BTCS Inc.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 20, 2025.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of BTCS Inc. and in the capacities and on the dates indicated.

To the Board of Directors and Stockholders of

BTCS Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of BTCS Inc. (The “Company”) as of December 31, 2024 and 2023 and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 3 to the financial statements, the Company has changed its method of accounting for digital assets (crypto currencies) to fair value, with changes in fair value recognized in net income, effective as of January 1, 2023 due to the adoption of Accounting Standards Update (“ASU”) No. 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”).

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Corporate Crypto Assets Held

Critical Audit Matter Description

Crypto assets are generally accessible only by the possessor of the unique private key relating to the digital wallet or node in which the crypto assets are held. Accordingly, private keys must be safeguarded and secured in order to prevent an unauthorized party from accessing the crypto assets within a digital wallet. The Company primarily holds crypto assets for its own use in wallets. The loss, theft, or otherwise compromise of access to the private keys required to access the crypto assets could adversely affect the Company’s ability to access the crypto assets within its environment. This could result in loss of corporate crypto assets held.

We identified crypto assets held as a critical audit matter due to the nature and extent of audit effort required to obtain sufficient appropriate audit evidence to address the risks of material misstatement related to the existence and rights & obligations of crypto assets in storage. The nature and extent of audit effort required to address the matter includes significant involvement of more experienced engagement team members and discussions and consultations with subject matter experts related to the matter.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to crypto assets in storage included the following, among others:

We applied auditor judgment in determining the nature and extent of audit evidence required, especially related to assessing the existence of the digital assets and whether the Company controls the digital assets. We evaluated the sufficiency and appropriateness of audit evidence obtained by assessing the results of procedures performed over the digital assets.

/s/ RBSM LLP

PCAOB ID 587

We have served as the Company’s auditor since 2016.

Las Vegas, Nevada

March 20, 2025

Consolidated Statements of Stockholders’ Equity

For the Years Ended December 31, 2024 and 2023

Note 1 -Organization and Description of Business and Recent Developments

BTCS Inc. (“BTCS” or the “Company”), a Nevada corporation listed on Nasdaq, is a U.S.-based blockchain technology company focused on blockchain infrastructure. The Company’s primary operations center on the Ethereum network, reflecting its strategic emphasis on Ethereum block-building (“Builder+”) and validator node operations (“NodeOps”) across various proof-of-stake (“PoS”) and delegated proof-of-stake (“dPoS”) networks.

BTCS operates non-custodial validator nodes (or “nodes”) that participate in blockchain network consensus by performing transaction validation (“attestation”) and block proposal services. The Company earns native token rewards by staking its PoS crypto assets (also referred to “cryptocurrencies”, “crypto”, “crypto assets”, “digital assets”, or “tokens”) to validator nodes operated by both BTCS and third-parties. Additionally, on certain dPoS networks, BTCS enables third-party crypto asset holders to delegate their assets to its validator nodes, earning validator node fees as a percentage of staking rewards generated from delegated crypto assets.

In 2024, BTCS launched its Builder+ operations, a core component of its blockchain infrastructure strategy. Builder+ leverages advanced algorithms to optimize the construction of Ethereum blocks for on-chain validation, focusing on maximizing gas fee revenue. Builder+ has become a central revenue driver for BTCS, positioning the Company as an integral participant in Ethereum’s transaction cycle.

In addition to its blockchain infrastructure operations, BTCS has developed ChainQ, an AI-powered blockchain data and analytics platform designed to enhance transparency and accessibility within the blockchain ecosystem. Currently in beta, ChainQ provides intuitive tools for exploring and analyzing on-chain data, leveraging insights from BTCS’s blockchain infrastructure activities.

As part of its strategic focus on Builder+ and Validator Node operations, BTCS discontinued support for its StakeSeeker platform on December 27, 2024.

The Company’s operations are subject to regulatory uncertainties, technological risks and market volatility inherent to blockchain technology and crypto assets. BTCS’s future success depends on the continued adoption of blockchain technology as well as the Company’s ability to scale its Ethereum block-building operations and expand its broader blockchain infrastructure operations.

Note 2 -Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), and include the accounts of the Company and its subsidiaries. The Company’s subsidiaries are entities in which the Company holds, directly or indirectly, more than 50% of the voting rights, or where it exercises control. All intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts in prior period financial statements have been reclassified to conform to the current period’s presentation. These reclassifications did not affect previously reported net income (loss), total assets, total liabilities, or equity, nor did they impact previously disclosed information.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of six months or less when purchased to be cash and cash equivalents. The Company maintains cash and cash equivalent balances at financial institutions that are insured by the FDIC. As of December 31, 2024 and 2023, the Company had approximately $1,978,000 and $1,458,000 in cash. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of December 31, 2024 and 2023, the Company had approximately $1,474,000 and $933,000 in excess of the FDIC insured limit, respectively.

Stablecoins

The Company holds stablecoins, such as USDT (Tether) and USDC (USD Coin), which are crypto assets that are pegged to the value of one U.S. dollar. Our stablecoins are typically held in secure digital wallets or on crypto asset exchanges. The Company acquires and holds stablecoins primarily to facilitate crypto asset transactions, including, but not limited to, payments to third-party vendors.

The Company accounts for its stablecoins as indefinite-lived intangible assets in accordance with ASC 350,Intangibles – Goodwill and Other. While not accounted for as cash or cash equivalents, these stablecoins are considered a liquidity resource.

Crypto Assets

Fair Value Measurement

The Company’s accounts for the fair value measurement for its crypto assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820,Fair Value Measurement. ASC 820 defines fair value as the price that would be received for an asset in a current sale, assuming an orderly transaction between market participants on the measurement date. Market participants are considered to be independent, knowledgeable, and willing and able to transact. It requires the Company to assume that its crypto assets are sold in their principal market or, in the absence of a principal market, the most advantageous market.

Kraken serves as the principal market for the Company’s crypto assets, being the Company’s primary cryptocurrency exchange for both purchases and sales. Coinbase is designated as the secondary principal market. This determination results from a comprehensive evaluation considering various factors, including compliance, trading activity, and price stability.

The fair value of crypto assets is primarily determined based on pricing data obtained from Kraken, the Company’s principal market. In the absence of Kraken data, pricing from Coinbase serves as a secondary source.

While Kraken is designated as the primary exchange, the Company retains flexibility to conduct cryptocurrency transactions on other exchanges where it maintains accounts. This flexibility allows the Company to adapt to changing market conditions and explore alternative platforms when necessary to ensure cost-effective execution and fair value measurement using the most advantageous market.

The selection of Kraken as the principal market reflects the Company’s commitment to informed decision-making and achieving the most accurate representation of fair value for its crypto assets. Regular reviews ensure alignment with the Company’s objectives and cryptocurrency market dynamics.

Accounting for Crypto Assets

The cost basis of the Company’s crypto assets is initially recorded at their fair value using the last close price of the day in the UTC (Coordinated Universal Time) time zone on the date of receipt.

