What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-20 compared with 2024-03-21 · 972 added, 1107 removed, 605 unchanged (77% of the section changed)

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as a result of a number of factors, including those set forth under Risk Factors and elsewhere in this report.

refer to the “Fiscal 2023” and the “Fiscal 2022” we are referring to the years ended December 31, 2023 and December

31, 2022, respectively.

is a Nasdaq listed company operating in the blockchain technology sector since 2014 and is one of the only U.S.

publicly traded

companies with a primary focus on proof-of-stake blockchain infrastructure.

Our core focus is on driving scalable growth through a diverse

range of business streams leveraging and built on top of our core and proven blockchain infrastructure operations.

refer to the “Fiscal 2025”, “Fiscal 2024” and the “Fiscal 2023” we are referring to the years ended

December 31, 2025, December 31, 2024 and December 31, 2023, respectively.

Inc., a Nasdaq-listed U.S.-based blockchain technology company, focuses on advancing blockchain infrastructure.

With a primary emphasis

on the Ethereum network, BTCS drives scalable growth through block-building and validator node operations, leveraging advanced technology

and robust operational expertise.

Infrastructure

Company specializes in operating validator nodes on various delegated proof-of-stake and proof-of-stake based blockchain networks, with

an emphasis on Ethereum.

We earn native token rewards by validating transactions across various blockchain networks by staking our crypto

assets on validator nodes operated by BTCS and third parties.

Subject to available capital and the restrictions of certain blockchains,

BTCS intends to expand its blockchain infrastructure operations to secure other disruptive blockchain protocols that allow for delegating,

which presents a significant growth opportunity for the Company.

blockchain infrastructure center on supporting the validation of transactions and securing proof-of-stake (“PoS”) and delegated

proof-of-stake (“dPoS”) blockchain networks.

The Company manages a network of cloud-based validator nodes that perform essential

network functions, including transaction validation (“attestation”) activities and proposing new blocks.

Through these activities,

BTCS earns native token rewards by staking its own crypto assets on validator nodes operated by BTCS and third parties.

evaluation of blockchain networks involves comprehensive due diligence procedures, including assessments of blockchain quality, reward

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factors such as i) market and on-chain statistics, ii) liquidity, iii) potential blockchain utility, iv) history and milestones, v) growth

and development roadmap, vi) use cases, vii) community interest, vii) quality of documentation, viii) decentralization, and ix) any other

and development roadmap, vi) use cases, vii) community interest, viii) quality of documentation, ix) decentralization, and x) any other

publicly available information.

This process ensures BTCS focuses on high-potential blockchain networks while mitigating technical and

operational risks.

Block Building – Builder+

central focus of BTCS’s current operations is its Ethereum block-building initiatives under Builder+, which commenced operations

Through Builder+ we purchase block space and leverage advanced algorithmic processes to construct blocks for on-chain validation.

The goal of Builder+ is to maximize gas fee revenue by optimizing the contents and structure of each block.

The Company aims to maximize

the value of gas fees earned by increasing the number of blocks we purchase while minimizing the payments to validators required for

purchasing block space.

has rapidly become a key driver of BTCS’s revenue growth, leveraging its scalable and efficient technology to expand its operational

footprint within the Ethereum ecosystem.

While Builder+ currently operates exclusively on Ethereum, its flexible design enables potential

adaptation to other blockchain networks, aligning with BTCS’s vision to diversify its infrastructure operations over time.

Staking-as-a-Service

Staking-as-a-Service (“StaaS”) business model allows for crypto asset holders to earn token rewards by participating in network

consensus mechanisms through staking and delegating their crypto assets to Company operated validator nodes.

As a non-custodial validator

operator, the Company receives a percentage of a crypto asset holders’ staking rewards generated as a validator node fee, for our

ministerial role in hosting the validator node.

This creates an opportunity for scalable revenue and business growth with limited additional

The Company’s StaaS strategy provides a more accessible and cost-effective alternative for crypto asset holders to participate

in blockchain networks’ consensus mechanisms, promoting the growth and adoption of blockchain technology.

Company’s internally-developed “StakeSeeker” platform is a personal finance software and education center with a comprehensive

crypto dashboard for crypto asset holders to connect, monitor, track, and analyze their crypto portfolios across exchanges and wallets

in a single analytics platform.

The StakeSeeker dashboard reads user data from digital wallets and utilizes application programming interfaces

(APIs) to read data from crypto exchanges and does not allow for the trading or custody of crypto assets.

StakeSeeker’s Stake Hub

functions as an educational center, offering users guidance on the delegation of their crypto assets to our non-custodial validator nodes,

along with the ability to monitor such delegation activities through data analysis.

StakeSeeker does not provide or facilitate direct,

crypto asset delegation or transaction execution on our platform.

The Stake Hub’s primary role is to offer instructional support

and tracking capabilities.

There is no active process for crypto asset delegation through the Stake Hub dashboard;

it is primarily a

monitoring tool.

Crypto asset holders are able to delegate to our validator nodes without signing up for our StakeSeeker platform;

crypto asset holders can delegate to validator nodes not operated by the Company and sign up for StakeSeeker to utilize our software

and data analytics.

The StakeSeeker platform is currently free-to-use for registered users so is not currently generating revenue.

Company is not a broker-dealer or an investment advisor and does not provide any such related services.

StaaS provider maintains a ministerial role in validating transactions on a given dPoS network on behalf of its Delegators by (1) arranging

transactions using open-source software to stake the relevant crypto assets;

(2) monitoring the nodes it is operating to ensure the computers

operates a non-custodial Staking-as-a-Service (“StaaS”) business model that enables crypto asset holders to participate in

network consensus mechanisms by staking and delegating to BTCS-operated validator nodes.

As a non-custodial validator operator, the Company

receives a percentage of a crypto asset holders’ staking rewards generated as a validator node fee, for our ministerial role in

hosting the validator node.

This creates an opportunity for scalable revenue and business growth with limited additional costs.

The Company’s

StaaS strategy provides a more accessible and cost-effective alternative for crypto asset holders to participate in blockchain networks’

consensus mechanisms, promoting the growth and adoption of blockchain technology.

StaaS provider maintains a ministerial role in validating transactions on a given dPoS network on behalf of its Delegators by (1) using

open-source software to stake the relevant crypto assets;

(2) monitoring and maintaining the nodes it is operating to ensure the computers

remain online to validate transactions;

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earned, which are then distributed directly to the Delegator’s wallet.

At no point does the Validator gain access, control, or

custody of the original staked crypto assets or the earned crypto rewards through staking to its node.

Therefore, the Company does not

have any exposure to the custodial risks that a crypto exchange would have related to excessive redemptions or withdrawals of crypto

assets, suspension of redemptions, or withdrawals.

Further, we do not issue or hold crypto assets on behalf of third parties and have

no exposure to the risks an exchange would have with respect to loans, rehypothecation, or margin.

following table sets forth the number of third-party crypto assets delegated to our non-custodial validator nodes as of December 31,

Crypto Assets

Near protocol

1548,000 ROSE

– Ethereum Block Building

January 2024, we introduced “Builder+”, an Ethereum block builder.

Builder+ utilizes advanced algorithms to maximize validator

earnings by constructing optimized blocks for on-chain validation.

We believe Builder+ should enhance our Ethereum blockchain infrastructure

and create opportunities for new scalable revenue streams on Ethereum’s blockchain.

Builder+ did not have a material impact to 2023 operations.

– AI Analytics

is an under-developed AI-powered blockchain data and analytics platform, designed to allow users to query real-time and historical

on-chain blockchain data.

Through comprehensive indexing of public blockchain data from our Blockchain Infrastructure operations, ChainQ

is intended to provide an intuitive and straightforward platform for users to access on-chain data.

tables below describes BTCS’s quarterly crypto assets holdings as of the end of Fiscal 2022 through the end of Fiscal 2023.

Assets Held at Period End

Ethereum (ETH)

Cardano (ADA)

Polkadot (DOT)

Cosmos (ATOM)

Polygon (MATIC)

Avalanche (AVAX)

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

Evmos (EVMOS)

Market Value of Crypto Assets at Period End

Ethereum (ETH)

Cardano (ADA)

Polkadot (DOT)

Cosmos (ATOM)

Polygon (MATIC)

Avalanche (AVAX)

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

Evmos (EVMOS)

of Crypto Assets at Period End

Ethereum (ETH)

Cardano (ADA)

Polkadot (DOT)

Cosmos (ATOM)

Polygon (MATIC)

Avalanche (AVAX)

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

Evmos (EVMOS)

tables below detail BTCS’s quarterly crypto assets earned as staking rewards during Fiscal 2023.

The blockchain network does not distribute any of the Delegator’s

earned crypto rewards to BTCS.

At no point does the Validator gain access, control, or custody of the original staked crypto assets or

the earned crypto rewards through staking to its node.

Therefore, the Company does not have any exposure to the custodial risks that

a crypto exchange would have related to excessive redemptions or withdrawals of crypto assets, suspension of redemptions, or withdrawals.

Further, we do not issue or hold crypto assets on behalf of third parties and have no exposure to the risks an exchange would have with

respect to loans, rehypothecation, or margin.

following table details the blockchain networks on which BTCS operates nodes that support third-party delegations as part of our staking-as-a-service

operations, including the amount of third-party crypto assets delegated to our non-custodial validator nodes, as of December 31, 2024.

Assets (Native

Assets ($USD)

complement our core blockchain infrastructure, BTCS has developed “ChainQ,” an AI-powered blockchain data and analytics platform

designed to increase accessibility and transparency within the blockchain ecosystem.

Currently in beta, ChainQ simplifies on-chain data

access and analysis for cryptocurrency holders, delivering deeper insights into blockchain activity.

By indexing public data from our

blockchain infrastructure operations, ChainQ provides an intuitive platform for exploring on-chain data.

of December 27, 2024, BTCS has discontinued its StakeSeeker platform to focus on Builder+ and NodeOps, reflecting the Company’s

strategic emphasis on scalable blockchain infrastructure.

tables below detail BTCS’s quarterly crypto assets holdings as of the end of each fiscal quarter from the fourth quarter of Fiscal

2023 through the end of Fiscal 2024.

Assets Held at the End of the Following Calendar Quarters:

Infinity (AXS)

Protocol (NEAR)

(POL fka MATIC)

Protocol (BAND)

Network (ROSE)

Market Value of Crypto Assets at the End of the Following Calendar Quarters:

Infinity (AXS)

Protocol (NEAR)

(POL fka MATIC)

Protocol (BAND)

Network (ROSE)

of Crypto Assets at the End of the Following Calendar Quarters:

Infinity (AXS)

Protocol (NEAR)

(POL fka MATIC)

Protocol (BAND)

Network (ROSE)

The prices have been rounded to the nearest whole dollar for prices above $100

tables below detail BTCS’s quarterly crypto assets earned during each of the following quarters:

Asset Rewards

Crypto assets earned from staking to BTCS validator nodes

assets earned from blockchain infrastructure staking activities through NodeOps

Infinity (AXS) *

Protocol (NEAR) *

(POL fka MATIC) *

Network (ROSE)

All or a portion of revenue earned from staking to third-party validator nodes

assets earned from Ethereum block-building through Builder+

Market Value of Crypto Asset Rewards Earned Recognized as Revenue

following table summarizes the revenues earned from the Company’s operations by revenue segment during the following calendar quarters:

revenue from blockchain infrastructure staking activities through NodeOps

revenue from Ethereum block-building through Builder+

tables below detail the fair market value of BTCS’s quarterly crypto assets earned as revenue in each respective segment during

the following calendar quarters:

from blockchain infrastructure staking activities through NodeOps

Infinity (AXS) *

Protocol (NEAR) *

Crypto assets earned from staking to third-party validator nodes

Axie Infinity (AXS)

Polygon (MATIC)

Polkadot (DOT)

Cardano (ADA)

Value of Crypto Asset Rewards Earned Recognized as Revenue

earned from staking to BTCS validator nodes

Ethereum (ETH)

Cosmos (ATOM)

Evmos (EVMOS)

Avalanche (AVAX)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

Total revenue earned from staking to BTCS validator nodes

earned from staking to third-party validator nodes

Axie Infinity (AXS)

Polygon (MATIC)

Polkadot (DOT)

Cardano (ADA)

Total revenue earned from staking to third-party validator nodes

to the Company’s adoption of ASU No.

2023-08, Intangibles—Goodwill and Other—Crypto Assets during Fiscal 2023,

the Company accounted for all crypto asset holdings as long-lived intangible assets, carrying them at their impaired cost value.

following table presents the Fair Market Value of crypto assets held compared to the GAAP Book Value reported on the Company’s

balance sheet in Fiscal 2022.

December 31, 2022

Ethereum (ETH)

Cardano (ADA)

Polkadot (DOT)

Cosmos (ATOM)

Polygon (MATIC)

Avalanche (AVAX)

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

adoption of ASU No.

2023-08 required an adjustment to the Company’s opening Retained Earnings balance, which is included in the

‘Accumulated Deficit’ line on the statement of stockholder’s equity for Fiscal 2023.

This adjustment was made during

the year of adoption (Fiscal 2023) to recognize the cumulative effect of initially applying the change in accounting principle to the

previous periods.

Specifically, it accounted for the difference between the Fiscal 2022 ending book value of crypto assets and their

fair market value, as disclosed in the table above.

(POL fka MATIC) *

Network (ROSE)

revenue from blockchain infrastructure staking activities through NodeOps

All or a portion of revenue earned from staking to third-party validator nodes

from Ethereum block-building through Builder+

revenue from Ethereum block-building through Builder+

OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

following tables reflect our operating results for the years ended December 31, 2024 and 2023:

For the Year Ended

Validator revenue (net of fees)

Total revenues

the Year Ended

infrastructure revenues (net of fees)

Cost of revenues

Validator expenses

infrastructure costs

and administrative

and development

and related expenses

(gains) losses on crypto asset transactions

operating expenses

General and administrative

Research and development

Compensation and related expenses

Impairment loss on crypto assets

(13,348,874 )

Realized (gains) losses on crypto asset transactions

Total operating expenses

income (expenses):

in unrealized appreciation (depreciation) on crypto assets

$ (4,451,876 )

in fair value of warrant liabilities

other income (expenses)

Change in unrealized appreciation (depreciation) on crypto assets

Change in fair value of warrant liabilities

Distributions to warrant holders

Total other income (expenses)

Net income (loss)

income (loss)

$ (1,271,174 )

decrease in revenue during Fiscal 2023 as compared to Fiscal 2022 is primarily due to a drop in the fair value of our crypto assets earned

as rewards for staking since the market’s highs in the first quarter of 2022.

Despite the late upswing in market prices of crypto

assets at the end of Fiscal 2023, revenue was recognized throughout the year at lower average prices than Fiscal 2022.

Although we believe

the number of crypto assets we earn from staking and revenue recognized may increase as we continue to expand our blockchain infrastructure

efforts, we recognize that volatility in the crypto asset markets may impact the market prices of the crypto assets we earn from staking.

decrease in cost of revenues during Fiscal 2023 as compared to Fiscal 2022 is due to efficiencies realized in our blockchain infrastructure

validating operating costs, including streamlining of web service hosting fees and reduction of services provided by third-party vendors.

We believe our cost of revenues will increase as we continue to ramp up our business.

However, we believe gross margin may improve as

we add scale to our blockchain infrastructure operations and reduce costs as a result of increased operational efficiencies, leading

to improved gross profits.

and administrative expenses consist of director compensation, legal and professional fees, and other personnel and related costs.

expenses decreased slightly during Fiscal 2023 compared to Fiscal 2022 as a result of cost-cutting measures employed by management in

numerous areas, including investor relation related as the Company focused on cost management and transitioning related efforts in-house

from third-party engagements.

These decreases were partially offset by increases in legal service costs during Fiscal 2023, driven primarily

by services surrounding the Series V Preferred Stock distribution and related listing on Upstream Exchange.

and development expenses increased during Fiscal 2023 as the Company focused on the beta release of our proprietary StakeSeeker platform,

including responding to user feedback and continued planned feature development and incorporation onto the platform.

