What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-13 · 290 added, 274 removed, 121 unchanged (82% of the section changed)

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When we refer to the “2025 Quarter” and the “2024 Quarter” we are referring to

the three months ended September 30, 2024 and September 30, 2023, respectively.

When we refer to the “2024 Period” and the

“2023 Period” we are referring to the nine months ended September 30, 2024 and September 30, 2023, respectively.

the three months ended March 31, 2025 and March 31, 2024, respectively.

is a Nasdaq-listed U.S.-based blockchain technology company focused on blockchain infrastructure, with its primary operations currently

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Infrastructure

core business centers on its blockchain infrastructure, which supports the validation of transactions and security of multiple proof-of-stake

(PoS) and delegated proof-of-stake (dPoS) blockchain networks.

The Company manages a network of cloud-based validator nodes, which play

a key role in network consensus by performing 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

blockchain infrastructure centers 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.

Block Building – Builder+

central focus of BTCS’s current operations is its Ethereum block-building initiative, branded as Builder+, launched in 2024.

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

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

is now a central driver of BTCS’s growth strategy, reflecting the Company’s emphasis on scalable and efficient revenue generation

through advanced blockchain technology.

Builder+ currently operates within the Ethereum ecosystem, it has been designed to adapt to a broader blockchain landscape, allowing

for potential expansion to other networks in the future.

This flexibility aligns with BTCS’s strategic vision to maintain a robust

blockchain infrastructure that is not limited to any single network, even as Ethereum remains a primary area of focus.

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

operational risks.

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 revenue by optimizing the contents and structure of each block.

The Company aims to maximize the

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

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+ operated exclusively on Ethereum prior to April 1, 2025, we have since expanded

into block-building on Binance Smart Chain.

Builder+’s 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

non-custodial 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 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.

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

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and (3) verifying transactions on the network when required.

a non-custodial StaaS provider, we do not hold or take possession of any Delegator funds, crypto assets, or crypto asset rewards at any

point during the staking or delegation process.

Delegation does not involve the transfer of crypto asset ownership to a Validator.

the process of staking, delegated crypto assets remain in the Delegator’s digital wallets.

The blockchain network calculates rewards

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

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.

a non-custodial StaaS provider, we do not hold or take possession of any Delegator funds, crypto assets, or crypto asset rewards at

any point during the staking or delegation process.

Delegation does not involve the transfer of crypto asset ownership to a

All Delegator assets remain under the sole control of the Delegator.

During the process of staking, delegated crypto

assets remain in the Delegator’s digital wallets.

The blockchain network calculates rewards earned, which are then distributed

directly to the Delegator’s wallet.

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 September 30, 2024:

operations, including the amount of third-party crypto assets delegated to our non-custodial validator nodes, as of March 31, 2025:

Blockchain Network

Validator Fee

Crypto Assets

(Native Tokens)

Validator Fee Percentage %

Delegated Crypto Assets (Native Tokens)

Delegated Crypto Assets ($USD)

3,052,000 ROSE

ChainQ and StakeSeeker

complement our core blockchain infrastructure, we have developed crypto-focused technology solutions aimed at increasing accessibility

and transparency within the blockchain ecosystem.

These solutions include “ChainQ”, an AI-powered blockchain data and analytics

platform currently in beta, and “StakeSeeker”, a portfolio monitoring tool designed for cryptocurrency holders.

simplifies the process of accessing and analyzing blockchain data, enabling deeper insights into on-chain activity.

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.

is a personal finance software and education center with a comprehensive crypto dashboard providing tools for crypto asset holders to

connect, monitor, track, and analyze their crypto portfolios across exchanges and wallets in a single analytics platform.

does not provide or facilitate direct, crypto asset delegation or transaction execution on our platform.

The StakeSeeker platform is

currently free-to-use for registered users and is not currently generating revenue.

The Company is not a broker-dealer or an investment

advisor and does not provide any such related services.

the ChainQ and StakeSeeker platforms contribute to the overall value BTCS offers within the blockchain space, supporting its infrastructure

operations and expanding user engagement and awareness.

the three months ended March 31, 2025, BTCS ceased operating validator nodes on Avalanche (AVAX).

