BTCS Inc

BTCS Inc. (“BTCS” or the “Company”) is a Nasdaq listed company operating in the blockchain technology sector since 2014 and is one of the only U.S. publicly traded companies with a primary focus on proof-of-stake blockchain infrastructure. Our core focus is on driving scalable growth through a diverse range of business streams leveraging and built on top of our core and proven blockchain infrastructure operations. BTCS secures and operates validator nodes on cutting-edge blockchain networks that power Web 3, earning native token rewards by staking our proof-of-stake crypto assets (also referred to “cryptocurrencies”, “crypto”, “crypto assets”, “digital assets”, or “tokens”), with an emphasis on Ethereum. Our innovative “StakeSeeker” platform empowers crypto holders with an analytics-focused cryptocurrency dashboard. We also offer a non-custodial Staking-as-a-Service solution, enabling users to earn staking rewards, while we earn a percentage of token holders’ rewards, creating the potential for scalable revenue with limited additional costs. We recently introduced “Builder+”, an Ethereum block builder. Builder+ leverages advanced algorithms to maximize profit through optimized block construction and creates opportunities for new scalable revenue streams.

OUR BUSINESS

BTCS’s blockchain infrastructure entails operating validator nodes (or “nodes”) on various proof-of-stake (“PoS”) and delegated proof-of-stake (“dPoS”)-based blockchain networks. In connection with the validation of transactions occurring on those blockchain networks, BTCS stakes (or “delegates”) blockchain-based crypto assets native to those blockchains networks (“native crypto assets”) to earn staking rewards. We also specialize in operating validator nodes on various PoS and dPoS-based blockchain networks, including Ethereum, Cosmos, Kava, Tezos, Avalanche, Kusama, Mina, Akash, Evmos, Oasis, and NEAR Protocol.

BTCS utilizes cloud infrastructure to operate and run its validator nodes and does not operate a data center or own physical assets such as servers. In addition to staking our crypto assets to our nodes, we also stake certain crypto assets to nodes operated by third-parties.

PoS blockchain infrastructure is akin to Bitcoin’s proof-of-work (“PoW”) mining consensus mechanism but differs in a few key ways. PoW is a consensus mechanism that requires nodes to dedicate computational resources to validate transactions on a blockchain. In PoW, miners use energy-consuming computers to do “work,” and they are rewarded with crypto assets for validating transactions on the blockchain. The reward is comprised of transaction fees and crypto assets. Conversely, PoS is a consensus mechanism that requires validator nodes to dedicate financial resources in the form of crypto assets, which are staked to participate in the consensus algorithm. Validators, the equivalent of miners in PoW networks, operate nodes and validate transactions on the blockchain. Validators are rewarded in crypto assets for aligning behavior with the rules of the algorithm.

We primarily earn crypto assets through the operation of our non-custodial validator nodes, with the intention of enhancing our production of crypto assets in various blockchain networks. While we have no formal policy, our primary objective is to hold and re-stake these earned crypto assets for network security and additional production opportunities, we may, on occasion, sell a portion for cash to meet operational needs. Our primary cryptocurrency exchange is Kraken; however, we also have basic accounts with multiple alternative cryptocurrency exchanges and OTC desks. As of the filing date, we have no exclusive agreements with any cryptocurrency exchanges, nor do we maintain margin or other type accounts that could create additional liability for the Company. Our approach to our crypto asset holdings remains adaptable to evolving market conditions and operational requirements.

Details of the Company’s crypto asset held can be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Staking-as-a-Service

Through BTCS’s blockchain infrastructure operations, we validate transactions on behalf of those who delegate their crypto holdings (or “Stake”) to BTCS-operated validator nodes (referred to as “Staking as a Service” or “StaaS”) on dPoS blockchains.

Delegation is a non-custodial process that allows token holders (“Delegators”, or “customers”) to maintain control of their private keys and revoke their delegation at any time (subject to the rules of a particular blockchain). There is no transfer of ownership, often referred to as “private keys”, of any Delegator’s crypto assets as part of the Delegation process. Delegation provides a method for token holders to designate to a validator node operator the ministerial task of running a validator node while still participating in the network consensus mechanism and earning rewards.