We anticipate research

and development costs to remain consistent as we continue to expand on technological solutions in the blockchain sector, including the

development of Builder+ and ChainQ with a focus on cost management of our third-party development team.

and related expenses decreased during Fiscal 2023 primarily due to approximately $2,825,000 non-cash equity-based contingent bonuses

granted to employees during Fiscal 2022 for the achievement of performance milestones compared to only approximately $1,643,000 non-cash

equity-based compensation during Fiscal 2023.

We believe our compensation expenses will increase from those reported in Fiscal 2023 as

the Company continues to utilize equity-based compensation incentives as a core part of our compensation strategy.

costs decreased during Fiscal 2023 as the Company focused on cost-reduction efforts.

decrease in operating expenses during Fiscal 2023 can be attributed primarily to the Company’s change in accounting principles

resulting from its adoption of ASU No.

2023-08 in Fiscal 2023.

This accounting change permits the Company to value its crypto assets

at their fair market value and eliminates the necessity to recognize impairment losses on crypto assets, which had been a

significant contributor to net losses in prior years.

Notably, in Fiscal 2022, the Company recorded an impairment loss of

approximately $13,349,000 on crypto assets, which is no longer required under the revised accounting treatment.

Company realized losses on sale of crypto assets during Fiscal 2023, compared to gains realized in Fiscal 2022, primarily resulting

from the Company’s sale of approximately 968 ETH earned as crypto rewards from our staking operations at prices below their

original cost after liquidity was unlocked in April 2023 as part of Ethereum’s Shanghai upgrade.

$ (9,089,902 )

the year ended December 31, 2024, revenue increased to approximately $4,073,000 compared to approximately $1,340,000 in 2023, primarily

driven by the expansion of Builder+ operations.

Builder+ contributed approximately $2,453,000 in revenue in 2024, while NodeOps revenue

grew to approximately $1,620,000.

significant increase in revenue during Fiscal 2024 was primarily due to the launch and scaling of BTCS’s Ethereum block-building

operations under Builder+, which resulted in a substantial increase in block rewards earned.

Additionally, higher market prices for crypto

assets during Fiscal 2024 contributed to the increased fair value of crypto asset rewards earned from both staking (NodeOps) and block-building

While we anticipate continued growth in the number of block rewards and staking rewards earned, crypto asset market volatility

may impact the fair value of rewards earned and recognized in future periods.

of revenues increased during Fiscal 2024, primarily due to higher Validator Payments made for purchasing block space as part of our Ethereum

block-building activities under Builder+.

Validator Payments totaled approximately $2,766,000 in 2024.

These increased costs were partially

offset by efficiency improvements in web service hosting fees related to NodeOps, which were reduced from approximately $325,000 in 2023

to approximately $142,000 in 2024.

Cloud and server hosting costs related to Builder+ totaled approximately $125,000 in 2024.

we continue to expand block-building operations and increase block production, we expect cost of revenues to rise correspondingly.

costs may grow at a greater rate than revenue in Fiscal 2025, likely reducing gross margins.

and Administrative Expenses

and administrative expenses increased during Fiscal 2024, primarily due to:

Increased by approximately $130,000, driven by a broader audit scope resulting from heightened operational complexity and

services related to our Form S-3 registration during Fiscal 2024.

Service Fees:

Increased by approximately $120,000 related to our 2024 annual meeting and solicitation of shareholder

Increase by approximately $104,000, attributed to purchases of order flow to support Ethereum block production as

part of Builder+.

increases were partially offset by a $119,000 reduction in legal fees, which were elevated in Fiscal 2023 due to services related to

the Series V Preferred Distribution and its related listing on the Upstream Exchange.

anticipate that audit fees may continue to rise due to expanding operational scope, while legal and proxy-related expenses are expected

to decline in Fiscal 2025.

Additionally, we anticipate future increases in order flow expenditures as we scale our block-building operations.

and Development Expenses

and development expenses increased during Fiscal 2024 as resources shifted from the beta release of our StakeSeeker platform in Fiscal

2023 to the launch of Builder+ operations and continued development of ChainQ, which launched in July 2024.

We expect research and development

costs to either increase or remain consistent, with a focus on cost management for third-party development services.

and Related Expenses

and related expenses increased significantly in Fiscal 2024, primarily due to higher equity-based compensation expenses, which totaled

approximately $5,340,000, compared to approximately $1,643,000 for Fiscal 2023.

substantial portion of the equity-based compensation expense relates to performance bonus accruals for Fiscal 2024.

These accruals primarily

increased due to the Company’s exceeding the maximum revenue performance milestone of $3,712,500 during the year, triggering equity-based

awards under employee incentive plans.

the total bonus amounts for officers approved for Fiscal 2024 were approximately $1,917,000 (as disclosed in Note 7 – Executive

Compensation ), the portion allocated to incentive stock options was recognized at a higher GAAP expense, as required under U.S.

The stock-based compensation charges for the options component were determined using the Black-Scholes valuation model, resulting in

a higher accrued amount.

part of the payment of accrued bonus compensation for the year ended December 31, 2024, the Company issued 1,312,068 options to employees

and officers.

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

Additionally,

the increase in equity-based compensation expenses includes approximately $380,000 in payroll taxes primarily driven by costs related to the net settlement of

shares issued upon the vesting of certain RSUs as well as increased salaries in Fiscal 2024.

ahead, we anticipate compensation expenses may decrease as the balance of unamortized stock-based compensation related to prior grants,

as well as the balance of unvested RSUs, declines.

However, equity-based incentives remain a key component of our compensation strategy,

and future fluctuations in expense levels may occur based on the timing and structure of future grants.

expenses rose during Fiscal 2024 due to additional ad campaigns executed.

We anticipate similar to more significant increases in advertising

spend in Fiscal 2025.

Losses on Crypto Asset Transactions

losses on crypto asset transactions increased during Fiscal 2024 due to Validator Payments for block-building and sales of crypto assets

to fund operations.

The Company may realize additional gains or losses in the future depending on the sale of crypto assets to meet operational

and cash needs as well as market conditions.

Income (Expense)

changes in other income for Fiscal 2023 were primarily attributed to the recognition of the change in unrealized appreciation on

crypto assets resulting from the Company’s adoption of ASU No.

2023-08 for Fiscal 2023.

This adoption allows the Company to

account for its crypto assets at their fair market value.

Prior to its adoption in Fiscal 2023, the Company accounted for its crypto

assets as long-lived intangible assets with carrying values based on the original cost, less any impairment.

Changes in the

unrealized appreciation or depreciation of crypto assets are directly influenced by the volatility in crypto markets, which can be

challenging for management to predict.

the changes in other income for Fiscal 2022 were primarily driven by the decrease in the fair value of warrant liabilities throughout

This non-cash expense is influenced by the value of our stock price at the end of each quarter, a factor that we cannot predict.

in other income for Fiscal 2024 were primarily attributed to the recognition of unrealized appreciation on crypto assets due to favorable

market conditions.

However, the unrealized appreciation in Fiscal 2024 was lower compared to Fiscal 2023, which experienced greater increases

in crypto asset market values.

Changes in unrealized appreciation or depreciation of crypto assets are directly influenced by crypto

market volatility, which can be challenging for management to predict.

This volatility can significantly impact other income in future

reporting periods.

Income (Loss)

increase in net income for Fiscal 2023, compared to the net loss in Fiscal 2022, is primarily attributable to a change in accounting

principle resulting from the Company’s adoption of ASU No.

decline in net income for Fiscal 2024 compared to Fiscal 2023 is primarily due to smaller increases in the fair value of crypto assets

during Fiscal 2024.

This change had significant

implications for crypto assets, including the elimination of the need for the Company to recognize impairment losses on its crypto

assets, which had been a primary contributor to net losses in previous years.

Additionally, this change allowed the Company to

account for its crypto assets at their fair market value and include the change in fair market value of crypto assets as part of net

income for the fiscal year.

We acknowledge that our net income (loss) may exhibit significant fluctuations due to the volatility in

the crypto asset markets, impacting changes in the fair value of crypto assets during future reporting periods.

Additionally, increased compensation expenses, including larger performance bonus accruals related to revenue milestones,

contributed to the decline.

Net income or loss may continue to fluctuate significantly due to crypto asset market volatility, impacting

changes in fair value during future periods.

AND CAPITAL RESOURCES

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& Co., LLC, as agent (“H.C.

Wainwright”), pursuant to which the Company may offer and sell, from time-to-time through

Wainwright, shares of the Company’s Common Stock having an aggregate offering price of up to $98,767,500.

From the period

September 14, 2021 through March 19, 2024, the Company sold a total of 4,346,748 shares of Common Stock under the ATM Agreement for

aggregate total gross proceeds of approximately $17,256,000 at an average selling price of $3.97 per share, resulting in net proceeds

Wainwright”), pursuant to which the Company may offer and sell, from time-to-time, shares

of its Common Stock through H.C.

Initially, the aggregate offering price of shares issuable under the ATM Agreement was $98,767,500.

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 period September 14, 2021 through March 17, 2025, the Company sold a total of 6,401,461 shares of Common Stock under the ATM Agreement

for aggregate total gross proceeds of approximately $24,230,000 at an average selling price of $3.79 per share, resulting in net proceeds

of approximately $23,445,000 after deducting commissions and other transaction costs.

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.

However, due to the SEC’s baby shelf requirements, the Company is

currently limited in its sales of Common Stock under the ATM Agreement to no more than one-third of its public float (calculated as the

aggregate market value of outstanding Common Stock held by non-affiliates) during any 12-month period, provided that the amount of securities

that may be sold under the Form S-3 may fluctuate based on changes in the Company’s public float and stock price.

As of March 17,

2025, the Company would be limited in its sale of shares under the ATM Agreement to approximately $13,747,000, subject to ongoing changes

in the Company’s public float and stock price.

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 settlement of liabilities in the normal course of business.

is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate

1 unchanged sentence

At December 31, 2024, the Company had approximately $1,978,000 of cash and working capital of approximately $33,893,000.

of March 19, 2024, the Company had approximately $870,000 of cash and the fair market value of the Company’s liquid crypto

assets was approximately $35,665,000.

As of March 17, 2025, the Company

had approximately $261,000 of cash and cash equivalents and the fair market value of the Company’s liquid crypto assets was approximately

The Company has no outstanding debt.

As of March 19, 2024, the Company also has approximately

$5.5 million available under the ATM Agreement over the next twelve months under the Form S-3 baby shelf rules, although, the amount

that we may raise under the Form S-3 may increase or decrease based upon our stock price.

The Company believes that the existing cash

and liquid crypto assets held by us, in addition to the funds available to the Company from the issuance of additional stock through

the ATM Agreement, provide sufficient liquidity to meet working capital requirements, anticipated capital expenditures and contractual

obligations for at least the next twelve months.

of our staked crypto assets may be locked up for varying durations, depending on the specific blockchain protocol, and we may be unable

to unstake them in a timely manner in order to liquidate to the extent desired.

Lock-up periods for our staked crypto assets range from

several hours to six months.

During times of instability in the market of crypto assets, we may not be able to sell our crypto assets

at reasonable prices or at all.

As a result, our crypto assets may not be able to serve as a source of liquidity for us to the same extent

as cash and cash equivalents.

used in operating activities was approximately $3,562,000 during Fiscal 2023 compared to approximately $777,000 during Fiscal 2022.

The sale of our remaining bitcoin holdings during 2022 was the primary contributor to the approximately $2,547,000 operating cash

inflows from the sale of non-productive crypto assets during the Fiscal 2022 compared to $0 in Fiscal 2023.

We do not anticipate any

future material cash inflows from the sale of non-productive assets, as our blockchain infrastructure strategy focuses primarily on

acquiring and staking productive proof-of-stake blockchain networks.

Additional non-cash adjustments to our operating cash flows

consisted of approximately $13,349,000 impairment loss on crypto assets (“Crypto Asset Impairment”) during Fiscal 2022

compared to $0 in Fiscal 2023.

Due to the Company’s change in accounting principle resulting from its adoption of ASU No.

2023-08 in Fiscal 2023, the Company will no longer be required to recognize impairment on its crypto assets in future reporting

This is partially offset by the approximately $2,688,000 equity-based contingent bonuses granted to employees during Fiscal

2022 for the achievement of performance milestones compared to only approximately $1,342,000 equity-based compensation in Fiscal

We anticipate similar levels of equity-based compensation in future periods as reported in Fiscal 2023.

provided by investing activities was approximately $186,000 during Fiscal 2023 compared to cash used in investing activities of approximately

$8,973,000 for Fiscal 2022.

Net cash outflows for investing activities were used primarily for the purchase of crypto assets for blockchain

infrastructure operations.

We anticipate purchase activity to remain lower and consistent with the levels reported during Fiscal 2023

as we focus our strategies on technical developments.

Fiscal 2022 included large purchases of productive crypto assets to build on our

blockchain infrastructure operations.

Fiscal 2023 included a higher than typical volume of sales of crypto assets, primarily driven by

the re-allocation of Ethereum rewards earned to other productive crypto assets which were subsequently staked.

provided by financing activities was approximately $2,688,000 during Fiscal 2023 compared to approximately $10,496,000 during Fiscal

The cash inflows from financing activities in Fiscal 2023 and Fiscal 2022 were entirely from proceeds of Common Stock sold pursuant

to the ATM Agreement.

The cash inflows from financing activities during Fiscal 2022 was partially offset by a one-time return of capital

distribution of $631,000 made to record holders as of March 17, 2022.

The Company has plans to continue to raise proceeds from the sale

of Common Stock to fund operations as needed.

The Company believes that

its existing cash and liquid crypto assets, in addition to the funds available to the Company from the issuance of additional stock

through the ATM Agreement, provide sufficient liquidity to meet working capital requirements, anticipated capital expenditures and

contractual obligations for at least the next twelve months from the filing date of this report.

However, this belief is based on current market conditions, regulatory

environment, and operational plans, all of which are subject to change.

Certain of our staked crypto assets may be locked up for varying durations,

depending on the specific blockchain protocol, and we may be unable to unstake them in a timely manner to liquidate to the extent desired,

which could materially impact our liquidity position.

Additionally, technical issues, network congestion, or regulatory changes could

further restrict our ability to access or liquidate these assets.

Lock-up periods for our staked crypto assets range from several hours

to six months.

During times of instability in the cryptocurrency markets, the Company may not be able to sell its crypto assets at prices

reflecting their perceived value or at all, which could result in substantial losses given the historical volatility of cryptocurrency

As a result, our crypto assets may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

Used in Operating Activities

used in operating activities was approximately $3,530,000 for Fiscal 2024, compared to approximately $3,562,000 for Fiscal 2023, reflecting

consistent operating cash outflows year-over-year.

Significant non-cash adjustments impacting operating cash flows included:

Positive Adjustments:

Approximately

$2,424,000 related to stock-based compensation, reflecting the issuance of equity-based awards to employees, including performance-based

equity awards.

Approximately

$2,766,000 related to Validator Payments made in ETH tokens as part of our Ethereum block-building operations.

Negative Adjustments:

Approximately

$7,684,000 in unrealized appreciation on crypto assets, driven by market value increases during Fiscal 2024.

Approximately

$4,074,000 in revenue earned in native crypto assets, which does not result in immediate cash inflows.

expect equity-based compensation to either increase or remain consistent with Fiscal 2024 levels, given its central role in our compensation

Non-cash adjustments related to revenue earned in crypto assets and Validator Payments are anticipated to grow as our Ethereum

block-building activities scale, though these factors are influenced by crypto market volatility.

Used in Investing Activities

used in investing activities was approximately $2,632,000 for Fiscal 2024, compared to cash provided by investing activities of $186,000

in Fiscal 2023.

The primary driver of the outflows in Fiscal 2024 was the purchase of crypto assets, primarily Ethereum, to support and

expand our blockchain infrastructure operations.

2023 investing activities included an atypically high volume of crypto asset sales, primarily from reallocating Ethereum rewards into

other productive crypto assets for staking.