In April 2025, BTCS also ceased operating

validator nodes on Akash (AKT) and Kava (KAVA) networks.

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 testing phase,

ChainQ simplifies on-chain data access and analysis for cryptocurrency holders, delivering deeper insights into blockchain activity

while adhering to data privacy standards.

By indexing public data from our blockchain infrastructure operations, ChainQ provides an intuitive platform for exploring

on-chain data.

forward, BTCS remains committed to enhancing its blockchain infrastructure capabilities, with a strong emphasis on its Ethereum block-building

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scalable opportunities within the rapidly evolving blockchain ecosystem.

While Ethereum is currently the primary network for BTCS’s

operations, the Company may expand its infrastructure to accommodate additional blockchain networks.

is dedicated to remaining at the forefront of blockchain innovation and staying adaptable to opportunities across the broader blockchain

This strategic agility positions BTCS to navigate the evolving blockchain landscape while maximizing its impact.

tables below detail BTCS’s quarterly crypto asset holdings as of the end of each quarter beginning with the 2023 Quarter and ending

the 2024 Quarter.

tables below detail BTCS’s quarterly crypto asset holdings for each quarter from Q1 2024 through Q1 2025.

Assets Held at the End of the Following Calendar Quarters:

Ethereum (ETH)

Cardano (ADA)

Polkadot (DOT)

Cosmos (ATOM)

Polygon (POL fka MATIC)

Avalanche (AVAX)

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

Evmos (EVMOS)

BNB Chain (BNB)

Rocket Pool (RPL)

Polkadot (DOT)

Polygon (POL)

Cardano (ADA)

Evmos (EVMOS)

Band Protocol (BAND)

Oasis Network (ROSE)

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

Ethereum (ETH)

Cardano (ADA)

Polkadot (DOT)

Cosmos (ATOM)

Polygon (POL fka MATIC)

Avalanche (AVAX)

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

Evmos (EVMOS)

BNB Chain (BNB)

Rocket Pool (RPL)

Polkadot (DOT)

Polygon (POL)

Cardano (ADA)

Evmos (EVMOS)

Band Protocol (BAND)

Oasis Network (ROSE)

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

Ethereum (ETH)

Cardano (ADA)

Polkadot (DOT)

Cosmos (ATOM)

Polygon (POL fka MATIC)

Avalanche (AVAX)

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

Evmos (EVMOS)

BNB Chain (BNB)

Rocket Pool (RPL)

Polkadot (DOT)

Polygon (POL)

Cardano (ADA)

Evmos (EVMOS)

Band Protocol (BAND)

Oasis Network (ROSE)

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

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

assets earned from BTCS validator nodes

assets earned from blockchain infrastructure staking activities through NodeOps

Ethereum (ETH)

Cosmos (ATOM)

Oasis Network (ROSE)

Avalanche (AVAX)

NEAR Protocol (NEAR)

Evmos (EVMOS)

Crypto assets earned from staking to third-party

validator nodes

Axie Infinity (AXS)

Polygon (POL fka MATIC)

NEAR Protocol (NEAR)

Avalanche (AVAX)

Rocket Pool (RPL)

Polygon (POL)

Polkadot (DOT)

Evmos (EVMOS)

Cardano (ADA)

NEAR Protocol (NEAR)

assets earned from Ethereum block building through Builder+

Evmos (EVMOS)

Oasis Network (ROSE)

Revenue includes amounts earned from staking to third-party validator nodes.

assets earned from block-building through Builder+

Ethereum (ETH)

Market Value of Crypto Asset Rewards Earned Recognized as Revenue

The following table summarizes the revenues earned from the Company’s

operations by revenue segment during the following calendar quarters:

Revenue by Segment

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

Total revenue from blockchain infrastructure staking activities through NodeOps

Total revenue from block-building through Builder+

Total revenue

from BTCS blockchain infrastructure operations

Total revenue from staking

to third-party validator nodes

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:

Revenue from BTCS validator nodes

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

Ethereum (ETH)

Cosmos (ATOM)

Oasis Network (ROSE)

Avalanche (AVAX)

Axie Infinity (AXS)