StaaS providers are operators of computer infrastructure and validation software that allow them and their Delegators to stake certain native crypto assets utilizing a dPoS consensus protocol. dPoS protocols provide for the validation of transactions on the related network as well as a “sybil resistance” mechanism to help secure the network.

The nodes comprising a blockchain network use a protocol (or set of rules) to reach an agreement as to whether a given transaction proposed by a user of the network is valid under the rules of the protocol and should be added to the ledger (such agreement being referred to as “consensus”). Protocols typically group transactions into blocks that can only be added to the common ledger when validated by a sufficient percentage of a dispersed network of unrelated computers or servers called “nodes” in the network. A complete record (or “blockchain”) is maintained on the ledger by adding these groups (or “blocks”) of transactions to the chain, and the nodes constantly automatically monitor the blocks to ensure record accuracy.

dPoS networks rely on validators who own native crypto assets and operate nodes for the network to confirm the validity of the transactions comprising each block to be added to the network ledger. The dPoS protocol software run by the relevant network nodes generally determines the validator node for each block at random, though each blockchain may have differing selection criteria. To be eligible to validate transactions and to write new blocks to the chain, validators are required to “stake” the relevant native crypto assets whereby validators commit value (in the form of the native crypto asset) to the underlying network and lock their native crypto assets, preventing them from otherwise transacting with those native crypto assets while they are staked. The dPoS mechanism is a sybil-resistance tool (fights against attacks on nodes) that incentivizes validators to confirm transactions that conform to the rules of the protocol at the risk of losing their staked crypto assets (“slashing”). Validators utilizing their native crypto assets to participate in dPoS protocols secure the relevant network and receive staking rewards for doing so.

As a non-custodial Validator operator, BTCS may charge a validator node fee, typically determined as a percent of the crypto asset rewards earned on crypto assets delegated to its node, creating the opportunity for potential scalable revenue and business growth with limited additional costs. This fee is broadcast by the Validator to the network and publicly available. Both the crypto reward paid to the Delegator and the crypto fee paid to the Validator are distributed by the blockchain network. These “validator fees” in the dPoS network encourage validators to participate in the network and thereby help to secure and decentralize the network.

A StaaS provider maintains a ministerial role in validating transactions on a given dPoS network on behalf of its Delegators by: (1) arranging transactions using open-source software to stake the relevant crypto assets; (2) monitoring the nodes it is operating to ensure the computers remain online to validate transactions; and (3) verifying transactions on the network when required.

As a StaaS provider, BTCS does not take custody of or pool Delegator crypto assets or Delegator crypto rewards (i.e. BTCS does not take possession of users’ private “keys” or “crypto”). The rewards earned on delegated crypto assets are sent directly to Delegators by the respective blockchain network and are never in BTCS’s possession. Therefore, BTCS does not obtain custody or facilitate transfers of any third-party crypto assets in its role as a Validator or StaaS provider.

StakeSeeker Platform

The Company’s internally developed “StakeSeeker” platform is a personal finance software and education center with a comprehensive crypto dashboard for crypto asset holders to connect, monitor, track, and analyze their crypto portfolios across exchanges and wallets in a single analytics platform. The StakeSeeker dashboard reads user data from digital wallets and utilizes application programming interfaces (APIs) to read data from crypto exchanges and is non-custodial, meaning it does not allow for the trading or custody of crypto assets. StakeSeeker’s Stake Hub functions as an educational center, offering users guidance on how to delegate their crypto assets to our non-custodial validator nodes, along with the ability to monitor such delegation activities through data analysis. StakeSeeker does not provide or facilitate direct crypto asset delegation through its StakeHub, nor does it facilitate transaction execution on our platform. Stake Hub’s primary role is to offer instructional support and monitoring capabilities. Crypto asset holders are able to delegate to our validator nodes without signing up for our StakeSeeker platform; conversely, crypto asset holders can delegate to validator nodes not operated by the Company and utilize our StakeSeeker software and data analytics. The StakeSeeker platform is currently free-to-use for registered users so is not currently generating revenue. The Company is not a broker-dealer or an investment advisor and does not provide any such related services. StakeSeeker operates exclusively as an informational and educational resource for the monitoring and analysis of crypto assets, with its non-custodial and non-transactional approach ensuring compliance with federal securities laws, thereby precluding any regulatory concerns as the platform continues to develop.