Looking forward, we anticipate that purchasing activity will grow subject to additional financing

or remain consistent.

Provided by Financing Activities

provided by financing activities was approximately $6,682,000 for Fiscal 2024 compared to approximately $2,688,000 for Fiscal 2023.

cash inflows from financing activities in Fiscal 2024 and Fiscal 2023 were entirely from proceeds of Common Stock sold pursuant to the

ATM Agreement.

Company anticipates continuing to raise proceeds through Common Stock sales under the ATM Agreement to fund operational needs.

financing activities will remain aligned with our strategic priorities, including the scaling of block-building operations and ongoing

blockchain infrastructure development.

Balance Sheet Transactions

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Value Measurement

Company’s fair value measurement for its crypto assets is guided by Financial Accounting Standards Board (“FASB”) Accounting

Standards Codification (“ASC”) 820 - Fair Value Measurement .

According to ASC 820, fair value is defined as the price

that would be received for an asset in a current sale, assuming an orderly transaction between market participants on the measurement

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.

In this context, market participants are considered to be independent, knowledgeable, and willing and able

has been identified as the principal market for the Company’s crypto assets, serving as the Company’s primary cryptocurrency

exchange for both purchases and sales.

This determination is based on a comprehensive evaluation process that considers various factors,

including regulatory compliance, trading activity, and price stability.

The Company places significant trust in Kraken’s well-established

reliability and robust capabilities.

determine the fair value of its crypto assets, the Company relies primarily on coinmarketcap.com (“CoinMarketCap”) as the

principal pricing source.

The selection of CoinMarketCap is the result of thorough due diligence, which identified it as the most reliable

source for consistently obtaining timely and accurate crypto asset price data, covering all the crypto assets held by the Company.

real-time pricing from CoinMarketCap is notably aligned with the bid/ask quotes observed on the Company’s primary exchange and

principal market, Kraken.

Kraken is designated as the primary exchange, the Company maintains the flexibility to engage in 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.

determination of Kraken as the principal market reflects the Company’s commitment to making informed decisions based on regulatory

compliance, trading activity, and price stability and achieving the most accurate representation of fair value for its crypto assets.

The Company regularly reviews and assesses its choice of principal market to ensure it aligns with its objectives and the evolving landscape

of the cryptocurrency market.

Company 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

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.

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.

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.

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.

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.

for Crypto Assets

cost basis of the Company’s crypto assets is initially recorded at their fair value using the U.S.

dollar spot price of the related

crypto asset at 4:00 p.m., New York time, on the date of receipt (or “carrying value”).

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 .

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.

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.

assets are measured at their 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.

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.

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.

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.

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.

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.

January 1, 2023, the Company has elected to early adopt ASU No.

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The impacts of the change in accounting principle are discussed further

to the Company’s adoption of ASU No.

2023-08, the Company accounted for its crypto assets as indefinite-lived intangible

assets in accordance with ASC 350, Intangibles –Goodwill and Other .

An intangible asset with an indefinite useful life

is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating

that it is more likely than not that the indefinite-lived asset is impaired.

Impairment exists when the carrying amount exceeds its

In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it

is more likely than not that an impairment exists.

If it is determined that it is not more likely than not that an impairment

exists, a quantitative impairment test is not necessary.

If the Company concludes otherwise, it is required to perform a

quantitative impairment test.

To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset.

Subsequent reversal of impairment losses is not permitted.

to the Company’s adoption of ASU No.

2023-08, on a quarterly basis, crypto assets were measured at carrying value, net of any

impairment losses incurred since receipt.

The Company recorded impairment losses as the fair value fell below the carrying value of

the crypto assets at any time during the period, as determined using the lowest intraday U.S.

dollar spot price of the related

crypto asset subsequent to its acquisition.

The crypto assets could only be marked down when impaired and not marked up when their

value increases.

Impairment losses could not be recovered for any subsequent increase in fair value until the sale or disposal of

Such impairment in the value of crypto assets was recorded as a component of costs and expenses in our statements of

The Company recorded impairment losses of approximately $0 and $13,349,000 related to crypto assets during the years

ended December 31, 2023 and 2022, respectively.

gain (loss) on sale of crypto assets are included in other income (expense) in the statements of operations.

The Company recorded realized

gains (losses) on crypto assets of approximately ($604,000) and $507,000 during the years ended December 31, 2023 and 2022, respectively.

in Note 3 - Changes in Accounting Principle .

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 $766,000 and $604,000

during the years ended December 31, 2024 and 2023, respectively.

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:

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:

Identify the contract with the customer

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The Company generates revenue through 1) staking rewards

generated from its blockchain infrastructure operations.

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 consolidated statements of operations.

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 fair value of the crypto asset award received is determined using the U.S.

price of the related crypto asset at 4:00 p.m., New York time, on the date of receipt.

Infrastructure

Infrastructure (NodeOps)

Company engages in network-based smart contracts by running its own crypto asset validator nodes as well as by staking (or “delegating”)

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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

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.

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.

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.

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

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.

provision of validating blockchain transactions is an output of the Company’s ordinary activities.

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At that point, revenue is recognized.

Company’s cost of revenue 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 allocated employee

salaries dedicated to node maintenance and support.

Additionally, the cost of revenue encompasses fees, including equity compensation

stock-based fees paid to third parties for their assistance in software maintenance and node operations.

These costs directly related to production of revenues are collectively summarized as “Validator expenses” in the

statements of operations.

Block Building (Builder+)

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.

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.

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 the 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.

Validator Payment represents a direct and fixed pre-determined cost.

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.

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

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.

costs directly related to the production of revenues are collectively termed ‘Blockchain infrastructure expenses’ in the

consolidated statements of operations.

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.

718 addresses all forms of share-based payment awards including shares issued under employee stock purchase plans and stock incentive

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.

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

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.

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.

Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating

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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.

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

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.

Term – The Company’s expected term represents the weighted-average period that the Company’s stock options are expected

to be outstanding.

treasury zero-coupon yield curve in effect at the time of

grant for the expected term of the option.

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

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.

uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise

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.

Stock Units (RSUs)

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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.

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.

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.

Term – The Company’s expected term represents the weighted-average period that the Company’s RSUs are expected to be

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.

treasury zero-coupon yield curve in effect at the time of

grant for the expected term of the RSUs.

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

If the market-based criteria are not achieved within the five-year period from the grant date, the RSUs will not vest and shall

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.

January 1, 2017, the Company elected to account for forfeited awards as they occur, as permitted by ASU 2016-09.

Ultimately, the actual

expenses recognized over the vesting period will be for those shares that vested.

Prior to making this election, the Company estimated

a forfeiture rate for awards at 0%, as the Company did not have a significant history of forfeitures.

ACCOUNTING PRONOUNCEMENTS

Note 3 to the financial statements for a discussion of recent accounting standards and pronouncements.

COVID-19 pandemic has created significant national and global economic disruptions, which may adversely affect our business.

based on our current assessment, we do not expect any material impact on our long-term development, our operations, or our liquidity

due to the worldwide spread of COVID-19.

We are actively monitoring this situation and the possible effects on its financial condition,

liquidity, operations, suppliers, and the industry.

addition to the impacts of COVID-19, we have experienced, and are experiencing, the impact of domestic and global inflationary pressures

largely outside of our control.

This inflationary pressure impacts our cost structure, leading to operational adjustments, and increasing

the cost of retaining talent and certain professional costs, despite our continued focus on controlling our costs where possible.

is unable to accurately predict when, or if, these national and global inflationary pressures will subside, or their long-term impacts

on our business and results of operations.

Note 3 - Changes in Accounting Principle to the financial statements for a discussion of recent accounting standards and pronouncements.

have experienced, and are experiencing, the impact of domestic and global inflationary pressures largely outside of our control.

inflationary pressure impacts our cost structure, leading to operational adjustments, and increasing the cost of retaining talent and

certain professional costs, despite our continued focus on controlling our costs where possible.

Management is unable to accurately predict

when, or if, these national and global inflationary pressures will subside, or their long-term impacts on our business and results of

We are actively monitoring the situation and assessing potential mitigation strategies.

are numerous and varied risks, known and unknown, that may prevent us from achieving our goals.

If any of these risks actually occur,

our business, financial condition or results of operation may be materially adversely affected.

In such case, the trading price of our

Common Stock could decline and investors could lose all or part of their investment.

The risks described below are not the

only ones we face.

Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially

adversely affect our business.

If any of these risks actually occur, our business, financial condition or results of operations may be

materially adversely affected.

In such case, the trading price of our Common Stock could decline substantially and investors could lose

all or part of their investment.

business is subject to numerous risks and uncertainties that you should consider before investing in our common stock.

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is a summary of the principal risks we face:

have a limited operating history, particularly with respect to our blockchain infrastructure solutions business, StakeSeeker,

Builder+, ChainQ and staking-as-a-service operations.

have a limited operating history, particularly with respect to our blockchain infrastructure solutions business, Builder+ and ChainQ

have an evolving business model which we may be unable to develop, adapt or execute effectively, and we may be unable to manage our

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are highly dependent on our executive officers, particularly Charles Allen, our Chairman and Chief Executive Officer, Michal Handerhan,

our Chief Operating Officer, Michael Prevoznik, our Chief Financial Officer, and Manish Paranjape, our Chief Technology Officer,

and the loss of the services of any of these individuals could materially harm our business.

may be subject to regulatory actions, private causes of actions such as intellectual property infringement claims, and restrictions

and limited access to banking and financial services due to our operations in the cryptocurrency industry, and regulatory or other

our Chief Operating Officer, and Michael Prevoznik, our Chief Financial Officer, and the loss of the services of any of these individuals

could materially harm our business.

may be subject to regulatory actions, private causes of actions due to our operations in the cryptocurrency industry, and regulatory or other

adverse developments in the cryptocurrency industry could otherwise adversely affect us.

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in engaging in activities involving financial instruments owned by third-party users, notwithstanding the non-custodial nature of

our platform or other features management believes to constitute meaningful distinctions for regulatory, compliance and other purposes.

our operations management believes to constitute meaningful distinctions for regulatory, compliance and other purposes.

particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty,

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after the staking process, during which the price or value of the crypto assets may depreciate.

are reliant on a single service provider for cloud computing infrastructure deployed in our blockchain infrastructure business,

and are therefore exposed to the risks which may arise from potential adverse developments that may be caused or experienced by such

service provider.

are subject to various other risks and uncertainties relating to our StaaS and other elements of our business, including potential

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launched or are still under development.

critical accounting policies may prove to be incorrect including due to our adoption of new accounting standards applicable to crypto

assets in 2023, we may need to implement additional finance and accounting systems, procedures and controls, and we face challenges

inherent in operating a crypto assets business which is subject to evolving accounting treatment for which there is limited precedent.

stock price has in the past and may in the future be subject to significant volatility due to a variety of factors, many of which

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Related to Our Company in General

have a limited operating history, particularly with respect to our blockchain infrastructure operations, including certain features and

service offerings which recently commenced and our platform and staking-as-a-service business model, and we have a history of operating

losses, and expect to incur significant additional operating losses.

have a limited operating history, and only recently commenced our blockchain infrastructure operations in 2021.

Further, we lack an operating

history with respect to our crypto asset analytics and staking-as-a-service platform’s functions and operations.

In addition, the

PoS blockchain networks on which our operations are centered are a relatively new and evolving means of validating crypto asset transactions.

In addition to the relative novelty of our business and industry generally, we also launched Builder+ which is designed to enhance validator

earnings by deploying algorithms to identify and access optimized blockers to increase reward fees in February 2024.

We are in the process

of developing ChainQ, an AI-powered blockchain data and analytics platform with the goal of launching later in 2024.

The performance

and results of these developments, and their impact on our business and financial condition, has yet to be determined.

Therefore, there

is limited historical financial information upon which to base an evaluation of our performance.

Our prospects must be considered in

light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations

in general, and in the cryptocurrency industry in particular with itself remains a relatively new space imbued with risk and uncertainty.

While we generated a net gain of $7.8 million for the year ended December 31, 2023, we generated a net loss of $15.9 million for the

year ended December 31, 2022.

We expect to incur additional net losses over the next several years as we seek to expand operations.

amount of future losses and when, if ever, we will achieve profitability are uncertain.

If we are unsuccessful at executing our business

plan, our business, prospects, and results of operations may be materially adversely affected.

We have a history of operating losses and expect

to incur additional operating losses as we scale our business.

BTCS has operated as a publicly

traded company for over a decade and commenced its blockchain infrastructure operations in 2021.

While the Company continues to expand

its business model, the blockchain and cryptocurrency industries remain highly dynamic and subject to rapid technological, regulatory,

and market changes.

As a result, there is uncertainty regarding the future profitability of our operations.

We incurred a net loss of $1.3

million for the year ended December 31, 2024, and we expect to incur additional losses in the near term as we invest in scaling our Ethereum

block-building operations under Builder+ and expanding NodeOps validator operations.

The amount and timing of future losses, and whether

we will ultimately achieve sustained profitability, remain uncertain.

Our ability to achieve profitability depends on various factors, including

successfully scaling our Builder+ operations, improving margins, securing greater order flow, and managing infrastructure costs efficiently.

If we fail to execute our business plan effectively or encounter unexpected challenges in the regulatory, competitive, or technological

landscape, our business, financial condition, and results of operations could be materially adversely affected.

have an evolving business model which we may be unable to develop, adapt or execute effectively.

and to the extent crypto assets and blockchain technologies become more widely available, we expect the services and products associated

with them to evolve.

In 2017, the SEC issued a DAO Report that promoters that use initial coin offerings or token sales to raise capital

may be engaged in the offer and sale of securities in violation of the Securities Act and the Securities Exchange Act of 1934 (the “Exchange

The SEC has also brought enforcement actions with respect to crypto assets and related activities, including custodial staking-as-a-service

models, and the SEC and courts have issued further orders and guidance as the crypto asset industry continues to develop and evolve,

as more particularly described later in these Risk Factors.

These or future developments may force or cause us to potentially change

our future business in order to comply fully with the federal securities laws as well as applicable state securities laws.

to stay current with the industry, our business model may need to evolve in the future as well.

From time to time we may modify aspects

of our business model relating to our product mix and service offerings.

For example, a main component of our current business objective

is developing a comprehensive crypto asset analytics and staking-as-a-service platform which enables users to perform or utilize a variety

of functions related to crypto assets, such as portfolio monitoring, and risk assessment all in one place in the hopes of attracting,

maintaining and growing a customer base in the long term.

However, our investments into and efforts with respect to this goal may not

come to fruition, including due to adverse developments in regulatory, technological, competitive or other aspects that are beyond our

As the crypto industry and technology surrounding it continues to develop, new market entrants offering the same, similar or

alternative products and services to ours could arise, challenging our business model and market share.

For example, disruptive technologies

such as generative artificial intelligence (AI) may fundamentally alter the use of crypto assets and related infrastructure in unpredictable

crypto assets and blockchain technologies continue to develop and achieve wider adoption, we expect the associated services and products

to evolve rapidly and potentially in unpredictable ways.

The SEC has brought enforcement actions with respect to crypto assets and related

activities, including custodial staking-as-a-service models, and the SEC and courts have issued further orders and guidance as the crypto

asset industry continues to develop and evolve, as more particularly described later in these Risk Factors.

These or future developments

may force or cause us to potentially change our future business in order to comply fully with the federal securities laws as well as

applicable state securities laws.

As a result, to stay current with the industry, our business model may need to evolve in the future

From time to time we may modify aspects of our business model relating to our product mix and service offerings.

Our goals related

to investments into development efforts may not come to fruition, including due to adverse developments in regulatory, technological,

competitive or other aspects that are beyond our control.

As the crypto industry and technology surrounding it continues to develop,

new market entrants offering the same, similar or alternative products and services to ours could arise, challenging our business model

and market share.

For example, disruptive technologies such as generative artificial intelligence (AI) may fundamentally alter the use

of crypto assets and related infrastructure in unpredictable ways.

of the foregoing realities and uncertainties surrounding our business and industry, we may invest substantial resources towards developing

additional platform features or new offerings such as Builder+ that ultimately fail to achieve the goals or benefits sought, or need

to be suspended, due to competitive, regulatory, technological or other conditions or developments beyond our control.

