Sharplink, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Cautionary Note Regarding Forward-Looking Statements The discussions in this Quarterly Report on Form 10-Q contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions with respect to the future and management’s current expectations, involve certain risks and uncertainties and are not guarantees. These forward-looking statements include, but are not limited to, statements concerning our strategy, competition, future operations, future financial position, future revenues, projected costs, profitability, expected cost reductions, capital adequacy, expectations regarding demand and acceptance for our technologies, growth opportunities and trends in the markets in which we operate, prospects and plans and objectives of management. The words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” “predicts” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Future results may differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, as amended, and that are otherwise described or updated from time to time in our other filings with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2025. The discussion of such risks is not an indication that any such risks have occurred at the time of this filing. We do not assume any obligation to update any forward-looking statements. Industry and Market Data We are responsible for all information contained in this Quarterly Report on Form 10-Q. In some cases, we have relied on market and industry data from third-party sources we believe to be reliable. These market estimates combine independent industry publications with our own assumptions about the Ethereum industry and broader market. Although we are not aware of any material inaccuracies in this data, it involves risks, uncertainties, and is subject to change based on various factors and these factors may be outside of the control of the Company. These factors include those discussed under “Cautionary Note Regarding Forward-Looking Statements,” Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, and Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. This section discusses the key factors that have shaped the financial condition, results of operations, liquidity and capital resources of Sharplink, Inc. and its wholly owned subsidiaries (collectively, “Sharplink,” the “Company,” “we,” “our,” or “us”). You should read this discussion together with our condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the U.S. Securities and Exchange Commission on March 9, 2026. As noted under “Cautionary Note Regarding Forward-Looking Statements,” this discussion includes forward-looking statements that involve risks, uncertainties, and assumptions. Actual results could differ materially from those expressed or implied by these statements. Unless the context indicates otherwise, references in this Quarterly Report on Form 10-Q to” “Sharplink,” “Sharplink US,” “our Company,” “we,” “our,” and “us” refer to Sharplink, Inc., a Delaware corporation, and its wholly owned subsidiaries. 37 Business Overview Headquartered in Miami, Florida, Sharplink, a Delaware corporation, undertook a significant strategic shift in June 2025 by becoming one of the world’s largest publicly traded companies to adopt Ether (“ETH”), the native token of the Ethereum blockchain, as its primary treasury asset. This strategy reflects the Company’s commitment to align our corporate treasury with the future of programmable finance, digital capital markets and decentralized infrastructure. The Company also operates an online affiliate marketing company that delivers unique fan activation solutions to its sportsbook and online casino gaming partners. In tandem with this transformation, Sharplink has streamlined its operations around two distinct reportable segments: 1) ETH Treasury Management. We seek to benefit from our ETH accumulation strategy through (i) potential ETH price appreciation and (ii) yield and other returns generated from staking and related treasury activities. Through our qualified custodians, we participate in native staking by delegating ETH to third-party validators in Ethereum’s proof-of-stake (“PoS”) network, earning protocol-level rewards. We also participate in liquid staking and restaking arrangements, whereby ETH is deployed into third-party protocols in exchange for liquid staking tokens (“LSTs”) and liquid restaking tokens (“LRTs”), such as LsETH and weETH. In addition, we generate incentive-based revenue from third-party arrangements tied to maintaining total value locked (“TVL”) within certain blockchain ecosystems. Our staking infrastructure and custody arrangements are designed to meet the governance, security and control standards expected of a public company. 2) Affiliate Marketing. Our Affiliate Marketing segment is focused on performance-based customer acquisition services for leading sportsbooks and online casino gaming operators worldwide. Through our iGaming affiliate marketing network, known as PAS.net, Sharplink focuses on driving qualified traffic and player acquisitions, retention and conversions to U.S. regulated and global iGaming operator partners worldwide. In addition, we own and operate a portfolio of direct-to-player, state-specific, affiliate marketing websites designed to attract, acquire and drive local sports betting and online casino gaming traffic to its valued partners which are licensed to operate in each respective state. ETH Treasury Management Strategy WE ARE NOT REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940, AND STOCKHOLDERS DO NOT HAVE THE PROTECTIONS ASSOCIATED WITH OWNERSHIP OF SHARES IN A REGISTERED INVESTMENT COMPANY NOR THE PROTECTIONS AFFORDED BY THE COMMODITIES EXCHANGE ACT. Our decision to accumulate ETH as a core treasury asset is grounded in a forward-looking view of the evolving global financial ecosystem. We believe Ethereum’s unparalleled programmability, security and active developer ecosystem position it as a foundational layer for decentralized finance and Web3 applications. With Ethereum’s proof-of-stake consensus mechanism and the growth of highly scalable Layer 2 networks, ETH has evolved into a yield-bearing, productive crypto asset with increasing institutional adoption and intrinsic network value. We view ETH as a digital asset trust commodity, offering the potential for long-term appreciation and yield generation as more stablecoins and tokenized real-world assets leverage the Ethereum ecosystem. A key strategy of our ETH Treasury Management strategy is to raise capital to be used to increase our ETH holdings and generate yield opportunities in a manner which is accretive to shareholders. This can come in the form of equity, equity-linked debt, debt of any kind or any other contract or arrangement