SHROOMS RISK DISCLOSURE STATEMENT

Document ID: SHROOMS-RISK-001

Version: 1.0

Effective Date: January 3, 2026

Last Updated: January 3, 2026

Governing Document: Terms of Service (SHROOMS-LEGAL-TOS-2025-001)

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RELATED DOCUMENTS

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WARNING: PLEASE READ CAREFULLY THIS RISK DISCLOSURE STATEMENT DESCRIBES IMPORTANT RISKS ASSOCIATED WITH PARTICIPATING IN digiSHROOMS. PARTICIPATION IN digiSHROOMS INVOLVES SIGNIFICANT RISKS, INCLUDING BUT NOT LIMITED TO THE PERMANENT LOSS OF ALL FUNDS SPENT. BY USING THE PLATFORM, YOU ACKNOWLEDGE THAT YOU HAVE READ, UNDERSTOOD, AND ACCEPTED ALL RISKS DESCRIBED HEREIN.

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TABLE OF CONTENTS

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SECTION 1: INTRODUCTION

1.1 Purpose

This Risk Disclosure Statement is designed to provide you with clear, comprehensive information about the risks associated with using the digiSHROOMS platform. It is incorporated by reference into the Terms of Service (SHROOMS-LEGAL-TOS-2025-001) and constitutes a material part of your agreement with GamesOnChain LLC.

1.2 Scope

This disclosure covers risks related to:

(a) Gameplay mechanics and cultivation care;

(b) NFT ownership and trading;

(c) Blockchain technology and smart contracts;

(d) Financial volatility and market conditions;

(e) Regulatory developments;

(f) Platform operations;

(g) Third-party services and integrations.

1.3 No Exhaustive List

This document does not and cannot describe all possible risks. New risks may emerge that are not currently foreseeable. You should carefully consider your individual circumstances and risk tolerance before participating.

1.4 Not Financial Advice

IMPORTANT NOTICE NOTHING IN THIS DOCUMENT OR ON THE digiSHROOMS PLATFORM CONSTITUTES FINANCIAL, INVESTMENT, LEGAL, OR TAX ADVICE. digiSHROOMS IS A GAME, NOT AN INVESTMENT OR FINANCIAL OPPORTUNITY. CONSULT QUALIFIED PROFESSIONALS BEFORE MAKING ANY FINANCIAL DECISIONS.

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SECTION 2: GAME-SPECIFIC RISKS

2.1 Grow Failure Risk

CRITICAL WARNING VIRTUAL GROWS CAN FAIL PERMANENTLY. GROW FAILURE RESULTS IN: - Complete loss of your spore purchase - Complete loss of all substrate purchases made during the Growing Cycle - Permanent burning of the Grow NFT - No ability to recover the grow or purchase cost - NO REFUNDS under any circumstances

Causes of Grow Failure:

Recovery Not Possible: Failed grows cannot be revived. There is no "undo" feature. All blockchain actions are final.

2.2 Difficulty Tier Risks

Higher difficulty tiers offer greater potential rewards but significantly increased risk of grow failure. Bulk substrate requires daily attention and precise care.

2.3 Quality Uncertainty

Your Shroom NFT Grade is determined by your care throughout the 40-50 day Growing Cycle:

Risk: Even with dedicated care, factors including on-chain randomness may affect final outcomes. There is no guarantee of achieving a specific Grade.

2.4 Time Commitment

The 40-50 day Growing Cycle requires consistent attention:

Risk: Missing care windows can result in grow failure. Life circumstances (travel, illness, etc.) may interfere with care requirements.

2.5 Randomness and Luck

Certain game elements are determined by on-chain randomness:

(a) Strain Assignment: When purchasing a spore, strain is randomly assigned from 49 possible strains;

(b) Trait Determination: Rare traits have varying probabilities;

(c) Environmental Events: Random contamination risk factors.

Results are cryptographically verifiable but ultimately unpredictable.

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SECTION 3: BLOCKCHAIN AND TECHNOLOGY RISKS

3.1 Smart Contract Risks

HIGH RISK WARNING SMART CONTRACTS ARE EXPERIMENTAL SOFTWARE. Despite audits and testing, smart contracts may contain: - Undiscovered bugs or vulnerabilities - Logic errors that cause unexpected behavior - Exploitable flaws that could result in loss of funds - Upgrade risks when contracts are modified

The Company cannot guarantee that smart contracts are free from defects.

3.2 Private Key Risks

CRITICAL WARNING IF YOU LOSE YOUR PRIVATE KEYS OR SEED PHRASE, YOUR ASSETS ARE PERMANENTLY LOST. - The Company CANNOT recover your private keys - The Company CANNOT reverse transactions - The Company CANNOT restore access to your wallet - There is NO password reset or account recovery

Your wallet security is entirely your responsibility.

3.3 Network Risks

3.4 Bridge and Layer 2 Risks

digiSHROOMS operates on Base (Ethereum Layer 2):

(a) Bridge Risks: Moving assets to/from Base involves bridge smart contracts that may have vulnerabilities;

(b) Sequencer Risks: Base sequencer outages may delay transaction finality;

(c) Exit Risks: Forced withdrawals to Ethereum Mainnet may take time;

(d) Rollup Risks: Layer 2 security depends on underlying Ethereum security.

3.5 Irreversibility of Transactions

All blockchain transactions are:

(a) Final: Once confirmed, transactions cannot be undone;

(b) Immutable: Historical records cannot be altered;

(c) Public: Visible to anyone with blockchain access;

(d) Permanent: Recorded forever on the blockchain.

