Sharplink, Inc. Commitments Disclosure

Note 10 - Commitments, Contingencies and Risks and Uncertainties

 

Commitments and Contingencies

 

From time to time, the Company may enter into certain types of contracts that require it to indemnify parties against third-party claims. The conditions of these obligations vary. In addition, legal claims may be made against the Company in the ordinary course of business, which could result in legal proceedings. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, which could have a material adverse effect on the Company’s results of operations for that period or future periods.

 

 

The Company has entered into certain capital markets arrangements in connection with its Amended and Restated May 2025 ATM Sales Agreement that include broker compensation provisions contingent upon future sales activity. Certain of these arrangements provide for a minimum broker fee over a specified period, which would be payable only in the event that aggregate fees generated under the ATM offering do not meet the specified minimum threshold over a one-year period ending August 2026. The Company’s obligation, if any, under such provisions is contingent upon future ATM sales activity, which is discretionary and subject to prevailing market conditions, including volatility in the Company’s stock price and digital asset markets. As of December 31, 2025, management concluded that it is not probable that the Company will incur a minimum broker fee shortfall. Accordingly, no liability has been accrued related to these arrangements.

 

On December 18, 2025, the Company executed a definitive agreement for a collaboration to deploy ETH onto Linea, a Zero-knowledge Ethereum Virtual Machine (“zkEVM”) Layer 2 network. The Company plans to allocate $200,000 in ETH for deployment on Linea in a risk-managed manner over a multi-year commitment period. See Note 12 - Related Parties and Note 15 - Subsequent Events.

 

Risks and Uncertainties

 

The Company holds ETH and ETH-related crypto assets with regulated custodians that safeguard the Company’s private keys. ETH and ETH-related crypto assets are controllable only by the possessor of both the unique public key and private key(s). The custodial services contracts do not restrict the Company’s ability to reallocate ETH and ETH-related crypto assets among custodians. The Company’s ability to access, transfer, or withdraw its crypto assets is therefore not contractually restricted, and the Company is able to convert or reallocate crypto assets as needed to meet operating requirements or settle obligations.

 

A portion of the Company’s ETH is deployed in liquid staking protocols. Staked ETH and LsETH remain accessible to the Company, subject to the applicable unbonding or withdrawal periods of the underlying protocol. The Ethereum network permits withdrawals of staked ETH, and the Company has the ability to request and receive withdrawals in the normal course of business. The Company also assesses whether staking-related lock-ups or protocol-level withdrawal queues create any restrictions that would affect liquidity or the timing of settlement of obligations.

 

The Company’s crypto assets are subject to fair value volatility. Changes in market prices directly affect the carrying value of crypto assets measured at fair value and may result in unrealized gains or losses. For crypto assets measured at cost less impairment, declines in observable market prices may result in impairment charges. The Company recognized a fair value unrealized loss of $(616,173) and an impairment loss on LsETH of $140,208 for the year ended December 31, 2025, reflecting the decline in ETH prices during the period.

 

The Company’s custodial arrangements with Anchorage Digital Bank N.A. and Coinbase Inc.

 

include operational controls designed to mitigate risks of loss, including multi-user approval quorums and internal controls requiring face-to-face authorization for non-recurring transactions. These quorums are unalterable by the users and provide safeguards for both the misappropriation of assets as well as mitigating the risk of a misstatement. While these controls reduce operational risk, the Company continues to evaluate counterparty, concentration, and operational risks associated with custodial relationships and considers these factors in assessing credit risk, fair value measurement inputs, and impairment indicators.

 

The Company also deploys ETH using decentralized finance and liquid staking protocols. All trading and investment activity involves risk, which is heightened in the case of decentralized finance due to the irrevocable nature of blockchain transactions and the possibility of errors in smart contracts. These risks may affect the recoverability, valuation, or liquidity of crypto assets. Smart-contract vulnerabilities, protocol failures, or validator-level issues could result in partial or total loss of staked or deployed assets. The Company evaluates these risks when determining fair value hierarchy levels, impairment indicators, and whether any restrictions on use or withdrawal require separate disclosure.

 

The Ethereum protocol enforces ownership and withdrawal rights for staked assets. The safeguarding of staked digital assets is enforced at the base protocol level and is protected by security mechanisms that are trusted globally across the Ethereum network. These protocol-level assurances support the Company’s conclusion that staked ETH remains accessible and under the Company’s control for financial-statement purposes.

 

The Company performs monthly and quarterly reconciliations of all wallet activity and staking revenue. The Company verifies the existence of a staking pipeline utilizing open-source smart contracts in the expected manner and in-line with on-chain protocols. These procedures support the Company’s assessment of existence, rights and obligations, and completeness of digital-asset balances and related revenue.

 

Loan Agreement

 

On November 26, 2025, the Company entered into a Master Lender Agreement (“Master Lender Agreement”) with FalconX Charlie Inc. (“FalconX”), whereas the Company may borrow U.S. dollars or specified digital assets under individually negotiated term sheets.  Borrowings under the Master Lender Agreement are secured by collateral in the form of U.S. dollars, digital assets or eligible securities and are subject to initial collateral ratio and ongoing margin maintenance requirements. There is no defined minimum or maximum loan amount and FalconX has no obligation to approve a lending request. A monthly Loan Fee is calculated by the Lender and agreed on between FalconX and the Company. The Master Lender Agreement also contains normal representations and warranties and includes provisions on hard forks and a termination event tied to specific valuation thresholds.  The Master Lender Agreement remains in effect until terminated by either party, provided any outstanding borrowings are repaid in full.  There were no borrowings under the Master Lender Agreement during the year ended December 31, 2025.