intended to fund the purchase of ETH, whether or not such financing is formally classified as debt or equity or other forms of offerings or arrangements (“Financings”), designed to maximize stockholder exposure to ETH within a prudent risk management framework. We also maintain the flexibility to buy back stock when it is accretive to stockholders. We have not set a specific target for the maximum amount of ETH we seek to hold. 38 We diligently track and routinely report key performance indicators (“KPIs”) designed to offer investors transparency and insight into the execution and effectiveness of our ETH Treasury Management strategies. Among these metrics, our ETH concentration (“ETH Concentration”), and growing it over time, has emerged as a central performance benchmark metric by which we gauge our progress. ETH Concentration or ETH per Share, which is calculated by dividing our total ETH holdings by every 1,000 Assumed Diluted Shares outstanding, reflects both the scale of our ETH accumulation efforts and the capital efficiency of our treasury operations. By prioritizing this metric, we underscore our commitment to driving long-term shareholder value, rather than short-term fluctuations in asset prices or market capitalization. Assumed Diluted Shares Outstanding (as defined below) represents the sum of (i) our actual shares of common stock, par value $0.0001 per share (the “Common Stock”) issued and outstanding as of the end of each reporting period, plus (ii) the additional shares that would be issued upon the assumed exercise or settlement of all outstanding warrants, pre-funded warrants, stock option awards, and restricted stock units (“Assumed Diluted Shares Outstanding”). Assumed Diluted Shares Outstanding is not calculated using the treasury stock method. It does not account for equity award vesting conditions, stock option exercise prices, or contractual restrictions limiting the convertibility of debt instruments. Additionally, it excludes any assumed share repurchases that would ordinarily be considered under the treasury stock method. We currently generate yield on our ETH holdings through native staking and liquid staking and restaking arrangements, which include participation in protocols that issue liquid staking tokens (“LSTs”) such as LsETH and liquid restaking tokens (“LRTs”) such as weETH. In native staking, our ETH is deposited into the Ethereum smart contract while withdrawal credentials remain controlled by our custodian, and the underlying ETH is not derecognized. Rewards earned from native staking are recognized as revenue as earned. In liquid staking and restaking arrangements, we deposit ETH into third-party protocols and receive LsETH or weETH, respectively, which are redeemable receipt tokens representing a claim on the underlying staked ETH and related rewards. Upon staking ETH through the liquid staking and restaking protocols, the ETH is derecognized and the LsETH and weETH token received concurrently are then recognized. Any gain or loss on the staking transaction is recognized based on the difference between the carrying amount of the ETH staked and the fair value of the LsETH and weETH received; and included in “Realized gain on crypto assets, net” in the Company’s condensed consolidated statements of operations. The LsETH or weETH received is recognized as an indefinite-lived intangible asset accounted for at cost less impairment. These receipt tokens may increase in value over time due to protocol-based reward mechanisms reflected in changes in exchange rates relative to ETH; however, such increases do not represent revenue and are not recognized in our financial statements until realized through redemption or sale. Revenue is also recognized for incentives earned from third-party arrangements, which are accounted for separately under applicable revenue recognition guidance. Importantly, our ETH Treasury Management strategy is complemented by our active participation in the Ethereum ecosystem. We are a founding member of the Linea Consortium, along with Consensys, see Note 12 - Related Parties, a leading governance body supporting the development of Ethereum’s most aligned Layer 2 blockchain network. Our participation in the consortium enables us to help steer capital allocation toward high-impact infrastructure, public goods and innovation pipelines that are intended to strengthen the long-term utility and defensibility of the Ethereum network, reinforcing the intrinsic value of our own ETH treasury assets. 39 Continuing Operations – ETH Treasury Management In June 2025, we formally launched our ETH-centered treasury strategy and established staking as a dedicated operating segment, reflecting its role in generating yield-based returns on our digital asset holdings. Our ETH Treasury Management segment includes both native staking and liquid staking and restaking activities. Through native staking, we delegate ETH to third-party validators that participate in the Ethereum network’s proof-of-stake consensus mechanism. In return, we earn protocol-level rewards in ETH, which are recognized as revenue as earned and are generally based on the amount of ETH staked and overall network activity. We also participate in liquid staking and restaking arrangements, whereby we deposit ETH into third-party protocols and receive liquid staking tokens (“LSTs”), such as LsETH, and liquid restaking tokens (“LRTs”), such as weETH. These tokens represent a redeemable claim on the underlying staked ETH and are accounted for as indefinite-lived intangible assets measured at cost less impairment. In addition to staking and restaking rewards, we earn incentive-based revenue from third-party arrangements related to maintaining TVL within certain blockchain ecosystems. These incentives are typically paid in digital assets and are recognized as revenue in accordance with applicable revenue recognition guidance. Changes in the value of LSTs and LRTs arising from protocol-based reward mechanisms are reflected in exchange rate movements relative to ETH and do not constitute revenue until realized through redemption or sale. Since initiating our ETH Treasury Management operations in June of 2025, we have accumulated approximately 872,984 in total ETH holdings, comprised of 590,823 in native ETH and 209,789 and 72,372 ETH on an as if redeemed basis from LsETH and weETH, respectively, as of May 4, 2026. The ETH holdings were derived through purchases of ETH, receipts of ETH from investors and ETH rewards. For the three months ended March 31, 2026, revenues generated from native staking rewards totaled $10,467. These native staking rewards represent the ETH-based rewards accumulated through the delegation of ETH to staking validators, which we expect to scale materially in future quarters in