NEAR Protocol (NEAR)

Evmos (EVMOS)

Total revenue from BTCS validator

Revenue from staking to third-party validator nodes

Axie Infinity

Polygon (POL fka MATIC)

Avalanche (AVAX)

Rocket Pool (RPL)

Polygon (POL)

Polkadot (DOT)

Evmos (EVMOS)

Cardano (ADA)

Protocol (NEAR)

revenue from staking to third-party validator nodes

from Ethereum block building through Builder+

Evmos (EVMOS)

Oasis Network (ROSE)

Total revenue from blockchain

infrastructure staking activities through NodeOps

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

from block building through Builder+

Ethereum (ETH)

Total revenue

from Ethereum block building through Builder+

of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

following tables reflect our operating results for the three and nine months ended September 30, 2024 and 2023:

Total revenue from block-building

through Builder+

of Operations for the Three Months Ended March 31, 2025 and 2024

following tables reflect our operating results for the three months ended March 31, 2025 and 2024:

For the Three Months Ended

September 30,

Blockchain infrastructure revenues (net of fees)

Blockchain infrastructure revenues

Total revenues

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Other income (expenses):

Change in unrealized appreciation (depreciation) on crypto assets

Change in fair value of warrant liabilities

Total other income (expenses)

Net income (loss)

Change in unrealized appreciation (depreciation) of crypto assets

(14,530,822 )

$ (27,633,489 )

For the Nine Months Ended

September 30,

Validator revenue

Total revenues

Cost of revenues

Validator expense

Operating expenses:

General and administrative

Research and development

Compensation and related expenses

Realized gains on crypto asset transactions

Total operating expenses

Other income (expenses):

Change in unrealized appreciation (depreciation) on crypto assets

Change in fair value of warrant liabilities

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(14,305,672 )

increase in revenue during the 2024 Quarter and 2024 Period as compared to the 2023 Quarter and 2023 Period is primarily due to the increase

in the block rewards earned from our Ethereum block-building activities during the 2024 Quarter and 2024 Period.

The increase is also

partially due to the increase in fair value of our crypto assets earned as rewards for staking as the market prices of crypto assets

continued to be elevated during 2024 Period compared to 2023 Period.

Although we believe the number of block rewards and tokens we earn

from staking and revenue recognized will 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.

above, in the 2024 Quarter, the Company earned approximately 217 ETH from its Builder+ and Validator operations.

the period from October 1, 2024 to November 12, 2024, the Company has earned approximately 541 ETH from its Builder+ and

Validator operations.

As such, the Company expects its revenue to significantly increase in the fourth quarter.

During this time

period, our associated costs of revenues have also increased at a larger percentage than our revenue growth, resulting in lower

gross margins.

increase in the cost of revenues during the 2024 Period as compared to the 2023 Period is due to the increase in Validator Payments made

to purchase block space as part of our Ethereum block-building activities during the 2024 Quarter and Period.

These additional costs

are partially offset by the efficiencies realized in our blockchain infrastructure validating operating costs, including streamlining

of web service hosting fees and reduction of services provided by vendors.

We believe our cost of revenues will increase as we continue

to ramp up our business, particularly our strategy to increase the number and value of block production, requiring additional purchases

of block space from Validators.

of Accounting Principle Change in Ethereum Block Building Revenues and Costs

the second Quarter of 2024, the Company implemented a change in accounting principle related to the presentation of revenues and

costs associated with our Ethereum bloc- building operations.

This change, made under ASC 606, now presents gas fees earned as gross

revenue and Validator Payments as cost of revenues, rather than netting them against each other.

This correction, applied

retrospectively, better reflects the economic substance of our transactions and provides enhanced transparency.

The change does not

impact gross profit, net income, or balance sheet items, but it does result in increased reported revenues and costs for the three

months ended March 31, 2024.

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

increase in the 2024 Period was primarily due to an increase of approximately $200,000 in proxy service fees related to our 2024 annual

meeting as well as a decrease of approximately $140,000 in legal fees and related administrative costs from the 2023 Period, driven primarily

by services surrounding the Series V Preferred Distribution and related listing on Upstream Exchange incurred during the first half of

We are uncertain as to whether our future legal expenses related to the SEC’s current investigation of the Company will have

a material impact on our operating expenses during the remainder of 2024, or thereafter.

