BTCS Inc. 10-Q

ITEM 1 Financial Statements BTCS Inc. Balance Sheets September 30, December 31, 2024 2023 (Unaudited) Assets: Current assets: Cash and cash equivalents $ 254,466 $ 1,458,327 Stablecoins 40,397 21,044 Crypto assets 430,483 302,783 Staked crypto assets 25,317,039 24,900,146 Prepaid compensation 288,309 - Prepaid expenses 96,439 62,461 Receivable for capital shares sold - 291,440 Total current assets 26,427,133 27,036,201 Other assets: Investments, at value (Cost $ 100,000 ) 100,000 100,000 Property and equipment, net 6,015 10,490 Total other assets 106,015 110,490 Total Assets $ 26,533,148 $ 27,146,691 Liabilities and Stockholders’ Equity: Accounts payable and accrued expenses $ 266,827 $ 55,058 Accrued compensation 1,052,647 712,092 Warrant liabilities 17,813 213,750 Total current liabilities 1,337,287 980,900 Stockholders’ equity: Preferred stock: 20,000,000 shares authorized at $ 0.001 par value: - - Series V preferred stock: 14,567,829 and 14,567,829 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively 2,563,938 2,563,938 Preferred stock, value 2,563,938 2,563,938 Common stock, 975,000,000 shares authorized at $ 0.001 par value, 16,555,221 and 15,320,281 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively 16,555 15,322 Additional paid-in capital 164,803,541 162,263,634 Accumulated deficit ( 142,188,173 ) ( 138,677,103 ) Total stockholders’ equity 25,195,861 26,165,791 Total Liabilities and Stockholders’ Equity $ 26,533,148 $ 27,146,691 The accompanying notes are an integral part of these unaudited condensed financial statements. 4 BTCS Inc. Statements of Operations (Unaudited) 2024 2023 2024 2023 For the Three Months Ended For the Nine Months Ended September 30, September 30, 2024 2023 2024 2023 Revenues Blockchain infrastructure revenues (net of fees) $ 739,157 $ 316,242 $ 1,751,735 $ 1,013,503 Total revenues 739,157 316,242 1,751,735 1,013,503 Cost of revenues Blockchain infrastructure costs 543,308 83,100 872,781 278,726 Gross profit 195,849 233,142 878,954 734,777 Operating expenses: General and administrative $ 586,926 $ 283,239 1,613,481 $ 1,510,637 Research and development 213,332 148,525 523,658 531,053 Compensation and related expenses 942,860 409,960 2,274,130 1,450,546 Marketing 55,611 2,155 141,690 11,121 Realized (gains) losses on crypto asset transactions 121,964 43,791 ( 176,050 ) 604,270 Total operating expenses 1,920,693 887,670 4,376,909 4,107,627 Other income (expenses): Change in unrealized appreciation (depreciation) on crypto assets ( 7,396,380 ) ( 2,914,029 ) ( 237,052 ) 3,734,213 Change in fair value of warrant liabilities 53,437 285,000 195,937 142,500 Other income 28,000 - 28,000 - Total other income (expenses) ( 7,314,943 ) ( 2,629,029 ) ( 13,115 ) 3,876,713 Net income (loss) $ ( 9,039,787 ) $ ( 3,283,557 ) $ ( 3,511,070 ) $ 503,863 Basic net income (loss) per share attributable to common stockholders $ ( 0.56 ) $ ( 0.23 ) $ ( 0.22 ) $ 0.04 Diluted net income (loss) per share attributable to common stockholders $ ( 0.56 ) $ ( 0.23 ) $ ( 0.22 ) $ 0.03 Basic weighted average number of common shares outstanding 16,158,032 14,317,750 15,870,343 13,957,097 Diluted weighted average number of common shares outstanding, basic and diluted 16,158,032 14,317,750 15,870,343 17,437,809 The accompanying notes are an integral part of these unaudited condensed financial statements. 5 BTCS Inc. Statements of Changes in Stockholders’ Equity (Unaudited) For the Nine Months Ended September 30, 2024 Shares Amount Shares Amount Capital Deficit Equity Series V Additional Total Preferred Stock Common Stock Paid-in Accumulated Stockholders’ Shares Amount Shares Amount Capital Deficit Equity Balance December 31, 2023 14,567,829 $ 2,563,938 15,320,281 $ 15,322 $ 162,263,634 $ ( 138,677,103 ) $ 26,165,791 Issuance of common stock, net of offering cost / At-the-market offering - - 443,727 443 652,897 - 653,340 Stock-based compensation - - 791,213 790 1,887,010 - 1,887,800 Net income (loss) - - - - - ( 3,511,070 ) ( 3,511,070 ) Balance September 30, 2024 14,567,829 $ 2,563,938 16,555,221 $ 16,555 $ 164,803,541 $ ( 142,188,173 ) $ 25,195,861 For the Nine Months Ended September 30, 2023 Shares Amount Shares Amount Capital Deficit (1) Equity Series V Additional Total Preferred Stock Common Stock