the value of the Merger Consideration Shares on (1) the date of the Merger Agreement, or (2) the date of termination, as determined in either case by averaging the last closing sale prices for SharpLink ordinary shares on NASDAQ, on the last five business days immediately preceding the applicable date.

SharpLink may also elect to terminate the Merger Agreement if (i) SportsHub shall have materially breached its obligations set forth in applicable covenants contained within the Merger Agreement, or (ii) the board of directors of SportsHub shall have taken any of the actions set forth in the covenants which are not permitted by the terms thereof. Upon termination pursuant to these conditions, SportsHub shall immediately pay SharpLink an amount equal to the Break-up Fee.

Amendment

The Merger Agreement may be amended by an instrument in writing signed on behalf of each of SharpLink, Merger Subsidiary and SportsHub with the approval of the respective boards of directors of SharpLink, Merger Subsidiary and SportsHub at any time, except that after the Merger Agreement has been adopted by the shareholders

of SharpLink, no amendment which by law requires further approval by the shareholders of SportsHub will be made without such further approval.

Governing Law and Jurisdiction

The Merger Agreement shall be governed by the laws of the State of Delaware regardless of the laws that might otherwise govern under applicable Delaware principles of conflicts of law.

FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER

The following is a summary of the material terms of the First Amendment to the Agreement and Plan of Merger (“Merger Agreement Amendment”), which is attached as Annex A-2 to this proxy statement and is incorporated by reference. The Merger Agreement Amendment has been attached to this proxy statement at Annex A-2 to provide you with information regarding its terms. It is not intended to provide any other factual information about SharpLink, the Merger Subsidiary or SportsHub. The following description does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement Amendment and its ancillary documents. You should refer to the full text of the Merger Agreement Amendment and the ancillary documents for details of the Transaction and the terms and conditions of the Merger Agreement Amendment.

The Merger Agreement Amendment

The Merger Agreement Amendment, dated November 2, 2022, amends the terms and conditions of the Merger Agreement, dated September 7, 2022, and provides for a change in the calculation of the number of SharpLink Ordinary Shares to be issued as consideration in the Transaction so that the number agreed to under the Merger Agreement (3,670,000 Ordinary Shares) will be adjusted as follows: (a) if SharpLink’s Stock Price is less than $1.03 on the Closing Date, then the number of Merger Consideration Shares shall be increased up to a maximum of 1,055,125 additional Ordinary Shares, as set forth in the table below; and (b) if the SharpLink Stock Price is $1.51 or greater on the Closing Date, then the number of Merger Consideration Shares shall be decreased up to a maximum of 450,072 fewer Ordinary Shares, as set forth in the table below.

Increase. In the event the Stock Price is less than $1.03 on the Closing Date, the number of Merger Consideration Shares shall be increased as set forth below:

Decrease. In the event the Stock Price is $1.51 or more on the Closing Date, then the number of Merger Consideration Shares shall be decreased as set forth below:

“2.14 Transfer of Merger Consideration Shares.” Unless the Company otherwise consents in writing, for a period ending six months following the Closing Date, no holder of Merger Consideration Shares or SharpLink Ordinary Shares distributed pursuant to the Share Distribution may Transfer such shares except in connection with a Permitted Transfer; provided, that in each month following such six-month period, a holder may not Transfer more than 25 percent of such holder’s Merger Consideration Shares and/or SharpLink Ordinary Shares distributed pursuant to the Share Distribution.”

ABOUT SPORTSHUB GAMES NETWORK, INC.

Overview

Founded in 2015 by a team of veteran fantasy sports industry pioneers, SportsHub 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 platform currently reaches more than two million fantasy sports fans who spend almost $40 million annually on its portfolio of digital gaming experiences and contests.

SportsHub’s platform currently includes the following line-up of fantasy sports-related assets:

What Are Fantasy Sports?

Season-long fantasy sports involve game players, or “team owners,” choosing a line-up of real sports athletes in an online selection process, or a draft, to assemble a fantasy team. Athletes’ real-game statistics are compiled and compared to see whose fantasy team has done the best and points are given accordingly as determined by the platform it is played on. Players track how their fantasy team is doing through the applicable season using various websites or mobile apps. Many players form leagues with friends and compete against only people they know, while others join public leagues hosted by website or apps and compete against other fans’ leagues. In fantasy sports, most everyone manages a roster by adding, dropping, trading and selling players to keep winning.

Based on the number of team owners in each fantasy sports league, there are different possible payout structures, which is typically determined by the “commissioner” who is appointed by the team owners. The commissioner’s primary responsibility is to decide the type of fantasy league they are running, what platform they will use to manage their league, and to set rules regarding points scoring and trades ahead of the start of each season. He or she is also the person that fellow team owners turn to if there is a major disagreement amongst owners or a lag in the leagues scoring updates, among other disputes. If the league plays for money, then it is the commissioner’s responsibility to ensure everyone’s entry fees are paid in and winnings are paid out.

Daily fantasy sports (“DFS”) games are similar to season-long games, however online contests range from a day to a week, depending on the sport. DFS competitors draft a player roster and those players earn points based on their respective in-game performance. Team owners can compete in both public or private tournaments, form leagues with friends, family members and coworkers, join other public leagues or play head to head with other owners.

According to Statista, a global market research firm, in the U.S. alone, the Fantasy Sports Market has grown from $5.3 billion in 2012 to $8.88 billion in 2021, reflecting the vast and growing popularity of fantasy sports game play in the nation.

SportsHub’s Business

SportsHub was founded in 2015 on the premise that the online fantasy sports industry was highly fragmented and ripe for consolidation. Moreover, heightened government scrutiny on daily fantasy operators created a new state-by-state taxation and regulatory structure for fantasy operators of all types, creating an attractive environment for rolling-up middle tier, well established operators seeking to mitigate rising operational and regulatory costs while also gaining access to growth capital.

To capitalize on prevailing acquisition opportunities in the industry and exponentially expand its business-building platform, SportsHub commenced a defined growth-through acquisition strategy in 2016, acquiring National Fantasy Championships, CDM Sports (which was subsequently rolled into National Fantasy Championships), Sports Technologies and LeagueSafe during that year. In 2017, it purchased WhatIfSports; in 2018, it acquired MFL10s; and in 2020, it completed its seventh acquisition with the purchase of Fantasy National Golf Club.

National Fantasy Championships | High Stakes Fantasy Sports

National Fantasy Championships (“NFC”) was originally created in 2004 to host a set of high stakes fantasy football (“NFFC”) and baseball (“NFBC”) competitions. With live drafts in Las Vegas, New York and Chicago, in its first season, NFFC drew 224 teams at $1,250 each for the main event with a $100,000 grand prize. The same year, NFBC also hosted live drafts in Las Vegas, New York and Chicago, drew 195 teams for the main event and awarded the industry’s first $100,000 grand prize for baseball. The National Fantasy Basketball Challenge (“NFBKC”) was started in the fall of 2006 with just three main event leagues competing for a grand prize of $3,000. After being acquired by SportsHub in 2016, SportsHub expanded NFC to include the National Fantasy Hockey Challenge (“NFHC”) in 2019.

NFC now hosts numerous high stakes fantasy sports competitions for football, baseball, basketball and hockey with millions of dollars in prize winnings awarded across all competitions each year, and includes live draft events held each year in Las Vegas and New York City. Players who are not able to make it to the live events can choose online options to compete for the national championships in many of NFC’s contests, such as the $250,000 grand prize in the NFFC Primetime, the $150,000 grand prize in the NFBC Main Event, the $150,000 grand prize in the Rotowire Fantasy Baseball Online Championship. Over the past 18 years, NFC has paid more than $55 million in prize winnings to its high stakes players.