correlation with growth in our treasury balance and broader ETH market performance. The foregoing revenue does not include staking rewards generated from our LsETH or weETH holdings. These receipt tokens increase in value over time due to protocol-based reward mechanisms reflected in changes in exchange rates relative to ETH; however, such increases do not represent revenue and are not recognized in our financial statements until realized through redemption or sale. See Liquid Staking and Wrapped Ether Protocol disclosure below. We view our ETH Treasury Management operations as a core strategic pillar and its broader alignment with the Ethereum ecosystem. Our current and future strategy includes pursuing yield and performance through staking and other treasury activities designed to generate yield and other returns, while contributing directly to Ethereum’s decentralization, scalability, and security. Moreover, we believe staking is foundational to a new generation of blockchain-native capital structures that enable corporations to earn yield without relying on traditional debt instruments, equities, or centralized intermediaries. Our staking and treasury efforts are focused on maximizing risk-adjusted yield, managing operational and market risks, and ensuring our operations meet institutional standards for transparency, efficiency and governance. On December 20, 2025, the Company executed the definitive agreement providing for allocation of at least $200 million in ETH for deployment on Linea over the following six months in a risk-managed manner over a multi-year commitment period. The Company expects to leverage Linea’s institutional-grade infrastructure to optimize onchain yield to capture differentiated ETH denominated returns. This differentiated yield is expected to combine native ETH yield, restaking rewards from securing EigenCloud Autonomous Verifiable Services (AVSs), and direct Linea and ether.fi protocol incentives, all within a compliant Layer 2 infrastructure. Consensys will not receive any fees or commission on the Company’s deployment of ETH on Linea. As of March 17, 2026, the Company had completed deployment of $200 million of ETH assets to Linea, converting 71,726 ETH into 66,102 units of weETH in connection with the deployment. 40 Liquid Staking Protocol As part of our ETH Treasury Management strategy, we participate in liquid staking through the Liquid Collective protocol, a decentralized, enterprise-focused liquid staking network that enables participants to stake ETH through a set of approved node operators while maintaining liquidity via a transferable receipt token. In a liquid staking arrangement, we transfer ETH to the protocol and receive LsETH, a fungible ERC-20 receipt token, that represents a proportional interest in the protocol’s pool of staked ETH. LsETH is accounted for as an indefinite-lived intangible asset under ASC 350-30, and recorded at cost, less any impairment losses. The Liquid Collective protocol establishes a daily Protocol Conversion Rate (“PCR”), which reflects the amount of ETH into which a unit of LsETH is redeemable. The PCR is calculated by dividing the total ETH held by the protocol, including accumulated staking rewards (net of penalties or slashing fees), by the total number of LsETH tokens in circulation. The PCR is updated daily through the protocol’s on-chain infrastructure and is publicly accessible. The PCR is not a market trading price. The process of redeeming LsETH for ETH is subject to the validator exit queue, bonding periods and other mechanics that may affect the timing and execution of redemption. As a result, we may not be able to redeem our holdings immediately. As of March 31, 2026, we held 189,327 LsETH tokens. The following table presents a roll-forward of our LsETH holdings, including relevant details related to LsETH purchases, redemptions and impairment losses within the periods presented. in thousands, except number of LsETH and price of LsETH Source of capital used to purchase LsETH LsETH original cost basis LsETH impairment losses LsETH carrying value Number of LsETH held Approx. average purchase price per LsETH Weighted Average LsETH Conversion Rate at Acquisition LsETH Conversion Rate at End of Period Balance at December 31, 2025 $ 624,659 $ (140,208 ) $ 500,912 $ 204,409 $ 3,056 LsETH acquisitions (a) 257 257 100 2,566 1.101622031 1.1058168385 LsETH redemptions (46,414 ) (28,671 ) (15,182 ) n/a LsETH impairment losses (114,944 ) (114,944 ) - n/a Balance as of March 31, 2026 $ 578,502 $ (255,152 ) $ 357,554 $ 189,327 $ 3,056 (a) Earned through rebates offered by protocol provider. 41 The following table shows the number of LsETH held at the end this period, as well as market value calculations of our LsETH holdings based on the lowest, highest, and ending market prices of one LsETH on the Coinbase exchange (our principal market): Period End Date Number of LsETH Held at End of Quarter Lowest Market Price of LsETH Held During the Quarter (b) Market Value of LsETH held using Lowest Market Price (c) Highest Market Price of LsETH Held During the Quarter (d) Market Value of LsETH held using Highest Market Price (e) Market Price of LsETH Held at End of Quarter (f) Market Value of LsETH Held at End of Quarter (g) March 31, 2026 $ 189,327 $ 1,888 $ 357,542 $ 3,630 $ 687,241 $ 2,236 $ 423,301 ● (b) The “Lowest Market Price of LsETH During the Quarter” represents the lowest market price for one LsETH reported on the Coinbase exchange during the respective quarter, without regard to when we purchased any of our LsETH. ● (c) The “Market Value of LsETH Held Using Lowest Market Price” represents a mathematical calculation consisting of the lowest market price for one LsETH reported on the Coinbase exchange during the respective quarter multiplied by the number of LsETH held by us at the end of the applicable period. ● (d) The “Highest Market Price of LsETH During the Quarter” represents the highest market price for one LsETH reported on the Coinbase exchange during the respective quarter, without regard to when we purchased any of our LsETH. ● (e) The “Market Value of LsETH Held Using Highest Market Price” represents a mathematical calculation consisting of the highest market price for one LsETH reported on the Coinbase exchange during the respective quarter multiplied by the number of LsETH held by us at the end of the applicable period. ● (f) The “Market Price of LsETH at End of Quarter” represents the market price of one LsETH on the Coinbase exchange at midnight UTC on the last day of the respective quarter. ● (g) The “Market Value of LsETH Held at End of Quarter” represents a mathematical calculation consisting of the market price of one LsETH on the Coinbase exchange at midnight UTC on the last day of the respective quarter multiplied