Paid-in Accumulated Stockholders’ Shares Amount Shares Amount Capital Deficit (1) Equity Balance December 31, 2022, as adjusted - $ - 13,107,149 $ 13,108 $ 160,800,263 $ ( 146,495,831 ) $ 14,317,540 Issuance of common stock, net of offering cost / At-the-market offering - - 803,054 803 1,113,015 - 1,113,818 Issuance of Series V preferred stock 14,542,803 2,559,533 - - ( 2,559,533 ) - - Stock-based compensation - - 462,983 463 1,057,049 - 1,057,512 Net income (loss) - - - - - 503,863 503,863 Balance September 30, 2023 14,542,803 $ 2,559,533 14,373,186 $ 14,374 $ 160,410,794 $ ( 145,991,968 ) $ 16,992,733 (1) Includes an adjustment to the opening balance of $ 4,986,377 resulting from a change in accounting principle. See Note 4 for further details. For the Three Months Ended September 30, 2024 Shares Amount Shares Amount Capital Deficit Equity Series V Additional Total Preferred Stock Common Stock Paid-in Accumulated Stockholders’ Shares Amount Shares Amount Capital Deficit Equity Balance Ju ne 30, 2024 14,567,829 $ 2,563,938 15,895,027 $ 15,895 $ 163,681,450 $ ( 133,148,386 ) $ 33,112,897 Issuance of common stock, net of offering cost / At-the-market offering - - 279,896 280 412,756 - 413,036 Stock-based compensation - - 380,298 380 709,335 - 709,715 Net income (loss) - - - - - ( 9,039,787 ) ( 9,039,787 ) Balance September 30, 2024 14,567,829 $ 2,563,938 16,555,221 $ 16,555 $ 164,803,541 $ ( 142,188,173 ) $ 25,195,861 For the Three Months Ended September 30, 2023 Shares Amount Shares Amount Capital Deficit Equity Series V Additional Total Preferred Stock Common Stock Paid-in Accumulated Stockholders’ Shares Amount Shares Amount Capital Deficit Equity Balance June 30, 2023 14,542,803 $ 2,559,533 14,181,410 $ 14,182 $ 159,955,610 $ ( 142,708,411 ) $ 19,820,914 Balance 14,542,803 $ 2,559,533 14,181,410 $ 14,182 $ 159,955,610 $ ( 142,708,411 ) $ 19,820,914 Issuance of common stock, net of offering cost / At-the-market offering - - 151,882 152 187,165 - 187,317 Stock-based compensation - - 39,894 40 268,019 - 268,059 Net income (loss) - - - - - ( 3,283,557 ) ( 3,283,557 ) Balance September 30, 2023 14,542,803 $ 2,559,533 14,373,186 $ 14,374 $ 160,410,794 $ ( 145,991,968 ) $ 16,992,733 Balance 14,542,803 $ 2,559,533 14,373,186 $ 14,374 $ 160,410,794 $ ( 145,991,968 ) $ 16,992,733 The accompanying notes are an integral part of these unaudited condensed financial statements. 6 BTCS Inc. Statements of Cash Flows (Unaudited) 2024 2023 For the Nine Months Ended September 30, 2024 2023 Net Cash flows used from operating activities: Net income (loss) $ ( 3,511,070 ) $ 503,863 Adjustments to reconcile net income to net cash used in operating activities: Depreciation expense 4,475 3,521 Stock-based compensation 1,887,800 1,057,512 Blockchain infrastructure revenue ( 1,751,735 ) ( 1,013,503 ) Builder payments (non-cash) 615,035 - Change in fair value of warrant liabilities ( 195,937 ) ( 142,500 ) Realized (gains) losses on crypto assets transactions ( 176,050 ) 604,270 Change in unrealized (appreciation) depreciation on crypto assets 237,052 ( 3,734,213 ) Changes in operating assets and liabilities: Stablecoins ( 19,353 ) ( 29,794 ) Prepaid expenses and other current assets ( 322,287 ) 16,298 Receivable for capital shares sold 291,440 Accounts payable and accrued expenses 211,769 15,932 Accrued compensation 340,555 25,209 Net cash used in operating activities ( 2,388,306 ) ( 2,693,405 ) Cash flows from investing activities: Purchase of productive crypto assets for validating ( 31,300 ) ( 1,804,482 ) Sale of productive crypto assets 562,405 1,994,890 Purchase of property and equipment - ( 5,276 ) Sale of property and equipment - 905 Net cash provided by (used in) investing activities 531,105 186,037 Cash flow from financing activities: Net proceeds from issuance common stock/ At-the-market offering 653,340 1,113,818 Net cash provided by financing activities 653,340 1,113,818 Net (decrease)/increase in cash ( 1,203,861 ) ( 1,393,550 ) Cash, beginning of period 1,458,327 2,146,783 Cash, end of period $ 254,466 $ 753,233 Supplemental disclosure of non-cash financing and investing activities: Series V Preferred Stock Distribution $ - $ 2,559,533 The accompanying notes are an integral part of these unaudited condensed financial statements. 