Bestball10s

Bestball10 is one of the nation’s most popular best ball fantasy games (as ranked by Footballguys.com, CheatSheetWarRoom.com and others), whereby fantasy league owners draft their team but there is no in-season management – no waiver wire, trades, adds or drops. Instead, the highest-scoring players chosen are optimized to form an owner’s starting lineup every week throughout the season. Leagues are decided by cumulative season points rather than head-to-head matchups. Using Bestball10s’ state-of-the-art draft room, owners can draft their teams in mere hours instead of days or weeks; and can be managed from any mobile device or desktop computer. BestBall10 features multiple tournaments for the NFL, NBA and MLB seasons and awards grand prize winnings of up to $10,000.

Fanball

Fanball, co-founded in 1993 by SharpLink’s CEO, Rob Phythian, began as one of the industry’s first online fantasy sports sites and the publisher of the world’s first weekly fantasy sports magazine, Fantasy Football Weekly. Fanball was sold in 2005 to FUN Technologies, one of the world’s largest providers of online and interactive casual and fantasy sports games and sports information at that time. In 2007, FUN was acquired by Liberty Media Corporation, which folded Fanball into CDM Sports. In 2015, SportsHub acquired CDM Sports and reinvigorated Fanball as a DFS online destination offering a wide range of free-to-play and paid contests in both standard salary cap, draft and auction type formats for the NFL, MLB and NBA seasons. Easy to use for even novice players, all features and services offered on Fanball can be readily accessed on both desktop and mobile devices and players can quickly enter competitions, draft their squads and make their deposits and cash-outs via its online cashier.

Fantasy National Golf Club

Fantasy National Golf Club is a private golf club for fantasy golfers. Offering world class research tools that allow users to sort over a large range of dates so that they can identify players with the best statistics over specific periods. Based on data officially licensed from the PGA TOUR, information provided ranges from par four performance on specific ranges to how individual pro golfers perform in certain wind conditions, among other stats. FNGC has an easy to use daily fantasy line-up generator; years of detailed data from each course; a simulator which has simulated every pro golf tournament 1000 times to determine the probability of each player winner; a user-friendly, customizable stat model; a highly interactive ownership model that has leveraged crowd sourced user activity to develop highly accurate ownership projections; betting tools that extend beyond daily fantasy pricing to regularly updated betting odds for those placing wagers in legal states; and tools for head to head betting analysis.

WhatIfSports

WhatIfSports is a sports simulation site featuring online simulation games and predictions for MLB, NFL, NHL, NBA and NCAA sports, analyzing the performance of past and present players and teams and utilizing every stat available to determine the outcome of a wide variety of “what if” scenarios. For instance, in its SimMatchup game, players can battle the 1927 New York Yankees against the 1975 Cincinnati Reds to see who would win; see how many goals Wayne Gretzky would score if he were on the ice with Connor McDavid; or answer the age old debate of whether the 1986 Los Angeles Lakers or the 1996 Chicago Bulls would win on the court? In its SimLeague Baseball game, players can manage a team comprised of their favorite athletes throughout MLB history (draft any player from 1885 through present day), competing against other baseball fans in a full season – complete with trades, play-by-play and hundreds of stats. In its Dynasty games, players can run their own baseball franchise or elect to coach, recruit and run their own college football, basketball or soccer program.

LeagueSafe

LeagueSafe was created in 2008 with the goal of simplifying and automating the last remaining hassle in fantasy league administration: finance management. Since its founding, LeagueSafe has become one of the most trusted sources for collecting and protecting season-long fantasy league dues and payouts of winnings via proven, secure online and mobile payment platforms. LeagueSafe’s proprietary wallet system empowers leagues to collect entry fee payments, safeguard league fees throughout the season, offers transparency of league finances to all team owners, gives owners the opportunity to validate their commissioners’ intended payouts, and releases funds immediately after the end of the season.

League commissioners can allocate payouts within hours of the end of the season, and league members can receive their winnings immediately using one of several instant payout delivery options. No credit card or bank account information is stored on the site, and each transaction is a one-time event. LeagueSafe generates revenue through the collection of interest earned on the dues held in its wallet system. Users can elect to leave their winnings in their wallets for future use or request payouts at any time.

Multiple Revenue Channels

SportsHub operates a multi-channel revenue model currently providing for:

Net Gaming Revenues

SportsHub 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.

Fee Revenues

SportsHub collects various forms of fee revenue from customers using its LeagueSafe platform. SportsHub’s 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 become inactive under the terms of the user agreement.

Software-as-a-Service Revenues

SportsHub’s WhatIfSports games provide sports simulation software that its users pay a fee to access over a period of time. SportsHub provides and maintains the software throughout the duration of the season, which constitute a single performance obligation and revenue is recognized over the term of the service.

Subscription Revenues

When a customer subscribes to Fantasy National Golf Club, SportsHub collects a subscription fee. SportsHub’s performance obligation under these contracts is to provide users with access to its intellectual property. Revenue is initially deferred and recognized ratably over the subscription period.

Key Growth Strategies

The key elements of SportsHub’s growth strategy are centered on:

A recent June 2022 study performed by polling firm Leger for the Fantasy Sports & Gaming Association found that 69.5 million adults in the United States either bet on sports or play some type of fantasy sports. The survey also estimated that 59% of that population are doing both. The Leger study showed that 98% of fantasy sports players who started betting also continued to play fantasy sports and 63% of sports bettors are now using the Internet to place their bets. This suggests that there exists an opportunity for SportsHub to engage and convert its growing base of fantasy sports games into sports bettors could lead to pronounced revenue growth for SportsHub in the future through the addition of net gaming revenues earned from sports betting on its platform or customer acquisition fees earned through direct referrals of new sports bettors to sportsbooks.

Intellectual Property and Technology

Intellectual property rights are important to the success of SportsHub’s business. SportsHub relies on a combination of database, trademark, trade secret, confidentiality and other intellectual property protection laws in the United States and other jurisdictions, as well as license agreements, confidentiality procedures, non-disclosure agreements with third parties and other contractual protections, to protect its intellectual property rights, including its patents, database, proprietary technologies, software, know-how and brands. In the United States, SportsHub has filed trademark applications, currently hold several trademarks and domain names, has been issued patents and, in the future, may acquire additional patents, additional trademarks and domain names. Please refer to “Schedule 4.1(C) – Intellectual Property” attached as an exhibit to the Merger Agreement found at Annex A included with this proxy statement for a full list of patents, trademarks and domain names held by SportsHub and its subsidiaries.

SportsHub has also entered into license agreements, data rights agreements and other arrangements with sports organizations for the right to collect and use their sports data. These agreements typically have terms of several years and are subject to renewal or extension.

It has not always been, and in the future may not be, possible or commercially desirable to obtain registered protection for SportsHub’s products, software, databases or other technologies. In such situations, SportsHub relies on laws governing protection of unregistered intellectual property rights, confidentiality and/or contractual exclusivity of and to underlying data and technology to prevent unauthorized use by third parties. SportsHub uses Open Source Software in its product development and periodically reviews its use of Open Source Software to attempt to avoid subjecting its services and product offerings to conditions it does not intend to impose on them.