Additionally, we incurred higher accounting

fees related to our audits and Form S-3 registration during the 2024 Period, which is partially offset by other reduced costs resulting

from cost cutting measures for other professional fees during the 2024 Period.

and development expenses decreased slightly during the 2024 Period from the 2023 Period as the Company shifted efforts dedicated to

the beta release of our proprietary StakeSeeker platform in the 2023 Period to focus on the launch of Builder+ operations as well as

the further development of ChainQ, which launched in July 2024.

We anticipate research and development costs to remain consistent as

we continue to expand on technological solutions in the blockchain sector with a focus on cost management of our third-party

development team.

and related expenses increased during the 2024 Period resulting from the addition of employee headcount during the 2024 Quarter as well

as larger accruals for estimated performance bonuses for 2024.

We believe our compensation expenses will increase from those reported

in the 2024 Period as the Company continues to utilize non-cash equity-based compensation incentives as a core part of our compensation

strategy and anticipate additional accruals for 2024 performance-based bonus incentives in future reporting periods and may bring on additional staff.

costs increased during the 2024 Period as the Company incurred costs associated with the purchase of transaction traffic to bolster Ethereum

block production as part of the ramp up of Builder+ operations.

The Company may have additional expenditures for transaction traffic

in order to further increase Ethereum block-building activities.

realized losses on crypto asset transactions increased during the 2024 Period as the Company sold certain crypto assets from our blockchain

infrastructure operations in order to fund operating activities.

The Company may realize additional gains (losses) in the future resulting from the sale of crypto assets to meet operational and cash needs.

(27,408,339 )

Net income (loss)

$ (17,268,697 )

$ (29,525,283 )

for the 2025 Quarter increased to approximately $1,689,000 compared to approximately $451,000 in the 2024 Quarter.

The increase was primarily

attributable to the expansion of our Builder+ operations, which focus on Ethereum block-building activities.

the 2025 Quarter, Builder+ operations contributed approximately $1,350,000 of total revenue, while our NodeOps business contributed approximately

The significant year-over-year increase in revenue reflects the continued scaling of our Builder+ operations, which resulted

in a substantial increase in block rewards earned during the period.

we anticipate continued growth in both the number of block rewards and staking rewards earned, the fair value of such rewards may fluctuate

due to the inherent volatility of crypto asset markets.

As a result, the amount of revenue recognized in future periods may be materially

impacted by market price movements of the underlying crypto assets at the time of reward receipt or recognition.

of revenues increased during the 2025 Quarter, primarily due to higher Validator Payments made to external parties to secure block space

for purchasing block space as part of our block-building activities under Builder+.

Validator Payments totaled approximately $1,480,000

during the 2025 Quarter.

These additional costs are partially offset by the efficiencies realized in our blockchain infrastructure validating

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

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, likely reducing gross margins.

and Administrative Expenses

and administrative expenses increased during the 2025 Quarter compared to the 2024 Quarter.

The increase was primarily attributable to

higher payments for order flow associated with supporting Ethereum block-building activities, expanded investor relations services, and

higher accounting fees, including increases in audit fees.

growth in general and administrative expenses reflects the Company’s ongoing investment in operational infrastructure to support

Builder+ activities and broader public company compliance efforts.

We expect general and administrative expenses to fluctuate based on

business needs, with potential increases in audit fees as well as order flow costs as operations continue to scale.

and Development Expenses

and development expenses increased during the 2025 Quarter compared to the 2024 Quarter, primarily due to continued investment in Builder+

strategies and development.

The Company also continued the development of ChainQ during the period, although the primary focus of research

and development activities remained centered on enhancing Builder+ operations.

We expect research and development costs to remain consistent

or moderately increase in future periods, with an emphasis on disciplined cost management, particularly for third-party development services.

and Related Expenses

and related expenses increased during the 2025 Quarter compared to the 2024 Quarter, primarily due to the addition of employee headcount

and larger accruals for estimated performance-based bonuses tied to operational and financial milestones.