by the number of LsETH held by us at the end of the applicable period. The amounts reported as “Market Value” in the table above represent only a mathematical calculation consisting of the number of LsETH tokens held by us at the end of the applicable period multiplied by the market price of LsETH as reported on the Coinbase Exchange. The LsETH token is relatively new and the market for LsETH may be subject to manipulation, limited transparency, inconsistent pricing sources, and episodic illiquidity. The price information referenced may not reflect actionable market depth or executable prices, and there is no assurance that we would be able to sell our LsETH holdings at the Market Value amounts indicated above, at the quoted market price, or at all. The market infrastructure supporting LsETH remains nascent, and future developments in protocol mechanics, exchange support, or regulatory oversight may materially impact pricing, liquidity, and valuation methodologies. Accordingly, the Market Value amounts reported above may not accurately reflect the fair market value of LsETH, and the actual realizable value of our holdings could differ materially from the calculated figures. Liquid Restaking Protocol As noted previously, on December 20, 2025, the Company executed the definitive agreement providing for allocation of at least $200 million in ETH for deployment on Linea over the following six months in a risk-managed manner over a multi-year commitment period. The Company expects to leverage Linea’s institutional-grade infrastructure to optimize onchain yield to capture differentiated ETH denominated returns. This differentiated yield is expected to combine native ETH yield, restaking rewards from securing EigenCloud Autonomous Verifiable Services (AVSs), and direct Linea and Ether.fi protocol incentives, all within a compliant Layer 2 infrastructure. Consensys will not receive any fees or commission on the Company’s deployment of ETH on Linea. Our digital assets, including ETH and weETH, are held in our name by Anchorage Digital Bank N.A., our qualified custodian, on both Ethereum and Linea. Upon depositing ETH into the ether.fi protocol and minting weETH, we derecognize the ETH transferred and recognize weETH as a new unit of account at its fair value on the mint date. Derecognition reflects the difference between the fair value of weETH received and the carrying amount of the ETH transferred is recognized as a realized gain (loss) on the condensed consolidated statement of operations. Since weETH provides the holder with an enforceable, pro-rata claim on ETH and accumulated rewards held by the ether.fi protocol, weETH fails the scope criterion in ASC 350-60-15-1(b), which requires that a crypto asset not provide the holder with enforceable rights to or claims on underlying goods, services, or other assets. Accordingly, weETH is outside the scope of ASC 350-60 and is accounted for as an indefinite-lived intangible asset under ASC 350-30. 42 The liquid restaking protocol uses a floating conversion rate, or PCR, between the receipt token and staked tokens, reflecting the value of accrued network rewards, penalties, and fees associated with the staked ETH. The conversion rate between weETH and ETH increases over time as staking rewards accrue to the protocol; no new or additional tokens are received. In addition to the core weETH accretion, we are entitled to monthly incentive payments funded by ether.fi, Linea, and EigenCloud under a SPA, with Consensys acting as program administrator. We have concluded that ether.fi, Linea, and Eigen are each customers under ASC 606, as they provide consideration in exchange for our service of providing and maintaining TVL on Linea, which is an output of our ongoing treasury operations. Consensys is a conduit and is not considered a customer. We consider each incentive stream as variable (based on month-end TVL metrics and subject to contractual caps) and is paid in a noncash form. We estimate variable consideration using the expected value method and the noncash consideration is measured at fair value at contract inception in accordance with ASC 606-10-32-21; subsequent changes in the fair value of the underlying tokens attributable solely to the form of consideration do not adjust the transaction price. We apply the variable consideration allocation exception in ASC 606-10-32-40, allocating each month’s variable consideration to the distinct monthly service period to which it relates. At each month-end, we recognize a receivable for the incentives earned for that period, measured at the fair value of the tokens to be received. Because settlement occurs in digital assets whose fair value fluctuates between the date the receivable is recognized and the settlement date, we have concluded that the receivable contains an embedded derivative. The embedded derivative is subsequently measured at fair value through earnings until settlement. Upon receipt of the tokens, we reclassify the receivable and embedded derivative to the applicable crypto asset account. As of March 31, 2026, we held 66,102 weETH tokens. The following table presents a roll-forward of our weETH holdings, including relevant details related to weETH purchases and impairment losses within the periods presented. in thousands, except number of weETH and price of weETH Source of capital used to purchase weETH weETH original cost basis weETH impairment losses weETH carrying value Number of weETH held Approx. average purchase price per weETH Weighted Average weETH Conversion Rate at Acquisition weETH Conversion Rate at End of Period Balance at December 31, 2025 $ - $ - $ - $ - $ - weETH acquisitions (a) 206,024 206,024 66,102 3,117 1.086104579 1.0915719777 weETH impairment losses (76,726 ) (76,726 ) - n/a Balance as of March 31, 2026 $ 206,024 $ (76,726 ) $ 129,298 $ 66,102 $ 3,117 (a) Earned through rebates offered by protocol provider. The following table shows the number of weETH held at the end of this period, as well as market value calculations of our weETH holdings based on the lowest, highest, and ending market prices of one weETH using observable prices across multiple active exchange, utilizing the pricing data aggregator CoinGecko: Period End Date Number of weETH Held at End of Quarter Lowest Market Price of weETH Held During the Quarter (b) Market Value of weETH held using Lowest Market Price (c) Highest Market Price of weETH Held During the Quarter (d) Market Value of weETH held using Highest Market Price (e) Market Price of weETH Held at End of Quarter (f) Market Value of weETH Held at End of Quarter (g) March 31, 2026 $ 66,102 $ 1,915 $ 126,580 $ 3,678 $ 243,125 $ 2,295 $ 151,705 ● (b) The “Lowest Market Price of weETH During the Quarter” represents the lowest market price for one weETH reported for the respective quarter, without regard to when we purchased any of our weETH. 