Further, any success

we have achieved or may in the future achieve towards our goal could be stifled by these forces, particularly if we are unable to adequately

or quickly adapt to them, which could render some or all of our offerings obsolete.

We cannot offer any assurance that our current business

plan or any other modifications or undertakings with respect thereto will be successful or will not result in harm to the business.

addition, we may not be able to manage our growth effectively, which could damage our reputation, limit our growth and negatively affect

our operating results.

If we are unable to effectively develop, execute and adjust our business plan, or successfully manage our growth,

you could lose some or all of your investment.

additional ChainQ platform features, or new offerings such as Builder+, that ultimately fail to achieve the goals or benefits sought,

or need to be suspended, due to competitive, regulatory, technological or other conditions or developments beyond our control.

any success we have achieved or may in the future achieve towards our goal could be stifled by these forces, particularly if we are unable

to adequately or quickly adapt to them, which could render some or all of our offerings obsolete.

We cannot offer any assurance that

our current business plan or any other modifications or undertakings with respect thereto will be successful or will not result in harm

to the business.

In addition, we may not be able to manage our growth effectively, which could damage our reputation, limit our growth

and negatively affect our operating results.

If we are unable to effectively develop, execute and adjust our business plan, or successfully

manage our growth, you could lose some or all of your investment.

loss of our executive officers could have a material adverse effect on us.

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In particular, we have relied and will continue to rely on Charles Allen, our Chairman and Chief Executive Officer,

Michal Handerhan, our Chief Operating Officer, Michael Prevoznik, our Chief Financial Officer, and Manish Paranjape, our Chief Technology

Officer, to continue and grow our operations and execute our business plan.

Our reputation among and our relationships with key cryptocurrency

industry leaders are the direct result of a significant investment of time and effort by these individuals to build our credibility in

a highly specialized industry.

The loss of services of any of our executive officers could diminish our business and growth opportunities

and our relationships with key leaders in the crypto asset industry and could have a material adverse effect on us.

and financial institutions may not provide banking services, or may cut off services, to businesses that engage in cryptocurrency-related

activities, and turmoil among financial institutions arising from or relating to crypto assets or in general can materially adversely

affect us and our industry.

number of companies that engage in crypto asset and/or other cryptocurrency-related activities have been unable to find banks or financial

institutions that are willing to provide them with bank accounts and other services.

Similarly, a number of companies and individuals

or businesses associated with cryptocurrencies may have had and may continue to have their existing bank accounts closed or services

discontinued with financial institutions in response to government action, including in China where regulatory response to cryptocurrencies

has been to exclude their use for ordinary consumer transactions within China.

Government action in the U.S.

involving crypto assets

and related activities may cause this trend to expand in the U.S.

We also may be unable to obtain or maintain these services for our

Many businesses that provide cryptocurrency-related activities may continue to have difficulties in finding banks and financial

institutions willing to provide them services which may decrease the usefulness of cryptocurrencies as a payment system and harm public

perception of cryptocurrencies, and could decrease their usefulness.

an example of adverse events affecting the crypto landscape, in November 2023 Binance, the world’s largest crypto exchange, undertook

to exit the U.S.

and paid a $4.4 billion fine to settle charges by the U.S.

Department of Justice, Treasury, and the Commodity Futures

Trading Commission that the exchange violated sanctions and facilitated human and narcotics trafficking.

Further, in March 2023 two large

financial institutions in the U.S., Silicon Valley Bank and Signature Bank, which both serviced customers involved with crypto assets,

collapsed as continued negative economic prospects and failures to obtain payment from borrowers, together with a large number of withdrawals,

caused these banks to encounter substantial financial difficulty leading up to their failures.

In response to these events, the Federal

Deposit Insurance Corporation (“FDIC”) transferred all the deposits, both insured and uninsured, of these banks to corresponding

“bridge banks” operated by the FDIC as it markets the institution to potential bidders.

The impact of these developments

on the Company and on the crypto asset industry and the economy in general, and whether and to what extent they signal a continuing trend

impacting the industry and potentially our business, remain unclear.

usefulness of cryptocurrencies as a payment system and the public perception of cryptocurrencies could be damaged if crypto exchanges

and other industry participants exit the U.S.

markets, and if banks or financial institutions were to close the accounts of businesses

engaging in cryptocurrency-related activities, which contingencies may become more likely in the future if and to the extent crypto assets

are considered a significant factor in the financial crises or criminal activity such as those described above.

This could occur as a

result of compliance risk, cost, government regulation, or public pressure.

The risk applies to securities firms, clearance and settlement

firms, national stock and derivatives on commodities exchanges, the over-the-counter market, and the Depository Trust Company, which,

if any of such entities adopts or implements similar policies, rules or regulations, could negatively affect our relationships with financial

institutions and impede our ability to convert cryptocurrencies to fiat currencies.

Such factors could have a material adverse effect

on our ability to continue as a going concern or to pursue our strategy at all, which could have a material adverse effect on our business,

prospects, or operations and harm investors.

Michal Handerhan, our Chief Operating Officer, and Michael Prevoznik, our Chief Financial Officer, to continue and grow our operations

and execute our business plan.

Our reputation among and our relationships with key cryptocurrency industry leaders are the direct result

of a significant investment of time and effort by these individuals to build our credibility in a highly specialized industry.

of services of any of our executive officers could materially and adversely affect our business and growth opportunities, including by damaging our relationships with key leaders

in the crypto asset industry, disrupting our operations, and impairing our ability to execute our business strategy.

Financial institutions may refuse to provide

banking services to businesses engaged in cryptocurrency-related activities, and broader financial sector instability could materially

and adversely affect us and our industry.

Companies operating in the cryptocurrency

sector, including blockchain infrastructure providers like BTCS, have historically faced challenges in securing and maintaining banking

relationships.

Some financial institutions remain hesitant to provide services to businesses engaged in crypto asset activities due to

regulatory uncertainty, compliance concerns, and perceived risks associated with digital assets.

This reluctance could limit our

ability to access essential banking services, process transactions, or efficiently convert crypto assets to fiat currency.

institutions restrict or discontinue banking services for crypto-related businesses, it could disrupt our operations and negatively impact

our liquidity and financial position.

Additionally, broader financial

instability, market volatility, or changes in banking regulations that restrict financial institutions from servicing cryptocurrency-related

businesses could have adverse consequences for BTCS and the broader industry.

Increased scrutiny from regulators, de-risking by

banks, or policy shifts that limit financial sector engagement with digital assets could create barriers to capital access, slow industry

growth, and harm public perception of cryptocurrencies as a legitimate financial system.

If we are unable to obtain or

maintain adequate banking relationships, we may experience delays in financial transactions, incur increased costs, or face operational

inefficiencies that could materially and adversely affect our business, financial condition, and results of operations.

Related to Crypto Assets

Risks Related to Crypto Assets

Volatility and Adoption Risks

prices of crypto assets are highly volatile, and significant declines in their value may adversely affect our business and financial

value of crypto assets is subject to extreme volatility due to various factors, including but not limited to:

(i) market demand,

(ii) regulatory developments, (iii) macroeconomic trends and monetary policies, and (iv) technological advancements and security vulnerabilities, and (v) market manipulation risks.

price declines in crypto assets can adversely affect our ability to generate revenue from staking and other blockchain

infrastructure operations, as these activities are directly dependent on the valuations of the underlying assets.

Additionally,

prolonged periods of price volatility or declines may reduce market confidence, decrease participation in staking and validator

services, and impact our financial condition.

If the value of the crypto assets we stake or own decreases significantly, it could

materially and adversely affect our business, results of operations, and prospects.

price of crypto assets may be affected by the sale of such crypto assets by other vehicles investing in crypto assets or tracking cryptocurrency

global market for crypto assets is characterized by supply constraints that differ from those present in the markets for commodities

or other assets such as gold and silver.

The mathematical protocols under which certain cryptocurrencies are mined or minted permit the

creation of a limited, predetermined amount of currency, while others have no limit established on total supply.

To the extent that other

vehicles investing in crypto assets or tracking cryptocurrency markets form and come to represent a significant proportion of the demand

for crypto assets, large redemptions of the securities of those vehicles and the subsequent sale of crypto assets by such vehicles could

negatively affect crypto asset prices and therefore affect the value of our crypto assets.

Such events could have a material adverse

effect on an investment in us.

is a lack of liquid markets, and possible manipulation of blockchain/cryptocurrency-based crypto assets.

assets that are represented and trade on a ledger-based platform may not necessarily benefit from viable trading markets.

Stock exchanges

have listing requirements and vet issuers;

requiring them to be subjected to rigorous listing standards and rules, and monitor investors

transacting on such platform for fraud and other improprieties.

These conditions may not necessarily be replicated on a distributed ledger

platform, depending on the platform’s controls and other policies.

The laxer a distributed ledger platform is about vetting issuers

of cryptocurrency assets or users that transact on the platform, the higher the potential risk for fraud or the manipulation of the ledger

due to a control event.

These factors may decrease liquidity or volume or may otherwise increase volatility or other assets trading on

a ledger-based system, which may adversely affect us.

Such circumstances could adversely affect an investment in us.

or economic crises may motivate large-scale sales of crypto assets, which could result in a reduction in crypto asset values and adversely

affect an investment in us.

or economic crises may motivate large-scale sales of crypto assets, which could rapidly decrease the price of crypto assets.

include recessions, rising inflation, tariffs, social, political and economic risks, conflicts, acts of war and sanctions and other restrictive

actions by the United States and/or other countries.

For example, market analysts have indicated that in some cases, such as during large

scale adverse economic events, trading and market prices of cryptocurrencies such as Bitcoin and Ethereum have correlated to some extent

with the movement of equity markets, regardless of the stock or asset class.

As an emerging asset class with limited acceptance as a

payment system or commodity, global crises and general economic downturn may discourage investment in crypto assets as investors focus

their investment on less volatile asset classes as a means of hedging their investment risk.

an alternative to fiat currencies that are backed by central governments, crypto assets such and Ethereum, which is relatively new, is

subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and

services, and it is unclear how such supply and demand will be impacted by geopolitical events.

Nevertheless, political or economic crises

may motivate large-scale acquisitions or sales of crypto assets either globally or locally.

Large-scale sales of crypto assets would

result in a reduction in crypto asset values and could adversely affect an investment in us.

and Legal Risks

changes or actions may alter the nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects

our business, prospects, or operations.

cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies;

certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while some jurisdictions,

such as the United States, subject the mining, ownership and exchange of cryptocurrencies to extensive, and in some cases overlapping,

unclear and evolving regulatory requirements.

January 2025, U.S.

President Donald Trump issued an executive order forming a presidential working group to establish a clear regulatory

framework for digital assets, and leaders in both houses of the U.S.

Congress have announced a bicameral working group with the objective

of passing legislation to provide regulatory clarity for the industry.

Committees in both houses of the U.S.

Congress have held hearings

to ensure fair access to financial services, including for companies operating in the digital asset space.

Additionally, in early March

2025, President Trump announced the creation of a U.S.

strategic crypto reserve, which will include Bitcoin Ethereum, Solana,

XRP, and Cardano.

This marks a shift from his previous stance of establishing a Bitcoin-only reserve.

these ongoing regulatory developments appear to be positive, and we anticipate greater regulatory certainty in the future, given the

difficulty of predicting the outcomes of ongoing and future regulatory actions and legislative developments, it is possible that future

developments could have a material adverse effect on our business, prospects, or operations.

particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty,

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be a complex matter.

Notably, the SEC has identified certain crypto assets as securities in the context of legal actions involving industry

participants, such as Ripple, Coinbase, and Binance.

The Coinbase action involved alleged securities law violations for its custodial

staking-as-a-service activities, which were followed by actions relating to their staking-as-a-service activities by numerous state regulators

The potential for and resolution of ongoing enforcement actions and legal proceedings are still pending, potentially leaving

room for further clarification to be sought regarding the regulatory treatment of specific crypto assets.

based upon decided federal court cases, it appears that the federal courts of appeals, and possibly the U.S.

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settle unresolved legal issues with respect to the identification of certain crypto assets as securities.

regard to the 2023 cases, in separate SEC complaints, the SEC has alleged several crypto assets we hold, specifically Cardano, Tezos,

Solana, Cosmos, Polygon, Axie Infinity, and NEAR Protocol are securities.

The Company has conducted a detailed legal analysis which has

led us to determine that the identification by the SEC of certain crypto assets held by us as securities should not impact our business,

financial condition, and results of operations.

However, if our conclusions or any part thereof turn out to be incorrect, or new adverse

regulatory developments occur, we could be adversely impacted and/or be forced to modify or cease certain aspects of our current and

planned operations and business.

separate SEC complaints, the SEC has alleged several crypto assets we hold, specifically Cardano, Tezos, Solana, Cosmos, Polygon,

Axie Infinity, and NEAR Protocol are securities.

Based on our current legal analysis, while the SEC’s identification of

certain crypto assets held by us as securities could have a material adverse impact on our business, this conclusion is subject to

significant uncertainty given the rapidly evolving regulatory landscape, financial condition, and results of operations.

our conclusions or any part thereof turn out to be incorrect, or new adverse regulatory developments occur, we could be adversely

impacted and/or be forced to modify or cease certain aspects of our current and planned operations and business.

February 2023, the SEC charged Kraken with failing to register the offer and sale of its staking-as-a-service program, whereby investors

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securities laws and regulations against our operations.

in March 2023 the New York Attorney General became the first U.S.

regulator to claim in court that Ethereum, one of the major crypto

assets which we hold and stake, is a security in its lawsuit against KuCoin, a crypto asset exchange.

If we become subject to regulatory

scrutiny or enforcement actions by securities regulators, it could result in expensive litigation and penalties and cessation of the

allegedly noncompliant operations, which would materially adversely harm us, including due to our recent shift of focus to our non-custodial

staking-as-a-service business and the costs and efforts deployed towards its development.

These or additional developments that may arise

underscore the risks in our business, particularly its reliance on the use of crypto assets and staking of users’ crypto asset

If we become subject to regulatory scrutiny or enforcement actions by securities

regulators, it could result in expensive litigation and penalties and cessation of the allegedly noncompliant operations, which would

materially adversely harm us, including due to our recent shift of focus to our non-custodial staking-as-a-service business and the costs

and efforts deployed towards its development.

These or additional developments that may arise underscore the risks in our business, particularly

its reliance on the use of crypto assets and staking of users’ crypto asset holdings.

certain crypto assets may be deemed to be a “security” under the laws of some jurisdictions but not others.

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and avoid the regulatory scrutiny and adverse consequences that could result.

Further, because of how recent these government actions

are and the high probability that further action is forthcoming, we anticipate higher compliance costs and diversion of management’s

limited time and attention towards these events until a more definitive regulatory regime is established to govern the crypto asset industry

in which we operate.

we do not currently, nor do we plan to, offer, sell, trade, and clear crypto assets or take custody of crypto assets as part of any potential

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This would have a material adverse effect on an investment in us.

hold and plan to acquire a portfolio of crypto assets including Ethereum and other crypto assets.

There is an increased regulatory examination

of crypto assets and Digital Securities.

hold and plan to acquire a portfolio of crypto assets including Ethereum and other crypto assets, each of which may be subject to different

and evolving regulatory treatment that could materially impact our ability to continue holding or transacting in such assets.

an increased regulatory examination of crypto assets and Digital Securities.

This has led to regulatory and enforcement activities.

As described elsewhere in these Risk

Factors, the SEC and certain state regulators have in recent years begun to take a more definitive and aggressive stance indicating that

crypto assets and related activities, including custodial staking-based services, entail the offer and sale of securities subject to

applicable securities laws and regulations.