SportsHub controls access to and use of its data, database, proprietary technology and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, clients and partners. SportsHub requires its employees, consultants and other third parties to enter into confidentiality and proprietary rights agreements, and it controls and monitors access to its data, database, software, documentation, proprietary technology and other confidential information. SportsHub’s policy is to require its employees and independent contractors to sign agreements assigning to it any inventions, trade secrets, works of authorship, developments, processes and other intellectual property generated by them on its behalf and under which they agree to protect its confidential information. In addition, SportsHub generally enters into confidentiality agreements with its clients and partners.

Market Opportunities

Fantasy Sports Gaming Industry

On a global basis, the Fantasy Sports Market was valued at $21.39 billion in 2021 and is expected to reach $44.07 billion, with an estimated CAGR of 12.92% over the forecast period of 2022-2027, according to a report published by market research firm ReportLinker in June 2022. In this report, the author states, “The increasing popularity of players, the emergence of sports leagues, growing investment in digital and Internet infrastructure and the launch of fantasy sports applications as other means to connect with fans’ favorite sports are some of the factors driving the market’s growth.”

In September 2022, research firm Market Decipher forecasted in its report titled, “Global Fantasy Sports Market Size, Statistics, Trend Analysis and Forecast Report, 2022-2032,” that the industry will reach $92.61 billion by 2032 with North America and India expected to lead the growth. In fact, Technavio, another independent market research firm, is projecting that 41% of the growth in the global industry will originate in North America between its forecasted period of 2021-2026.

Based on its May 2022 survey of 2,000 American adults, research firm Leger reported that approximately 20% of all Americans over the age of 18, or approximately 50.4 million people, now play fantasy sports, an increase of six million versus 2021 when the U.S. sports industry was still in the throes of the COVID pandemic. The Leger study also showed that Daily Fantasy Sports (“DFS”) continued to grow with over 30 million U.S. adults playing – up 12% over 2019 when the number was last calculated. Data from the study also reflected that the crossover between DFS players and season-long fantasy players is up significantly, too. Looking strictly at key behavioral indicators of a fantasy sports player, the NFL, MLB and NBA continue to be the most popular sports leagues with players -- with eSports making a huge jump among DFS players.

Online Sports Betting Industry

Prior to May 2018, the Professional and Amateur Sports Protection Act of 1992, or “PASPA,” restricted the ability of individual states to legalize sports betting in the United States.  However, in May 2018, the U.S. Supreme Court ruled that PASPA violated the United States Constitution.  As a result of the Supreme Court’s decision, the federal restrictions on sports betting under PASPA were no longer enforceable, giving individual states the power to legalize sports betting. Since PASPA overturned the federal ban on regulated sports wagering outside of Nevada, 35 states, the District of Columbia and Puerto Rico have legalized sports betting – and nearly a dozen more have considered, or are considering, it. Of the states that have legalized sports betting, 27 states have authorized online sports betting; though Montana, Washington and Mississippi have limited their online betting markets to bets placed while inside a licensed casino.

On September 7, 2022, the American Gaming Association (“AGA”) reported that a record 46.6 million Americans say they plan on betting on the NFL this football season according to its annual survey of American’s NFL betting plans. The nearly 47 million people who plan to bet this year represent 18% of all American adults, up 3% from last year and more than 40% since 2020. “As legalization spreads, consumers are moving their betting away from bookies and towards legal options.” Accordingly, the AGA is projecting that 23 million people will place a bet online this season, up 18% from 2021 and 104% from 2020. Moreover, the industry group added that beyond traditional betting, 59% of NFL bettors will place a casual bet with friends or as part of a pool, squares or fantasy contest.

Looking at the overall U.S. market, the nation’s sports betting and online casino market combined for $7.75 billion in gross revenue in 2021 and is on pace to reach $24.3 billion by 2026, according to a July 2022 study published by Vixio Gambling Compliance. The outlook worldwide is just as bullish. Research firm Technavio’s January 2022 report, titled “Sports Betting Market by Platform and Geography – Forecast and Analysis 2021-2025,” states that the global market witnessed year-over-year growth of 21.54% in 2021 and will grow to reach $106.25 billion by 2025 due largely to the digital revolution. It further states: “The growing effect of technologies like blockchain, virtual reality and artificial intelligence, particularly machine learning tools, is one of the important developments in the global sports betting business.”

Gaming Today, which tracks monthly U.S. sports betting revenue, reported that for the month of August 2022, in every state that has mobile sports betting, mobile handle dominated compared to the retail counterpart. In most markets, more than 70% of sports betting was done online; and for markets where mobile is heavily favored, like New York and New Jersey, over 90% of betting was conducted online.

Competition

Generally speaking, the U.S. Fantasy Sports Market is intensely competitive and many companies which may be perceived as competitors of SportsHub have substantially greater financial, distribution and marketing resources, as well as greater brand awareness. Included among them are popular fantasy sports platforms produced by operators such as ESPN, DraftKings, Yahoo, NFL.com, FanDuel, CBS Sports and Underdog Fantasy, among others. Strictly in the DFS segment of the industry, DraftKings and FanDuel currently dominate the marketplace, holding over 80% market share between them. Nonetheless, SportsHub believes that it differentiates itself from its competition through the hundreds of innovative, real-money fantasy sports games and contests it has deployed on its platform and the proprietary tech stack it has developed which allows new, highly immersive online and mobile fantasy sports gaming experiences to come to market faster while keeping costs low.

Government Regulations

In 2006, the U.S. Congress passed the Unlawful Internet Gambling Enforcement Act (the “UIGEA”), which deals with gambling over the Internet. The law specifically exempts fantasy sports that enable participation in any fantasy or simulation sports game or educational game of contest in which (if the game or contest involves a team or teams) no fantasy or simulation team is based on the current membership of an actual team that is a member of an amateur or professional sports organization and that meets all of the following criteria:

When Congress initially passed the UIGEA, it created an exemption for fantasy sports with an understanding that the fantasy league would be based on season-long performances. In recent years, however, new daily fantasy sports (“DFS”) leagues – such as those hosted by SportsHub, FanDuel and DraftKings – have popped up with contests lasting as short as one day. As DFS companies have expanded into sports gambling while also operating DFS platforms, the distinction between the two products is blurred. Even then, both have regulatory issues at state and federal levels. Among these questions are whether DFS is “gambling,” subject to attendant regulation at the state and federal level, and whether DFS violates the federal Wire Act prohibition against interstate gaming.

According to an article published in The International Sports Law Journal, titled “Daily Fantasy Sports and the Law in the USA,” the debate that consumed regulators prior to 2018 – whether DFS was a game of chance, and therefore gambling, or of skill and permissible under UIEGA – continues to matter for regulatory classification at the state level and at the federal level for purposes of the Wire Act and the UIGEA. Although the UIGEA grants an exemption for “fantasy sports,”  when the Act was written, Congress could not foresee the enormous proliferation of DFS. The law’s authors clarified that although an exception was granted, they did not believe fantasy sports to be a major source of Internet gambling. Yet the proliferation of DFS as a related but significantly different game raises the question of whether DFS should be treated as traditional fantasy sports or, rather, is DFS a game of chance, and therefore gambling?