7 BTCS Inc. Notes to Unaudited Condensed Financial Statements Note 1 - Business Organization and Nature of Operations BTCS Inc. (“BTCS” or the “Company”), a Nevada corporation listed on Nasdaq, is a U.S.-based blockchain technology company focused on blockchain infrastructure, with its primary operations currently centered on the Ethereum network. Since its inception in 2014, BTCS has developed a diverse set of blockchain-related operations, with a current emphasis on block building and validator node operation (as a “Validator”) on various proof-of-stake (“PoS”) and delegated proof-of-stake (“dPoS”) networks. The Company’s core operations include the management of cloud-based validator nodes on PoS-based blockchain networks. These nodes participate in network consensus mechanisms by providing transaction validation (“attestation”) and block proposal services as a Validator. BTCS earns native token rewards by staking our proof-of-stake crypto assets (also referred to “cryptocurrencies”, “crypto”, “crypto assets”, “digital assets”, or “tokens”) to validator nodes operated by both BTCS and third-parties. BTCS conducts its Ethereum block-building operations under the Builder+ brand, which commenced in 2024. Builder+ uses advanced algorithms to acquire block space and optimize the construction of blocks for on-chain validation, with a focus on maximizing gas fee revenue. Builder+ represents a central component of BTCS’s blockchain infrastructure operations, driving scalable revenue growth through its efficient block optimization processes. BTCS also operates as a non-custodial Staking-as-a-Service (“StaaS”) provider for certain dPoS networks, allowing third-party crypto asset holders to delegate their tokens to BTCS-operated validator nodes (or “nodes”), earning validator node fees as a percentage of staking rewards earned on delegated crypto assets. The Company has also developed and maintains crypto focused technology solutions, such as ChainQ, an AI-powered blockchain analytics tool currently in beta, and StakeSeeker, a crypto portfolio monitoring tool. These platforms complement BTCS’s blockchain infrastructure operations. The Company’s operations are subject to regulatory uncertainties, market volatility, and technological risks associated with blockchain technology and crypto assets. Future success depends on the continued adoption of blockchain technology and the Company’s ability to grow both its Ethereum block-building operations and its broader blockchain infrastructure operations. Note 2 - Basis of Presentation Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions to Form 10-Q and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying unaudited condensed financial statements do not include all of the information and notes required by GAAP for annual financial statements, but in the opinion of the Company’s management, reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Interim results for the three and nine months ended September 30, 2024 are not necessarily indicative of results for the full year ending December 31, 2024. The unaudited condensed financial statements and notes should be read in conjunction with the financial statements and notes for the year ended December 31, 2023. Reclassifications Certain prior period amounts have been reclassified in order to conform with the current period presentation in the unaudited condensed financial statements and accompanying notes. The reclassifications did not have a material impact on the Company’s unaudited condensed financial statements and related disclosures. The impact on any prior period disclosures was immaterial. 8 Note 3 - Summary of Significant Accounting Policies There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2023 Annual Report. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three 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 September 30, 2024 and December 31, 2023, the Company had approximately $ 254,000 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 September 30, 2024 and December 31, 2023, the Company had approximately $ 0 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. 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. 