Crypto assets are measured at their fair respective fair market values at each reporting period end on the balance sheets and classified as either ‘Staked Crypto Assets’ or ‘Crypto Assets’ to distinguish their nature within the respective balances. Staked crypto assets are presented as current assets if their lock-up periods are less than 12 months, and as long-term other assets if the lock-up extends beyond one year. The majority of our crypto assets are staked, typically with lock-up periods of less than 21 days, and are considered current assets in accordance with ASC 210-10-20,Balance Sheet, due to the Company’s ability to sell them in a liquid marketplace, as we have a reasonable expectation that they will be realized in cash or sold or consumed during the normal operating cycle of our business to support operations when needed.

The classification of purchases and sales in the consolidated statements of cash flows is determined based on the nature of the crypto assets, which can be categorized as ‘productive’ (i.e. acquired for purposes of staking) or ‘non-productive’ (e.g. bitcoin). Acquisitions of non-productive crypto assets are treated as operating activities, while acquisitions of productive crypto assets are classified as investing activities in accordance with ASC 230-10-20,Investing activities. Productive crypto assets staked with lock-up periods of less than 12 months are listed as current assets in the ‘Staked Crypto Assets’ line item on the balance sheet. Staked crypto assets with lock-up periods exceeding 12 months are categorized as long-term other assets. Non-productive crypto assets are included in the ‘Crypto Assets’ line item on the balance sheet.

Effective January 1, 2023, the Company elected to early adopt ASU No. 2023-08, resulting in a material change in accounting principle related to the Company’s accounting treatment of crypto assets. The impacts of the change in accounting principle are discussed further in Note 3 –Changes in Accounting Principle.

The Company employs the specific identification method to determine the cost basis of our assets for the computation of gains and losses, in accordance with ASC 350-60-50-2a. This method involves identifying and using the actual cost of each individual asset sold or disposed of to calculate the gain or loss on its sale. Realized gains (losses) on sale of crypto assets are included in other income (expenses) in the consolidated statements of operations. The Company recorded realized losses on crypto assets of approximately $767,000 and $604,000 during the years ended December 31, 2024 and 2023, respectively.

Operating Segments

The Company’s blockchain infrastructure operations include two primary revenue-generating activities: Ethereum block building (“Builder+”) and validator node operations (“NodeOps”).

The Company’s Chief Operating Decision Maker (“CODM”) is comprised of several members of its executive management team, including the Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”) and Chief Financial Officer (“CFO”), who are responsible for evaluating the Company’s financial performance, managing operations, and allocating capital and resources.

The CODM regularly reviews discrete financial information related to Builder+ and NodeOps, assessing financial performance based on gross profit (loss), direct operating expenses, and key financial metrics. These financial reviews direct operational decisions and shape capital deployment strategies for each activity.

While the CODM evaluates Builder+ and NodeOps separately, these activities share common economic characteristics, infrastructure, and operational oversight and are therefore aggregated into a single operating segment under ASC 280, Segment Reporting.

Consistent with ASU 2023-07, the Company discloses significant segment expenses that are regularly provided to the CODM for decision-making purposes. See Note 12 –Segment Information for more information.

Revenue Recognition

The Company recognizes revenue under ASC 606*, Revenue from Contracts with Customers*. The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

Revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company generates revenue through 1) staking rewards generated from its blockchain infrastructure operations (NodeOps), and 2) gas fees earned from successful Ethereum block-building through Builder+. These revenues are collectively termed ‘Blockchain infrastructure revenues’ in the consolidated statements of operations.

The transaction consideration the Company receives - the crypto asset awards and gas fees - are a non-cash consideration, which the Company measures at fair value on the date received.

The Company engages in network-based smart contracts by running its own crypto asset validator nodes as well as by staking (or “delegating”) crypto assets directly to both its own validator nodes and nodes run by third-party operators. Through these contracts, the Company provides crypto assets to stake to a node for the purpose of validating transactions and adding blocks to a respective blockchain network. The term of a smart contract can vary based on the rules of the respective blockchain and typically last from a few days to several weeks after it is cancelled (or “un-staked”) by the delegator and requires that the crypto assets staked remain locked up during the duration of the smart contract.

In exchange for staking the crypto assets and validating transactions on blockchain networks, the Company is entitled to all of the fixed crypto asset award earned from the network when delegating to the Company’s own node and is entitled to a fractional share of the fixed crypto asset award a third-party node operator receives (less crypto asset transaction fees payable to the node operator, which are immaterial and are recorded as a deduction from revenue), for successfully validating or adding a block to the blockchain. The Company’s fractional share of awards received from delegating to a third-party validator node is proportionate to the crypto assets staked by the Company compared to the total crypto assets staked by all Delegators to that node at that time.

On certain blockchain networks on which the Company operates a validator node, the Company earns a validator node fee (“Validator Fee”), determined as a node operator’s published percentage of the crypto asset rewards earned on crypto assets delegated to its node.

Token rewards earned from staking, as well as tokens earned as Validator Fees, are calculated and distributed directly to BTCS digital wallets by the blockchain networks as part of their consensus mechanisms.

The provision of validating blockchain transactions is an output of the Company’s ordinary activities. Each separate block creation or validation under a smart contract with a network represents a performance obligation. The satisfaction of the performance obligation for processing and validating blockchain transactions occurs at a point in time when confirmation is received from the network indicating that the validation is complete, and the awards are available for transfer. At that point, revenue is recognized.

Ethereum Block Building (Builder+)

The Company participates in the Ethereum blockchain network by engaging in the construction of blocks (“block building”) containing strategically bundled transactions from the Ethereum mempool and from searchers who connect to the Company’s endpoint with the intent of the Company’s builder proposing their transactions. Revenue recognition for these activities, conducted through Builder+, entails the recognition of gas fees (or “transaction fees”) earned in exchange for successfully constructing blocks of bundled transactions and having these blocks selected and proposed by a validator to the Ethereum network for validation and successfully finalized on the network.

These gas fees are earned as a direct result of the Company’s fulfillment of its performance obligations, which include the construction of blocks by bundling transactions to maximize the value of the included fees and the proposal of that block by a Validator. Each constructed block under a smart contract with the Ethereum network signifies a distinct performance obligation.

As part of the block construction and proposal process, the Company’s Builder purchases block space through a fixed non-negotiable fee paid to a Validator (a “Validator Payment”) embedded in each proposed block. The Validator Payment, predetermined by the Builder, is paid to Validators as compensation for selecting and proposing the Company’s block to the network for validation. The Validator Payment is intrinsically linked to the Company’s performance obligations and is disbursed in the block constructed by the Builder if our Builder’s block is both selected by a Validator and successfully proposed to, and finalized on, the Ethereum network; otherwise, our Validator Payment may be included in a subsequent block. The Validator Payment represents a direct and fixed pre-determined cost.

The satisfaction of the performance obligation occurs at a point in time when the constructed block is both proposed by a Validator and successfully finalized on the Ethereum network. At this juncture, the Company has fulfilled its obligations, and the gas fees associated with the transactions included in the block become available and are transferred to the Company’s digital wallet.

The Company recognizes revenue, reflecting the fair value of the total gas fees earned from the constructed block.

The following table summarizes the revenues earned from the Company’s operations for the years ended December 31, 2024 and 2023:

The following table details the native token rewards and their respective fair market value recognized as revenue during the years ended December 31, 2024 and 2023. Revenues earned from blockchain infrastructure staking activities through NodeOps include token rewards earned from the delegation of cryptocurrency assets to third-party validator nodes as well as token rewards derived from BTCS-operated validator nodes, which include staking of the Company’s crypto assets to BTCS nodes and Validator Fees earned from third parties asset delegations to our nodes. Revenues earned from Ethereum block-building through Builder+ includes block rewards generated by BTCS Builders.