StakeSeeker provides a valuable analytical platform to crypto enthusiasts and strategically seeks to entice users with its features. One underlying strategic objective of the platform is to drive the expansion of Delegators to our validator nodes. The growth of the size of delegations is central to the scalability of BTCS’s StaaS business strategy. The Company believes that StaaS provides a more accessible and cost-effective way for crypto asset holders to participate in blockchain network consensus, thereby promoting the growth and adoption of blockchain technology.

The estimated staking rewards, expressed as the Annual Percentage Reward (APR), as displayed on StakeSeeker’s Stake Hub and our StakeSeeker website (www.stakeseeker.com), are determined using the most recent network data obtained through API data pulls from www.stakingrewards.com, a third-party blockchain data provider. To ensure accuracy and consistency, BTCS conducts periodic checks to validate the APR data obtained against the data reported on each respective blockchain network’s blockchain explorer. Disclosure on StakeSeeker’s website clearly states that the APR presented is not guaranteed and does not include StakeSeeker’s validator fee. The APR figures are provided for informational purposes and are subject to change based on the dynamics of the underlying blockchain networks.

The Company anticipates taking the StaaS Platform out of beta prior to the end of 2024. The current functionality allows crypto asset holders to connect, monitor, track, and analyze their crypto portfolios across exchanges and wallets in a single analytics platform. In the future we may add support for additional blockchains and provide other analytic tools. We are also exploring the feasibility of adding Ethereum non-custodial staking to StakeSeeker in 2024. We anticipate the costs associated with doing so would be in line with our historical research and development costs.

Ethereum Block Building

On February 1, 2024, we introduced Builder+, a newly developed Ethereum block builder (“Builder”) to maximize validator earnings by utilizing advanced algorithms to construct optimized blocks for on-chain validation. Builders actively monitor the Ethereum transaction queue, known as the “mempool”, for pending transactions and strategically reorder them to create ‘optimized blocks’ containing transactions with the highest fees. Builders pay a fee to Validators for block space in order to increase the chances of their blocks being selected by a validator and, in return, earn the associated crypto transaction fees.

Builder+ represents an innovative extension of our core Ethereum blockchain infrastructure operations, aimed at driving scalable revenue growth by leveraging our current Ethereum validator operations. We seek to capture a larger share of the Builder market within the Ethereum ecosystem with Builder+ and secure a share of the crypto rewards generated by Ethereum validators who use Builder+. We believe this market offers significant potential for scalable revenue growth.

Builder+ was in the development and testing phase in 2023 and did not have a material impact on our operations or 2023 financial results.

ChainQ

ChainQ is an under-development AI-powered blockchain data and analytics platform, designed to allow users to query real-time and historical on-chain blockchain data. Through comprehensive indexing of public blockchain data from our Blockchain Infrastructure operations, ChainQ is intended to provide an intuitive and straightforward platform for users to access on-chain data. We continue to incur costs associated with the research and development of ChainQ, with a goal to publicly launch in 2024.

Custody and Key Storage

BTCS prioritizes self-custody of its crypto assets through secure storage of most of its crypto assets in cold digital wallets, with the goal of typically maintaining less than 0.1% of its crypto assets on crypto exchanges at any given time, except during necessary transfers between wallets and exchanges for sales or purchases. Occasionally, we may use hot wallets or move crypto assets to exchanges for operational or transactional requirements. Additionally, we regularly transfer crypto assets to more secure cold wallets when appropriate. As of December 31, 2023, 97% of BTCS’s crypto assets were held in cold storage wallets and 3% of crypto assets were held in other storage wallets, including hot wallets.