Mistakes (wrong address, wrong amount) cannot be corrected after confirmation.

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SECTION 4: FINANCIAL AND MARKET RISKS

4.1 Cryptocurrency Volatility

VALUE DISCLAIMER ETH AND NFT VALUES ARE EXTREMELY VOLATILE. You may experience: - Significant gains or losses in short periods - Complete loss of purchase value - Inability to sell at desired prices - Market illiquidity at critical times

Historical performance does not guarantee future results.

4.2 NFT Value Uncertainty

4.3 Total Loss Risk

You may lose 100% of your purchase, including:

(a) All ETH spent on spores;

(b) All ETH spent on substrates and care;

(c) All value of NFTs held;

(d) Gas fees spent on transactions.

Only spend what you can afford to lose completely.

4.4 No Guaranteed Returns

IMPORTANT NOTICE GAME NFTs (SHROOM NFTs) DO NOT ENTITLE HOLDERS TO: - Dividends or profit distributions - Revenue sharing from the Protocol - Any financial return based on token holdings - Investment returns of any kind Treasury funds are for community purposes only, not member distributions.

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SECTION 5: REGULATORY AND LEGAL RISKS

5.1 Regulatory Uncertainty

Cryptocurrency, NFT, and blockchain regulations are evolving rapidly:

Future regulations may:

(a) Classify NFTs as securities;

(b) Impose licensing requirements;

(c) Restrict or ban certain activities;

(d) Require identity verification (KYC);

(e) Impose tax reporting obligations.

5.2 Tax Implications

Participating in digiSHROOMS may have tax consequences:

(a) NFT Purchases: May be taxable events;

(b) NFT Sales: Capital gains or ordinary income taxes may apply;

(c) Airdrops/Rewards: May be taxable as income;

(d) Cross-Border Issues: International tax obligations may apply;

(e) Reporting Requirements: Tax reporting for crypto varies by jurisdiction.

Consult a qualified tax professional for guidance.

5.3 Mushroom-Related Content Risks

LEGAL NOTICE digiSHROOMS IS A VIRTUAL GAME. No actual psilocybin, psilocin, or any controlled substance is involved. However: - Mushroom-themed content may be restricted in some jurisdictions - Employers or institutions may have policies regarding such content - Some platforms may restrict mushroom-related NFT content - Future regulations may affect mushroom-themed games

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SECTION 6: OPERATIONAL RISKS

6.1 Platform Availability

The Platform may be unavailable due to:

6.2 Protocol Changes

The Protocol may change through Founder decisions:

(a) Game mechanics and parameters;

(b) Fee structures;

(c) NFT functionality;

(d) Platform rules;

(e) Smart contract implementations.

Platform changes are binding on all users.

6.3 Team and Development Risks

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SECTION 7: THIRD-PARTY RISKS

7.1 Wallet Provider Risks

7.2 Infrastructure Dependencies

digiSHROOMS depends on third-party services:

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SECTION 8: RISK MITIGATION STRATEGIES

8.1 Security Best Practices

Wallet Security:

Operational Security:

8.2 Spending Guidelines

(a) Only Invest What You Can Afford to Lose: Treat all digiSHROOMS purchases as entertainment expenses, not financial instruments;

(b) Diversification: Do not concentrate all assets in digiSHROOMS;

(c) Research: Understand the game mechanics before spending;

(d) Start Small: Begin with minimal spending to learn;

(e) No Leverage: Do not borrow money to spend on digiSHROOMS.

8.3 Game Strategy

(a) Start with BRF: Learn mechanics before advancing;

(b) Consistent Care: Set reminders for grow care;

(c) Read Documentation: Understand all game mechanics;

(d) Community Engagement: Learn from experienced players;

(e) Accept Losses: Grow failure is part of the game.

8.4 Skill-Based Gameplay

Game outcomes in digiSHROOMS depend predominantly on:

(a) Player Knowledge: Understanding game mechanics, growth phases, and care requirements;

(b) Consistent Care: Daily attention to sterility, humidity, and FAE;

(c) Strategic Decision-Making: Optimal timing for actions and harvest windows;

(d) Time Commitment: Active participation throughout the 40-50 day Growing Cycle;

(e) Learning and Adaptation: Improving techniques based on experience.

SKILL VS. CHANCE While random number generation determines certain initial traits (such as strain assignment), the quality of your final harvest—and thus any rewards—depends almost entirely on your consistent care and skill over 40-50 days. A player who tends their grow diligently will consistently produce higher-quality shrooms than one who neglects their grow, regardless of initial random traits.

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SECTION 9: RISK SUMMARY MATRIX

9.1 Risk Categories

9.2 Risk/Reward Assessment

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SECTION 10: ACKNOWLEDGMENT

10.1 Your Acknowledgment

By using the digiSHROOMS Platform, you acknowledge and agree that:

10.2 Continuing Acceptance

Your continued use of the Platform constitutes ongoing acceptance of these risks. If you do not accept these risks, do not use the Platform.

10.3 Updates

This Risk Disclosure Statement may be updated. Material changes will be communicated through the Platform. Your continued use after updates constitutes acceptance of the updated disclosures.

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VERSION HISTORY

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This Risk Disclosure Statement is part of the digiSHROOMS legal framework and is incorporated by reference into the Terms of Service (SHROOMS-LEGAL-TOS-2025-001).

Legal Inquiries: binarydrool@protonmail.com

Security Reports: binarydrool@protonmail.com