We cannot be certain as to how future regulatory developments will impact the treatment of

Ethereum and other crypto assets, or our operations as they relate to such crypto assets or in general, under the law.

described elsewhere in these Risk Factors, the SEC and certain state regulators have in recent years begun to take a more definitive

and aggressive stance indicating that crypto assets and related activities, including custodial staking-based services, entail the offer

and sale of securities subject to applicable securities laws and regulations.

We cannot be certain as to how future regulatory developments

will impact the treatment of Ethereum and other crypto assets, or our operations as they relate to such crypto assets or in general,

under the law.

the 1940 Act, a company may be deemed an investment company under if the value of its investment securities is more than 40% of its total

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For example, California defines the term “investment contract” more strictly than the SEC.

In addition, the New York

Attorney General has taken the position that Ethereum is a security under New York law, and if this position is upheld it could significantly

impact Ethereum and other crypto assets, as notwithstanding the decentralized nature of crypto assets, a substantially large proportion

of capital markets activities and the U.S.

population are located in New York.

legislation, SEC rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact

the manner in which Bitcoin, Ethereum, and other crypto assets are treated for classification and clearing purposes.

July 25, 2017 DAO Report expressed its view that crypto assets may be securities depending on the facts and circumstances, and recent

developments have confirmed that the SEC presently considers many if not most crypto assets to be securities.

the manner in which Ethereum and other crypto assets owned by us are treated for classification and clearing purposes.

a crypto asset we hold were later determined to be a Digital Security, we could inadvertently become an investment company, as defined

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order to limit our acquisition of Digital Securities to stay within the 40% threshold, we will examine the manner in which a crypto asset

was initially marketed to determine if it may be deemed a Digital Security and subject to federal and state securities laws.

we conclude that a particular crypto asset is not a security under the 1940 Act, certain states take a stricter view which means the

crypto asset may have violated applicable state securities laws.

was initially marketed, the economic reality of the instrument, and apply the Howey test factors to determine if it may be deemed a Digital

Security subject to federal and state securities laws.

Even if we conclude that a particular crypto asset is not a security under the

1940 Act, certain states take a stricter view which means the crypto asset may have violated applicable state securities laws.

the total value of securities which we hold exceed more than 40% of our assets (exclusive of cash) SEC Rule 3a-2 under the 1940 Act allows

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Such additional registrations:

i) would result in extraordinary, non-recurring expenses, ii) is time consuming and restrictive, iii) would require a restructuring of

our operations, and iv) we would be very constrained in the kind of business we could do as a registered investment company, thereby

materially and adversely impacting an investment in us.

Further, if our examination of a crypto asset is incorrect, we may incur regulatory

penalties and private investor liabilities since Section 5 of the Securities Act is a strict liability statute much like selling spoiled

milk and state securities laws generally impose liability for negligence for misrepresentations.

i) would result in extraordinary, non-recurring expenses, ii) would be time consuming and restrictive, iii) would require a restructuring

of our operations, and iv) would result in significant constraints in the kind of business we could do as a registered investment company,

thereby materially and adversely impacting an investment in us.

Further, if our examination of a crypto asset is incorrect, we may incur

regulatory penalties and private investor liabilities since Section 5 of the Securities Act imposes strict liability for unregistered

securities offerings, regardless of intent, and state securities laws generally impose liability for negligent misrepresentations.

order to comply with the 1940 Act, we anticipate having increased management time and legal expenses in order to analyze which crypto

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have a materially adverse impact to conduct our operations.

If the SEC concludes that our non-custodial

staking business involves the offer and sale of a security in violation of Section 5 of the Securities Act of 1933 and the courts conclude

the SEC is correct, we will be required to cease our staking as a service business and seek another business opportunity and may be subject

to monetary and other penalties.

the SEC concludes that NodeOps our non-custodial staking business involves the offer and sale of a security in violation of Section 5

of the Securities Act of 1933 and the courts conclude the SEC is correct, we will be required to cease our staking as a service business

and seek another business opportunity and may be subject to monetary and other penalties.

SEC has been successful in litigating against certain companies and individuals who have offered and sold various cryptocurrencies in

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of any settlement.

We have no plans with regard to another business opportunity and our shareholders may not have any opportunity to

vote on any new business, unless our common stock remains listed on the Nasdaq Capital Market and its rules require it.

of the recent volatility in the cryptocurrency market and other adverse developments and publicity surrounding the industry, our business

plans may not be successful and our business and financial condition may be adversely affected.

business is focused on the cryptocurrency industry, particularly blockchain infrastructure and staking-as-a-service.

We also hold and

stake a number of crypto assets to generate revenue from the PoS systems on which they operate.

The crypto asset industry is characterized

by a high level of volatility, and the significant decline in the prices of most popular crypto assets such as Bitcoin and Ethereum from

their all-time highs in 2021 has cast doubt on the future of crypto asset-focused businesses such as ours, despite the partial recovery

of those prices as of February 2024.

This trend was further impacted by the recent controversy and failure surrounding FTX, a crypto

asset exchange that collapsed after its Chief Executive Officer was accused of fraud and misappropriation of corporate funds in a manner

that has been compared to both Enron and Madoff.

Since then certain other crypto asset-focused companies have filed for bankruptcy, in

March 2023 three major U.S.

banks with involvement in crypto assets collapsed, and in November 2023 Binance settled charges alleging

violation of sanctions and facilitating human and narcotics trafficking which settlement included its forced exit from the United States.

These developments appear to reflect a broader regulatory landscape, wherein regulators have begun reviewing crypto asset-focused companies

and their operations with greater scrutiny, and have brought enforcement actions seeking to restrict or cease such activities.

we believe the non-custodial staking model we are pursuing for our platform presents distinctions from custodial methods of holding and

controlling crypto assets such as those that were employed by defendants in past regulatory actions such as FTX and Kraken, holders of

crypto assets, regulators, and other stakeholders may fail to appreciate this distinction or to consider it sufficient to utilize our

services or invest in our business.

If we are unable to separate ourselves from the recent adverse developments in the crypto asset space,

or otherwise develop and execute on our business plan and blockchain infrastructure in a manner that enables us to establish and maintain

material revenue sources, our business and financial condition could be materially adversely affected.

Further, a perceived lack of stability

in the crypto asset and the closure or suspension shutdown of crypto asset exchanges and networks due to business failure, hackers or

malware, government-mandated regulation, or fraud, may reduce confidence in crypto asset networks and result in greater volatility in

crypto asset values and on our results of operations.

Further, our focus on crypto assets, and the above-described past and/or any future

adverse developments with respect to our operations or industry, could result in declines or volatility in our stock price, difficulty

or inability to obtain adequate financing as needed, on favorable terms or at all, reduction in consumer demand for our platform and

services, the risk of increased losses or asset impairments, and the potential for legal proceedings and reputational harm which could

arise from any of the foregoing.

Such external developments have the potential to affect us even if we believe our financial condition,

operations and infrastructure our secure.

These potential consequences could materially adversely affect an investment in us.

and recent events have increased the likelihood that U.S.

federal and state legislatures and regulatory agencies will enact laws and

regulations to regulate crypto assets and crypto asset intermediaries, such as crypto exchanges and custodians.

with the collapse of TerraUSD and Luna in 2022 and the bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, Celsius

Network, Voyager Digital, Genesis Global and BlockFi, as well as alleged violations of law brought against other industry participants,

have resulted in calls for heightened scrutiny and regulation of the crypto asset industry, with a specific focus on crypto asset exchanges,

platforms, and custodians.

Federal and state legislatures and regulatory agencies are expected to introduce and enact new laws and regulations

to regulate crypto asset intermediaries, such as crypto asset exchanges and custodians.

The March 2023 collapses of Silicon Valley Bank,

Silvergate Bank, and Signature Bank are believed to have also contributed to these trends.

regulatory regime – namely the Federal

Reserve Board, U.S.

Congress and certain U.S.

agencies (e.g., the SEC, the CFTC, FinCEN, the Office of the Comptroller of the Currency,

the Federal Deposit Insurance Corporation, and the Federal Bureau of Investigation) as well as the White House have issued reports and

releases concerning crypto assets, including Bitcoin and crypto asset markets, and have formed coalitions aimed at addressing the perceived

threats posed by crypto assets and activities involving them.

However, the extent and content of any forthcoming laws, regulations and

government actions are not yet ascertainable with certainty, and it may not be ascertainable in the near future.

A divided Congress makes

any prediction difficult.

Further the SEC seems to have changed tactics as it has sued multiple crypto asset companies for selling, operating

exchanges, and engaging in other prohibited activities involving unregistered securities.

We cannot predict how these and other related

events will affect us or the crypto asset business generally.

We cannot assure you that future legislation or regulation will not have

an adverse effect upon us.

It is possible that new laws and increased regulation and regulatory scrutiny may require the Company to comply

with certain regulatory regimes, which could result in new costs for the Company.

The Company may have to devote increased time and attention

to regulatory matters, which could increase costs to the Company.

New laws, regulations, and regulatory actions could significantly restrict

or eliminate the market for, or uses of, crypto assets including Ethereum, which could have a negative effect on the value of Ethereum,

which in turn would have a negative effect on the value of the Company’s shares.

our blockchain infrastructure business is dependent on the value of the crypto assets we stake to obtain blockchain rewards, and because

those rewards are paid out in the form of the blockchain’s native crypto assets, low market values and/or continued or long-term

declines in crypto asset prices will materially and adversely affect our results of operations.

discussed above, the cryptocurrency market experienced a critical decline in 2022, although prices of some major crypto assets including

Bitcoin and Ethereum have partially recovered in 2023 and thus far in 2024.

Prospects of a full recovery declined when the FTX controversy

arose and was subsequently followed by other adverse developments involving crypto-focused companies.

Our reliance on staking, which

is expected to increase as we continue to seek to expand our non-custodial staking-as-a-service business, means that if the market values

of the crypto assets we stake continues to decline or remain at the relatively low levels they are currently, which appears possible

given the adverse developments and wide scale sales of and skepticism surrounding crypto assets that have resulted, the revenue we generate

from staking will diminish.

This is because the rewards for staking a given crypto asset are paid out in more of that same crypto asset.

Therefore, if the market price for the crypto asset declines while staking is ongoing, unless the price later recovers, the rewards we

receive may not cover the decline in value of the assets.

If this trend continues, our operating results and financial condition will

be materially adversely affected.

business faces significant scaling obstacles due to its dependence on crypto assets and related infrastructure.

assets on which our current and planned operations depend face significant scaling obstacles that can lead to high fees or slow transaction

settlement times, and attempts to increase the volume of transactions may not be effective.

Scaling of crypto assets is essential to

the widespread acceptance of crypto assets as a means of payment or other uses that stakeholders have in the past cited in demonstrating

interest in crypto assets.

Many crypto asset networks, including those with which we are or may become involved in our operations, face

significant scaling challenges.

For example, crypto assets are limited with respect to how many transactions can occur per second.

in the crypto asset ecosystem debate potential approaches to increasing the average number of transactions per second that a network

can handle and have implemented mechanisms or are researching ways to increase scale, such as increasing the allowable sizes of blocks,

and therefore the number of transactions per block, and sharding (a horizontal partition of data in a database or search engine), which

would not require every single transaction to be included in every single validator’s block.

However, there is no guarantee that

any of the mechanisms in place or being explored for increasing the scale of settlement of crypto asset transactions will be effective.

adoption of crypto assets as a means of payment or other uses does not occur on the schedule or scale anticipated or at all, the demand

for crypto assets may stagnate or decrease, which could adversely affect future prices of crypto assets we hold or otherwise rely upon

in our operations, and our results of operations and financial condition, which could have a material adverse effect on our business

or the market price for our securities.

interpretations require the regulation of Bitcoin, Ethereum, and other crypto assets under the CEA by the CFTC, we may be required to

To the extent that we decide to continue operations, the required registrations and regulatory

compliance steps may result in extraordinary, non-recurring expenses to us.

We may also decide to cease certain operations.

Any disruption

of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.

and future legislation, CFTC and other regulatory developments, including interpretations released by a regulatory authority, may impact

the manner in which Ethereum, and other crypto assets we own are treated for classification and clearing purposes.

In particular, derivatives

on these assets are not excluded from the definition of “commodity future” by the CFTC.

We cannot be certain as to how future

regulatory developments will impact the treatment of Bitcoin, Ethereum, and other crypto assets under the law.

and Ethereum have been deemed to fall within the definition of a commodity and, we may be required to register and comply with additional

regulation under the CEA, including additional periodic report and disclosure standards and requirements.

Moreover, we may be required

to register as a commodity pool operator and to register us as a commodity pool with the CFTC through the National Futures Association.

Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment

If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our

Any such action may adversely affect an investment in us.

interactions with a blockchain may expose us to SDN or blocked persons or cause us to violate provisions of law that did not contemplate

distributed ledger technology.

Office of Financial Assets Control of the U.S.

Department of Treasury requires us to comply with its sanction program and not conduct

business with persons named on its specially designated nationals (“SDN”) list.

However, because of the pseudonymous nature

of blockchain transactions we may inadvertently and without our knowledge engage in transactions, to the extent validation constitutes

a transaction, with persons named on OFAC’s SDN list.

While we do not believe validation constitutes a transaction, we can provide

no assurances that regulators will agree with our interpretation.

By way of example our Ethereum validator nodes only use block builders

which remove wallet addresses found on the SDN list and Builder+ also screens out these SDN wallet addresses.

Our Company’s policy

prohibits any transactions with such SDN individuals, but we may not be adequately capable of determining the ultimate identity of the

individual who delegate to our nodes.

Additionally, the U.S Department of Treasury recently has added sanctions that prevent U.S.

from using cryptocurrencies to circumnavigate financial sanctions placed on Russia.

our business requires us to download and retain one or more blockchains to effectuate our ongoing business, it is possible that such

digital ledgers contain prohibited depictions without our knowledge or consent.

To the extent government enforcement authorities literally

enforce these and other laws and regulations that are impacted by decentralized distributed ledger technology, we may be subject to investigation,

administrative or court proceedings, and civil or criminal monetary fines and penalties, all of which could harm our reputation and affect

the value of our Common Stock.

federal or state legislatures or agencies initiate or release tax determinations that change the classification of Bitcoin, Ethereum

or other crypto assets as property for tax purposes (in the context of when such crypto assets are held as an investment), such determination

could have a negative tax consequence on our Company or our shareholders.

IRS guidance indicates that crypto assets such as Ethereum should be treated and taxed as property, and that transactions involving the

payment of Ethereum for goods and services should be treated as barter transactions.

While this treatment creates a potential tax reporting

requirement for any circumstance where the ownership of an Ethereum passes from one person to another, usually by means of Ethereum transactions

(including off-blockchain transactions), it preserves the right to apply capital gains treatment to those transactions which may have

adversely affect an investment in our Company.

To the extent that a foreign jurisdiction with a significant share of the market of crypto asset users imposes onerous tax burdens crypto

users, or imposes sales or value added tax on purchases and sales of crypto assets for fiat currency, such actions could result in decreased

demand for crypto assets in such jurisdiction, which could impact the price of crypto assets and negatively impact an investment in our

and Ecosystem Risks

further development and acceptance of cryptographic and algorithmic protocols governing the issuance of and transactions in cryptocurrencies,

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the value of any Ethereum or other crypto assets we hold or acquire, which would harm investors in our securities.

a malicious actor or botnet obtains control in excess of 50% control of a cryptocurrency network, it is possible that such actor or botnet

could manipulate a blockchain in a manner that adversely affects an investment in us.

a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions

of the computers) obtains a majority of the processing power or staked assets dedicated to either mining or staking a cryptocurrency,

it may be able to alter blockchains on which transactions of cryptocurrency reside and rely by constructing fraudulent blocks or preventing

certain transactions from completing in a timely manner, or at all.

The malicious actor or botnet could control, exclude or modify the

ordering of transactions, though depending on blockchain may not generate new units or transactions using such control.

The malicious

actor could “double-spend” its own cryptocurrency (i.e., spend the same crypto asset in more than one transaction) and prevent

the confirmation of other users’ transactions for as long as it maintained control.

To the extent that such malicious actor or

botnet does not yield its control of the processing power or staked assets on the network, or the cryptocurrency community does not reject

the fraudulent blocks as malicious, reversing any changes made to blockchains may not be possible.