43 ● (c) The “Market Value of weETH Held Using Lowest Market Price” represents a mathematical calculation consisting of the lowest market price for one weETH reported during the respective quarter multiplied by the number of weETH held by us at the end of the applicable period. ● (d) The “Highest Market Price of weETH During the Quarter” represents the highest market price for one weETH reported during the respective quarter, without regard to when we purchased any of our weETH. ● (e) The “Market Value of weETH Held Using Highest Market Price” represents a mathematical calculation consisting of the highest market price for one weETH reported during the respective quarter multiplied by the number of weETH held by us at the end of the applicable period. ● (f) The “Market Price of weETH at End of Quarter” represents the market price of one weETH at midnight UTC on the last day of the respective quarter. ● (g) The “Market Value of weETH Held at End of Quarter” represents a mathematical calculation consisting of the market price of one weETH at midnight UTC on the last day of the respective quarter multiplied by the number of weETH held by us at the end of the applicable period. Regulatory Developments — SEC/CFTC Joint Interpretation on Digital Assets (March 17, 2026) On March 17, 2026, the SEC and the Commodity Futures Trading Commission (“CFTC”) issued a joint interpretation addressing the application of federal securities and commodities laws to certain digital assets and related transactions. The interpretation is intended to provide market participants with greater clarity regarding the regulatory treatment of digital assets and to support ongoing Congressional efforts to establish a comprehensive digital asset market structure framework. The joint interpretation introduces a functional taxonomy distinguishing among digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. It further explains how a digital asset that itself is not a security may nonetheless be sold as part of an “investment contract,” and how such an asset may cease to be subject to an investment contract over time as the underlying facts and circumstances evolve. The SEC and CFTC also clarified the application of federal securities laws to airdrops, protocol mining, protocol staking, and the wrapping of non-security digital assets. The agencies stated that the CFTC will administer the Commodity Exchange Act in a manner consistent with the SEC’s interpretation. Management is evaluating the potential implications of this interpretation on the Company’s digital asset activities, including the classification, measurement, and disclosure of digital assets held in treasury and any activities involving protocol staking or other network participation. Based on the Company’s current operations and information available as of the date of this filing, the Company does not expect the interpretation to have a material impact on its condensed consolidated financial statements. The Company will continue to monitor regulatory developments and update its disclosures as appropriate. Affiliate Marketing In December 2021, we acquired certain assets of FourCubed, including FourCubed’s online casino gaming-focused affiliate marketing network, known as PAS.net (“PAS”). For more than 18 years, PAS has focused on delivering quality traffic and player acquisitions, retention and conversions to regulated and global casino gaming operator partners worldwide. In fact, PAS won industry recognition as the European online gambling industry’s Top Affiliate Manager, Top Affiliate Website and Top Affiliate Program for four consecutive years by both igamingbusiness.com and igamingaffiliate.com. The strategic acquisition of FourCubed brought us talent with proven experience in affiliate marketing services and recurring net gaming revenue (“NGR”) contracts with many of the world’s leading online casino gambling companies, including Party Poker, bwin, UNIBET, GGPoker, 888 poker, betfair, World Poker Tour and others. As part of our strategy to expand our affiliate marketing services to the emerging American sports betting market, in November 2022, we began a systematic roll-out of our U.S.-focused performance-based marketing business with the launch of 15 state-specific, content-rich affiliate marketing websites. Our user-friendly, state-specific domains are designed to attract, acquire and drive local sports betting and casino traffic directly to our sportsbook and casino partners, which are licensed to operate in each respective state. As of April 2026, we are licensed to operate in 18 jurisdictions and own and operate sites serving 17 U.S. states (Arizona, Colorado, Iowa, Illinois, Indiana, Kansas, Louisiana, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and Wyoming). We largely utilize search engine optimization and programmatic advertising campaigns to drive traffic to our direct-to-player (“D2P”) sites. 44 Capital Markets Funds Raised - At-The-Market (“ATM”) Offerings On May 1, 2024, we entered into an ATM Sales Agreement (the “2024 ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P”) pursuant to which we may offer and sell, from time to time, through A.G.P., as sales agent and/or principal, shares of our Common Stock having an aggregate offering price of up to $1.7 million, subject to certain limitations on the amount of Common Stock that may be offered and sold by us set forth in the 2024 ATM Sales Agreement (the “2024 ATM Offering”). On May 30, 2025, we entered into a second ATM Sales Agreement (the “May 2025 ATM Sales Agreement”) with A.G.P. relating to the sale of shares of our Common Stock from time to time, having an aggregate offering price of up to $1.0 billion (the “May 2025 ATM Offering”). On July 17, 2025, we entered into an Amendment to the May 2025 ATM Sales Agreement (the “Amendment”) to (i) increase the number of shares that may be sold in the May 2025 ATM Offering to $6.0 billion; and (ii) to permit the forward sale of shares to be sold in the May 2025 ATM Offering pursuant to Master Forward Confirmation Letter Agreements. Addition of Sales Agents to ATM Offering On August 19, 2025, the Company entered into an Amended and Restated Sales Agreement (the “Amended and Restated ATM Sales Agreement”) (which amended and restated the May 2025 ATM Sales Agreement) by and among the Company, A.G.P., Canaccord Genuity LLC (“Canaccord Genuity”), Societe Generale, B. Riley Securities, Inc. (“B. Riley”), and Citizens JMP Securities, LLC (“Citizens”) to add Canaccord Genuity, Societe Generale, B. Riley, and Citizens as additional sales agents and to make certain conforming changes. We elected not to conduct any sales under our ATM programs for the three months ended March 31, 