The Company currently does not maintain any insurance policies that provide coverage for potential losses of crypto assets in cases of theft, lost keys, or any other events that might lead to the loss of private keys or crypto assets held within our secure digital wallets.

Our cold wallet private keys are protected through a variety of methods, including key sharding, key encryption, and offline encrypted key storage in safety deposit boxes situated across multiple geographic locations. We believe this multi-layered approach ensures the utmost security for our crypto assets.

As a result of our prioritizing the self-custody of our crypto assets, our exposure to crypto related companies that have declared bankruptcy such as FTX, BlockFi, and Celsius has been limited to the negative impact these platforms had on the value of our assets in the crypto markets.

INDUSTRY AND MARKET OVERVIEW (CRYPTO ASSET AND BLOCKCHAIN TECHNOLOGIES)

Blockchain and Cryptocurrencies

BTCS prioritizes self-custody of its crypto assets through secure storage of most of its crypto assets in cold digital wallets, with the goal of typically maintaining less than 0.1% of its crypto assets on crypto exchanges at any given time, except during necessary transfers between wallets and exchanges for sales or purchases. Occasionally, we may use hot wallets or move crypto assets to exchanges for operational or transactional requirements. Additionally, we regularly transfer crypto assets to more secure cold wallets when appropriate. As of December 31, 2023, 97% of BTCS’s crypto assets were held in cold storage wallets and 3% of crypto assets were held in other storage wallets.

The Company currently does not maintain any insurance policies that provide coverage for potential losses of crypto assets in cases of theft, lost keys, or any other events that might lead to the loss of private keys or crypto assets held within our secure digital wallets.

Our cold wallet private keys are protected through a variety of methods, including key sharding, key encryption, and offline encrypted key storage in safety deposit boxes situated across multiple geographic locations. We believe this multi-layered approach ensures the utmost security for our crypto assets.

As a result of our prioritizing the self-custody of our crypto assets, our exposure to crypto related companies that have declared bankruptcy such as FTX, BlockFi, and Celsius has been limited to the negative impact these platforms had on the value of our assets in the crypto markets.

Business Profile and Risks

The decision to pursue blockchain and crypto asset businesses exposes the Company to risks associated with a new and untested strategic direction. The prices of crypto assets have experienced substantial volatility, which may reflect “bubble” type volatility, meaning that high or low prices may have little or no merit, are subject to rapidly changing investor sentiment, and may be influenced by factors such as technology, regulatory void or changes, fraudulent actors, manipulation, and media reporting.

Government Oversight

Blockchain networks are a relatively new technological innovation and the regulatory schemes to which crypto assets and their blockchain networks are or may be subject, including both the interpretation and applicability of existing laws and regulations and the potential establishment of new laws and regulations, have not been fully explored or developed.

Recent actions taken by the SEC, including enforcement actions brought against crypto asset companies with a focus on custodial staking, are more particularly described under certain “Risk Factors”, demonstrate the SEC’s position that many, if not most, crypto assets may be securities and therefore reflect the reality that we will likely face increased government regulation and oversight as our industry and government treatment of the crypto assets on which our operations are based continue to evolve. These developments follow the SEC’s July 25, 2017, DAO Report, wherein its Chairman expressed concerns about the “Wild West” nature of the cryptocurrency market. More recently, the SEC Enforcement Division has taken action against crypto asset focused enterprises, and if the interpretations of federal securities laws are further expanded to apply to the Company, it would adversely affect the Company’s future acquisition of crypto assets by limiting the amount of crypto asset securities (“Digital Securities”) it may acquire, potentially limiting or precluding the use of its blockchain infrastructure and other operations, and creating increased compliance and legal costs. In October 2020 the U.S. Department of Justice (“DOJ”) published a report entitled “Cryptocurrency: An Enforcement Framework” that detailed the DOJ’s strategies and abilities to handle the threats posed by digital assets. In January 2023, the House of Representatives created the Financial Services Subcommittee on Digital Assets with the goal to develop rules and policies covering digital assets. In addition, each state has its own securities laws and regulations with varying provisions and effects, any of which may require us to alter or reduce our current or planned operations in the future. We continue to monitor legislative matters related to our industry.