9 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 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 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. The impacts of the change in accounting principle are discussed further in Note 4. 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 statements of operations. The Company recorded realized gains (losses) on crypto assets of approximately ($ 122,000 ) and ($ 44,000 ) for the three months ended September 30, 2024 and 2023, respectively, and approximately $ 176,000 and ($ 604,000 ) for the nine months ended September 30, 2024 and 2023, respectively. 10 Revenue Recognition The Company recognizes revenue under ASC 606 , Revenue from Contracts with Customers . The core principle of the 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: ● Step 1: Identify the contract with the customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when the Company satisfies a performance obligation 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, and 2) gas fees earned from successful Ethereum block building through Builder+. These revenues are collectively termed ‘Blockchain infrastructure revenues’ in the 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. Blockchain Infrastructure 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 staked crypto assets 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 awards earned from the network when delegating to the Company’s own node and is entitled to a fractional share of the fixed crypto asset awards 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. 11 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. 12 The following table summarizes the revenues earned from the Company’s operations for the three and nine months ended September 30, 2024 and 2023. Schedule of Revenues Earned from Company’s Operations 2024 2023 2024 2023 For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 Revenues from blockchain infrastructure operations Staking to BTCS nodes $ 276,393 $ 283,654 $ 1,027,591 $ 891,083 Staking to third-party nodes 58,261 32,588 210,756 122,420 Builder+ 404,503 - 513,388 - Total revenues $ 739,157 $ 316,242 $ 1,751,735 $ 1,013,503 The following tables detail the native token rewards and their respective fair market value recognized as revenue for the three and nine months ended September 30, 2024 and 2023. Revenues are derived from three primary sources: (1) token rewards earned from the delegation of cryptocurrency assets to third-party validator nodes; (2) token rewards derived from BTCS-operated validator nodes, which include staking of the Company’s crypto assets to BTCS nodes as well as Validator Fees earned from third parties asset delegations to our nodes; and (3) block rewards generated by BTCS Builders. Crypto assets earned from BTCS validator nodes Schedule of Crypto Assets Earned From Validator Nodes For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 Asset Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Ethereum (ETH) 65 $ 180,487 85 $ 151,699 202 $ 610,153 292 $ 507,454 Cosmos (ATOM) 13,603 $ 69,534 13,312 $ 106,982 37,334 $ 295,188 29,955 $ 292,238 Akash (AKT) 6,151 $ 17,763 2,671 $ 2,263 16,971 $ 63,249 8,329 $ 4,467 Kava (KAVA) 7,046 $ 2,508 12,500 $ 9,523 19,970 $ 12,065 35,903 $ 30,609 Mina (MINA) 720 $ 319 2,880 $ 1,234 6,480 $ 6,404 10,080 $ 6,141 Oasis Network (ROSE) - $ - 26,321 $ 1,183 - $ 3,254 76,972 $ 4,114 Kusama (KSM) 288 $ 5,782 300 $ 6,416 576 $ 14,365 753 $ 20,788 Avalanche (AVAX) - $ - - $ - 668 $ 18,491 646 $ 8,403 NEAR Protocol (NEAR) - $ - 1,606 $ 2,050 714 $ 4,422 4,293 $ 7,002 Tezos (XTZ) - $ - 385 $ 288 - $ - 1,998 $ 1,989 Evmos (EVMOS) - $ - 27,271 $ 2,016 - $ - 59,507 $ 7,878 Total earned from BTCS validator nodes $ 276,393 $ 283,654 $ 1,027,591 $ 891,083 13 Crypto assets earned from staking to third-party validator nodes Schedule of Crypto Assets Earned From Third Party For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 Asset Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Axie Infinity (AXS) 5,796 $ 29,236 4,629 $ 23,755 16,949 $ 113,937 13,554 $ 93,096 Solana (SOL) 97 $ 14,414 131 $ 2,860 355 $ 51,139 380 $ 7,972 Polygon (POL fka MATIC) 6,851 $ 2,716 6,276 $ 3,676 19,395 $ 12,205 18,416 $ 15,470 Polkadot (DOT) 398 $ 1,980 402 $ 1,898 1,134 $ 7,556 1,004 $ 5,359 Evmos (EVMOS) 3,321 $ 66 - $ - 21,581 $ 1,275 - $ - Cardano (ADA) 1,683 $ 628 1,458 $ 399 5,010 $ 2,218 1,891 $ 523 Tezos (XTZ) 594 $ 419 - $ - 1,266 $ 1,124 - $ - NEAR Protocol (NEAR) 1,881 $ 8,802 - $ - 3,767 $ 21,302 - $ - Total earned from staking to third-party validator nodes $ 58,261 $ 32,588 $ 210,756 $ 122,420 Crypto assets earned from Ethereum block building through Builder+ Schedule of Crypto Assets Earned From Ethereum For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 Asset Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Ethereum (ETH) 152 $ 404,503 - $ - 186 $ 513,388 - $ - Total earned from Ethereum block building through Builder+ 152 $ 404,503 - $ - 186 $ 513,388 - $ - 14 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 statements of operations. The following table further details the costs of revenues for the three and nine months ended September 30, 2024 and 2023. Schedule of Costs of Revenues 2024 2023 2024 2023 For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 Cost of staking revenues $ 42,813 $ 83,100 $ 142,180 $ 278,726 Cost of Builder+ revenues 500,495 - 730,601 - Total cost of revenues $ 543,308 $ 83,100 $ 872,781 $ 278,726 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. 15 Property and Equipment Property and equipment consists of computers, 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 to five 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 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 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 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. 16 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 statements of operations. The fair value of the warrants has been estimated using a Black-Scholes valuation model (see Note 6). 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 long-term 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. These options often vest over a one-year period. 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. 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. 17 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 $ 56,000 and $ 2,000 for the three months ended September 30, 2024 and 2023, respectively, and approximately $ 142,000 and $ 11,000 for the nine months ended September 30, 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 income (loss) per share excludes the shares issuable upon the conversion of preferred stock, notes and warrants from the calculation of net income (loss) per share if their effect would be anti-dilutive. The following financial instruments were not included in the diluted loss per share calculation for the three and nine months ended September 30, 2024 and 2023 because their effect was anti-dilutive: Schedule of Earnings Per Share Anti-diluted 2024 2023 As of September 30, 2024 2023 Warrants to purchase common stock 712,500 712,500 Options 1,302,500 1,150,000 Non-vested restricted stock awards units 1,806,373 1,631,399 Total 3,821,373 3,493,899 Anti-dilutive securities 3,821,373 3,493,899 Recent Accounting Pronouncements In December 2023, the FASB issued ASU No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60) , 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 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 4. 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 financial statements. 18 Note 4 - Changes in Accounting Principle Fair Value Accounting for Crypto Assets - Adoption of ASU No. 2023-08 Effective January 1, 2023, the Company has elected to early adopt ASU No. 2023-08, resulting in a material change in accounting principles 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 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 period 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 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 . Presentation of Ethereum Block Building Revenues and Costs – ASC 606 During the second quarter of 2024, the Company elected to change its accounting principle related to the presentation of revenue and cost of revenues associated with its Ethereum block-building operations, as conducted through Builder+. This change in accounting principle is pursuant to ASC 606, Revenue from Contracts with Customers . Upon re-evaluation, the Company determined that gas fees earned by our Ethereum block builders should be recognized