Crypto assets earned from blockchain infrastructure staking activities through NodeOps

Crypto assets earned from Ethereum block-building through Builder+

Cost of Revenues

The Company’s cost of revenues related to its blockchain infrastructure operations primarily includes direct production costs associated with transaction validation on the network, cloud-based server hosting expenses related to our validator nodes and Builders, and allocated employee salaries dedicated to node maintenance and support. Additionally, the cost of revenues encompasses Validator Payments made from our Builder to Validators as well as fees paid to third parties for their assistance in software maintenance and node operations. These costs directly related to the production of revenues are collectively termed ‘Blockchain infrastructure expenses’ in the consolidated statements of operations.

The following table further details the costs of revenues for the years ended December 31, 2024 and 2023:

Internally Developed Software

Internally developed software consists of the core technology of the Company’s StakeSeeker and ChainQ platforms. For internally developed software, the Company uses both its own employees as well as the services of external vendors and independent contractors. The Company accounts for computer software used in the business in accordance with ASC 985-20 and ASC 350.

ASC 985-20,Software-Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product. Some companies use a “tested working model” approach to establishing technological feasibility (i.e., beta version). Under this approach, software under development will pass the technological feasibility milestone when the Company has completed a version that contains essentially all the functionality and features of the final version and has tested the version to ensure that it works as expected.

ASC 350,Intangibles-Goodwill and Other, requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. Costs incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment and software. These costs generally consist of internal labor during configuration, coding, and testing activities. Capitalization begins when (i) the preliminary project stage is complete, (ii) management with the relevant authority authorizes and commits to the funding of the software project, and (iii) it is probable both that the project will be completed and that the software will be used to perform the function intended.

Property and Equipment

Property and equipment consist of computer, equipment and office furniture and fixtures, all of which are recorded at cost. Depreciation and amortization are recorded using the straight-line method over the respective useful lives of the assets ranging from three tofive years. Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable.

Use of Estimates

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP. This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. The Company’s significant estimates and assumptions include the recoverability and useful lives of indefinite life intangible assets, stock-based compensation, and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates, including the carrying amount of the indefinite life intangible assets, could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates and assumptions.

Income Taxes

The Company recognizes income taxes on an accrual basis based on tax positions taken or expected to be taken in its tax returns. A tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not (i.e., likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold are measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized. Should they occur, the Company’s policy is to classify interest and penalties related to tax positions as income tax expense. Since the Company’s inception, no such interest or penalties have been incurred.

Accounting for Warrants

The Company accounts for the issuance of Common Stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of ASC 815,Derivatives and Hedging. The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). In addition, Under ASC 815, registered Common Stock warrants that require the issuance of registered shares upon exercise and do not expressly preclude an implied right to cash settlement are accounted for as derivative liabilities. The Company classifies these derivative warrant liabilities on the balance sheets as a current liability.

The Company assessed the classification of Common Stock purchase warrants as of the date of each offering and determined that such instruments originally met the criteria for equity classification; however, as a result of the Company no longer being in control of whether the warrants may be cash settled, the instruments no longer qualify for equity classification. Accordingly, the Company classified the warrants as a liability at their fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as “change in the fair value of warrant liabilities” in the consolidated statements of operations. The fair value of the warrants has been estimated using a Black-Scholes valuation model (see Note 5-Fair Value of Financial Assets and Liabilities).

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718,Compensation - Stock Compensation. ASC 718 addresses all forms of share-based payment awards including shares issued under employee stock purchase plans and stock incentive shares. Under ASC 718, awards result in a cost that is measured at fair value on the awards’ grant date, based on the estimated number of awards that are expected to vest and will result in a charge to operations.

Share-based payment awards exchanged for services are accounted for at the fair value of the award on the estimated grant date.

Options

Stock options issued under the Company’s equity incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Expected Volatility – The Company uses historical volatility as it provides a reasonable estimate of the expected volatility. For options granted prior to January 1, 2025, historical volatility was based on the most recent volatility of the stock price over a period equivalent to the expected term of the option. For the most recent options granted on January 1, 2025, historical volatility was determined using a two-year lookback period. Management selected this approach to better reflect the Company’s current market conditions and exclude periods of non-representative volatility associated with significant changes in the Company’s business, market conditions, and capital structure. The two-year lookback period balances capturing industry and market cycles with avoiding outdated and non-representative data.

Risk-Free Interest Rate – The risk-free interest rate is based on the U.S. treasury zero-coupon yield curve in effect at the time of grant for the expected term of the option.

Expected Term – The Company’s expected term represents the weighted-average period that the Company’s stock options are expected to be outstanding. The expected term is based on the expected time to post-vesting exercise of options by employees. The Company uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise patterns.

Expected Dividend– The Company has not historically declared or paid any cash dividends on its common shares and does not plan to pay any recurring cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

Restricted Stock Units (“RSUs”)

For awards vesting upon the achievement of a service condition, compensation cost measured on the grant date will be recognized on a straight-line basis over the vesting period. Stock-based compensation expense for the market-based restricted stock units with explicit service conditions is recognized on a straight-line basis over the longer of the derived service period or the explicit service period, regardless of whether the market condition is satisfied. However, in the event that the explicit service period is not met, previously recognized compensation cost would be reversed. Market-based restricted stock units subject to market-based performance targets require achievement of the performance target as well as a service condition in order for these RSUs to vest.

The Company estimates the fair value of market-based RSUs as of the grant date and expected derived term using a Monte Carlo simulation that incorporates pricing inputs covering the period from the grant date through the end of the derived service period.

Expected Volatility– The Company uses historical volatility as it provides a reasonable estimate of the expected volatility. Historical volatility is based on the most recent volatility of the stock price over a period of time equivalent to the expected term of the RSUs.

Risk-Free Interest Rate– The risk-free interest rate is based on the U.S. treasury zero-coupon yield curve in effect at the time of grant for the expected term of the RSUs.

Expected Term– The Company’s expected term represents the weighted-average period that the Company’s RSUs are expected to be outstanding. The expected term is based on the stipulated 5-year period from the grant date until the market-based criteria are achieved. If the market-based criteria are not achieved within the five-year period from the grant date, the RSUs will not vest and shall expire.

Vesting Hurdle Price– The vesting hurdle prices are determined by taking the vesting Market Cap criteria divided by the shares outstanding as of the valuation dates

Dividends

Effective January 27, 2023, the Company’s Board of Directors (the “Board”) approved the issuance of a newly designated Series V Preferred Stock (“Series V”) on a one-for-one basis to the Company’s shareholders (including restricted stock unit holders and warrant holders who were entitled to such distribution). The distribution of Series V shares was approved and completed on June 2, 2023 to shareholders as of the record date of May 12, 2023. The Series V: (i) is non-convertible, (ii) has a 20% liquidation preference over the shares of common stock, (iii) is non-voting and (iv) has certain rights to dividends and distributions (at the discretion of the Board). A total of 14,542,803 shares of Series V Preferred Stock were distributed to shareholders on June 2, 2023. In June 2023, the Series V shares commenced trading on Upstream, a Merj Exchange market (“Upstream”). In November 2023, Upstream announced that it was no longer providing U.S. individuals with the ability to trade on Upstream. All Series V shares owned by U.S investors were returned to the transfer agent.