The tests employed to determine the answer vary across jurisdictions further clouding the debate. Recognizing that state laws on sports gambling vary, DFS websites maintain that DFS “is legal everywhere.” This proposition too is subject to debate. As of 2022, all but six states have expressly authorized DFS, with varied regulatory schemes. These laws address a variety of policy decisions and impose varied regulatory conditions on DFS operators. For example, these regulations require a minimum age for players, preventing DFS operator employees from participating in contests, segregating player funds from operational funds, and establishing a state agency to oversee the industry. Other states restrict DFS contests on amateur sporting events, including college sports. Some states have special task forces in charge of reviewing the economic impact of DFS as well as related consumer protections and taxation within the state. Some states impose annual operating fees, ranging from $5,000 for three years to $50,000 annually.

As the impact of DFS on the economy continues to develop, states will likely make several more changes over the years to its regulations and policies.

SportsHub operates in various jurisdictions and its business is subject to extensive regulation under the laws, rules and regulations of the jurisdictions in which it operates. Violations of laws or regulations in one jurisdiction could result in disciplinary action in that and other jurisdictions. SportsHub has employed a progressive and responsible licensing strategy and is currently licensed or authorized to operate its season-long fantasy games and contests in virtually every state in the country, while observing strict regulatory and/or licensing requirements for operation of its DFS properties in the 44 states where DFS gaming is not prohibited.

In addition to state and federal regulations and legal guidelines related directly to fantasy sports games and contests, state and federal laws applicable to SportsHub’s business also include those regulating privacy, data/cyber security, data collection and use, cross-border data transfers, advertising regulations and/or sports betting and online gaming laws and regulations. These laws impact, among other things, data collection, usage, storage, security and breach, dissemination (including transfer to third parties and cross-border), retention and destruction. Certain of these laws provide for civil and criminal penalties for violations.

These laws and regulations are complex, change frequently and have tended to become more stringent over time. The laws and regulations applicable to some parts of SportsHub’s business are still developing in certain jurisdictions, and there can be no assurance that its activities will not become the subject of any regulatory or law enforcement, investigation, proceeding or other governmental action or that any such proceeding or action, as the case may be, would not have a material adverse impact on SportsHub or its business, financial condition or results of operations. SportsHub incurs significant expenses in its attempt to ensure compliance with these laws.

Currently, public concern is high with regard to the operation of companies in the data collection industry, as well as the collection, use, accuracy, correction and sharing of personal information. Some consumer advocates, privacy advocates, legislatures and government regulators believe that existing laws and regulations do not adequately protect privacy and have become increasingly concerned with the use of these types of personal information. In the United States, Congress and state legislatures may propose and enact additional data privacy requirements. Additional laws could result in significant limitations on or changes to the ways in which SportsHub can collect, use, host, store or transmit the personal information and data of its customers or employees, and deliver products and services, or may significantly increase its compliance costs. As its business expands to include new uses or collection of data that is subject to privacy or security regulations, SportsHub’s compliance requirements and costs will increase and it may be subject to increased regulatory scrutiny. Additional legislative or regulatory efforts in the United States could further regulate its businesses.

Employees and Contractors

As of November 2, 2022, SportsHub employed a total of 21 full-time employees, most of whom work remotely from their homes located throughout the country. None of these employees are currently represented by a labor union or covered by a collective bargaining agreement, and SportsHub’s management believes that its relations with its employees are good.

Properties

SportsHub’s corporate headquarters is located at 333 Washington Avenue North, Suite 104, Minneapolis, Minnesota, where members of its senior management team share approximately 725 square feet of office space with certain members of the senior management team and staff of SharpLink Gaming. SportsHub holds the lease for this facility and sublets to SharpLink in exchange for a monthly fee of $1,435.

The majority of SportsHub’s employees work remotely from their homes, which are located throughout the U.S. Approximately eight employees residing in or around the greater Minneapolis/St. Paul region operate using a hybrid remote/office work model.

SportsHub believes its current facilities will be adequate to meet its needs. It does not own any real property for use in its operations or otherwise.

Legal Proceedings

SportsHub is not party to any currently pending legal proceedings, and its management is not aware of any governmental authority contemplating any proceeding to which it would be a party or to which its properties would be subject.

Related Party Transactions

SportsHub owned approximately 40% of the outstanding Ordinary Shares of SharpLink as of June 30, 2022. SportsHub has historically paid direct expenses incurred by SharpLink’s subsidiary, Sports Technologies, Inc. (“STI,”), which includes salaries and related expense for the employees of STI. SportsHub collects cash on behalf of STI’s revenue generating activities. For the six months ended June 30, 2022 and 2021, SportsHub allocated to STI cost of revenue and selling, general and administrative expenses for costs incurred by SportsHub that were clearly applicable to the current and future revenue producing activities of STI, which totaled $157,145 and $153,322, respectively. For the years ended December 31, 2021 and 2020, the allocation of costs to STI for similar expenses totaled $284,625 and $2,211,303, respectively. SportsHub’s 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 expense.

Since the merger of STI and SharpLink on November 1, 2020, SportsHub has generated a receivable from STI for expenses paid on behalf of STI in excess of cash collected by SportsHub on behalf of STI’s revenue generating activities, which is recorded in related party receivable in the consolidate balance sheet as of December 31, 2021. As of June 30, 2022, STI owed SportsHub $47,520.

In June of 2020, SportsHub purchased the assets of Fantasy National Golf Club. In connection with the purchase, SportsHub issued a promissory note in the amount of $1,000,000 to the seller, who was an employee of SportsHub as of December 31, 2021 and 2020. The promissory note carries interest at 2.5% annually and is being repaid in six monthly installments. As of December 31, 2020, there was approximately $167,000 outstanding on the promissory note. The loan was paid off in January 2021.

SportsHub has a banking relationship with Platinum Bank (Platinum), which is considered a related party due to a board member of Platinum also serving on the board of directors for SportsHub and owns Common Stock of SportsHub. As of June 30, 2022 and December 31, 2021, SportsHub had restricted cash balances of $33,194,993 and $28,549,384, respectively; and had interest income related to these accounts totaling $135,460 and $109,023, respectively.

SportsHub uses Brown & Brown (Brown), formerly Hays Companies, for all of its insurance brokerage needs. Brown is considered a related party as executives in Brown and its predecessor, own common stock in SportsHub, a Brown employee serves on the board of directors for SportsHub, and a SportsHub employee serves on the board of directors for both SportsHub and SharpLink. SportsHub paid $0 and $20,093 for the six months ended June 30, 2022 and 2021, respectively; and $163,332 and $18,330 for the years ending December 31, 2021 and 2020, respectively, for insurance coverage brokered by Brown.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF SPORTSHUB’S FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion of SportsHub’s results of operations should be read together with its audited consolidated financial statements and the related notes for the years ended December 31, 2021 and December 31, 2020, which are attached as Annex D to this proxy statement; as well as the unaudited condensed consolidated financial statements and related notes for the six-month periods ended June 30, 2022 and June 30, 2021, which are attached as Annex C to this proxy statement. The following discussion contains forward-looking statements that reflect SportsHub’s current plans, estimates and beliefs and involve risks and uncertainties. Actual results may differ materially from those discussed in the forward-looking statements. SportsHub’s past results may not be indicative of future results. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this proxy statement.

Overview

Founded in 2015 by a team of veteran fantasy sports industry pioneers, SportsHub 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. The platform currently reaches more than two million fantasy sports fans who spend almost $40 million annually on its portfolio of digital gaming experiences and contests.