as gross revenue. The Validator Payments, which are fees paid to the validator nodes for the contractual rights to control transaction bundles within the blocks, should be presented separately as cost of revenues. The Company previously presented the net amount of gas fees, after netting off the Validator Payments made, as revenue. This change from a net to a gross presentation aligns more closely with the economic realities of our business operations and the transaction structure within the Ethereum network. The Company has retrospectively applied this change in accounting principle to the financial statements for the three months ended March 31, 2024, to ensure comparability across all periods presented. The effect of this change results in an increase in the presentation of both revenues and cost of revenues by $ 65,614 for the three months ended March 31, 2024. The effect of this change in accounting principle is immaterial and does not impact the reported gross profit, net income (loss), or any balance sheet items for the current or prior periods. 19 Detailed impacts for the three months ended March 31, 2024, are presented in the following table: Schedule of Changes Affects in Current and Prior Periods As reported on Form 10-Q As revised resulting from change in accounting principle For the Three Months Ending March 31, 2024 As reported on Form 10-Q As revised resulting from change in accounting principle Revenues $ 385,773 $ 451,387 Cost of revenues 95,012 160,626 Gross profit $ 290,761 $ 290,761 Based on an analysis of ASC 250, Accounting Changes and Error Corrections , and Staff Accounting Bulletin 99, Materiality , the Company has determined that the effect of this change was immaterial to the previously issued financial statements for the three months ended March 31, 2024. The Company elected to implement this change in accounting principle as it provides a more accurate and transparent view of our Ethereum block-building operations. This change enhances stakeholders’ understanding of the operational performance and the financial aspects of our block-building activities under Builder+. Note 5 – Crypto Assets The following table presents the Company’s crypto assets held as of September 30, 2024: Schedule of Crypto Assets Held Asset Tokens Cost Fair Market Value Ethereum (ETH) 7,978 $ 9,259,645 $ 20,767,299 Cosmos (ATOM) 307,489 5,138,912 1,452,240 Solana (SOL) 6,936 475,790 1,058,786 Avalanche (AVAX) 18,510 1,147,773 513,465 Axie Infinity (AXS) 77,500 2,027,926 390,911 Polygon (POL fka MATIC) 525,405 860,810 208,271 Kusama (KSM) 8,362 1,441,447 167,245 Kava (KAVA) 365,364 1,101,365 131,275 NEAR Protocol (NEAR) 84,748 188,503 448,572 Akash (AKT) 136,042 109,405 376,836 Cardano (ADA) 270,264 404,210 100,930 Mina (MINA) 96,497 69,943 53,749 Polkadot (DOT) 9,784 147,268 43,406 Evmos (EVMOS) 367,358 98,678 7,310 Tezos (XTZ) 27,440 74,444 19,309 Band Protocol (BAND) 992 1,500 1,216 Rocket Pool (RPL) 584 6,545 6,702 Total $ 22,554,164 $ 25,747,522 20 Note 6 – 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 September 30, 2024 and December 31, 2023: Schedule of Fair Value of Assets and Liabilities Valued on Recurring Basis Fair Value Measured at September 30, 2024 Total at September 30, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2024 (Level 1) (Level 2) (Level 3) Assets Crypto Assets $ 25,747,522 $ 25,747,522 $ - $ - Investments 100,000 - - 100,000 Total Assets $ 25,847,522 $ 25,747,522 $ - $ 100,000 Liabilities Warrant Liabilities $ 17,813 $ - $ - $ 17,813 Fair Value Measured at December 31, 2023 Total at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2023 (Level 1) (Level 2) (Level 3) Assets Crypto Assets $ 25,202,929 $ 25,202,929 $ - $ - Investments 100,000 - - 100,000 Total Assets $ 25,302,929 $ 25,202,929 $ - $ 100,000 Liabilities Warrant Liabilities $ 213,750 $ - $ - $ 213,750 The Company did not make any transfers between the levels of the fair value hierarchy during the nine months ended September 30, 2024 and 2023. 21 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 September 30, 2024 and December 31, 2023, the Company’s Level 3 investments were carried at the 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 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 statements of operations. On March 2, 2021, the Company entered into a securities purchase agreement with certain purchasers which closed on March 4, 2021 pursuant to which the Company sold 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 offering. 