The Company continues to rely

on non-cash equity-based compensation as a core element of its overall compensation strategy, and we expect total compensation costs

to increase in future periods as additional personnel are added and as further accruals for performance-based incentives are recognized.

expenses increased during the 2025 Quarter compared to the 2024 Quarter, primarily due to expanded advertising campaigns and promotional

activities aimed at enhancing brand visibility and supporting business development initiatives.

The Company expects that marketing spend

are expected to remain at current or higher levels in future periods, in line with strategic growth objectives and broader customer engagement

Losses on Crypto Asset Transactions

losses on crypto asset transactions during the 2025 Quarter were primarily driven by the sale of Kusama (KSM), which the Company had

held with a long-standing unrealized loss totaling approximately $1.3 million that was recognized upon sale.

This transaction reflects

the Company’s strategic exit from its KSM-related operations and holdings.

Additional realized gains or losses may be recognized

in future periods based on the timing and pricing of crypto asset sales to support operational or liquidity needs.

Income (Expenses)

changes in other income for the 2024 Quarter and 2024 Period were primarily attributed to the recognition of the change in unrealized

appreciation on crypto assets resulting from the increase in the fair market value of the Company’s crypto assets during the 2024

Period compared to the 2023 Period and the decrease in the fair market value of the Company’s crypto assets during the 2024 Quarter.

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 the 2024 Quarter was partially 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.

income (expense) for the 2025 Quarter was primarily impacted by changes in the fair value of the Company’s crypto assets and warrant

recognition of unrealized depreciation of crypto assets during the 2025 Quarter, compared to unrealized appreciation during the 2024

Quarter, contributed significantly to the year-over-year change.

These fluctuations reflect movements in the fair market value of

the Company’s crypto asset holdings, which are directly influenced by the volatility of crypto markets.

Market volatility

remains difficult to predict and can materially affect the value of assets reported on our balance sheet and the related effects on

our results of operations.

Additionally,

the decrease in the fair value of warrant liabilities during the 2025 Quarter contributed to a reduction in non-cash expense.

The valuation

of warrant liabilities is primarily influenced by changes in the Company’s stock price as of each reporting period end, which may

fluctuate based on market conditions beyond management’s control.

income (loss)

decrease in net income for the 2024 Period compared to the 2023 Period is primarily attributable to larger increases in fair value of

our crypto assets during the 2024 Period compared to the 2023 Period.

The decrease in net loss for the 2024 Quarter compared to the 2023

Quarter is primarily attributable to the decline of crypto market prices during the 2024 Quarter, resulting in decreased values of our

crypto assets and reporting of unrealized depreciation in the 2024 Quarter.

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

decline in net income for the 2025 Quarter compared to the 2024 Quarter was primarily driven by a sharp reversal in the fair value of

crypto assets, resulting in significant unrealized losses during the period.

In contrast, the prior-year quarter benefited from substantial

unrealized gains.

This swing in non-cash fair value adjustments reflects ongoing crypto market volatility, which may continue to materially

impact results in future periods.

expenses also increased meaningfully, led by higher compensation costs—including increased performance bonus accruals tied to revenue

growth—and a rise in marketing spend to support strategic growth initiatives.

Additionally, the Company recognized realized losses

on crypto asset transactions during the 2025 Quarter, compared to immaterial realized gains in the prior-year period.

combined impact of these factors contributed to a substantial year-over-year decrease in net income.

income (loss) may continue to fluctuate significantly due to the volatility in the crypto asset markets, impacting changes in the fair

value of crypto assets during future reporting periods.

and Capital Resources

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price of up to $98,767,500.

From September 14, 2021 through November 12, 2024, the Company sold a total of 5,260,536 shares

of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $19, 176 ,000 at an average selling price

of $3.65 per share, resulting in net proceeds of approximately $18,548,000 after deducting commissions and other transaction costs.

a result of the SEC’s baby shelf requirements, the Company is currently limited in its sales of Common Stock under the ATM Agreement

to one-third of its public float during the 12 calendar months immediately prior to the sale.

