Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Note 9 – Income Taxes
On a quarterly basis, we estimate our annual effective tax rate and record a quarterly income tax provision based on the anticipated rate. As the year progresses, we refine our estimate based on the facts and circumstances, including discrete events, by each tax jurisdiction. The effective tax rate for the six months ended June 30, 2026 was 0.20%, primarily due to the full valuation allowance for the Company’s deferred tax assets as of June 30, 2026, as well as the current tax expense of $(2,181) for the six months ended June 30, 2026. At each reporting period, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. At June 30, 2026, management has determined that there is not sufficient positive evidence to conclude that it is more likely than not that the Company’s net deferred tax asset will be fully realized.
Although the Company maintains a full valuation allowance against its net deferred tax assets, the Company has been, and expects to continue to be, a net taxpayer on a quarterly and annual basis, resulting in the recognition of current income tax expense and the payment of cash income taxes. This is primarily attributable to the recognition of LsETH and weETH staking rewards being recognized for income tax purposes as revenue. LsETH and weETH staking rewards are recognized as revenue for financial reporting purposes only when the LsETH or weETH are redeemed and derecognized, measured at the fair value of ETH at contract inception, which is when the ETH were staked. Further, the Company has limited ability to utilize its Net Operating Losses available to offset current year taxable income due to the 80% limitation on the utilization of post-2017 federal Net Operating Losses under Section 172 of the Internal Revenue Code.
SHARPLINK, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025 (dollar amounts in thousands, except share, per share data, and crypto asset tokens)
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