Key Growth Strategies

The key elements of SportsHub’s growth strategy are centered on:

A recent June 2022 study performed by polling firm Leger for the Fantasy Sports & Gaming Association found that 69.5 million adults in the United States either bet on sports or play some type of fantasy sports. The survey also estimated that 59% of that population are doing both. The Leger study showed that 98% of fantasy sports players who started betting also continued to play fantasy sports and 63% of sports bettors are now using the Internet to place their bets. This suggests that there exists an opportunity for SportsHub to engage and convert its growing base of fantasy sports games into sports bettors could lead to pronounced revenue growth for SportsHub in the future through the addition of net gaming revenues earned from sports betting on its platform or customer acquisition fees earned through direct referrals of new sports bettors to sportsbooks.

Factors Affecting Comparability of Financial Information

Impacts of COVID-19 Pandemic

The COVID-19 pandemic had a significant adverse effect on SportsHub’s business. The direct impact on its business was primarily driven by the suspension, postponement or cancellation of major sports seasons and events during the global health crisis. For example, in 2020 the NCAA March Madness men’s basketball tournament was cancelled, while professional leagues like the MLB and the NBA played significantly shorter or limited seasons.

SportsHub does not expect there to be a long-term financial impact from the COVID-19 pandemic. However, there can be no assurance that more postponements or cancellations of major sporting events will not occur in response to a resurgence in COVID-19 outbreaks. SportsHub has also taken appropriate business continuity measures to ensure that employees are safe and can work remotely to support all aspects of the business.

Seasonality

Certain of SportsHub’s fantasy sports games and contests are tied to specific sporting events and/or seasons. For example, SportsHub expects that its revenues will materially increase during the NFL season, which starts in early September and ends in early February. Accordingly, its operations are subject to seasonal fluctuations that may result in revenue and cash flow volatility between reporting periods.

Deconsolidation of SharpLink Gaming Ltd.

The financial results of SportsHub were significantly affected by several extraordinary events during the year ended December 31, 2021, including commitment fee expense of $23.3 million, goodwill impairment expense of $21.7 million, gain on deconsolidation of SharpLink of $48.7 million, and non-cash impairment loss of $29.4 million.

SharpLink was a majority-owned subsidiary of SportsHub as of December 31, 2020. On July 26, 2021, Israel-based Mer Telemanagement Solutions Ltd. completed the merger of its U.S. subsidiary with SharpLink and MTS was subsequently renamed SharpLink Gaming Ltd.

Gain on deconsolidation

On August 31, 2021, SportsHub no longer had a controlling interest in SharpLink and deconsolidated it from SportsHub’s consolidated financial statements. As a result, SportsHub recorded a gain on deconsolidation of $48.7 million during the year ended December 31, 2021 in the other income (expense) section of the consolidated statements of operations.

Non-cash impairment

As of August 31, 2021, SportsHub began to account for its SharpLink investment under the equity method of accounting. Under the equity method of accounting, the investment is initially recorded at cost, then SportsHub’s proportional share of SharpLink’s net income or loss is recorded as a component of other income (expense) with a corresponding increase or decrease to the carrying value of the investment. Distributions received from SharpLink reduce SportsHub’s carrying value of the investment. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. At December 31, 2021, SportsHub determined its investment was impaired as the fair value of the equity owned was less than its carrying value. The Company recognized a non-cash impairment loss of $29.4 million for the year ended December 31, 2021.

Commitment fee expense

Prior to the deconsolidation event on August 31, 2021, SharpLink incurred a $23.3 commitment fee expense. The commitment fee, which required SharpLink to sell to a Series A preferred stock shareholder 3,692,865 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 close of the MTS merger, required the Company to transfer a variable number of shares outside of its control and was classified as a liability.

The change in the fair value of the commitment fee was $23.3 million as of August 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.

Goodwill impairment expense

Prior to August 31, 2021, SharpLink recorded goodwill impairment of $21.7 million in its Enterprise TEM reporting unit due to a significant decrease in the market value of the reporting unit, which operates in a declining industry.

Additional details regarding the deconsolidation of SharpLink can be found in the attached audited financial statements.

Acquisition of Fantasy National Golf Club

On June 10, 2020, SportsHub acquired the assets and liabilities of Fantasy National Golf Club in exchange for 563,000 restricted shares of SportsHub’s Common Stock, $1.0 million in cash, and a $1.0 million promissory note payable to the seller. SportsHub financed the acquisition by obtaining a $2.0 million term loan. It acquired the operations of this entity for the purpose of obtaining the software and existing customer relationships and to gain access to customers for future online fantasy sports games and game development.

The acquisition was accounted for as a business combination. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair values as determined by SportsHub’s management, using information available at the date of acquisition and assumptions of future operations available on the acquisition date. The premium paid over the fair value of the net tangible and identified intangible assets was recognized as goodwill.

In connection with the business acquisition, SportsHub incurred non-recurring transaction costs of approximately $6,800, which were expensed in the consolidated statement of operations and classified as selling, general, and administrative expenses, during the year ended December 31, 2020. Results of operations from this acquisition are included in the consolidated statement of operations since the date of acquisition.

Basis of Presentation

SportsHub wholly owns and operates a portfolio of real cash fantasy sports and simulation games and contests offered to fantasy sports enthusiasts and 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.

SportsHub’s non-controlling interest represents the interest in SharpLink that is owned by other investors and their related equity raised. On August 31, 2021, SportsHub no longer had a controlling interest in SharpLink and deconsolidated it from its consolidated financial statements.

Key Factors Affecting SportsHub’s Financial Performance

Industry Trends and Competitive Landscape

According to Statista, a global market research firm, in the U.S. alone, the Fantasy Sports Market has grown from $5.3 billion in 2012 to $8.88 billion in 2021, reflecting the vast and growing popularity of fantasy sports game play in the nation. On a global basis, the Fantasy Sports Market was valued at $21.39 billion in 2021 and is expected to reach $44.07 billion, with an estimated CAGR of 12.92% over the forecast period of 2022-2027, according to a report published by market research firm ReportLinker in June 2022.

A recent June 2022 study performed by polling firm Leger for the Fantasy Sports & Gaming Association found that 69.5 million adults in the United States either bet on sports or play some type of fantasy sports. The survey also estimated that 59% of that population are doing both. The Leger study showed that 98% of fantasy sports players who started betting also continued to play fantasy sports and 63% of sports bettors are now using the Internet to place their bets.

Generally speaking, the U.S. Fantasy Sports Market is intensely competitive and many companies which may be perceived as competitors of SportsHub have substantially greater financial, distribution and marketing resources, as well as greater brand awareness. Included among them are popular fantasy sports platforms produced by operators such as ESPN, DraftKings, Yahoo, NFL.com, FanDuel, CBS Sports and Underdog Fantasy, among others. Strictly in the DFS segment of the industry, DraftKings and FanDuel currently dominate the marketplace, holding over 80% market share between them. Nonetheless, SportsHub believes that it differentiates itself from its competition through the hundreds of innovative, real-money fantasy sports games and contests it has deployed on its platform and the proprietary tech stack it has developed which allows new, highly immersive online and mobile fantasy sports gaming experiences to come to market faster while keeping costs low.

Key Components of Revenue and Expense

Revenue

SportsHub derives five categories of revenue for financial reporting purposes: software licensing, SaaS and other, net gaming revenue, fee revenue and subscription revenue.

Costs and Expenses

Cost of Revenue. SportsHub’s cost of revenue consists primarily of labor directly related to its on-premise games development, merchant financial processing fees, and fees for third-party hosting services.