As of the filing date of this Form 10-Q,

the Company would be limited in its sales under the ATM Agreement to approximately $$2,618,000 of shares.

the expiration of the Company’s prior Form S-3, the Company filed a new Form S-3, which became effective October 4, 2024.

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.

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

on an ongoing basis.

As of September 30, 2024, the Company had approximately $254,000 of cash and working capital of approximately $25,090,000.

of November 12, 2024, the Company had approximately $1,466,000 of cash and cash equivalents and the fair market value of the Company’s

liquid crypto assets was approximately $31,548,000.

The Company has no outstanding debt.

The Company believes that the existing cash

and liquid crypto assets held by us provide sufficient liquidity to meet working capital requirements, anticipated capital expenditures

and contractual obligations for at least the next 12 months.

September 14, 2021 through May 13, 2025, the Company sold a total of 7,383,868 shares of Common Stock under the ATM Agreement for

aggregate total gross proceeds of approximately $25,839,000 at an average selling price of $3.50 per share, resulting in net proceeds

of approximately $24,997,000 after deducting commissions and other transaction costs.

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 May 13, 2025, the Company would be limited in its sale of shares under the

ATM Agreement to approximately $12,138,000, 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 liquidation of liabilities in the normal course of business.

is the ability of a company to generate sufficient funds to support its current and future operations, satisfy its obligations as they come due, and

otherwise operate on an ongoing basis.

As of March 31, 2025, the Company had approximately $270,000 of cash and working capital of

approximately $20,202,000.

of May 13, 2025, subsequent to the financing described below, the Company had approximately $7,747,000 of cash and cash equivalents,

and the fair market value of the Company’s crypto assets was approximately $30,741,000.

in Note 11 – Subsequent Events , on May 13, 2025, the Company issued $7,810,526 of 5% Original Issue Discount Senior Secured

Convertible Notes for a purchase price of $7,420,000.

(i) are convertible into shares of the Company’s common stock

at a conversion price of $5.85 per share, (ii) mature on May 13, 2027, and (iii) accrue interest at a rate of 6% per annum, which may

be paid on a quarterly basis in either cash or freely tradable shares of the Company’s common stock.

The Company also had

approximately $320,000 in debt obligations outstanding under its lending arrangement with AAVE Protocol as of May 13, 2025.

The Company believes that its existing cash and crypto assets, together

with the proceeds from the May 13 financing and the ability to raise additional funds through its ATM Agreement, provide sufficient liquidity

to meet working capital requirements, anticipated capital expenditures, strategic funding needs, and contractual obligations for at least

the next twelve months from the filing date of this report.

This assessment is based on current market conditions, regulatory environment,

and the Company’s operational plans, all of which are subject to change.

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 nine 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 $2,388,000 during the 2024 Period compared to approximately $2,693,000 for the 2023 Period.

The largest recurring non-cash adjustments to our operating cash flows consisted of approximately $1,888,000 in stock-based compensation

as well as approximately $1,752,000 of revenue earned in native token crypto assets.

provided by investing activities was approximately $531,000 during the 2024 Period compared to cash used in investing activities of approximately

$186,000 for the 2023 Period.

Net cash inflows from investing activities resulted from the sale of crypto assets.

We anticipate similar

levels of crypto assets sales in future quarters to fund operating activities.

provided by financing activities was approximately $653,000 during the 2024 Period compared to approximately $1,114,000 for the 2023

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.

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 prices.

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 $1,902,000 during the 2025 Quarter compared to approximately $769,000 for the 2024 Quarter.

Significant non-cash adjustments impacting operating cash flows included:

Approximately

$3,598,000 related to stock-based compensation, reflecting the issuance of equity-based awards to employees, including performance-based

equity awards.

Approximately

$1,480,000 related to Validator Payments made in native crypto asset tokens as part of our Ethereum block-building operations.

Approximately

$14,531,000 in unrealized depreciation of crypto assets, driven by market value decreases during the 2025 Quarter.

Approximately

$1,689,000 in revenue earned in native crypto assets, which does not result in immediate cash inflows.

anticipate that equity-based compensation will decrease during Fiscal 2025, as the achievement of performance-based awards has become

more challenging due to the recent pullback in crypto market values and related revenue impacts.