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 September 30, 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 sheet 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 at the date of issuance and, as of September 30, 2024 and December 31, 2023, is as follows: Summary of Valuation Methodology and Significant Unobservable Inputs Warrant Liabilities September 30, 2024 December 31, 2023 Risk-free rate of interest 3.98 % 4.23 % Expected volatility 91.05 % 108.19 % Expected life (in years) 1.42 2.18 Expected dividend yield - - 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. 22 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 nine months ended September 30, 2024 and 2023, that are measured at fair value on a recurring basis: Schedule of Changes in Fair Value and Other Adjustments of Warrants Fair Value of Level 3 Financial Assets September 30, September 30, 2024 2023 Beginning balance $ 100,000 100,000 Purchases - - Unrealized appreciation (depreciation) - - Ending balance $ 100,000 $ 100,000 Fair Value of Level 3 Financial Liabilities September 30, September 30, 2024 2023 Beginning balance $ 213,750 $ 213,750 Fair value adjustment of warrant liabilities ( 195,937 ) ( 142,500 ) Ending balance $ 17,813 $ 71,250 Note 7 – Stockholders’ Equity 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 . 23 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 through H.C. Wainwright, shares of the Company’s Common Stock having an aggregate offering price of up to $ 98,767,500 (the “Shares”). The Company will pay H.C. Wainwright a commission rate equal to 3.0 % of the aggregate gross proceeds from each sale of Shares. As a result of the SEC’s baby shelf requirements, the Company is currently limited in its sales of Common Stock under the ATM Agreement to one-third of its public float during the 12 calendar months immediately prior to the sale. As of the filing date of this Form 10-Q, the Company would be limited in its sales under the ATM Agreement to approximately $ 2,618,000 of shares. During the nine months ended September 30, 2024, the Company sold a total of 443,727 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $ 682,000 at an average selling price of $ 1.54 per share, resulting in net proceeds of approximately $ 653,000 after deducting commissions and other transaction costs. Share Based Payments Effective January 19, 2023, the Board approved the annual issuance of $ 50,000 of common stock to each independent director. The shares will be issued in four equal installments ($ 12,500 ) 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 nine months ended September 30, 2024, 72,315 shares of common stock approximating $ 98,000 were issued to independent directors related to the quarterly approved issuances. 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. 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. For the nine months ended September 30, 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 were returned to net settle the issuance and pay related taxes, resulting in a net share issuance of 370,928 shares. 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 of Directors) . A total of 14,542,803 shares of Series V Preferred Stock were distributed to shareholders on June 2, 2023. 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. The fair value of the Series V 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. 24 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 The following weighted-average assumptions were used to estimate the fair value of options granted on the deemed grant date during the nine months ended September 30, 2024 and 2023 for the Black-Scholes formula: Schedule of Weighted-Average Assumptions Used to Estimate Fair Value Nine Months Ended September 30, 2024 2023 Exercise price $ 1.55 $ 0.63 Term (years) 5.00 5.00 Expected stock price volatility 144.57 % 152.84 % Risk-free rate of interest 4.31 % 3.99 % 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 option. 