        Selling, general and administrative. Selling, general and administrative expenses, or SG&A, consist primarily of administrative personnel costs, including executive salaries, bonuses and benefits, research and development costs, professional services (including legal, regulatory, accounting, audit and licensing), rent expense, marketing and advertising costs.

Non-cash operating expenses. SportsHub’s financial performance was materially impacted by the accounting for the divesting and deconsolidation of SharpLink, which resulted in significant non-cash, non-recurring operating expenses and income resulting from commitment fee expenses associated with SharpLink’s equity financing activities; goodwill impairment expenses; losses on changes of equity interest in SharpLink; and impairment of SharpLink’s equity method investment. Additional details regarding the deconsolidation of SharpLink can be found in the attached audited financial statements.

Critical Accounting Policies and Estimates

Business Activity

SportsHub is an online gaming business that primarily facilitates daily and seasonal peer-to-peer fantasy contests for its end users. SportsHub 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.

SharpLink Gaming Ltd. (formerly Mer Telemanagement Services or “MTS”) is an Israeli-based multinational corporation. SharpLink is comprised of four operating segments: Affiliate Marketing Services – United States, Sports Gaming Client Services, Affiliate Marketing Services – International and Enterprise Telecom Expense Management (“TEM”). 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.” SharpLink hereinafter refers to SharpLink, Inc. for the period prior to the merger and SharpLink Gaming Ltd. for the period subsequent to the merger. As a result of the MTS Merger, SharpLink, Inc. shareholders own 86% of SharpLink, 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 SharpLink 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 MTS is the accounting acquiree. SharpLink applied the acquisition method of accounting to the identifiable assets and liabilities of MTS, which were measured at estimated fair value as of the date of the business combination.

Principles of Consolidation

SportsHub’s consolidated financial statements, attached to this proxy statement at Annex C and Annex D, include the accounts of SportsHub Games Network, Inc. and its wholly-owned subsidiaries, LeagueSafe Management, LLC, SportsHub Reserve, LLC, and Virtual Fantasy Games Acquisition, LLC. All significant inter-company balances and transactions have been eliminated in consolidation.

Non-controlling interest represents the interest in SharpLink that was owned by other investors prior to the consummation of the MTS Merger and their related equity raised. This averaged approximately 17% of the activity in SharpLink, Inc. based on the percentage of ownership during the six months ended June 30, 2021. SportsHub allocated all of SharpLink’s stock-based compensation, preferred dividend and discount accretion to non-controlling interest. Effective August 31, 2021, SportsHub no longer had a controlling interest in SharpLink and deconsolidated it from its consolidated financial statements.

Business Acquisitions

SportsHub accounts for business acquisitions under the acquisition method of accounting as required by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations. The total cost of business acquisitions is determined based on the fair value of the consideration transferred to the seller to acquire control, while the cost allocated to the underlying separately identifiable net assets acquired is based on their respective estimated fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired is recorded as goodwill. Net assets not separately identifiable are subsumed into goodwill. Fair values are calculated using a variety of methodologies including the cost approach, which uses the concept of replacement as an indicator of market value, and the income approach, which utilizes discounted cash flow models. Determining the fair value of assets acquired and liabilities assumed using the valuation methodologies requires judgement and often involves the use of significant estimates and assumptions, including assumptions with respect future cash inflows and outflows and discount rates, among other items.

Common Control Merger

On November 1, 2020, SportsHub contributed certain assets and liabilities to a newly formed, wholly owned subsidiary, Sports Technologies, LLC (STI). Following this contribution, STI merged into ST Acquisitions, LLC, a wholly owned subsidiary of SharpLink, in a reverse triangular merger under which STI was the surviving subsidiary to SharpLink. As consideration in exchange for the merger, SportsHub received 4,061,141 shares of SharpLink, Inc. common stock.

Concentrations of Credit Risk

SportsHub maintains its cash accounts in various financial institutions, the balances of which are periodically in excess of federally insured limits.

Restricted Cash

SportsHub’s restricted cash balances consist of funds held for payment of prize liabilities for its various daily and seasonal peer-to-peer fantasy games, as well as customer deposits from private fantasy leagues that utilize the services offered via SportsHub’s secure online payment and league due management website. Restricted cash is segregated from operating cash and cash held for customers and is used only to meet the SportsHub’s prize liability and customer deposit obligations.

Restricted Investments

SportsHub invests restricted cash in order to increase its return during the hold period. SportsHub classifies its investments held for customers, which consist of debt securities, as available-for-sale. Debt securities classified as available-for-sale are carried at their estimated fair value. Realized gains and losses, determined using the average cost method, are included in earnings; unrealized holding gains and losses on available-for-sale debt securities are reported in other comprehensive income.

SportsHub follows the accounting guidance related to recognition and presentation of other-than-temporary impairment. This guidance specifies that (a) if a company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When an entity does not intend to sell the security and it is more likely than not the entity will not have to sell the debt security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive loss.

Equity Method Investment

As of August 31, 2021, SportsHub no longer had a controlling interest in SharpLink, Inc. and deconsolidated it from SportsHub’s consolidated financial statements (see audited SportsHub consolidated financial statements as of December 31, 2021 attached as Annex D to this proxy statement) and started to account for the investment under the equity method of accounting. Under the equity method of accounting, the investment is initially recorded at cost, then SportsHub’s proportional share of SharpLink’s net income or loss is recorded as a component of other income (expense) with a corresponding increase or decrease to the carrying value of the investment. Distributions received from SharpLink reduce SportsHub’s carrying value of the investment. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. At December 31, 2021, SportsHub determined it’s investment was impaired and recognized an impairment loss of $29,381,877 for the year ended December 31, 2021. At June 30, 2022, SportsHub determined its investment was impaired and recognized an impairment loss of $10,853,652 for the six months ended June 30, 2022.

Accounts Receivable and Credit Policy

Accounts receivables are recorded at their estimated net realizable value, net of an allowance for doubtful accounts. SportsHub’s estimate of the allowance for doubtful accounts is based upon historical experience, its evaluation of the current status of receivables, and unusual circumstances, if any. Accounts are considered past due if payment is not made on a timely basis in accordance with SportsHub’s credit terms. SportsHub does not charge interest on past due accounts. Credit terms are extended to customers in the normal course of business. SportsHub performs ongoing credit evaluations of its customers’ financial conditions and generally requires no collateral. As of June 30, 2022 and December 31, 2021, there was no allowance for doubtful accounts.

SportsHub estimates an allowance for doubtful accounts based upon an evaluation of the current status of receivables, historical experience and other factors, as necessary. It is reasonably possible that the estimate of the allowance for doubtful accounts will change.

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. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful life of the asset or the life of the lease.

Fair Value Measurements

SportsHub 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.

Intangible Assets

Intangible assets with a finite life consist of internally developed software, customer relationships, trade names, and acquired technology and are carried at cost less accumulated amortization. SportsHub amortizes the cost of identifiable intangible assets on a straight-line basis over the expected period of benefit, which ranges from three to seven 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 three to five years. SportsHub reassesses whether it has met the relevant criteria for deferral and amortization at each reporting date. SportsHub capitalized $0 and $292,229 of costs in the development of its software in the years ending December 31, 2021 and 2020, respectively. SportsHub classified amortization related to developed technology as cost of revenue totaling $1,132,853 and $1,181,970 for the years ended December 31, 2021 and 2020, respectively. SportsHub classifies amortization related to developed technology as cost of revenue totaling $629,496 and $723,907 for the six months ended June 30, 2022 and 2021, respectively.