The Company will evaluate the appropriateness of potential future dividends as the Company continues to grow its operations.

Advertising Expense

Advertisement costs are expensed as incurred and included in marketing expenses. Advertising and marketing expenses amounted to approximately $81,000 and $12,000 for the years ended December 31, 2024 and 2023, respectively.

Net Income (Loss) per Share

Basic income (loss) per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the Company’s restricted stock units, options and warrants. Diluted loss per share excludes the shares issuable upon the conversion of preferred stock and warrants from the calculation of net loss per share if their effect would be anti-dilutive.

For the year ended December 31, 2024, diluted loss per share excludes all potential common shares, including restricted stock units, options, warrants, and other convertible instruments, as their inclusion would be anti-dilutive due to the net loss reported for the period.

For the year ended December 31, 2023, the Company reported net income. As a result, diluted net income per share included potential common shares that were dilutive during the period.

The following financial instruments were from the calculation of diluted loss per share for the year ended December 31, 2024, as their effect was anti-dilutive:

Recent Accounting Pronouncements

The Company continually assesses new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of such change to its Consolidated Financial Statements and assures that there are proper controls in place to ascertain that the Company’s Consolidated Financial Statements properly reflect the change.

In December 2023, the FASB issued ASU 2023-08,Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60)(“ASU 2023-08”), which is intended to improve the accounting for and disclosure of crypto assets. The ASU requires entities to subsequently measure crypto assets that meet specific criteria at fair value, with changes recognized in net income each reporting period. The ASU also the requires specific presentation of cash receipts arising from crypto assets that are received as noncash consideration in the ordinary course of business and are converted nearly immediately into cash. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU No. 2023-08 effective January 1, 2023, which had a material impact to its financial statement and related disclosures, which are further discussed in Note 3 –Changes in Accounting Principle.

In November 2023, the FASB issued ASU 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures(“ASU 2023-07”). ASU 2023-07 is intended to enhance reportable segment disclosures by requiring disclosures of significant segment expenses regularly provided to the CODM, requiring disclosure of the title and position of the CODM and explanation of how the reported measures of segment profit and loss are used by the CODM in assessing segment performance and a location of resources. ASU 2023-07 is effective for the Company for annual periods beginning after December 31, 2023. The Company adopted ASU 2023-07 for the year ended December 31, 2024. As a result of the adoption, the Company expanded its disclosures in Note 12 –Segment Information, to present significant expenses that are included within cost of revenue, by reportable segment, which are presented to the CODM.

In December 2024, the FASB issued ASU 2024-03,Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). ASU 2024-03 requires, in the notes to the financial statements, disclosures of specified information about certain costs and expenses specified in the updated guidance. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the impact the updated guidance will have on its disclosures.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

Note 3 -Changes in Accounting Principle

Effective January 1, 2023, the Company has elected to early adopt ASU No. 2023-08, resulting in a material change in accounting principle related to the Company’s accounting treatment of crypto assets.

As a result of the adoption of ASU No. 2023-08, crypto assets are recorded at their fair market value on its balance sheet and changes in the fair market value of its crypto assets during reporting periods are recorded within its consolidated statements of operations as unrealized appreciation (depreciation). Prior to adopting ASU No. 2023-08, crypto assets were accounted for as intangible assets with an indefinite life in accordance with ASC 350,Intangibles –Goodwill and Other, carrying them at their impaired value and recognizing impairment losses during reporting periods. Adoption of the fair market value guidance contained within ASU No. 2023-08 eliminates the need to calculate impairment losses on crypto assets for the year of adoption and moving forward.

The Company elected to early adopt the guidance contained with ASU No. 2023-08 as we believe that the specified changes in financial reporting better reflect the economic realities of the Company’s business model and the value of the crypto assets held, enhancing the transparency and accuracy of the consolidated financial statements.

The adoption of ASU No. 2023-08 required an adjustment to the Company’s opening Retained Earnings balance as of January 1, 2023, to recognize the cumulative effect of initially applying the change in accounting principle to previous periods. The adjustment accounts for the difference between the December 31, 2022 ending book value of crypto assets and their respective fair market value, which amounted to approximately $4,986,000.

Note 4 –Crypto Assets

The following tables present the Company’s crypto assets held as of December 31, 2024 and 2023:

The following table presents a roll forward of the Company’s crypto asset activities for the years ended December 31, 2024 and 2023:

Note 5 -Fair Value of Financial Assets and Liabilities

The Company measures certain assets and liabilities at fair value. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability (i.e., an ‘exit price’) in the principal or most advantageous market in an orderly transaction between market participants at the measurement date.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – Valuations based on unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that are accessible at the measurement date. Since valuations are based on quoted prices that are readily and regularly available in an active market, these valuations do not entail a significant degree of judgment.

Level 2 – Valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Valuations based on inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Financial instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of December 31, 2024 and 2023:

The Company did not make any transfers between the levels of the fair value hierarchy during the years ended December 31, 2024 and 2023.

Level 3 Valuation Techniques

Level 3 financial assets consist of private equity investments for which there is no current public market for these securities such that the determination of fair value requires significant judgment or estimation. As of December 31, 2024, the Company’s Level 3 investments were carried at original cost of the investments, with a value of $100,000. The Company has elected to apply the measurement alternative under ASC 321,Investments—Equity Securities, for these investments.

Level 3 financial liabilities consist of the warrant liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation.

Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement. Changes in the values of the warrant liabilities are recorded in “change in fair value of warrant liabilities” in the Company’s consolidated statements of operations.

On March 2, 2021, the Company entered into a securities purchase agreement (the “Offering”) with certain purchasers pursuant to which the Company agreed to sell an aggregate of (i)950,000 shares of Common Stock, and (ii) Common Stock warrants (the “Warrants”) to purchase up to 712,500 shares of Common Stock for gross proceeds of $9.5 million in a private placement. The closing of the Offering occurred on March 4, 2021.

The Warrants require, at the option of the holder, a net-cash settlement following certain fundamental transactions (as defined in the Warrants) at the Company. At the time of issuance, the Company maintained control of certain fundamental transactions and as such the Warrants were initially classified in equity. As of December 31, 2024, the Company no longer maintained control of certain fundamental transactions as they did not control a majority of shareholder votes. As such, the Company may be required to cash settle the Warrants if a fundamental transaction occurs which is outside the Company’s control. Accordingly, the Warrants are classified as liabilities. The Warrants have been recorded at their fair value using the Black-Scholes valuation model, and will be recorded at their respective fair value at each subsequent balance sheet date. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk-free rates, as well as volatility.

The Warrants require the issuance of registered shares upon exercise, do not expressly preclude an implied right to cash settlement and are therefore accounted for as derivative liabilities. The Company classifies these derivative warrant liabilities on the balance sheets as a current liability.

A summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy as of December 31, 2024 and 2023, is as follows:

The risk-free interest rate was based on rates established by the Federal Reserve Bank. For the Warrants, the Company estimates expected volatility giving primary consideration to the historical volatility of its Common Stock. The general expected volatility is based on the standard deviation of the Company’s underlying stock price’s daily logarithmic returns. The expected life of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based on the fact that the Company has not historically paid dividends on its Common Stock and does not expect to pay recurring dividends on its Common Stock in the future.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial assets and liabilities for the years ended December 31, 2024 and 2023, that are measured at fair value on a recurring basis:

Note 6 -Stockholders’ Equity (Deficit)

Common Stock

The Company received shareholder approval on July 11, 2023 to amend our Articles of Incorporation to increase the number of authorized shares of common stock from 97,500,000 shares to 975,000,000. On July 12, 2023, the Company filed a Certificate of Amendment to the Articles of Incorporation to effectuate the increase of our authorized shares of common stock to 975,000,000.

At The Market Offering Agreement

On September 14, 2021, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as agent (“H.C. Wainwright”), pursuant to which the Company may offer and sell, from time-to-time, shares of the Company’s Common Stock through H.C. Wainwright, as agent. Initially, the aggregate offering price of shares issuable under the ATM Agreement was $98,767,500 (the “Shares”).

On October 4, 2024, the Company’s new Form S-3 registration statement became effective, increasing the total amount of securities that may be offered and sold under the prospectus to $250,000,000.

The Company will pay H.C. Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares.

During the year ended December 31, 2024, the Company sold a total of 2,021,361 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $6,905,000 at an average selling price of $3.42 per share, resulting in net proceeds of approximately $6,682,000 after deducting commissions and other transaction costs.

During the year ended December 31, 2023, the Company sold a total of 1,707,621 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $2,790,000 at an average selling price of $1.63 per share, resulting in net proceeds of approximately $2,688,000 after deducting commissions and other transaction costs.

Share-based Payments

Board Compensation

Effective January 19, 2023, the Board approved the issuance of $50,000 of common stock to each independent director. The shares will be issued in four equal installments ($12,500 each) at the end of each calendar quarter beginning March 31 st, subject to continued service on each applicable issuance date. The number of shares issuable will be based on the closing price of the Company’s common stock on the last trading day prior to the end of the applicable calendar quarter. For the year ended December 31, 2024,87,498 shares of common stock approximating $136,000 were issued to independent directors related to the quarterly approved issuances. For the year ended December 31, 2023,122,124 shares of common stock approximating $150,000 were issued to independent directors related to the quarterly approved issuances.

Shares Issued in Lieu of Cash Compensation

On September 12, 2024, the Board approved a resolution to allow all employees, officers, and directors of the Company to elect to receive up to three months of their cash compensation in advance in the form of restricted common stock. This decision aimed to prevent disruptions in operations that could arise from the need to unstake and sell cryptocurrency to meet upcoming cash requirements. The approval of this equity compensation plan was in response to extensive delays (over 4 months) by the U.S. Securities and Exchange Commission in reviewing our responses to a comment letter that contained seven comments primarily comprised of future filing requests and immaterial comments. On September 13, 2024, in a collective effort to support the Company’s operations and strategy, all employees, directors, and officers (collectively 9 individuals) accepted part of their compensation as equity. This resulted in the issuance of 380,399 restricted common stock shares approximating $430,000. Of the shares issued,32,429 were returned to net settle the issuance and pay related taxes, resulting in a net share issuance of 347,970 shares.

Performance Bonus Payments

For the year ended December 31, 2024,414,148 shares of common stock were issued to officers related to payment of 2023 accrued bonus compensation totaling approximately $675,000. Of the shares issued,43,220 shares were returned to net settle the issuance and pay related taxes, resulting in a net share issuance of 370,928 shares.

For the year ended December 31, 2023,410,317 shares of common stock were issued to officers related to payment of 2022 accrued bonus compensation totaling approximately $264,000. Of the shares issued,55,604 shares were returned to net settle the issuance and pay related taxes, resulting in a net share issuance of 354,713 shares.

Bonus shares

On December 12, 2024, the Board of Directors approved the issuance of 12,500 shares of restricted common stock to a non-executive employee as a discretionary bonus. These shares will vest in equal installments over five years, with 2,500 shares vesting at the end of each calendar year, beginning December 31, 2025, and continuing through December 31, 2029.

Issuance of Restricted Stock to Service Providers

During the year ended December 31, 2023, the Company issued to one service provider a total of approximately 12,500 shares of restricted Common Stock, representing a total fair value of $59,000.

Preferred Stock

Series V

Effective January 27, 2023, the Board approved the issuance of a newly designated Series V Preferred Stock (“Series V”) on a one-for-one basis to the Company’s shareholders (including restricted stock unit holders and warrant holders). The distribution of Series V shares was approved and completed on June 2, 2023 to shareholders as of the record date of May 12, 2023. The Series V: (i) is non-convertible, (ii) has a 20% liquidation preference over the shares of common stock, (iii) is non-voting and (iv) has certain rights to dividends and distributions (at the discretion of the Board). A total of 14,542,803 shares of Series V Preferred Stock were distributed to shareholders on June 2, 2023.

The fair value of the Preferred stock as of the record date, May 12, 2023, amounted to approximately $2,560,000. The Company used a probability valuation model to determine the fair value of the preferred stock.

For the year ended December 31, 2023, an additional 25,026 shares of Series V were issued related to the vesting of eligible employee RSUs.

On September 6, 2024, at the 2024 Annual Meeting the Company’s stockholders voted to approve an amendment to the Certificate of Designation of the Series V to provide the Board the discretion to convert each share of the Series V into one share of Common Stock. The Board has not filed an amendment to the Series V Certificate of Designation nor chosen to convert the Series V.

For the year ended December 31, 2024, the Company issued 465,402 additional shares of Series V Preferred Stock in connection with the vesting of employee RSUs. Of these,367,108 shares were unrestricted, and 98,294 shares were restricted and remain subject to time-based vesting conditions. The restricted shares of Series V will vest over a period of one to three years, with full vesting expected by December 31, 2027.

2021 Equity Incentive Plan

The Company’s 2021 Equity Incentive Plan (the “2021 Plan”) was effective on January 1, 2021 and approved by shareholders on March 31, 2021 and amended on June 13, 2022. The Company received shareholder approval on July 11, 2023 to increase the authorized amount under the 2021 Plan from 7,000,000 shares to 12,000,000 shares.

Options

A summary of options activity under the Company’s stock option plan for the years ended December 31, 2024 and 2023 are presented below:

The following weighted-average assumptions were used to estimate the fair value of options granted during the years ended December 31, 2024 and 2023, using the Black-Scholes model:

These assumptions are consistent with the methods described in Note 2 –Summary of Significant Accounting Policies.

RSUs

On December 29, 2023, upon recommendation of the Compensation Committee, the Board approved the grant of 50,000 RSUs to each of its executive officers (Messrs. Allen, Handerhan, Prevoznik and Paranjape), effective January 1, 2024. The RSUs granted vest annually over a 5-year period (10,000 per year) with the first vesting date of December 31, 2024 and each subsequent vesting on the one-year anniversary of the first vesting date, subject to continued employment on each applicable vesting date.

On January 12, 2024, Messrs. Allen and Handerhan forfeited their respective 50,000 RSUs for personal reasons, effective January 1, 2024. Subsequently, effective January 12, 2024, the Board approved the grant of 50,000 additional RSUs to Mr. Prevoznik and Mr. Paranjape, each, which vest annually over a 5-year period (10,000 per year) with the first vesting date of December 31, 2024 and each subsequent vesting on the one-year anniversary of the first vesting date, subject to continued employment on each applicable vesting date.