Because of the foregoing or other regulatory developments, in the future, before we acquire or transact in crypto assets, we may be required to examine how they were originally offered to determine if they were offered as an investment contract or other type of security. Because of legal uncertainties, careful examination of the results of our compliance review will be required by experienced securities counsel. Because we must stay under the requirement under Investment Company Act of 1940 (the “1940 Act”) that no more than 40% of our assets (excluding cash items) constitute investment securities to avoid being deemed an investment company, we will limit the amount of Digital Securities we acquire. Further, while we believe our operations and platform are meaningfully different than Kraken’s and Coinbase’s custodial staking platforms that were subject to SEC enforcement proceedings in 2023, that development or future positions the SEC may take, including potentially against us and our business, may demonstrate a differing view and require us to adjust, reduce, limit or even cease some or all of our operations or business plans. If our compliance procedures and legal reviews prove to be incorrect, we may incur the likelihood of prohibitive SEC penalties and/or private lawsuit defense costs and adverse rulings.

Gary Gensler, the current SEC Chairman, has continued to voice his concerns about and continued intention to regulate crypto assets, referring to decentralized finance, or DeFi, platforms that focus on crypto assets as well as the crypto assets themselves, and concluding by stating that the SEC would “continue to take our authorities as far as they go.” In late 2023, Mr. Gensler stated that cryptocurrency entrepreneurs have “generally built a business model around noncompliance with the law.” There has not been any definitive guidance provided as of the date of this Report, however a number of regulatory proceedings and enforcement actions have been brought against crypto assets developers and their proponents such as Coinbase, Binance, and Kraken.

The Company may acquire additional crypto assets and continues to develop and expand upon its StakeSeeker, Builder+, and ChainQ platforms to enable it to offer a wider range of functions and availability for use with a greater variety of crypto assets. The Company currently owns and plans to expand its crypto asset holdings, both through staking its existing crypto asset holdings on PoS blockchain networks and potentially through other means. To avoid being inadvertently classified as an investment company under the 1940 Act, we actively focus, in consultation with legal counsel, on ensuring that our ownership of assets that are not considered securities under the 1940 Act always exceed 60% of our total assets, excluding cash items. In separate SEC complaints, the SEC identified Cardano, Tezos, Solana, Cosmos, Polygon, Axie Infinity, and NEAR Protocol crypto assets as securities. As a matter of practice the Company typically targets keeping in excess of 60% of the Company’s total assets (excluding cash and government securities) in Ethereum. Therefore, to the extent the SEC identified all other crypto assets held by the Company excluding Ethereum as securities, the Company would still not meet the definition of an “investment company” under Section 3(a)(1)(C) of the 1940 Act. By doing so, we can avoid being subject to the regulatory requirements and oversight that apply to investment companies.

The Company has conducted a detailed legal analysis which has led us to determine that certain crypto assets that are identified as securities by the SEC should not impact our business, financial condition, and results of operations. Provided, however, if over 40% of our assets are considered securities, excluding cash, we may be considered a 1940 Act company*(see the risk factor on page 12 herein)*. Further, the aforementioned assessments are risk-based judgments and not a legal standard or determination binding on any regulatory body or court. To the extent a regulatory body or court finds that our conclusions are incorrect, we may seek to cease certain of our operations. Any such action may adversely affect an investment in us.

In addition to the securities laws and investment company considerations, as our business model and operations continue to evolve, including StakeSeeker, Builder+, and ChainQ we may become subject to additional laws and regulations. For example, to the extent we collect, analyze, distribute, or otherwise use data concerning individuals or entities and their holdings and transactions, we may become subject to the ever-growing number of data privacy and security laws within and without the U.S. which often have far-reaching implications for businesses. In general these laws require disclosure and preventative measures designed to protect users from unauthorized access or disclosure of their personal information, and impose fines and sanctions for failure to comply with their requirements. On the other hand, because transactions in crypto assets often provide a reasonable degree of anonymity, they are susceptible to misuse for criminal activities, such as money laundering. This misuse, or the perception of such misuse (even if untrue), could lead to greater regulatory oversight of crypto platforms and operations such as ours, and there is the possibility that regulators could close crypto platforms or other crypto asset-related technology and infrastructure with little or no notice or opportunity for challenge, and prevent users of custodial platforms from accessing or retrieving crypto assets held on or connected to such platforms or infrastructure. For example, lawmakers and regulators have in recent years expressed views that government oversight is needed, including with a view to curtailing the use of crypto asset use for malign and illegal activities.