The foregoing description is not the

only means by which the entirety of blockchains or cryptocurrencies may be compromised but is only an example and may differ from blockchain

to blockchain.

possible crossing of the 50% threshold indicates a greater risk that a single validator could exert authority over the validation of

network transactions.

To the extent that a blockchain ecosystem including other validators do not act to ensure greater decentralization

of validator voting power, the feasibility of a malicious actor obtaining control will increase because the botnet or malicious actor

could compromise more than 50% voting power and thereby gain control of blockchain, whereas if the blockchain remains decentralized it

is inherently more difficult for the botnet of malicious actor to aggregate enough voting power to gain control of the blockchain, may

adversely affect an investment in our Common Stock.

Such lack of controls and responses to such circumstances could have a material adverse

effect on our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect

on our business, prospects or operations and potentially the value of any Ethereum or other crypto assets we acquire or hold, and harm

decentralized nature of crypto asset systems may lead to slow or inadequate responses to crises, which may negatively affect our business .

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of an exchange’s failure could adversely affect an investment in us.

is a lack of liquid markets, and possible manipulation of blockchain/cryptocurrency-based crypto assets.

assets that are represented and trade on a ledger-based platform may not necessarily benefit from viable trading markets.

Stock exchanges

have listing requirements and vet issuers;

requiring them to be subjected to rigorous listing standards and rules, and monitor investors

transacting on such platform for fraud and other improprieties.

These conditions may not necessarily be replicated on a distributed ledger

platform, depending on the platform’s controls and other policies.

The laxer a distributed ledger platform is about vetting issuers

of cryptocurrency assets or users that transact on the platform, the higher the potential risk for fraud or the manipulation of the ledger

due to a control event.

These factors may decrease liquidity or volume or may otherwise increase volatility or other assets trading on

a ledger-based system, which may adversely affect us.

Such circumstances could adversely affect an investment in us.

or economic crises may motivate large-scale sales of crypto assets, which could result in a reduction in crypto asset values and adversely

affect an investment in us.

or economic crises may motivate large-scale sales of crypto assets, which could rapidly decrease the price of crypto assets.

market analysts have indicated that in some cases, such as during large scale adverse economic events, trading and market prices of cryptocurrencies

such as Bitcoin and Ethereum have correlated to some extent with the movement of equity markets, regardless of the stock or asset class.

For example, in March 2020, as global shutdowns ramped up in response to the COVID-19 pandemic, the price of Bitcoin, Ethereum and other

crypto assets plummeted together with stock prices globally.

Similarly, in 2022 as the Federal Reserve raised interest rates to combat

inflation, crypto asset prices declined with stock prices in the U.S.

These trends are contrary to a formerly commonly held conception

that buying and holding crypto assets can be used as a “hedge” to investing in the more conventional equity markets, and

may eventually result in diminished popularity of crypto assets in general by the public.

Alternatively, as an emerging asset class with

limited acceptance as a payment system or commodity, global crises and general economic downturn may discourage investment in crypto

assets as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.

an alternative to fiat currencies that are backed by central governments, crypto assets such as Bitcoin and Ethereum, which are relatively

new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling

goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events.

Nevertheless, political or

economic crises may motivate large-scale acquisitions or sales of crypto assets either globally or locally.

Large-scale sales of crypto

assets would result in a reduction in crypto asset values and could adversely affect an investment in us.

price of crypto assets may be affected by the sale of such crypto assets by other vehicles investing in crypto assets or tracking cryptocurrency

global market for crypto assets is characterized by supply constraints that differ from those present in the markets for commodities

or other assets such as gold and silver.

The mathematical protocols under which certain cryptocurrencies are mined or minted permit the

creation of a limited, predetermined amount of currency, while others have no limit established on total supply.

To the extent that other

vehicles investing in crypto assets or tracking cryptocurrency markets form and come to represent a significant proportion of the demand

for crypto assets, large redemptions of the securities of those vehicles and the subsequent sale of crypto assets by such vehicles could

negatively affect crypto asset prices and therefore affect the value of our crypto assets.

Such events could have a material adverse effect on an investment in us.

interpretations require the regulation of Bitcoin, Ethereum, and other crypto assets under the CEA by the CFTC, we may be required to

To the extent that we decide to continue operations, the required registrations and regulatory

compliance steps may result in extraordinary, non-recurring expenses to us.

We may also decide to cease certain operations.

Any disruption

of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.

and future legislation, CFTC and other regulatory developments, including interpretations released by a regulatory authority, may impact

the manner in which Bitcoin, Ethereum, and other crypto assets are treated for classification and clearing purposes.

In particular, derivatives

on these assets are not excluded from the definition of “commodity future” by the CFTC.

We cannot be certain as to how future

regulatory developments will impact the treatment of Bitcoin, Ethereum, and other crypto assets under the law.

and Ethereum have been deemed to fall within the definition of a commodity and, we may be required to register and comply with additional

regulation under the CEA, including additional periodic report and disclosure standards and requirements.

Moreover, we may be required

to register as a commodity pool operator and to register us as a commodity pool with the CFTC through the National Futures Association.

Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment

If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our

Any such action may adversely affect an investment in us.

interactions with a blockchain may expose us to SDN or blocked persons or cause us to violate provisions of law that did not contemplate

distribute ledger technology.

Office of Financial Assets Control of the U.S.

Department of Treasury requires us to comply with its sanction program and not

conduct business with persons named on its specially designated nationals (“SDN”) list.

However, because of the

pseudonymous nature of blockchain transactions we may inadvertently and without our knowledge engage in transactions, to the extent

validation constitutes a transaction, with persons named on OFAC’s SDN list.

While we don’t believe validation

constitutes a transaction, we can provide no assurances regulators will agree with that view.

By way of example our Ethereum

validator nodes only use block builders which remove wallet addresses found on the SDN list and Builder+ also screens out these SDN

wallet addresses.

Our Company’s policy prohibits any transactions with such SDN individuals, but we may not be adequately

capable of determining the ultimate identity of the individual who delegate to our nodes.

Additionally, the U.S Department of

Treasury recently has added sanctions that prevent U.S.

persons from using cryptocurrencies to circumnavigate financial sanctions

placed on Russia.

our business requires us to download and retain one or more blockchains to effectuate our ongoing business, it is possible that such

digital ledgers contain prohibited depictions without our knowledge or consent.

To the extent government enforcement authorities literally

enforce these and other laws and regulations that are impacted by decentralized distributed ledger technology, we may be subject to investigation,

administrative or court proceedings, and civil or criminal monetary fines and penalties, all of which could harm our reputation and affect

the value of our Common Stock.

federal or state legislatures or agencies initiate or release tax determinations that change the classification of Bitcoin, Ethereum

or other crypto assets as property for tax purposes (in the context of when such crypto assets are held as an investment), such determination

could have a negative tax consequence on our Company or our shareholders.

IRS guidance indicates that crypto assets such as Ethereum should be treated and taxed as property, and that transactions involving the

payment of Ethereum for goods and services should be treated as barter transactions.

While this treatment creates a potential tax reporting

requirement for any circumstance where the ownership of an Ethereum passes from one person to another, usually by means of Ethereum transactions

(including off-blockchain transactions), it preserves the right to apply capital gains treatment to those transactions which may have

adversely affect an investment in our Company.

December 5, 2014, the New York State Department of Taxation and Finance issued guidance regarding the application of state tax law to

crypto assets such as Bitcoin and Ethereum.

The agency determined that New York State would follow IRS guidance with respect to the treatment

of crypto assets for state income tax purposes.

Furthermore, they defined crypto assets to be a form of “intangible property,”

meaning the purchase and sale of crypto assets for fiat currency is not subject to state income tax (although transactions of crypto

assets for other goods and services maybe subject to sales tax under barter transaction treatment).

It is unclear if other states will

follow the guidance of the IRS and the New York State Department of Taxation and Finance with respect to the treatment of crypto assets

for income tax and sales tax purposes.

If a state adopts a different treatment, such treatment may have negative consequences including

the imposition of greater a greater tax burden on investors in crypto assets or imposing a greater cost on the acquisition and disposition

of crypto assets, generally;

in either case potentially having a negative effect on prices in crypto assets and may adversely affect

an investment in our Company.

jurisdictions may also elect to treat crypto assets differently for tax purposes than the IRS or the New York State Department of Taxation

To the extent that a foreign jurisdiction with a significant share of the market of crypto asset users imposes onerous tax

burdens crypto users, or imposes sales or value added tax on purchases and sales of crypto assets for fiat currency, such actions could

result in decreased demand for crypto assets in such jurisdiction, which could impact the price of crypto assets and negatively impact

an investment in our Company.

Risks Specific to BTCS’s Crypto Asset Activities

Model Dependence and Revenue Risks

our blockchain infrastructure business is dependent on the value of the crypto assets we stake to obtain blockchain rewards, and because

those rewards are paid out in the form of the blockchain’s native crypto assets, low market values and/or continued or long-term

declines in crypto asset prices will materially and adversely affect our results of operations.

reliance on staking, which continues to increase as we continue to expand our non-custodial staking-as-a-service business, means that

if the market values of the crypto assets we stake declines, the revenue we generate from staking will diminish.

This is because the

rewards for staking a given crypto asset are paid out in more of that same crypto asset.

Therefore, if the market price for the crypto

asset declines while staking is ongoing, unless the price later recovers, the rewards we receive may not cover the decline in value of

the assets, potentially resulting in significant losses to our staking operations.

If this trend continues, our operating results and financial condition will be materially adversely affected.

ChainQ , and our blockchain infrastructure operations including Company owned and run validator nodes on PoS blockchains,

are subject to concentration risks due to reliance on a limited number of infrastructure providers.

development and operation of the Company’s validator nodes for non-custodial staking, as well as the Builder+ block-builders and

the development of ChainQ, are hosted on a combination of cloud computing infrastructure provided by Amazon Web Services (“AWS”)

and bare metal servers operated by a separate service provider, Latitude.

While this diversification mitigates some concentration risks,

significant portions of our proprietary technology and operations remain reliant on AWS and Latitude, which subjects us to cyber security

and operational risks specific to these providers.

have limited control over the services provided by AWS and Latitude, including their safety and security measures.

If either provider

fails to maintain the continuous functionality or security of their networks and related hardware, our ability to operate could be compromised.

For example, some PoS networks impose slashing penalties if a validator node is offline for an extended period, resulting in the loss

of crypto assets staked for validation purposes.

If validator nodes hosted on either AWS or bare metal servers experience outages or

other disruptions, we may face significant losses, including slashing penalties, claims from Delegators, reputational harm, and loss

of customer relationships.

adverse developments affecting AWS or our bare metal server provider, including service outages, cyberattacks, or operational failures,

could materially and adversely affect our ability to generate revenue, harm our reputation, and negatively impact our business, financial

condition, and results of operations.

assets staked on proof-of-stake blockchains are locked in smart contracts and may not be accessible and liquid.

assets that utilize PoS consensus mechanisms are locked in smart contracts while staked, which limits the liquidity of the underlying

crypto asset.

This is because under PoS network protocols, in order to participate in the staking process validators such as us are required

to enter into smart contracts which, among other things, require the validator to continue to keep a specified number of the crypto assets

owned by the validator “locked-up” in the network for a specified period of time before they can again be transferred by

such validator.

This lock-up period often extends beyond the time at which the transaction is validated.

We currently stake certain of

our crypto assets and operate nodes on blockchain networks through our blockchain infrastructure services business.

During times of high

volatility or downturns, we may be unable to liquidate certain crypto assets to the extent desired.

As such we may experience large losses

when and if we are able to liquidate our crypto assets as a result of continued volatility.

Further if we are unable to liquidate our

crypto assets we could suffer material financial losses, which would adversely impact our business.

staking-as-a-service business is dependent on consumer investment in crypto assets, and economic downturns or excessive removal of delegated

crypto assets could materially and adversely impact our business.

non-custodial staking-as-a-service business strategy depends on consumers purchasing crypto assets, holding them long-term, and staking

them to our validator nodes.

Economic downturns or a recession could significantly reduce delegation traffic to our nodes as consumers

may reduce spending on investments or non-essential items such as crypto assets.

Similarly, a decline in the popularity or public perception

of crypto assets could yield a similar result.

Crypto markets and stock prices have experienced substantial volatility in recent years,

and in adverse market conditions, consumers may elect to sell their crypto assets or decline to increase their holdings, rather than

hold and stake them to our nodes.

Additionally,

we may experience loss of revenue from the excessive removal of delegated crypto assets from our validator nodes, whether due to economic

factors, declining market confidence, or changes in consumer preferences.

Such removal would result in a loss of associated revenue,

which could materially and adversely impact our financial condition.

Prolonged or recurring recessionary conditions, turbulent market

conditions, or a significant loss of delegated assets could harm our business, results of operations, and prospects.

and Performance Risks

may suffer losses due to staking, delegating, and other related services.

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slashed by an underlying blockchain network, our crypto assets may be confiscated, withdrawn, or burnt by the network, resulting in permanent

and irrecoverable losses that could materially impact our financial position.

Any penalties or slashing events could damage our brand and reputation, cause us to suffer financial losses, and adversely impact

our business.

ChainQ, and our blockchain infrastructure operations including Company owned and run validator nodes on PoS blockchains, are subject

to concentration risk as they are consolidated on Amazon Web Services.

development and operation of the Company’s validator nodes for non-custodial staking, as well as the development of StakeSeeker,

Builder+, and ChainQ, are hosted on cloud computing by Amazon Web Services (“AWS”).

The consolidation of our proprietary

technology on AWS subjects the Company to cyber security and other risks that face AWS.

We have limited control over AWS, the services

it provides us and the safety and security measures related thereto.

If AWS fails to maintain the continuous functionality or security

of its networks and related hardware on which we rely for our operations, we may be unable to generate revenue we otherwise would, and

could suffer substantial losses.

For example, some PoS networks implement the slashing penalties described above, wherein the crypto

assets that were staked to allow us to participate in the validation process are taken away from us, if a validator node on which the

crypto asset is staked is offline for a certain amount of time.

Additionally, if our Delegators crypto assets become subject to slashing,

we could experience significant losses, from resulting claims against us by them, as well as reputational harm and lost customer relationships.

If any of the foregoing or other adverse developments occur as a result of our reliance on a single service provider for our PoS validating

operations, it could have a material adverse effect on our business, financial condition and results of operations.

assets staked on Proof-of-Stake blockchains are locked in smart contracts and may not be accessible and liquid.

assets which utilize PoS consensus mechanisms are locked in smart contracts while staked which limits liquidity of the underlying crypto

This is because under PoS network protocols, in order to participate in the staking process validators such as us are required

to enter into smart contracts which, among other things, require the validator to continue to keep a specified number of the crypto assets

owned by the validator “locked-up” in the network for a specified period of time before they can again be transferred by

such validator.

This lock-up period often extends beyond the time at which the transaction is validated.

We currently stake certain of

our crypto assets and operate nodes on blockchain networks through our blockchain infrastructure services business.

During times of high

volatility or downturns, which are common among crypto assets for many reasons including those described elsewhere in these Risk Factors,

we may be unable to liquidate certain crypto assets to the extent desired.

As such we may experience large losses when and if we are

able to liquidate our crypto assets as a result of continued volatility.

Further if we are unable to liquidate our crypto assets we could

suffer material financial losses, which would adversely impact our business.

our current staking-as-a-service business plan and operations depend on consumers investing in crypto assets and staking to our nodes

and monitoring them using our non-custodial platform, economic downturns will materially adversely affect us.

non-custodial staking-as-a-service strategy depends on consumers purchasing crypto assets from exchanges and holding them long-term,

and staking them to our validator nodes.

Therefore, economic downturns or a recession will cause a reduction in delegation traffic to

our nods by causing consumers to reduce spending on investments or non-essential items such as crypto assets.

Similarly, a decline in

the popularity or public perception of such crypto assets would yield a similar result.