Long-Term Incentive Plan (LTI) RSUs

On January 2, 2022, the Board approved grants of RSUs (“LTI RSUs”) under the Company’s Long-Term Incentive Plan (“LTI”) to executive officers. These RSUs were initially subject to vesting upon achievement of market capitalization thresholds of $100 million, $150 million, $200 million, and $400 million, sustained for 30 consecutive days. On February 22, 2022, upon the appointment of the Chief Technology Officer, additional LTI RSUs were granted under the same terms.

Effective January 1, 2023, the Board approved an amendment to the LTI plan, reducing the market capitalization thresholds to $50 million, $100 million, $150 million, and $300 million. The modification resulted in an increase in fair value of $83,000, which was added to unrecognized compensation expense in accordance with ASC 718*– Share-Based Compensation*.

The fair value of market-based LTI RSUs is estimated using a Monte Carlo simulation. The following assumptions were used to determine fair value as of the January 1, 2023, modification date:

For awards vesting upon the achievement of a service condition, compensation cost measured on the grant date will be recognized on a straight-line basis over the vesting period. Stock-based compensation expense for the market-based restricted stock units with explicit service conditions is recognized on a straight-line basis over the longer of the derived service period or the explicit service period, regardless of whether the market condition is satisfied. However, in the event that the explicit service period is not met, previously recognized compensation cost would be reversed. Market-based restricted stock units subject to market-based performance targets require achievement of the performance target as well as a service condition in order for these LTI RSUs to vest.

On December 12, 2024, the Company achieved the $50 million market capitalization threshold, triggering the vesting of certain performance-based LTI RSUs granted to the Company’s executive officers. As a result of meeting this threshold,342,082 shares of common stock and 342,082 shares of Series V preferred stock vested and were issued to executive officers. Of the common stock,45,479 shares of common stock were returned to net settle the issuance and pay related taxes, resulting in a net share issuance of 296,603 shares of common stock.

In addition,38,242 restricted shares of common stock and 38,242 restricted shares of Series V were issued as a result of achieving the performance milestone under the LTI plan. These restricted shares remain subject to time-based vesting conditions and will vest over atwo-year period, with full vesting expected by December 31, 2026.

Accelerated Vesting of RSUs and Conversion to Restricted Common Stock

On December 12, 2024, the Board approved a resolution allowing recipients of RSUs with time-based vesting criteria to elect to accelerate vesting and convert their RSUs into restricted shares of Common Stock. The restricted shares issued under this resolution remain subject to the original time-based vesting schedules of the RSUs. Additionally, the Board approved a resolution to accelerate the vesting of RSUs that were originally scheduled to vest on December 31, 2024 without restriction. This action was taken to reduce the administrative burden on the Company and align the vesting date with the issuance of other accelerated RSUs.

Effective December 12, 2024, the vesting of 220,052 RSUs was accelerated and converted into restricted shares of Common Stock issued to executive officers. As a portion of these RSUs was eligible for the Series V share dividend, an additional 60,052 restricted shares of Series V preferred stock were issued. These restricted shares retained their original time-based vesting schedules, ranging from one to five years.

Additionally,65,026 shares of unrestricted Common Stock and, due to dividend eligibility,25,026 unrestricted shares of Series V preferred stock were issued as a result of the Board-approved accelerated vesting of outstanding RSUs originally scheduled to vest on December 31, 2024.

Of the total issuances related to the accelerated vesting of RSUs on December 12, 2024,62,718 unrestricted shares were returned to net settle the issuance and pay related taxes, resulting in a net share issuance of 2,308 shares of unrestricted Common Stock.

The following table summarizes restricted Common Stock activity under the 2021 Plan for the years ended December 31, 2024 and 2023:

RSU Activity Summary

The following table summarizes RSU activity under the 2021 Plan for the years ended December 31, 2024 and 2023:

Stock-based Compensation

Stock-based compensation expenses are recorded as a part of general and administrative expenses, compensation expenses and cost of revenues. Stock-based compensation expenses for the years ended December 31, 2024 and 2023 were as follows:

Stock Purchase Warrants

The following is a summary of warrant activity for the years ended December 31, 2024 and 2023:

Note 7 –Executive Compensation

Employment Agreements

Charles W. Allen – Chief Executive Officer and Director

On June 22, 2017, we entered into an employment agreement with Charles Allen (the “Allen Employment Agreement”), whereby Mr. Allen agreed to serve as our Chief Executive Officer and Chief Financial Officer for a period of two (2) years, subject to renewal, in consideration for an annual salary of $245,000. Additionally, under the terms of the Allen Employment Agreement, Mr. Allen shall be eligible for an annual bonus if we meet certain criteria, as established by the Board. Mr. Allen shall be entitled to participate in all benefits plans we provide to our senior executives. We shall reimburse Mr. Allen for all reasonable expenses incurred in the course of his employment. The Company shall pay the Executive $500 per month to cover telephone and internet expenses. If the Company does not provide office space to the Executive the Company will pay the Executive an additional $500 per month to cover expenses in connection with their office space needs.

On February 6, 2019 we amended the Allen Employment Agreement whereby the annual salary was increased to $345,000 per year effective January 1, 2019, subject to a 4.5% annual increase each subsequent year to adjust for inflation. All other terms of the Allen Employment Agreement remained unchanged including the Annual Increase. For the year ended December 31, 2024, Mr. Allen’s annual base salary was $429,933.

Michal Handerhan – Chief Operating Officer and Director

On June 22, 2017, we entered into an employment agreement with Michal Handerhan (the “Handerhan Employment Agreement”), whereby Mr. Handerhan agreed to serve as our Chief Operating Officer and Secretary for a period of two (2) years, subject to renewal, in consideration for an annual salary of $190,000. Additionally, under the terms of the Handerhan Employment Agreement, Mr. Handerhan shall be eligible for an annual bonus if we meet certain criteria, as established by the Board. Mr. Handerhan shall be entitled to participate in all benefits plans we provide to our senior executives. We shall reimburse Mr. Handerhan for all reasonable expenses incurred in the course of his employment. The Company shall pay the Executive $500 per month to cover telephone and internet expenses. If the Company does not provide office space to the Executive the Company will pay the Executive an additional $500 per month to cover expenses in connection with their office space needs.

On February 6, 2019 we amended the Handerhan Employment Agreement whereby the annual salary was increased to $215,000 per year effective on January 1, 2019, subject to a 4.5% annual increase each subsequent year to adjust for inflation. All other terms of the Handerhan Employment Agreement remained unchanged, including the Annual Increase.

On January 19, 2022, the Board approved a salary increase for Michael Handerhan to $275,000, effective January 1, 2022. For the year ended December 31, 2024 Mr. Handerhan’s annual base salary was $300,307.