Many PoW crypto assets have also been subject to skepticism due to concerns about the high energy consumption used in mining on blockchain networks. In the U.S., in March 2022 President Biden issuedExecutive Order 14067 on Ensuring the Responsible Development of Digital Assets, which prioritized the responsible development of crypto assets in a manner which includes reducing negative climate impacts and environmental pollution. In November 2022, the Governor of New York signed a law banning certain bitcoin mining operations that run on carbon-based power sources for two years. While our focus is currently on PoS blockchain networks which use significantly lower amounts of energy when compared to PoW, future regulations may arise in response to these concerns that could apply to us and the cryptocurrency industry as a whole.

Given the growing interest by regulators and other stakeholders, we anticipate that legislation and regulation of crypto assets is forthcoming and will intensify in the future.

Given the above developments, both our current and planned operations, and the cryptocurrency industry in general, continue to be subject to expanding, complex and uncertain government oversight. See “Risk Factors” beginning on page 12 and “Business” beginning on page 3 for more information.

As both the regulatory landscape develops and journalistic familiarity with crypto assets increases, mainstream media’s understanding of them and the regulation thereof may improve. Regulation of crypto assets varies from country to country as well as within countries. An increase in the regulation of crypto assets may affect our proposed business by increasing compliance costs or prohibiting certain or all of our proposed activities.

COMPETITION

The Company’s current and future competition is centered on the following areas:

Many of our current and potential competitors enjoy advantages such as greater financial resources, longer operational histories, larger user bases, bigger teams, and stronger brand recognition. Most are also not burdened with the additional costs and time commitments required of being an exchange-listed public company. These competitors may allocate more substantial resources to technology development, infrastructure enhancement, and marketing efforts. Moreover, they may be able to develop and deploy solutions more rapidly than us.

In addition to existing competitors, the Company must contend with the potential of new entrants to the industry and the possibility of industry consolidation through business combinations and alliances, which could further strengthen the competitive positions of our rivals. Given our small team and relative lack of capital to many peers, we acknowledge that we face a competitive disadvantage in this landscape.

ASSETS

The Company’s primary assets consist of its crypto assets and cash as well as its human capital and intellectual property noted below.

INTELLECTUAL PROPERTY AND TRADE SECRETS

Our business depends in large part on our proprietary technology, particularly with regards to StakeSeeker, the operation of validator nodes as part of our blockchain infrastructure, our efforts and development with respect to our initiatives, and our brand. We rely on, and expect to continue to rely on, a combination of trademark, domain name, and trade secret laws, as well as confidentiality and license agreements with our employees, contractors, consultants, and third parties with whom we have relationships, to establish and protect our brand and intellectual property rights.

GROWTH STRATEGY

BTCS remains steadfast in its commitment to its core business of blockchain infrastructure operation, validation, and data analytics. Our growth strategy is structured around expanding our infrastructure, attracting a larger Delegator base, tapping into the Ethereum MEV market through Builder+, and launching ChainQ as a revenue-generating platform. These initiatives are discussed further below and are designed to position us for sustainable growth in the dynamic and evolving blockchain industry. We will continue to monitor and adapt our strategy to remain competitive and capitalize on emerging opportunities in the blockchain space.

Expansion of Blockchain Infrastructure:

Our primary objective is to expand our presence in the blockchain ecosystem by operating validator nodes on PoS and dPoS-based blockchain networks. To achieve this, subject to available capital, we plan to continue to identify promising blockchain networks and allocate resources towards the development and operation of validator nodes.