Long-Lived Assets

SportsHub 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 an 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. Based on this assessment there was no impairment recognized during the six months period ended June 30, 2022 and 2021.

Goodwill

SportsHub records goodwill when consideration paid in an acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. Goodwill is not amortized, but rather is tested for impairment. SportsHub has determined that there are seven reporting units for the purpose of goodwill impairment tests. SportsHub 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. SportsHub 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, SportsHub 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. SportsHub estimates fair value utilizing the income approach and the market approach. 

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 SportsHub-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. SportsHub had accumulated goodwill impairment of $1,644,000 as of June 30, 2022 and 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.

Accounting for Leases

Effective January 1, 2020, SportsHub adopted the new lease accounting guidance in Accounting Standards Update No. 2016-02, Leases (ASC 842), using a modified retrospective approach. The adoption of ASC 842 resulted in the establishment of a right-of-use-asset and lease liability of $567,602 on January 1, 2020 and did not have any effect on accumulated deficit. The standard requires the recognition of right-of-use assets and lease liabilities for lease contracts with terms greater than 12 months.

Operating lease costs are recognized in the income statement as a single lease cost and finance lease costs are recognized in two components, interest expense and amortization expense. SportsHub has elected the package of practical expedients permitted in ASC 842. Accordingly, SportsHub accounted for its existing leases as either finance or operating lease under the new guidance, without reassessing (a) whether the contract contains a lease under ASC 842, (b) whether classification of the operating lease would be different in accordance with ASC 842, or (c) whether the unamortized initial direct costs before transition adjustments would have met the definition of initial direct costs in ASC 842 at lease commencement. In addition, SportsHub elected to utilize the practical expedient to use hindsight in determining the lease term when considering options to extend the term of leases.

Prize Liability

SportsHub’s prize liability consists of funds to be paid to participants of the various fantasy games hosted by SportsHub. These prizes are paid to the participants once a fantasy game has concluded and final winners have been determined.

Customer Deposits

SportsHub holds cash on behalf of customers in wallet accounts and accounts on the LeagueSafe Management, LLC platform. Cash related to these accounts may be drawn on at any time at the request of the customer.

Income Taxes

SportsHub 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. 

SportsHub 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.

Revenue Recognition

SportsHub enters into contracts for the development, hosting, operations, maintenance, and service of games and contests that are hosted by SportsHub and accessed through the customer’s website or other electronic media. This generally results in revenue from developing, hosting, and maintaining software for customers (cloud-hosted SaaS) or licensing revenue for the development of software.

SportsHub enters into implicit and explicit contracts with end users for the hosting peer to peer online fantasy game and wallet operations. This generally results in revenue from online fantasy games and wallet operations.

SportsHub 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 SportsHub expects to be entitled in exchange for promised goods or services. SportsHub’s performance obligations are satisfied either over time (net gaming revenue, subscription revenue and certain types of fee revenue) or at a point in time (for certain types of fee revenue). Other items relating to charges collected from customers include reimbursable expenses. Charges collected from customers as part of SportsHub’s sales transactions are included in revenues and the associated costs are included in cost of revenues.

Stock-Based Compensation

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. SportsHub 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.

SharpLink Redeemable Preferred Stock Issued with a Commitment Fee

SharpLink issued redeemable preferred stock with a commitment fee in 2020. SportsHub considers guidance within ASC 470-20, Debt (ASC 470), Distinguishing Liabilities from Equity (ASC 480), and Derivatives and Hedging (ASC 815) when accounting for a redeemable equity instrument issued with a freestanding-instruments (e.g., commitment fee), such as in the December 2020 SharpLink preferred stock issuance (First Tranche) and the second issuance upon the date the common stock of SharpLink is listed or quoted on any trading market (Going Public Transaction) (Second Tranche). 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. 

Commitment Fee

SportsHub accounts for the commitment fee as either equity instrument, liability, or derivative liability in accordance with ASC 480 and/or ASC 815, depending on the specific terms of the agreement. The commitment fee, which requires SharpLink to issue common shares equal to the greater of either 15% of the aggregate of the First and Second Tranche or 3% of SharpLink’s issued and outstanding capital immediately following the Second Tranche, may require SharpLink to transfer a variable number of shares outside of its control, 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. SportsHub recognized commitment fee expense of $18,851,927 for the six months ended June 30, 2021. There was no commitment fee expense for the six months period June 30, 2022.

Paycheck Protection Program Loans

SportsHub followed Financial Accounting Standards Board (FASB) Topic 470-Debt in accounting for its Paycheck Protection Program (PPP) loans. Upon forgiveness and legal release, SportsHub reduced the liability by the amount forgiven and recorded a gain on forgiveness.

Advertising Costs

SportsHub expenses the costs of advertising as incurred. Advertising expense for the six months ended June 30, 2022 and 2021, was $73,804 and $206,217, respectively.

Accounting Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect 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.

Recently Issued Accounting Pronouncements Not Yet Adopted

Financial Instruments – Credit Losses

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. SportsHub would be required to use a forward-looking CECL model for accounts receivables, guarantees, and other financial instruments. SportsHub will adopt ASC 326 on January 1, 2023, and SportsHub is still evaluating the impact on its consolidated financial statements.

Revenues

Revenues totaled $2,052,350 and $3,589,535 for the six months ended June 30, 2022 and 2021, respectively. The 43% decrease was primarily attributable to the deconsolidation of SharpLink and the related B2B games development business in August 2021, resulting in the decline of SaaS revenues to zero for the six months ended June 30, 2022 compared to $1,631,965 for the same six-month period in 2021. For the comparable six-month reporting periods in 2022 and 2021, net gaming revenues from SportsHub’s fantasy sports games declined 4% to $1,037,957 from $1,085,701, respectively; fee revenues from SportsHub’s LeagueSafe platform increased 44% to $503,153 from $350,008, respectively; and subscription revenues from Fantasy National Golf Club remained relatively flat at $511,240 and $521,861, respectively.

Cost of revenues

For the six months ended June 30, 2022, cost of revenues declined 53% to $1,140,223 from $2,437,578 reported for the six months ended June 30, 2021, due to the deconsolidation of SharpLink and the B2B games development business in August 2021, which also resulted in gross profit margin on revenues rising measurably, increasing to 44% from 32% for the six-month periods ended June 30, 2022 and 2021, respectively.

Total operating expenses

Total operating expenses decreased 90% to $2,378,523 for the six months ended June 30, 2022 as compared to $23,259,733 for the same six month period in 2021. The decrease was primarily attributable to accounting for a non-cash commitment fee expense of $18,851,927 related to SharpLink’s financing activities which was recorded in the six-month period ended June 30, 2021, as well as a 46% decrease in selling, general and administrative expenses, which totaled $2,290,692 and $4,210,767 for the six months ended June 30, 2022 and 2021, respectively. The decrease in SG&A was due primarily to the deconsolidation of SharpLink and the B2B games development business in August 2021.

Depreciation and amortization

For the six months ended June 30, 2022, depreciation and amortization decreased 55% to $87,831 compared to $197,039 for the first half of 2021, which was largely attributable to the deconsolidation of SharpLink and the B2B games development business in August 2021.