Michael Prevoznik – Chief Financial Officer

On December 1, 2021 we entered into an employment agreement with Michael Prevoznik (the “Prevoznik Employment Agreement”), whereby Mr. Prevoznik agreed to serve as our Chief Financial Officer in consideration for an annual salary of $175,000. Additionally, under the terms of the Prevoznik Employment Agreement, Mr. Prevoznik shall be eligible for an annual bonus if we meet certain criteria, as established by the Board. Mr. Prevoznik shall be entitled to participate in all benefits plans we provide to our senior executives. We shall reimburse Mr. Prevoznik for all reasonable expenses incurred in the course of his employment. The Company shall pay the Executive $500 per month to cover telephone and internet expenses. If the Company does not provide office space to the Executive the Company will pay the Executive an additional $500 per month to cover expenses in connection with their office space needs.

On June 1, 2022, the Board approved a salary increase for Michael Prevoznik to $225,000, effective June 1, 2022.

On December 9, 2022, upon recommendation of the Compensation Committee of the Board approved a 4.5% inflationary increase in Mr. Prevoznik’s annual base salary, effective January 1, 2023.

On January 12, 2024, upon recommendation of the Compensation Committee of the Board approved a 4.5% inflationary increase in Mr. Prevoznik’s annual base salary, effective January 1, 2024.

For the year ended December 31, 2024 Mr. Prevoznik’s annual base salary was $245,706.

On January 1, 2025, the Board approved a salary increase for Michael Prevoznik to $260,000, effective January 1, 2025.

Manish Paranjape – Chief Technology Officer

On February 22, 2022 we entered into an employment agreement with Manish Paranjape (the “Paranjape Employment Agreement”), whereby Mr. Paranjape agreed to serve as our Chief Technology Officer in consideration for an annual salary of $225,000. Additionally, under the terms of the Paranjape Employment Agreement, Mr. Paranjape shall be eligible for an annual bonus if we meet certain criteria, as established by the Board. Mr. Paranjape shall be entitled to participate in all benefits plans we provide to our senior executives. We shall reimburse Mr. Paranjape for all reasonable expenses incurred in the course of his employment. The Company shall pay the Executive $500 per month to cover telephone and internet expenses. If the Company does not provide office space to the Executive the Company will pay the Executive an additional $500 per month to cover expenses in connection with their office space needs.

On December 9, 2022, upon recommendation of the Compensation Committee of the Board approved a 4.5% inflationary increase in Mr. Paranjape’s annual base salary, effective January 1, 2023.

On January 12, 2024, upon recommendation of the Compensation Committee of the Board approved a 4.5% inflationary increase in Mr. Paranjape’s annual base salary, effective January 1, 2024.

For the year ended December 31, 2024 Mr. Paranjape’s annual base salary was $245,706.

On February 3, 2025, Mr. Paranjape resigned as Chief Technology Officer of BTCS Inc.

Termination/Severance Provisions

The terms of the Allen Employment Agreement and Handerhan Employment Agreement (collectively the “Employment Agreements”) provide each of Messrs. Allen and Handerhan (the “Executives”) certain, severance and change of control benefits if the Executive resigns from the Company for good reason or the Company terminates him other than for cause. In such circumstances, the Executive would be entitled to a lump sum payment equal to (i) the Executive’s then-current base salary, and (ii) payment on a pro-rated basis of any bonus or other payments earned in connection with any bonus plan to which the Executive was a participant. In addition, the severance benefit for the Executives the employment agreements include the Company continuing to pay for medical and life insurance coverage for up to one year following termination. If, within eighteen months following a change of control (as defined below), the Executive’s employment is terminated by the Company without cause or he resigns from the Company for good reason, the Executive will receive certain severance compensation. In such circumstances, the cash benefit to the Executive will be a lump sum payment equal to two times (i) his then-current base salary and (ii) his prior year cash bonus and incentive compensation. Upon the occurrence of a change of control, irrespective of whether his employment with the Company terminates, each Executive’s stock options and equity-based awards will immediately vest.

A “change of control” for purposes of the Employment Agreements means any of the following: (i) the sale or partial sale of the Company to an un-affiliated person or entity or group of un-affiliated persons or entities pursuant to which such party or parties acquire shares of capital stock of the Company representing at least twenty five (25%) of the fully diluted capital stock (including warrants, convertible notes, and preferred stock on an as converted basis) of the Company; (ii) the sale of the Company to an un-affiliated person or entity or group of such persons or entities pursuant to which such party or parties acquire all or substantially all of the Company’s assets determined on a consolidated basis, or (iii) Incumbent Directors (Mr. Allen and Mr. Handerhan) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board of the Company.

Additionally, pursuant to the terms of the Employment Agreements, we have entered into an indemnification agreement with each executive officer.

Clawback Policy

On November 17, 2023, our Board adopted a clawback policy in accordance with the rules of the Nasdaq Stock Exchange, to recoup “excess” incentive compensation, if any, earned by current and former executive officers during a three year look back period in the event of a financial restatement due to material noncompliance with any financial reporting requirement under the securities laws (with no fault required).

Bonuses

2023 Bonuses

On May 11, 2023, upon recommendation of the Compensation Committee, the Board approved a performance-based Annual Cash Incentive Plan (“ACIP”) for fiscal year 2023. Under the ACIP, executives were eligible to receive bonuses of up to 64% to 128% of their base salary, contingent on achieving key performance milestones established by the Board. Bonuses were payable in cash and/or equity, at the sole discretion of the Board, and based on the closing price of the Company’s Common Stock on December 31, 2023.

On December 29, 2023, the Board approved aggregate payouts of $705,061 for fiscal year 2023 performances allocated as follows:

Of the total performance bonuses earned by Officers for fiscal year 2023, $30,000 was paid in cash, with the remainder awarded in 414,148 shares of restricted Common Stock.

2024 Bonuses

On April 11, 2024, the Board approved the ACIP for fiscal year 2024, increasing the potential bonus range to 163% to 195% of base salary. As in prior years, bonuses were contingent on achieving performance milestones established by the Board and payable in cash, incentive stock options, and/or restricted shares of Common Stock, at the sole discretion of the Board, and based on the closing price of the Company’s Common Stock on December 31, 2024.

On January 1, 2025, the Board approved aggregate payouts of $1,916,909 for fiscal year 2024 performance, allocated as follows:

Of the total performance bonuses earned by Officers for fiscal year 2024, approximately $200,000 was paid in cash, with the remainder awarded in 319,930 shares of restricted Common Stock and 1,234,795 incentive stock options. The equity awards disclosed here pertain only to Officers, whereas Footnote 6 –Stockholders’ Equity includes total equity awards granted to both Officers and other employees.

Note 8 –Accrued Expenses

As of December 31, 2024 and 2023, the Company had accrued expenses consisting of the following:

Accrued compensation and related expenses include approximately $3,907,000 and $710,000 related to performance bonus accruals as of December 31, 2024 and 2023, respectively.

The accrued compensation balance for 2024 reflects stock-based compensation expenses associated with the performance bonuses approved by the Board on January 1, 2025 as well as discretionary bonuses accrued for non-officer employees. While the total bonus amounts for officers approved for fiscal year 2024 were $1,916,909 (as disclosed in Note 7 –Executive Compensation), the portion allocated to incentive stock options was recognized at a higher expense for accounting purposes, as required under U.S. GAAP. The stock-based compensation charges for the options component were determined using the Black-Scholes valuation model, resulting in a higher accrued amount.