2026. See Note 6 - Equity for results from recently closed capital market offerings. Meetings of Stockholders - April 2026 Annual Meeting of Stockholders On April 10, 2026, Sharplink convened its 2026 Annual Meeting of Stockholders (the “Annual Meeting”) virtually via live webcast. Only stockholders of record at the close of business on March 6, 2026, the record date for the Annual Meeting, were entitled to vote at the Annual Meeting. As of the record date, 197,161,623 shares of the Company’s common stock were outstanding and entitled to vote at the Annual Meeting. Based on the certified final voting results received from the Inspector of Election, present at the meeting or by proxy were holders of 109,754,580 shares of the Company’s common stock, which represented approximately 56% of the voting power of all shares of common stock as of the record date and constituted a quorum for the transaction of business at the Annual Meeting. The stockholders of the Company voted and approved on the following three proposals at the Annual Meeting: 1) To elect Joseph Lubin, Joseph Chalom, Leslie Bernhard, Obie McKenzie, and Robert Gutkowski to serve as directors until the next annual meeting of stockholders or until their successors have been duly elected and qualified; 2) To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2026; and 3) To approve, on an advisory basis, the compensation of the Company’s named executive officers. 45 Other Matters - Termination of Asset Management Agreements On April 3, 2026, Sharplink entered into a mutual termination agreement (the “Galaxy Termination Agreement”) with Galaxy Digital Capital Management LP (“Galaxy”) in connection with the mutual termination of that certain asset management agreement by and between the Company and Galaxy, dated May 30, 2025, for certain discretionary investment management services with respect to the Company’s purchase of Ethereum (the “Galaxy Asset Management Agreement”). Pursuant to the Galaxy Termination Agreement, the Galaxy Asset Management Agreement will be terminated effective May 31, 2026. On April 3, 2026, the Company also entered into a mutual termination agreement (the “ParaFi Termination Agreement” and together with the Galaxy Termination Agreement, the “Termination Agreements”), with ParaFi Capital LP (“ParaFi”) in connection with the mutual termination of that certain asset management agreement between ParaFi and the Company, dated May 30, 2025, for certain discretionary investment management services with respect to the Company’s purchase of Ethereum (the “ParaFi Asset Management Agreement, and, together with the Galaxy Asset Management Agreement, the “Asset Management Agreements”). Pursuant to the ParaFi Termination Agreement, the Galaxy/ParaFi Asset Management Agreement will be terminated effective May 31, 2026. Neither the Company nor Galaxy or ParaFi shall have any remaining or future obligations or commitments to the other party under the Asset Management Agreements other than those amounts pursuant to the Termination Agreements. Further, the Company is not required to pay Galaxy or ParaFi any termination fees or penalties in connection with the mutual termination of the Asset Management Agreements. The decision to enter into the Termination Agreements reflects the Company’s continued evolution, including the addition of internal asset management personnel, and was not the result of any disagreement with either Galaxy or ParaFi. Adoption of Inducement Award Plan On August 19, 2025, the Board of Directors of the Company (the “Board”) adopted the Sharplink Gaming, Inc. Inducement Award Plan (the “Inducement Award Plan”). The Inducement Award Plan was adopted without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4) and will be administered by the Compensation Committee of the Board or the independent members of the Board. The Board reserved 3,000,000 shares of the Company’s common stock for issuance under the Inducement Award Plan, subject to adjustment as provided in the plan document. The terms of the Inducement Award Plan are substantially similar to the terms of the Company’s Amended and Restated 2023 Equity Incentive Plan, with the exception that incentive stock options may not be issued under the Inducement Award Plan and equity awards under the Inducement Award Plan (including nonqualified stock options, restricted stock, restricted stock units, and other stock-based awards) may be issued only to an employee who is commencing employment with the Company or any subsidiary or who is being rehired following a bona fide interruption of employment by the Company or any subsidiary, in either case if he or she is granted such award in connection with his or her commencement of employment and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary. The Board also adopted a form of Restricted Stock Unit Agreement Notice of Restricted Stock Unit Grant (Time-Based Grant) (the “Inducement Time-Based RSU Grant Package”) and a form of Restricted Stock Unit Agreement Notice of Restricted Stock Unit Grant (Performance-Based Grant) (the “Inducement Performance-Based RSU Grant Package”) for use under the Inducement Award Plan. 46 2025 Share Repurchase Plan On August 21, 2025, the Board approved a share repurchase program (the “2025 Repurchase Program”) providing for the repurchase of up to $1.5 billion of the Company’s outstanding shares of common stock. Under the 2025 Repurchase Program, the Company is authorized to repurchase shares of common stock through open market purchases, privately-negotiated transactions, accelerated share repurchases, or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The 2025 Repurchase Program does not obligate the Company to repurchase shares of common stock and the specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance metrics, market conditions, securities law limitations and other factors. In connection with the 2025 Repurchase Program, on August 21, 2025, the Company entered into an Open Market Share Repurchase Agreement (the “Repurchase Agreement”) with The Benchmark Company, LLC (the “Broker”) whereby the Broker has agreed to act as a non-exclusive agent on behalf of the Company to repurchase shares of the Company’s common stock in the open market pursuant to Rule 10b-18 of the Exchange Act. The Repurchase Agreement will continue in effect until terminated by either the Company or the Broker, with or without cause, upon written notice to the other party. The Company will pay Broker a commission at a rate of $0.01 for each share of common stock repurchased pursuant to the Repurchase Agreement. For the three months ended March 31, 2026, the Company did not repurchase any shares of its Common Stock. Reverse Stock Split On May 5, 2025, we effected a one-for-twelve (1:12) reverse stock split of all the Company’s common stock, whereby the Company decreased the number of issued and outstanding shares of common stock from 7,916,206 to 659,684. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retrospectively adjusted as of the earliest period presented in the financial statements to reflect the reverse stock split. Results of Operations (in thousands, except for percentages) The following table provides certain selected financial information for the periods presented: For the Three Months Ended March 31, 2026 March 31, 2025 Change % Change Revenue from staking $ 11,501 $ - $ 11,501 $ 100.0 Revenue from affiliate marketing 557 742 (185 ) (24.9 ) Total revenue 12,058 742 11,316 1,525.1 Gains and (losses) from operations Realized gain on crypto assets, net 12,005 - 12,005 100.0 Unrealized loss on crypto assets at fair value, net (506,664 ) - (506,664 ) 100.0 Total losses from operations (494,659 ) - (494,659 ) Operating expenses Cost of revenues from affiliate marketing 432 610 (178 ) (29.2 ) Selling, general, and administrative expenses 9,876 1,058 8,818 833.5 Impairment of crypto assets at cost 191,670 - 191,670 100.0 Total operating expenses 201,978 1,668 200,310 12,009.0 Operating loss (684,579 ) (926 ) (683,653 ) 73,829 Total other income, net 201 12 189 1,575.0 Net loss before income taxes (684,378 ) (914 ) (683,464 ) 74,777 Income tax expense (1,183 ) (3 ) (1,180 ) 39,333 Net loss from continuing operations (685,561 ) (917 ) (684,644 ) 74,661 Net loss from discontinued operations, net of tax - (58 ) 58 (100.0 ) Net loss $ (685,561 ) $ (975 ) $ (684,586 ) 70,214 47 For the Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025 Revenue For the three months ended March 31, 2026, total revenue increased 1,525.1% to $12,058 compared to $742 reported for the same three-month period in the prior year. The notable increase was due to revenues from staking generated by our ETH Treasury Management segment, launched in June 2025, which was $11,501, or 95.4% of our total revenues for the quarter ended March 31, 2026. The revenues from staking have immaterial costs and therefore nearly 100% gross margin. The increase in revenues was offset by a -24.9% decline in revenues generated in our Affiliate Marketing Segment, which generated $557 in revenues compared to $742 for the three months ended March 31, 2026 and 2025, respectively. The decrease in affiliate marketing revenues was primarily due to softening market conditions in the global iGaming industry, changes in customer pricing structures and the loss of customers due primarily to evolving regulatory environments in certain foreign markets in which our affiliate marketing business operates. Total Losses from Operations We recognized a gain on crypto assets at fair value of $12,005 and recorded an unrealized loss on crypto assets at fair value, net of $(506,664) resulting from the sum of fair value accounting adjustments of ($506,464), due to the volatility in the price of ETH, and $(18) of unrealized losses on rebate and incentive rewards earned for the three months ended March 31, 2026 as compared to zero for the same three month period in the prior year. Total Operating Expenses For the three months ended March 31, 2026, cost of revenues - affiliate marketing decreased $(178) to $432 from $610 compared to the same three-month period in the prior year. This decrease is reflective of the decrease in revenues from Affiliate Marketing Segment. For the three months ended March 31, 2026, total selling, general and administrative expenses increased 833.5% to $9,876 from $1,058 reported for the same three-month period in the prior year. The increase was primarily attributable to the following: $1,254 in asset manager fees, $2,570 in compensation costs, $1,251 in accounting, legal and compliance fees, $327 in custodial and banking fees. These expenses were incurred to establish and support our ETH Treasury Management strategy. For the three months ended March 31, 2026, we also recognized an impairment loss on LsETH and weETH crypto assets of $191,670. These crypto assets do not meet the scope criteria of ASC 350-60. Accordingly, these crypto assets continue to be accounted for as indefinite-lived intangible assets under ASC 350-30 and are measured at historical cost less cumulative impairment, rather than at fair value. We did not incur any such impairment losses for the same three month period in the prior year. 48 Operating Loss Net loss from operations increased 73,829% to $(684,579) for the three months ended March 31, 2026, compared to a net loss from operations of $(926) reported for the same three-month period in 2025. This is attributable to the impairment on crypto assets of LsETH and weETH of $191,670 and an unrealized loss on our crypto assets at fair value, net which totaled $(506,664), offset by a $12,005 net realized gains on our crypto assets, for the three months ended March 31, 2026. Net Income (Loss) from Discontinued Operations, Net of Tax For the three months ended March 31, 2026, net income from discontinued operations, net of tax was zero compared to $(58), for the three months ended March 31, 2025. The prior period discontinued operations were associated with the wind down of certain MTS business amounts, which are immaterial in the current period. Net Loss As a result of the aforementioned reasons, net loss for the three months ended March 31, 2026 totaled $(685,561), climbing 70,214% when compared to net loss of $(975) reported for the three months ended March 31, 2025. Cash Flows (in thousands, except for percentages) Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 As of March 31, 2026, cash on hand was $16,875, a 1,127% increase when compared to cash on hand of $1,375 as of March 31, 2025. The increase was due to net proceeds raised from the PIPE, ATM and registered direct offerings completed from May through year end 2025, which increased cash on hand at the end of 2025, compared to cash on hand at the end of March 31, 2025. For the three months ended March 31, 2026, net cash used in operating activities from continuing operations totaled $(10,646) compared to net cash used in operating activities from continuing operations of $(453) in the prior year. Net cash used in operating activities from discontinued operations was zero, compared to net cash used in operating activities of $(61) from discontinued operations for the same three-month period in 2025. Overall, net cash used in operating activities was $(10,646) and $(514) for the three months ended March 31, 2026 and 2025, respectively. The change in the operating cash flows was largely attributable to cash used in payments of accounts payable and accrued expenses and prepaid expenses in the first quarter of 2026 as compared to the prior period. For the three months ended March 31, 2026, net cash provided by our investing activities from operations totaled $1,878, an increase of 476% when compared to cash used in investing activities from operations of $(500) for the same three-month period in 2025. The increase in net cash used in investing activities for the three months ended March 31, 2026 versus 2025 was due to our ETH Treasury Management strategy and the related redemptions of USDC stablecoins in the first quarter of 2026. 