In 2022, the U.S.

capital markets in general,

and crypto assets prices in particular, saw significant declines as the Federal Reserve heightened interest rates to combat inflation.

This followed initial declines earlier in 2022 in response to the Ukraine war and worsening supply chain issues and supply shortages.

While the markets have appeared to recover as of February 2024, crypto and stock prices have nonetheless experienced substantial volatility

in recent years, and in the event of adverse market conditions, consumers may elect to sell their crypto assets, or decline to increase

their holdings, rather than hold and stake them to our nodes.

Because we and our industry depend on consumers holding and staking crypto

assets long-term, such a trend has the potential to materially adversely harm us and our prospects.

Particularly in the event of prolonged

or recurring recessionary or turbulent market conditions.

business faces significant scaling obstacles due to its dependence on crypto assets and related infrastructure.

assets on which our current and planned operations depend face significant scaling obstacles that can lead to high fees or slow transaction

settlement times, and attempts to increase the volume of transactions may not be effective.

Scaling of crypto assets is essential to

the widespread acceptance of crypto assets as a means of payment or other uses that stakeholders have in the past cited in demonstrating

interest in crypto assets.

Many crypto asset networks, including those with which we are or may become involved in our operations, face

significant scaling challenges.

For example, crypto assets are limited with respect to how many transactions can occur per second.

in the crypto asset ecosystem debate potential approaches to increasing the average number of transactions per second that a network

can handle and have implemented mechanisms or are researching ways to increase scale, such as increasing the allowable sizes of blocks,

and therefore the number of transactions per block, and sharding (a horizontal partition of data in a database or search engine), which

would not require every single transaction to be included in every single validator’s block.

However, there is no guarantee that

any of the mechanisms in place or being explored for increasing the scale of settlement of crypto asset transactions will be effective.

adoption of crypto assets as a means of payment or other uses does not occur on the schedule or scale anticipated or at all, the demand

for crypto assets may stagnate or decrease, which could adversely affect future prices of crypto assets we hold or otherwise rely upon

in our operations, and our results of operations and financial condition, which could have a material adverse effect on our business

or the market price for our securities.

business operations involve running validator nodes for blockchain networks, including those associated with third-party staking ecosystems.

This presents several risks that could materially affect our financial condition, results of operations, and business prospects.

validator nodes for third-party staking ecosystems presents significant risks, particularly around the security of staked tokens and

governance uncertainties.

Staked tokens are locked in smart contracts, and vulnerabilities in the blockchain protocol or smart contract

code could result in loss or slashing of tokens.

Additionally, many staking ecosystems operate under decentralized autonomous organizations

(DAOs), where governance decisions—such as fee changes, validator selection criteria, or protocol upgrades—can be unpredictable

and influenced by participants with concentrated voting power.

Adverse governance outcomes or misalignment with DAO strategies could

negatively impact the economic viability of our validator operations.

Furthermore, any controversy or operational failures associated

with third-party providers could harm our reputation, even if we are not directly involved.

Finally, protocol updates or changes may

require rapid technical adaptations, and failure to do so could result in penalties, operational disruptions, or removal from the validator

Despite our efforts to mitigate these risks through security measures and governance monitoring, these challenges could materially

affect our operations, the security of our crypto assets, our financial results, and the price of our stock.

The inherent vulnerabilities

in blockchain protocols or smart contract codes could lead to potential loss of staked tokens, while unpredictable governance decisions

by decentralized autonomous organizations could impact our strategic alignment and economic viability.

Consequently, any adverse outcomes

or operational failures could have a material adverse effect on our company.

in the Ethereum block-building landscape and market could increase the difficulty of remaining competitive and increase costs.

Ethereum block builder, Builder+, faces competition from existing and potential entrants in the expanding market.

New and existing competitors

may emerge with superior algorithms or strategies, potentially eroding our current market share, potential growth, and revenue generation

Moreover, changes in the Ethereum ecosystem, including network upgrades or shifts to alternative networks, may impact the

demand for our services.

Staying competitive requires continuous innovation and adaptation to market dynamics, which may necessitate

additional investments and resources.

obligations to comply with the laws, rules, regulations, and policies of a variety of jurisdictions is uncertain and untested, and we

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to certain business models.

While the guidance directly addressed Bitcoin mining, it did not address securing PoS blockchains which while

similar to Bitcoin mining has technical nuanced differences which could potentially alter the analysis.

As such, there can be no guarantee

that securing (staking) on PoS blockchain networks will be viewed as compliant, notwithstanding the May 2019 FinCEN guidance.

In particular,

the nature of blockchains make it technically impossible in all circumstances to prevent or identify transactions with particular persons

or addresses.

Our platform, StakeSeeker, utilizes geo-blocking in an effort to prevent its use by persons located in sanctioned jurisdictions

by employing third-party software, Cloudflare, to automatically identify and restrict log-in attempts to the StakeSeeker platform from

specific countries and jurisdictions These restricted areas include Cuba, Iran, North Korea, the Russian Federation, Syria, and Venezuela.

Any StakeSeeker users detected from these regions will be redirected to a page informing them that their access has been restricted.

In addition, our Builder+ block builder software is equipped with a filtering mechanism that screens transactions initiated by wallet

addresses listed on OFAC’s Specially Designated Nationals And Blocked Persons (SDN) list, ensuring transactions from identified

wallets are not included in the blocks we propose to validators.

We actively monitor sanctioned jurisdictions to ensure that appropriate

restrictions are maintained.

If, notwithstanding these efforts, our current or planned activities are found to constitute “facilitating”

or assisting the actions of non-U.S.

While the guidance directly addressed Bitcoin mining, it did not address securing PoS blockchains, which,

while similar to Bitcoin mining, has technical nuanced differences that could potentially alter the analysis.

As such, there can be no

guarantee that securing (staking) on PoS blockchain networks will be viewed as compliant, notwithstanding the May 2019 FinCEN guidance.

In particular, the nature of blockchains make it technically impossible in all circumstances to prevent or identify transactions with

particular persons or addresses.

Our Builder+ block builder software is equipped with a filtering mechanism that screens transactions

initiated by wallet addresses listed on OFAC’s Specially Designated Nationals And Blocked Persons (SDN) list, ensuring transactions

from identified wallets are not included in the blocks we propose to validators.

We actively monitor sanctioned jurisdictions to ensure

that appropriate restrictions are maintained.

If, notwithstanding these efforts, our current or planned activities are found to constitute

“facilitating” or assisting the actions of non-U.S.

persons that would be prohibited for U.S.

persons to perform directly due to U.S.

sanctions, despite

the fact we don’t take custody of staked crypto assets nor pay delegator crypto rewards, it could result in material negative consequences

for us, including costs related to government investigations, harsh financial penalties, and harm to our reputation.

The impact on us

related to these matters could be substantial.

We’ve sought and are seeking additional legal guidance on what, if any, controls

and procedures need to be put in place and whether our activities could constitute facilitation of any illicit activities under the current

regulatory framework.

persons to perform directly

sanctions, despite the fact we don’t take custody of staked crypto assets nor pay delegator crypto rewards, it could

result in material negative consequences for us, including costs related to government investigations, harsh financial penalties, and

harm to our reputation.

The impact on us related to these matters could be substantial.

We’ve sought and are seeking additional

legal guidance on what, if any, controls and procedures need to be put in place and whether our activities could constitute facilitation

of any illicit activities under the current regulatory framework.

worldwide frequently study each other’s approaches to the regulation of the digital economy.

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jurisdictions.

In addition, digital economies themselves are subject to rapid and unpredictable change that regulators could decide warrants

In addition, digital economies themselves are subject to rapid and unpredictable change so that regulators could decide warrants

updates or additions to existing regulatory regimes.

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obligations that we have not obtained or with which we have not complied.

As a result, we are at a heightened risk of enforcement action,

As a result, we are at a heightened risk of

litigation, regulatory, and legal scrutiny which could lead to sanctions, cease, and desist orders, or other penalties and censures which

could significantly and adversely affect our continued operations and financial condition.

may experience losses resulting from technical failures, bugs, or vulnerabilities in our block builder software.

Ethereum block-building process heavily relies on advanced algorithms and technology.

Technical failures, bugs, or vulnerabilities in

our block builder software could lead to significant operational disruptions and potential financial losses that may be substantial and

could materially impact our business.

While we implement extensive testing and security measures, we cannot guarantee that all technical

vulnerabilities will be detected and remediated before causing harm.

Furthermore, the security of our operation is paramount, as vulnerabilities

in smart contracts, blockchain infrastructure, or the Ethereum network could result in security breaches, data breaches, and financial

harm to our clients and us.

Ensuring the ongoing scalability and efficiency of our algorithms requires continuous investment in research

and development.

actors gaining 50% or greater control of a cryptocurrency network could manipulate the blockchain, leading to significant adverse effects

on the network and indirectly on our business.

a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions

of the computers) obtains a majority of the processing power or staked assets dedicated to either mining or staking a cryptocurrency,

it may be able to alter blockchains on which transactions of cryptocurrency reside and rely by constructing fraudulent blocks or preventing

certain transactions from completing in a timely manner, or at all.

The malicious actor or botnet could control, exclude or modify the

ordering of transactions, though depending on blockchain may not generate new units or transactions using such control.

The malicious

actor could “double-spend” its own cryptocurrency (i.e., spend the same crypto asset in more than one transaction) and prevent

the confirmation of other users’ transactions for as long as it maintained control.

To the extent that such malicious actor or

botnet does not yield its control of the processing power or staked assets on the network, or the cryptocurrency community does not reject

the fraudulent blocks as malicious, reversing any changes made to blockchains may not be possible.

The foregoing description is not the

only means by which the entirety of blockchains or cryptocurrencies may be compromised but is only an example and may differ from blockchain

to blockchain.

possible crossing of the 50% threshold indicates a greater risk that a single validator could exert authority over the validation of

network transactions.

To the extent that a blockchain ecosystem including other validators do not act to ensure greater decentralization

of validator voting power, the feasibility of a malicious actor obtaining control will increase because the botnet or malicious actor

could compromise more than 50% voting power and thereby gain control of blockchain, whereas if the blockchain remains decentralized it

is inherently more difficult for the botnet of malicious actor to aggregate enough voting power to gain control of the blockchain, may

adversely affect an investment in our Common Stock.

Such lack of controls and responses to such circumstances could have a material adverse

effect on our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect

on our business, prospects or operations and potentially the value of any Ethereum or other crypto assets we acquire or hold, and harm

Risks Related to Our Crypto Asset Holdings

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is a risk that part or all of our crypto assets could be lost, stolen, destroyed or become inaccessible.

We believe that our crypto assets

will be an appealing target to hackers or malware distributors seeking to destroy, damage, or steal our crypto assets.

To minimize the

risk of loss, damage and theft, security breaches, and unauthorized access we primarily hold our crypto assets in various cryptocurrency

digital wallets and hold minimal amounts at exchanges.

Nevertheless, the digital wallets and exchanges we utilize may not be impenetrable

and may not be free from defect or immune to acts of God, and any loss due to a security breach, software defect or act of God will be

Any of these events may adversely affect our operations and, consequently, an investment in us.

Our crypto assets are an appealing

target to hackers or malware distributors seeking to destroy, damage, or steal our crypto assets, and we have experienced attempts to

breach our security measures in the past.

To minimize the risk of loss, damage and theft, security breaches, and unauthorized access

we primarily hold our crypto assets in various cryptocurrency digital wallets utilizing industry-standard multi-signature security protocols

and cold storage solutions, and hold minimal amounts (less than 1% of total holdings) at regulated exchanges.

Nevertheless, the digital

wallets and exchanges we utilize may not be impenetrable and may not be free from defect or immune to acts of God, and any loss due to

a security breach, software defect or act of God will be borne by us.

Any of these events may adversely affect our operations and, consequently,

an investment in us.

the extent that any of our crypto assets are held by crypto exchanges, we may face heightened risks from cybersecurity attacks and the

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of our crypto assets for which no person is liable.

crypto assets held by us are not insured.

Therefore, a loss may be suffered with respect to our crypto assets which are not covered by

insurance and for which no person is liable in damages which could adversely affect our operations and, consequently, an investment in

crypto assets held by us are not insured through any government program or private insurance policy.

Any loss of our crypto assets, whether through security breaches, technical failures, or other causes, would not be covered

by insurance and could result in permanent and unrecoverable losses that could adversely affect our operations and, consequently, an

investment in us.

assets held by us are not subject to FDIC or SIPC protections.

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Related to Our Development Efforts

is substantial doubt that we will be able to fully develop or commercialize our StakeSeeker platform as intended.

are continuing to develop our StakeSeeker platform with the ultimate goal of consolidating users’ information so that it can be

more easily accessed and reviewed by users.

is substantial doubt that we will be able to fully develop or commercialize our ChainQ platform as intended.

are continuing to develop our ChainQ platform with the ultimate goal of creating an advanced blockchain infrastructure tool to enhance

user accessibility and operational efficiency.

We may not successfully fully develop this platform as planned, in a cost-efficient manner,

to the extent sought or at all.

If we fail to develop a comprehensive dashboard for StakeSeeker as intended, it could have a material

adverse effect on our business, especially to the extent that we allocate significant capital, labor and other resources to this endeavor

rather than focusing on other business opportunities which may prove to have been more lucrative in hindsight.

If we fail to develop a comprehensive platform for ChainQ as intended, it could have a material adverse

effect on our business, especially to the extent that we allocate significant capital, labor, and other resources to this endeavor rather

than focusing on other business opportunities which may prove to have been more lucrative in hindsight.

if we do successfully develop our platform and bring it to the marketplace, there is no guarantee that we will attract enough users to

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us could lose some or all of its value.

if we develop and commercialize our StakeSeeker platform, we may not be able to generate material revenues.

continued development of StakeSeeker will require significant time and capital.

if we develop and commercialize our ChainQ platform, we may not be able to generate material revenues.

continued development of ChainQ will require significant time and capital.

Even if we do develop this platform and acquire a sufficient

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While we are pursuing the development of additional features to make our platform more useful and

attractive to consumers involved in crypto assets, we may fail to develop these features effectively in an efficient manner, or within

a timeframe that enables us to be or remain competitive.

Our ability to capitalize on any platform we do develop will depend on a variety

of factors and uncertainties beyond our control, including the competition we face and similar or superior services that may already

exist by the time we begin marketing our platform, the volatile nature of the blockchain industry generally and the unknown demand for

the services we plan to offer through our platform as it is currently envisioned, regulatory developments that have arisen or may arise

in the future, and the advancement of new technologies which could arise in the future and render our platform partially or completely

If any of these or other risks come to fruition to prevent our platform from generating material revenue to justify its costs

of production, it would have a material adverse effect on our business.

may experience loss of revenues resulting from excessive removal of delegated crypto assets from our validator nodes.

the extent the Company successfully executes on its business plan and earns material revenue from customers who delegate their crypto

assets to the Company’s validator nodes and subsequently experiences excessive removal of customer staked crypto assets from its

validator nodes (i.e.

a loss of customers) the Company would lose the related revenue which may have a material adverse impact on the

in the Ethereum block building landscape and market could increase the difficulty of remaining competitive and increase costs.

Ethereum block builder, Builder+, faces competition from existing and potential entrants in the expanding market.

New and existing competitors

may emerge with superior algorithms or strategies, potentially eroding our current market share, potential growth, and revenue generation

Moreover, changes in the Ethereum ecosystem, including network upgrades or shifts to alternative networks, may impact the

demand for our services.

Staying competitive requires continuous innovation and adaptation to market dynamics, which may necessitate

additional investments and resources.

may experience losses resulting from technical failures, bugs, or vulnerabilities in our block builder software.

risk of technical failures, bugs, or vulnerabilities in our block builder software could lead to operational disruptions and potential

financial losses.

Our Ethereum block-building process heavily relies on advanced algorithms and technology.

The risk of technical failures,

bugs, or vulnerabilities in our block builder software could lead to operational disruptions and potential financial losses.

the security of our operation is paramount, as vulnerabilities in smart contracts, blockchain infrastructure, or the Ethereum network

could result in security breaches, data breaches, and financial harm to our clients and us.