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. For awards vesting upon the achievement of the market conditions which were met at the date of grant, compensation cost measured on the date of grant was immediately recognized. For awards vesting upon the achievement of the market conditions which were not met at the date of grant, compensation cost measured on the grant date will be recognized on a straight-line basis over the vesting period based on estimation using a Monte-Carlo simulation. 25 A summary of option activity under the Company’s stock option plan for nine months ended September 30, 2024 is presented below: Summary of Option Activity Number of Shares Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of December 31, 2023 1,200,000 $ 2.12 $ 8,700 2.4 Employee options granted 120,000 1.52 - 4.6 Employee options expired ( 17,500 ) 10.30 - - Outstanding as of September 30, 2024 1,302,500 $ 1.96 $ 1,650 1.9 Options vested and exercisable as of September 30, 2024 1,127,500 $ 2.03 $ - 1.5 RSUs On December 29, 2023, upon recommendation of the Compensation Committee, the Board of BTCS Inc. approved the grant of 50,000 RSUs to each of its executive officers (Mr. Allen, Mr. Handerhan, Mr. Prevoznik and Mr. 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 both informed the Compensation Committee, that for personal reasons, they each do not accept, and forfeit, the 50,000 restricted stock units granted to them each by the Company effective January 1, 2024. Subsequently, effective January 12, 2024, the Compensation Committee 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. A summary of the Company’s restricted stock units granted under the 2021 Plan during the nine months ended September 30, 2024 are as follows: Summary of Restricted Stock Number of Restricted Stock Units Weighted Average Grant Date Fair Value Nonvested at December 31, 2023 1,606,373 $ 3.25 Granted 300,000 1.71 Forfeited ( 100,000 ) 1.63 Nonvested at September 30, 2024 1,806,373 $ 3.09 Stock Based Compensation Stock-based compensation expense is recorded as a part of selling, general and administrative expenses, compensation expenses and cost of revenues. Stock-based compensation expense for the three and nine months ended September 30, 2024 and 2023 was as follows: Schedule of Stock-based Compensation Expense 2024 2023 2024 2023 For the Three Months Ended September 30, For the Nine Months Ended September 30, 2024 2023 2024 2023 Employee stock option awards $ 34,601 $ 441 $ 66,594 $ ( 4,871 ) Employee restricted stock unit awards 244,409 230,118 725,307 726,409 Employee share-based salary payments 75,468 - 75,468 - Non-employee restricted stock awards 66,929 21,536 127,509 45,777 Stock-based compensation $ 421,407 $ 252,095 $ 994,878 $ 767,315 26 Note 8 – Accrued Expenses Accrued expenses consist of the following: Schedule of Accrued Expenses September 30, 2024 December 31, 2023 Accrued compensation $ 1,052,647 $ 712,092 Accounts payable and accrued expenses 266,827 55,058 Accrued Expenses $ 1,319,474 $ 767,150 Accrued compensation includes approximately $ 1,053,000 and $ 710,000 related to performance bonus accruals as of September 30, 2024 and December 31, 2023, respectively. 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 nine months ended September 30, 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 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 financial statements, the Company has historically incurred a net loss and has an accumulated deficit of approximately $ 142,188,000 at September 30, 2024, and net cash used in operating activities of approximately $ 2,388,000 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 – Subsequent Events The Company evaluates events that have occurred after the balance sheet date but before the 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 financial statements other than disclosed. During the period from October 1, 2024 to November 12, 2024, the Company sold a total of 470,061 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $ 1,238,000 at an average selling price of $ 2.63 per share, resulting in net proceeds of approximately $ 1,198,000 after deducting commissions and other transaction costs. After the expiration of the Company’s prior Form S-3, the Company filed a new Form S-3, which became effective October 4, 2024. 27