49 For the three months ended March 31, 2026, net cash used for financing activities from operations was $(2,896), a -419% increase when compared to net cash provided by financing activities from operations of $907 for the same three-month period in 2025. Cash used in financing activities during the first quarter of 2026 related to cash payments of taxes for net share settlement of stock issued for previously accrued severance and bonus awards. Cash generated by financing activities during the first quarter of 2025 related to gross cash proceeds from the sale of our Common Stock. Liquidity and Capital Resources (in thousands) As of March 31, 2026, we had working capital of $12,589. For the three months ended March 31, 2026, we had net loss from continuing operations of $(685,561) compared to a net loss from continuing operations of $(917) reported for the same three-month period in 2025. The net loss from continuing operations was primarily driven by the net unrealized loss on our crypto assets of $(506,664) and impairment of crypto assets at cost of $(191,670) due to price decreases in ETH during the first quarter of 2026. Principal Sources of Liquidity Our principal sources of liquidity are our cash and cash equivalents balances and proceeds from equity financing transactions, including pursuant to our at-the-market offering facility under the Amended and Restated ATM Sales Agreement with A.G.P. Under our internal Treasury Reserve Policy, we use the vast majority of our cash, including cash generated from capital raising transactions, to acquire ETH, some of which are classified as indefinite-lived intangible assets. As of March 31, 2026 and December 31, 2025, we held approximately $1,239,140 and $1,899,683 ETH in crypto assets at fair value, respectively, all of which are unencumbered. As of March 31, 2026 and December 31, 2025, we held approximately $486,852 and $500,912 LsETH and weETH in crypto assets at cost, respectively. As of May 4, 2026, we held approximately 872,984 in total ETH holdings, comprised of 590,823 in native ETH, 209,789 in ETH as if redeemed from LsETH and 72,372 in ETH as if redeemed from weETH, all of which are unencumbered. As discussed further below, although our crypto assets are classified as non-current assets due to our long-term treasury strategy, they represent a significant and readily accessible source of liquidity. Based on current Ethereum network conditions, we estimate that a material portion of our staked ETH could be withdrawn and converted to cash within approximately 30 days, and our entire staking portfolio within approximately 90 days. We believe this provides meaningful additional liquidity support beyond our cash and cash equivalents. Short-Term and Long-Term Liquidity Short-Term Liquidity — Our short-term liquidity needs include working capital requirements, anticipated capital expenditures, and contractual obligations due within the next 12 months. We expect that our cash and cash equivalents as of March 31, 2026, together with cash and cash equivalents generated by our operations, coupled with the use of a portion of proceeds earned from staking activities and redeemed for cash, and equity financings will be sufficient to satisfy these needs over the twelve months. Although we do not anticipate needing to use our ETH to meet our short-term liquidity needs, to the extent necessary, we may seek to use proceeds from the sale of our ETH, and other tokens earned and received as rewards and incentives, to meet such needs. See “ Availability of ETH for Liquidity ” below and “Item 1A. Risk Factors” for additional information. Long-Term Liquidity — Beyond the next 12 months, our long-term cash needs are primarily for obligations related to working capital needs. We expect our cash and cash equivalents as of March 31, 2026, together with cash and cash equivalents, coupled with the use of a portion of proceeds earned from staking activities and redeemed for cash, and equity financings will be sufficient to satisfy these needs over the twelve months. See “ Availability of ETH for Liquidity ” below and “Item 1A. Risk Factors” for additional information. 50 Availability of ETH for Liquidity — We do not believe we will need to sell or engage in other transactions with respect to any of our ETH within the next 12 months to meet our liquidity needs, although we may from time to time sell or engage in other transactions with respect to our ETH, and other tokens earned and received as rewards and incentives, as part of treasury management operations, as noted above. The ETH market historically has been characterized by significant volatility in its price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of instability in the ETH market, we may not be able to sell our ETH at reasonable prices or at all. As a result, our ETH are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. In addition, upon sale of our ETH, we may incur additional taxes related to any realized gains or we may incur capital losses as to which the tax deduction may be limited. See “Item1A. Risk Factors” for additional information. Off-Balance Sheet Arrangements On March 31, 2026, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. We have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities. Inflation Our opinion is that inflation did not have a material effect on our operations for the three months ended March 31, 2026. Climate Change Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations. New Accounting Pronouncements In November 2024, the FASB issued ASU 2024-04, Debt-Debt with Conversions and Other Option. ASU 2024-04 is intended to clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. This ASU is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on its disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued Accounting Standards Update No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for us for our annual reporting for fiscal 2028 and for interim period reporting beginning in fiscal 2029 on a prospective basis. Both early adoption and retrospective application are permitted. The Company is currently evaluating the impact that the adoption of these standards will have on its condensed consolidated financial statements and disclosures. 51 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this Item.