Ensuring the ongoing scalability and efficiency

of our algorithms requires continuous investment in research and development.

development of our StakeSeeker and ChainQ platforms will depend on the successful efforts of our employees.

attractive to consumers involved in blockchain technology, we may fail to develop these features effectively in an efficient manner,

or within a timeframe that enables us to be or remain competitive.

Our ability to capitalize on any platform we do develop will depend

on a variety of factors and uncertainties beyond our control, including the competition we face and similar or superior services that

may already exist by the time we begin marketing our platform, the volatile nature of the blockchain industry generally and the unknown

demand for the services we plan to offer through our platform as it is currently envisioned, regulatory developments that have arisen

or may arise in the future, and the advancement of new technologies which could arise in the future and render our platform partially

or completely obsolete.

If any of these or other risks come to fruition to prevent our platform from generating material revenue to justify

its costs of production, it would have a material adverse effect on our business.

development of our ChainQ platform will depend on the successful efforts of our employees.

platform development efforts are completely dependent on our infrastructure.

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If our data stored on

AWS and the backups thereof are compromised, our platform and prospects could be harmed.

Despite our implementation of network security

measures, our servers are vulnerable to computer viruses, physical or electronic break-ins, and similar disruptions, the occurrence of

any of which could lead to interruptions, delays, loss of critical data, or the inability to launch our platform.

The occurrence of any

of the foregoing risks could materially harm our business.

AWS as well as bare metal servers, and the backups thereof, are compromised, our platform and prospects could be harmed.

implementation of network security measures, our servers are vulnerable to computer viruses, physical or electronic break-ins, and similar

disruptions, the occurrence of any of which could lead to interruptions, delays, loss of critical data, or the inability to launch our

The occurrence of any of the foregoing risks could materially harm our business.

are subject to cyber security risks and may incur delays in platform development in an effort to minimize those risks and to respond

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is and will continue to be dependent on the secure operation of our website and systems as well as the operation of the Internet generally.

The platform involves reading user data, and storage of user data, and security breaches could expose us to a risk of loss or misuse

of this information, litigation, and potential liability.

A number of large Internet companies have suffered security breaches, some

of which have involved intentional attacks.

From time to time, we and many other internet businesses also may be subject to a denial-of-service attacks wherein attackers attempt to block customers’ access to our website.

If we are unable to avert a denial-of-service

attack for any significant period, we could sustain delays in the development of the platform and when launched risk losing future users

and have user dissatisfaction.

The platform involves processing and storage of sensitive data, and security breaches could expose us to a risk of loss or misuse of

this information, litigation, and potential liability.

A number of large Internet companies have suffered security breaches, some of

which have involved intentional attacks.

From time to time, we and many other internet businesses also may be subject to a denial-of-service

attacks wherein attackers attempt to block customers’ access to our website.

If we are unable to avert a denial-of-service attack

for any significant period, we could sustain delays in the development of the platform and when launched risk losing future users and

have user dissatisfaction.

We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types

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financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm our business.

may become subject to data privacy and data security laws and regulations by virtue of our StakeSeeker platform, which could force us

to incur significant compliance costs and expose us to liabilities.

may become subject to data privacy and data security laws and regulations by virtue of our ChainQ platform, which could force us to incur

significant compliance costs and expose us to liabilities.

virtue of our platform, including planned additional functions, we may become subject to the various local, state, federal, and international

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the United States, state and federal lawmakers and regulatory authorities have increased their attention on the collection and use of

For example, California enacted the California Consumer Privacy Act, or CCPA, which became effective in 2020.

The CCPA requires

covered companies to, among other things, provide new disclosures to California users, and affords such users new privacy rights such

as the ability to opt-out of certain sales of personal information and expanded rights to access and require deletion of their personal

information, opt out of certain personal information sharing, and receive detailed information about how their personal information is

collected, used, and shared.

The CCPA provides for civil penalties for violations, as well as a private right of action for security

breaches that may increase security breach litigation.

Potential uncertainty surrounding the CCPA may increase our compliance costs and

potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including

how we use personal information, our financial condition, the results of our operations or prospects.

Since the CCPA was enacted, a growing

number of states have enacted similar legislation designed to protect the personal information of consumers and penalize companies that

fail to comply, and other states have also proposed similar legislation.

The costs of compliance with, and other burdens imposed by,

the CCPA, and similar laws may limit our prospective customer base or the use and adoption of our products and services and/or require

us to incur substantial compliance costs, which could have an adverse impact on our business.

Additionally, many foreign countries and

governmental bodies in which our users may reside, have laws and regulations concerning the collection, use, processing, storage, and

deletion of personal information obtained from their residents or by businesses operating within their jurisdiction.

These laws and regulations

are often more restrictive than those in the United States.

Such laws and regulations may require companies to implement new privacy

and security policies, permit individuals to access, correct, and delete personal information stored or maintained by such companies,

inform individuals of security breaches that affect their personal information, require that certain types of data be retained on local

servers within these jurisdictions, and, in some cases, obtain individuals’ affirmative opt-in consent to collect and use personal

information for certain purposes.

For example, California enacted the California Rights Privacy Act, or CPRA, which augmented the California Privacy Rights

Act, became effective in 2020.

The CPRA requires covered companies to, among other things, provide new disclosures to California users,

and affords such users new privacy rights such as the ability to opt-out of certain sales of personal information and expanded rights

to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information

about how their personal information is collected, used, and shared.

The CPRA provides for civil penalties for violations, as well as

a private right of action for security breaches that may increase security breach litigation.

Potential uncertainty surrounding the CPRA

may increase our compliance costs and potential liability, particularly in the event of a data breach, and could have a material adverse

effect on our business, including how we use personal information, our financial condition, the results of our operations or prospects.

Since the CPRA was enacted, a growing number of states have enacted similar legislation designed to protect the personal information

of consumers and penalize companies that fail to comply, and other states have also proposed similar legislation.

The costs of compliance

with, and other burdens imposed by, the CPRA, and similar laws may limit our prospective customer base or the use and adoption of our

products and services and/or require us to incur substantial compliance costs, which could have an adverse impact on our business.

Additionally,

many foreign countries and governmental bodies in which our users may reside, have laws and regulations concerning the collection, use,

processing, storage, and deletion of personal information obtained from their residents or by businesses operating within their jurisdiction.

These laws and regulations are often more restrictive than those in the United States.

Such laws and regulations may require companies

to implement new privacy and security policies, permit individuals to access, correct, and delete personal information stored or maintained

by such companies, inform individuals of security breaches that affect their personal information, require that certain types of data

be retained on local servers within these jurisdictions, and, in some cases, obtain individuals’ affirmative opt-in consent to

collect and use personal information for certain purposes.

is a risk that as we develop and offer our platform and other services, we may become subject to one or more of these data privacy and

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framework governing the application of privacy laws to blockchain technology is still highly undeveloped and likely to evolve.

given the pseudonymous nature of activities involving crypto assets, we may encounter enhanced difficulties in our compliance efforts

that are not present to the same degree in other business types.

Our failure, or the failure by our third-party providers or partners,

to comply with applicable laws or regulations and to prevent unauthorized access to, or use or release of personal data, or the perception

that any of the foregoing types of failure has occurred, even if unfounded, could subject us to audits, inquiries, whistleblower complaints,

adverse media coverage, investigations, potential severe criminal or civil sanctions, fines or damages, reputational harm, or expensive

and time-consuming proceedings by governmental agencies and private claims and litigation, any of which could materially adversely affect

our business, operating results, and financial condition.

given the pseudonymous nature of activities involving crypto assets, we face unique and substantial challenges in our compliance efforts

that are not present in traditional financial services, including difficulties in identifying and verifying the identity of transaction

participants, monitoring suspicious activities, and maintaining effective know-your-customer (KYC) procedures.

Our failure, or the failure

by our third-party providers or partners, to comply with applicable laws or regulations and to prevent unauthorized access to, or use

or release of personal data, or the perception that any of the foregoing types of failure has occurred, even if unfounded, could subject

us to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, potential severe criminal or civil sanctions,

fines or damages, reputational harm, or expensive and time-consuming proceedings by governmental agencies and private claims and litigation,

any of which could materially adversely affect our business, operating results, and financial condition.

may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from

commercializing or increase the costs of commercializing the StakeSeeker platform.

commercializing or increase the costs of commercializing the ChainQ platform.

commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights

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of the foregoing, we may be subject to legal claims of alleged infringement of the intellectual property rights of third parties.

expect this risk to increase as we continue to develop and roll-out additional functions for the StakeSeeker platform and potential StaaS

operations in the future.

The ready availability of damages, royalties and the potential for injunctive relief has increased the defense

litigation costs of patent infringement claims, especially those asserted by third parties whose sole or primary business is to assert

Such claims, even if not meritorious, may result in significant expenditure of financial and managerial resources, and the

payment of damages or settlement amounts.

expect this risk to increase as we continue to develop and roll-out additional functions for the ChainQ platform in the future.

availability of damages, royalties and the potential for injunctive relief has increased the defense litigation costs of patent infringement

claims, especially those asserted by third parties whose sole or primary business is to assert such claims.

Such claims, even if not

meritorious, may result in significant expenditure of financial and managerial resources, and the payment of damages or settlement amounts.

we could expend significant resources defending against patent infringement and other intellectual property right claims, which could

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accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a

wide range of matters that are relevant to our business, including but not limited to revenue recognition, estimating valuation

allowances and accrued liabilities (including allowances for returns, credit card chargebacks, doubtful accounts and obsolete and

damaged inventory), internal use software and website development (acquired and developed internally), accounting for income taxes,

valuation of long-lived and intangible assets and goodwill, stock-based compensation and loss contingencies, are highly complex and

involve many subjective assumptions, estimates and judgments by our management.

Additional complexities can arise with respect to

crypto asset operations.

Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments

by our management could significantly change our reported or expected financial performance.

Further, in January 2024 we adopted a

new accounting treatment (ASU No.

2023-08) for our crypto assets, which may pose challenges or added expenses in the preparation of

our financial statements, or render a comparison of our financial performance and condition between periods more difficult or

investors, especially given the novelty of this new accounting method for crypto assets.

our estimates or judgment relating to our critical accounting policies prove to be incorrect, our operating results could be adversely

wide range of matters that are relevant to our business, including but not limited to revenue recognition, estimating valuation allowances

and accrued liabilities (including allowances for returns, credit card chargebacks, doubtful accounts and obsolete and damaged inventory),

internal use software and website development (acquired and developed internally), accounting for income taxes, valuation of long-lived

and intangible assets and goodwill, stock-based compensation and loss contingencies, are highly complex and involve many subjective assumptions,

estimates and judgments by our management.

Additional complexities can arise with respect to crypto asset operations.

Changes in these

rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change

our reported or expected financial performance.

our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely

preparation of financial statements in conformity with generally accepted accounting principles, or GAAP, requires management to make

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controls and reporting procedures.

company compliance may make it more difficult to attract and retain officers and directors.

Sarbanes-Oxley Act and rules implemented by the SEC have required changes in corporate governance practices of public companies.

public company, we expect these rules and regulations to increase our compliance costs and make certain activities more time-consuming

The impact of the SEC’s July 25, 2017 report on Digital Securities (the “DAO Report”) as well as enforcement

actions and speeches made by the SEC’s Chairman will increase our compliance and legal costs.

As a public company, we also expect

that these rules and regulations will make it more difficult and expensive for us to obtain director and officer liability insurance

in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same

or similar coverage.

As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board or as

executive officers, and to maintain insurance at reasonable rates, or at all.

Related to our Common Stock

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As a result, you may be unable to resell your shares at a desired price.

we paid a cash dividend in 2022, and declared a Series V Preferred stock (“Series V”) dividend in 2023, we do

not expect to pay regular or recurring dividends in the future.

we paid a cash dividend in 2022, and declared a Series V Preferred stock (“Series V”) dividend in 2023, we do not expect

to pay regular or recurring dividends in the future.

Any return on investment may be limited to the value of our Common Stock.

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could adversely affect the rights of the holders of our Common Stock.

Board has the authority to fix and determine the relative rights and preferences of preferred stock.

Our Board also has the authority

to issue preferred stock without further shareholder approval.

As a result, our Board could authorize the issuance of a series of preferred

stock that would grant to holders the preferred right to our assets upon liquidation, provide holders of the preferred anti-dilution

protection, the right to receive dividend payments before dividends are distributed to the holders of Common Stock and the right to the

redemption of the shares, together with a premium, prior to the redemption of our Common Stock.

For example, we issued a total of 14,542,803

shares of Series V Preferred Stock in June 2023, which preferred stock comes with a 20% liquidation preference over our Common Stock

and also has certain rights to dividend and distributions at the discretion of the Board.

In addition, our Board could authorize the

issuance of a series of preferred stock that has greater voting power than our Common Stock or that is convertible into our Common Stock,

which could decrease the relative voting power of our Common Stock or result in dilution to our existing shareholders.

to our articles of incorporation, our Board has the authority to fix and determine the relative rights and preferences of preferred stock

without further shareholder approval.

Our Board also has the authority to issue preferred stock without further shareholder approval.

As a result, our Board could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to

our assets upon liquidation, provide holders of the preferred anti-dilution protection, the right to receive dividend payments before

dividends are distributed to the holders of Common Stock and the right to the redemption of the shares, together with a premium, prior

to the redemption of our Common Stock.

For example, we issued a total of 15,033,231 shares of Series V Preferred Stock, which has a 20%

liquidation preference over our Common Stock and also has certain rights to dividend and distributions at the discretion of the Board.

In addition, our Board could authorize the issuance of a series of preferred stock that has greater voting power than our Common Stock

or that is convertible into our Common Stock, which could decrease the relative voting power of our Common Stock or result in dilution

to our existing shareholders.

Conversion of Series V Preferred Stock to Common Stock Could Result in Substantial Dilution and Cause Market Volatility

the 2024 annual meeting, BTCS shareholders approved a proposal authorizing the Board of Directors, at its discretion, to convert each

share of Series V Preferred Stock into one share of Common Stock.

While the Board now has the authority to implement this conversion,

it has not yet taken such action.

If the Board decides to proceed with the conversion, the issuance of a substantial number of additional

shares of Common Stock could result in significant dilution to existing common shareholders.

As of December 31, 2024, there were 15,033,231

shares of Series V Preferred Stock outstanding.

If all Series V shares are converted into Common Stock, the number of outstanding shares

of our Common Stock would materially increase.

Such an increase in our outstanding Common Stock could materially affect the market price

of our shares and impact investor confidence.

Additionally, the increase in the number of freely tradeable shares could create downward

pressure on the stock price if investors decide to sell shares in response to the dilution or due to other market-related factors.

and prospective investors may also perceive the conversion negatively, leading to increased volatility and reduced demand for our Common

Furthermore, our ability to raise capital in the future through equity offerings may be affected by the potential overhang of

additional shares.

future sales of our Common Stock by us or by our existing shareholders could cause our stock price to fall.

equity financings (in addition to the shares issued under the ATM Agreement) or other share issuances by us, including shares issued

in connection with strategic alliances and corporate partnering transactions, could adversely affect the market price of our Common Stock.

Sales by existing shareholders of a large number of shares of our Common Stock in the public market or the perception that additional

sales could occur could cause the market price of our Common Stock to drop.

have primarily financed our strategic growth through our ATM Agreement.

Additional equity financings (in addition to the shares issued

under the ATM Agreement) or other share issuances by us, including shares issued in connection with strategic alliances and corporate

partnering transactions, could adversely affect the market price of our Common Stock.

Sales by existing shareholders of a large number

of shares of our Common Stock in the public market or the perception that additional sales could occur could cause the market price of

our Common Stock to drop.

Additionally,

if we were not eligible to sell shares under our existing Registration Statement on Form S-3, we would be prohibited from selling under

the ATM Agreement and may need to raise capital under terms less friendly to the Company and cause more dilution to existing and future

shareholders.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-K

Item 7. Management’s Discussion and Analysis