Other income (expense)

After factoring a non-cash net loss from the SharpLink equity method investment of $4,710,503 and a non-cash impairment of $10,853,652 recorded in the first six months of 2022, total other expense was $15,524,059 for the six months ended June 30, 2022. This compared to total other income of $695,854 for the six months ended June 30, 2021 – a period in which SportsHub benefited from a $700,000 gain on loan forgiveness in connection with the Paycheck Protection Program administered by the U.S. Small Business Administration. Interest income rose 27% to $135,460 for the six months ended June 30, 2022 compared to $106,964 for the six months ended June 30, 2021 and interest expense remained relatively unchanged when comparing both periods.

Income tax benefit (expense)

For the six months ended June 30, 2022, income tax benefit totaled $3,738,209, which compared to an income tax expense of $700 for the same six-month period in the previous year.

Liquidity and Capital Resources

At June 30, 2022, SportsHub had working capital of $9,701,563; cash and restricted cash totaled $34,222,684; and total stockholders’ equity was $7,901,023. At December 31, 2021, working capital totaled $26,370,253; cash and restricted cash totaled $38,962,884; and total stockholders’ equity was $21,162,269.

Cash Flows

Operating activities

Net cash used in operating activities increased to $4,470,968 when compared to $269,654 in net gain provided by operating activities for the six months ended June 30, 2022 and 2021, respectively, which was attributable to a non-cash expense of $10,853,652 recorded for impairment of the SharpLink equity method investment and a non-cash loss on changes of equity interest in SharpLink of $4,710,503, partially offset by a $4,800,219 increase in customer deposits and a $3,010,683 decline in prize liability recorded for the six months of 2022.

Investing activities

Net cash provided by investing activities was $0 for the six months ended June 30, 2022, compared to $580,534 in net cash provided by investing activities in the first half of 2021. For the six months ended June 30, 2021, net cash flow provided by investing activities included expenditures for capital equipment and internally developed software of $147,232 offset by proceeds from the maturity of restricted investments of $727,766.

Financing activities

For the six months ended June 30, 2022, net cash used in financing activities was $269,232, compared to net cash provided by financing activities of $555,223 for the six months ended June 30, 2021.

Revenues

Revenues for the year ended December 31, 2021 increased 22% to $8,024,101, compared to $6,591,383 reported for the prior year. Revenues were positively impacted in 2021 by a $408,691 increase in subscription revenue generated from its Fantasy National Golf Club, which was acquired by SportsHub in late July 2020. Growing popularity of SportsHub’s high stakes daily fantasy sports (“DFS”) games, National Fantasy Championships (“NFC”) and Fanball, also helped SportsHub to $627,993 sales growth in net gaming revenues in 2021, spurred on by overall growth of the fantasy sports and online sports betting industries in the United States. SportsHub’s LeagueSafe platform also grew year-over-year, increasing $238,010; and SaaS revenues from SportsHub’s B2B games development business rose $300,624 for the 12 months ended December 31, 2021, compared to the prior year. SportsHub software license revenue decreased $142,600 from the year ended December 31, 2020 compared to the year ended December 31, 2021.

Cost of revenues

Cost of revenues for the year ended December 31, 2021 increased 23% to $4,962,947, compared to $4,045,233 for the year ended December 31, 2020. This resulted in gross profit of $3,061,154 in 2021, representing a gross profit margin of 38%, which compared to gross profit of $2,546,150 and 39% gross profit margin for 2020.

Operating expenses

After factoring non-cash goodwill impairment expense of $21,722,213 related to the MTS acquisition, as well as non-cash costs incurred for a commitment fee expense of $23,301,206 in connection with SharpLink’s financing activities in 2021, total operating expenses increased significantly, rising to $56,584,424. This compared to total operating expenses of $5,859,034 for the year ended December 31, 2020.

Selling, general and administrative

Selling, general and administrative costs for the year ended December 31, 2021 rose 120% to $6,111,486, compared to $5,111,661 for the year ended December 31, 2020. The significant increase was due primarily to the SharpLink go-public transaction in 2021.

Depreciation and amortization

Depreciation and amortization expense totaled $337,858 for the year ended December 31, 2021, rising 14% from $239,373 for the year ended December 31, 2020.

Other income (expense)

Interest income declined 19% to $271,105 from $333,025 for the years ended December 31, 2021 and 2020, respectively. For the same comparable periods, interest expense rose 15% to $272,673 from $237,505, respectively. SportsHub also recognized a gain on loan forgiveness of $1,399,519 for the 12-month period ended December 31, 2021 in connection with forgiveness of a Payment Protection Program (“PPP”) loan in the amount of $700,000 received from the U.S. Small Business Administration (“SBA”) in January 2021. In January 2021, a second PPP loan in the amount of $699,519 granted in January 2021 was forgiven by the SBA.

In association with the deconsolidation of SharpLink in August 2021, SportsHub recorded a non-cash gain on deconsolidation of $48,648,838 during the year ended December 31, 2021, which was partially offset by the accounting for a non-cash charge of $29,381,877 for impairment of the SharpLink equity method investment, as well a net loss from the SharpLink equity method investment totaling $1,390,681.

Income tax benefit (expense)

For the year ended December 31, 2021, income tax expense totaled $3,858,000, which compared to an income tax benefit of $334 for the year ended December 31, 2020.

Liquidity and Capital Resources

Cash Flows

Operating activities

Net cash provided by SportsHub operating activities for year ended December 31, 2021 increased to $9,818,679, compared to net cash provided by its operating activities of $3,334,662 reported for the year ended December 21, 2020.

Investing activities

For the year ended December 31, 2021, net cash used by investing activities totaled $4,568,853, which compared to net cash provided by investing activities of $1,075,213 in the prior year. The decline was largely attributable to the accounting for the deconsolidation of cash of SharpLink of $7,019,776 offset by cash and restricted cash acquired in the MTS merger of $1,932,000 during 2021. The decrease in net cash flows from SharpLink’s investing activities were also materially impacted by the 2020 acquisition of Fantasy National Golf Club and higher proceeds from maturity of restricted investments during the year ended December 31, 2020.

Financing activities

Net cash provided by financing activities for the year ended December 31, 2021 totaled $6,172,468, compared to net cash provided by financing activities of $3,546,271 for the year ended December 31, 2020. The increase was primarily attributable to $6,000,000 realized from SharpLink’s preferred stock offerings in 2021, which was offset by cash of $1,919,219 provided by SharpLink’s preferred stock offering activities in the previous year. In addition, net cash from financing activities in 2020 included proceeds from long -term debt of $1,816,805, which declined to $158,219 in 2021; and higher payments were made on long-term debt in 2021 compared to 2020, which rose to $518,603 from $153,571, respectively.

PRINCIPAL SHAREHOLDERS OF COMBINED COMPANY

The following tables and the related notes present information on the beneficial ownership of Ordinary Shares of the combined company by:

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. The number of Ordinary Shares beneficially-owned and the percentage of Ordinary Shares beneficially owned assumes, in each case, the consummation of the Transaction resulting in a total of 27,139,135 Ordinary Shares, subject to potential adjustments associated with the Merger Agreement Amendment, and 124,810 Preferred B Shares issued and outstanding immediately following the consummation of the Transaction.

Ordinary Shares of the combined company that may be acquired by an individual or group within 60 days of the date of consummation of the Transaction, pursuant to the exercise of options or warrants or the conversion of a security, are deemed outstanding for the purposes of computing the percentage of Ordinary Shares beneficially owned by such shareholder, but are not deemed outstanding for purposes of computing the percentage of Ordinary Shares beneficially owned by any other individual or group shown in the tables.