Note 9 –Employee Benefit Plans

The Company maintains defined contribution benefit plans under Section 401(k) of the Internal Revenue Code covering substantially all qualified employees of the Company (the “401(k) Plan”). Under the 401(k) Plan, the Company may make discretionary contributions of up to 100% of employee contributions. For the years ended December 31, 2024 and 2023, the Company made contributions to the 401(k) Plan of $109,000 and $95,000, respectively.

Note 10 –Liquidity

The Company follows “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The Company’s consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the consolidated financial statements, the Company has historically incurred a net loss and has an accumulated deficit of approximately $139,948,000 as of December 31, 2024, and net cash used in operating activities of approximately $3,530,000 for the reporting period then ended. The Company is implementing its business plan and generating revenue; however, the Company’s cash position and liquid crypto assets are sufficient to support its daily operations over the next twelve months.

Note 11 -Income Taxes

The Company hadno income tax expense due to operating losses incurred for the years ended December 31, 2024 and 2023.

The tax effects of temporary differences and tax loss and credit carry forwards that give rise to significant portions of deferred tax assets and liabilities at December 31, 2024 and 2023 are comprised of the following:

At December 31, 2024, the Company had net operating loss (“NOL”) carry forwards for federal and state tax purposes of approximately $33,665,000 which begins toexpire in 2034. The 20-year carryforward period has been replaced with an indefinite carryforward period for these NOLs generated in tax years beginning after December 31, 2017 and future years.

Accordingly, the amount of Federal NOLs that were generated in the tax year December 31, 2014 in the amount of $1,290,156 will expire after December 31, 2034. The amount of NOLs that were generated in the tax year December 31, 2015 in the amount of $1,545,343 will expire after December 31, 2035. The amount of NOLs that were generated in the tax year December 31, 2016 in the amount of $794,762 will expire after December 31, 2036. The amount of NOLs that were generated in the tax year December 31, 2017 in the amount of $1,084,564 will expire after December 31, 2037. The NOLs generated in the tax years December 31, 2018 in the amounts of $11,899,437 and onwards will have an indefinite life per current U.S. federal income tax legislation.

Prior to the February 5, 2014 merger, the Company had generated net operating losses, which the Company’s preliminary analysis indicates would be subject to significant limitations pursuant to Internal Revenue Code Section 382. The Company has not completed its IRC Section 382 Valuation, as required and the NOL’s because of potential change of ownerships might be completely worthless.

Therefore, Management of the Company has recorded a full valuation reserve, since it is more likely than not that no benefit will be realized for the deferred tax assets.

As of December 31, 2024, the Company had a deferred tax liability related to the unrealized gains on its crypto assets amounting to approximately $2,338,000. The final tax impact could significantly differ from current estimates due to future market fluctuations and changes in tax laws.

Therefore, Management of the Company has recorded a full valuation reserve, since it is more likely than not that no benefit will be realized for the deferred tax assets.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which those temporary differences become deductible. Management evaluates the scheduled reversal of deferred tax liabilities, projected future taxable income, and available tax planning strategies in making this assessment.

As a result of the deferred tax liability arising from unrealized crypto gains, the valuation allowance was partially reduced by approximately $387,000 as of December 31, 2024. However, due to the Company’s continued history of operating losses and lack of clear evidence of sustained profitability, a full release of the valuation allowance remains unjustified at this time.

The expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with actual tax expense (benefit) as follows:

The Company has not identified any uncertain tax positions requiring a reserve as of December 31, 2024 and 2023.

Note 12 –Segment Information

The Company operates as a single reportable segment focused on blockchain infrastructure, which consists of two primary revenue-generating activities: Validator Node Operations (“NodeOps”) and Ethereum Block Building (“Builder+”). NodeOps includes revenue generated from staking rewards earned by BTCS’s own proof-of-stake crypto assets, as well as validator fees collected from third-party delegations. Builder+ generates revenue from gas fees embedded in successfully finalized Ethereum blocks constructed by the Builder.

Gross profit (loss) is the primary segment performance measure reviewed by the CODM for operational and capital allocation decisions.

The following tables present segment revenue and gross profit (loss), including the significant expense items reviewed by the CODM, for the years ended December 31, 2024 and 2023:

The following table reconciles total segment gross profit to consolidated net income (loss):

Note 13 -Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the consolidated financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements other than disclosed.

ATM Sales

During the period from January 1, 2025 to March 17, 2025, the Company sold a total of 33,352 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $69,000 at an average selling price of $2.08 per share, resulting in net proceeds of approximately $67,000 after deducting commissions and other transaction costs.

Payment of 2024 Performance Bonuses

On January 1, 2025, the Company issued 329,110 shares of common stock to officers and employees as part of the payment of accrued bonus compensation for the year ended December 31, 2024. The total fair value of the shares issued was approximately $813,000 based on the Company’s closing stock price on the issuance date. Of the shares issued,33,731 shares were returned to net settle the issuance and pay related taxes, resulting in a net share issuance of 295,379 shares of common stock.

In addition to the stock issuance, the Company paid approximately $221,000 in cash bonuses to officers and employees, consistent with the terms of the 2024 Annual Incentive Plan.

As part of the payment of accrued bonus compensation for the year ended December 31, 2024, the Company also issued 1,312,068 options to employees and officers. The options were granted under the Company’s 2021 Equity Incentive Plan with an expiration term of 7 years.

The fair value of the options was estimated at approximately $2,872,000 using the Black-Scholes valuation model with the following assumptions:

The total compensation expense associated with the 2024 performance bonuses was accrued as of December 31, 2024, in accordance with ASC 718 – Share-Based Compensation and ASC 710 – Compensation. The settlement of the bonuses in 2025 via a combination of cash, shares, and options aligns with the terms of the 2024 Annual Incentive Plan. There is no additional financial impact in 2025 related to the settlement, as the full expense was recognized in 2024.

LTI RSU Issuance

On January 1, 2025, the Board approved the grant of 150,000 RSUs under the Company’s Long-Term Incentive Plan (“LTI”) to a non-officer employee. These RSUs are subject to both market capitalization and time-based vesting conditions.

The RSUs vest in three equal tranches of 50,000 RSUs each, based on the Company achieving and sustaining specific market capitalization thresholds for 30 consecutive days on or before December 31, 2026, as follows:

Any RSUs for which the market capitalization condition is not met by December 31, 2026, will expire.

For any tranche in which the market capitalization condition is achieved, the RSUs remain subject to a time-based vesting schedule, with 20% of eligible RSUs vesting annually over five years, beginning on each December 31, 2025 through 2029, provided the grantee remains in continuous service through each vesting date.

The fair value of these market-based RSUs was determined using a Monte Carlo simulation. The following assumptions were used to determine fair value as of the grant date, January 1, 2025:

The Company will recognize compensation expense for these RSUs over the requisite service period, subject to acceleration upon meeting the market capitalization criteria.

Accelerated Vesting of RSUs and Conversion to Restricted Common Stock

On January 13, 2025, the vesting of 1,170,834 RSUs was accelerated and converted into restricted shares of Common Stock issued to executive officers and employees. As a portion of these RSUs was eligible for the Series V share dividend, an additional 1,020,834 restricted shares of Series V preferred stock were issued.

The newly issued restricted shares of Common Stock and Series V preferred stock retain their original market capitalization-based vesting conditions, as well as their time-based vesting schedules, which range fromone tofive years.