Growth of Delegator Base and Assets:

A critical component of our growth strategy is to increase the number of Delegators and crypto assets delegated to our validator nodes including our own. We plan to achieve this by: 1) acquiring more crypto assets and staking them to our nodes, and 2) enhancing the StakeSeeker platform’s capabilities as an educational center and analytical tool. We believe that leveraging StakeSeeker’s capabilities to provide insights and guidance will foster trust and confidence among potential Delegators.

Penetrating Ethereum Block Builders Market with Builder+:

We believe we are strategically positioned to capture a large share of the Builder market within the Ethereum ecosystem and available MEV rewards through the introduction of Builder+. Builder+ is an innovative solution designed to optimize validator earnings by actively monitoring the Ethereum mempool and strategically reordering transactions to create optimized blocks. To achieve this, we plan to promote Builder+ and will seek to build strategic relationships to expand its adoption. Continuous refinement of Builder+ algorithms and strategy will be a priority to ensure competitiveness and maximize rewards for validators.

Roll Out Subscription-Based ChainQ Offering:

We are actively developing ChainQ, an AI-powered blockchain data and analytics platform, with the goal of launching it as a subscription-based service in 2024. ChainQ plans to provide users with access to real-time and historical on-chain blockchain data. To achieve this, we plan to work towards the completion of the development of ChainQ, potentially establish partnerships and collaborations with other blockchain projects for integration, and implement a subscription-based pricing model to monetize the platform.

HUMAN CAPITAL / EMPLOYEES

As of December 31, 2023, we had five full-time employees, all of whom work full-time, none of which are covered by a collective bargaining agreement. We engage third-party contractors and consultants on an as-needed basis.

We are a remote-first Company. We believe that allowing our employees to work in the location that best suits them provides us access to a larger talent pool and a sustained advantage in hiring and retaining employees and consultants in the United States and worldwide.

Human capital management is critical to our ongoing business success, which requires investing in our people. Our aim is to create a highly engaged and motivated workforce where employees are inspired by leadership, engaged in purpose-driven, meaningful work, and have opportunities for growth and development. We are committed to creating and maintaining a work environment in which employees are treated with respect and dignity. We value our diverse employees, and provide career and professional development opportunities that foster the success of our Company.

We are committed to the principles of equal employment and complying with all federal, state, and local laws providing equal employment opportunities, and all other employment laws and regulations. It is our intent to maintain a work environment that is free of harassment, discrimination, or retaliation because of age, race, color, national origin, ancestry, religion, sex, sexual orientation (including transgender status, gender identity or expression), pregnancy (including childbirth, lactation, and related medical conditions), physical or mental disability, genetic information (including testing and characteristics), veteran status, uniformed servicemember status, or any other status protected by federal, state, or local laws. We are dedicated to the fulfillment of this policy in regard to all aspects of employment, including but not limited to recruiting, hiring, placement, transfer, training, promotion, rates of pay, and other compensation, termination, and all other terms, conditions, and privileges of employment.

Our Compensation Committee is also actively involved in reviewing and approving executive compensation, and succession plans so that we have leadership in place with the requisite skills and experience to deliver results the right way. We offer fair, competitive compensation and benefits appropriate for a company of our size that supports our employees. While we do not offer health benefits, we do offer 401(k) plans with 100% matching of employees’ contributions subject to IRS limitations.

CAPITALIZATION

The following table details the Company’s capitalization as of March 19, 2024.

The table above describes the shares of Common Stock and Preferred Stock which are outstanding and/or are issuable under outstanding securities. The Series V preferred Stock is perpetual and does not convert into shares of the Company’s Common Stock.

Cautionary Note Regarding Forward Looking Statements

This report contains forward-looking statements, including our liquidity, our belief that our blockchain infrastructure efforts will form the core growth for our business, including but not limited to Builder+, StakeSeeker, and Chain, plans to expand our PoS operations, growth opportunities for the Company, our belief regarding blockchain, expected increase in our revenues and gross margins and future business plans. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “may,” “potential,” “continues,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements are contained in the Risk Factors below. Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.