Non-cash adjustments related to revenue

earned in native crypto assets and Validator Payments are expected to grow as we continue scaling our Ethereum block-building operations.

However, the magnitude of these non-cash adjustments will continue to be influenced by the inherent volatility of crypto markets, which

can materially impact both asset valuations and operational outputs.

Used in Investing Activities

used in investing activities was approximately $34,000 during the 2025 Quarter compared to approximately

$19,000 for the 2024 Quarter.

Net cash inflows from investing activities resulted from the sale and purchase of crypto assets.

We anticipate

similar levels of crypto assets sales in future quarters to fund operating activities.

Provided by Financing Activities

provided by financing activities was approximately $229,000 during the 2025 Quarter compared to approximately $0 for the 2024 Quarter.

The cash inflows from financing activities were entirely from proceeds of Common Stock sold pursuant to the ATM Agreement.

The Company plans to continue to raise proceeds from the sale of Common Stock to fund operations as needed.

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

of September 30, 2024, there were no off-balance sheet arrangements and we were not a party to any off-balance sheet transactions.

have no guarantees or obligations other than those which arise out of normal business operations.

of March 31, 2025, there were no off-balance sheet arrangements and we were not a party to any off-balance sheet transactions.

no guarantees or obligations other than those which arise out of normal business operations.

Accounting Policies and Estimates

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ACCOUNTING PRONOUNCEMENTS

information on recent accounting pronouncements, see Note 3 to the Unaudited Condensed Financial Statements.

information on recent accounting pronouncements, see Note 3 - Summary of Significant Accounting Policies to the Unaudited

Consolidated Condensed Financial Statements.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

report contains forward-looking statements, including our liquidity, our belief that our blockchain infrastructure efforts will form

the core growth for our business, including but not limited to Builder+, StakeSeeker, and ChainQ, plans to expand our PoS operations,

growth opportunities for the Company, our belief regarding blockchain, expected increase in our revenues and gross margins and future

business plans.

Forward-looking statements can be identified by words such as “anticipates,” “intends,” “may,”

“potential,” “continues,” “plans,” “seeks,” “believes,” “estimates,”

report contains forward-looking statements, including statements regarding our liquidity, our belief that our blockchain

infrastructure efforts will form the core growth for our business, including but not limited to Builder+, StakeSeeker, and ChainQ,

plans to expand our PoS operations, potential growth opportunities for the Company, our views regarding blockchain technology,

anticipated increases in our revenues and gross margins and our future business plans.

Forward-looking statements can be identified

by words such as “anticipates,” “intends,” “may,” “potential,”

“continues,” “plans,” “seeks,” “believes,” “estimates,”

“expects” and similar references to future periods.

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Important factors that could cause actual results to differ materially from those in the forward-looking

statements include the rewards and costs associated with staking or validating transactions on blockchains and successfully building blocks on Ethereum’s blockchain, regulatory issues

related to our business model, a drop in the price of our crypto assets, significant decrease in the value of our crypto assets and

rewards, loss or theft of the private withdrawal keys resulting in the complete loss of crypto assets and reward, and others which

are contained in our filings with the SEC, including our Form 10-K for the year ended December 31, 2023.

Any forward-looking

statement made by us speaks only as of the date on which it is made.

Factors or events that could cause our actual results to differ

may emerge from time to time, and it is not possible for us to predict all of them.

We undertake no obligation to publicly update

any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required

statements include:

(i) the rewards and costs associated with staking or validating transactions on blockchains and successfully

building blocks on Ethereum’s blockchain;

(ii) regulatory issues related to our business model;

(iii) fluctuations in the

price of our crypto assets;

(iv) potential decreases in the value of our crypto assets and rewards;

(v) risks related to the loss or

theft of private withdrawal keys resulting in the complete loss of crypto assets and rewards;

and (vi) other risks and

uncertainties described in our filings with the SEC, including our Form 10-K for the year ended December 31,

Any forward-looking statement made by us speaks only as of the date on which it is made.

Factors or events that could cause

our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.

We undertake no

obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or

otherwise, except as may be required by law.

3 Quantitative and Qualitative Disclosures About Market Risk

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis