| Summary of Significant Accounting Policies | Note
3 - Summary of Significant Accounting Policies There
have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2023 Annual
Report. Cash
and Cash Equivalents The
Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents.
The Company maintains cash and cash equivalent balances at financial institutions that are insured by the FDIC. As of June 30, 2024 and
December 31, 2023, the Company had approximately $ 537,000 1,458,000 Financial
instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 61,000 933,000 Stablecoins The
Company holds stablecoins, such as USDT (Tether) and USDC (USD Coin), which are crypto assets that are pegged to the value of one U.S.
dollar. Our stablecoins are typically held in secure digital wallets or on crypto asset exchanges. The Company acquires and holds stablecoins
primarily to facilitate crypto asset transactions, including, but not limited to, payments to third-party vendors. While not accounted
for as cash or cash equivalents, these stablecoins are considered a liquidity resource. Crypto
Assets Fair
Value Measurement The
Company’s accounts for the fair value measurement for its crypto assets in accordance with Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement Kraken
serves as the principal market for the Company’s crypto assets, being the Company’s primary cryptocurrency exchange for both
purchases and sales. Coinbase is designated as the secondary principal market. This determination results from a comprehensive evaluation
considering various factors, including compliance, trading activity, and price stability. The
fair value of crypto assets is primarily determined based on pricing data obtained from Kraken, the Company’s principal market.
In the absence of Kraken data, pricing from Coinbase serves as a secondary source. While
Kraken is designated as the primary exchange, the Company retains flexibility to conduct cryptocurrency transactions on other exchanges
where it maintains accounts. This flexibility allows the Company to adapt to changing market conditions and explore alternative platforms
when necessary to ensure cost-effective execution and fair value measurement using the most advantageous market. The
selection of Kraken as the principal market reflects the Company’s commitment to informed decision-making and achieving the most
accurate representation of fair value for its crypto assets. Regular reviews ensure alignment with the Company’s objectives and
cryptocurrency market dynamics. Accounting
for Crypto Assets The
cost basis of the Company’s crypto assets is initially recorded at their fair value using the last close price of the day in the
UTC (Coordinated Universal Time) time zone on the date of receipt. Crypto
assets are measured at their fair respective fair market values at each reporting period end on the balance sheets and classified as
either ‘Staked Crypto Assets’ or ‘Crypto Assets’ to distinguish their nature within the respective balances.
Staked crypto assets are presented as current assets if their lock-up periods are less than 12 months, and as long-term other assets
if the lock-up extends beyond one year. The majority of our crypto assets are staked, typically with lock-up periods of less than 21
days, and are considered current assets in accordance with ASC 210-10-20, Balance Sheet The
classification of purchases and sales in the statements of cash flows is determined based on the nature of the crypto assets, which can
be categorized as ‘productive’ (i.e. acquired for purposes of staking) or ‘non-productive’ (e.g. bitcoin). Acquisitions
of non-productive crypto assets are treated as operating activities, while acquisitions of productive crypto assets are classified as
investing activities in accordance with ASC 230-10-20, Investing activities Effective
January 1, 2023, the Company has elected to early adopt ASU No. 2023-08 The
Company employs the specific identification method to determine the cost basis of our assets for the computation of gains and losses,
in accordance with ASC 350-60-50-2a. This method involves identifying and using the actual cost of each individual asset sold or disposed
of to calculate the gain or loss on its sale. Realized 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 $ 287,000 568,000 298,000 560,000 Revenue
Recognition The
Company recognizes revenue under ASC 606 , Revenue from Contracts with Customers
● Step
1: Identify the contract with the customer
● Step
2: Identify the performance obligations in the contract
● Step
3: Determine the transaction price
● Step
4: Allocate the transaction price to the performance obligations in the contract
● Step
5: Recognize revenue when the Company satisfies a performance obligation Revenue
is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration
the Company expects to be entitled to in exchange for those goods or services. The Company generates revenue through 1) staking rewards
generated from its blockchain infrastructure operations, and 2) gas fees earned from successful Ethereum block building through Builder+.
These revenues are collectively termed ‘ Blockchain infrastructure revenues The
transaction consideration the Company receives - the crypto asset awards and gas fees - are a non-cash consideration, which the Company
measures at fair value on the date received. Blockchain
Infrastructure The
Company engages in network-based smart contracts by running its own crypto asset validator nodes as well as by staking (or “delegating”)
crypto assets directly to both its own validator nodes and nodes run by third-party operators. Through these contracts, the Company provides
crypto assets to stake to a node for the purpose of validating transactions and adding blocks to a respective blockchain network. The
term of a smart contract can vary based on the rules of the respective blockchain and typically last from a few days to several weeks
after it is cancelled (or “un-staked”) by the delegator and requires that the staked crypto assets remain locked up during
the duration of the smart contract. In
exchange for staking the crypto assets and validating transactions on blockchain networks, the Company is entitled to all of the fixed
crypto asset awards earned from the network when delegating to the Company’s own node and is entitled to a fractional share of
the fixed crypto asset awards a third-party node operator receives (less crypto asset transaction fees payable to the node operator,
which are immaterial and are recorded as a deduction from revenue), for successfully validating or adding a block to the blockchain.
The Company’s fractional share of awards received from delegating to a third-party validator node is proportionate to the crypto
assets staked by the Company compared to the total crypto assets staked by all Delegators to that node at that time. On
certain blockchain networks on which the Company operates a validator node, the Company earns a validator node fee (“Validator
Fee”), determined as a node operator’s published percentage of the crypto asset rewards earned on crypto assets delegated
to its node. Token
rewards earned from staking, as well as tokens earned as Validator Fees, are calculated and distributed directly to BTCS digital wallets
by the blockchain networks as part of their consensus mechanisms. The
provision of validating blockchain transactions is an output of the Company’s ordinary activities. Each separate block creation
or validation under a smart contract with a network represents a performance obligation. The satisfaction of the performance obligation
for processing and validating blockchain transactions occurs at a point in time when confirmation is received from the network indicating
that the validation is complete, and the awards are available for transfer. At that point, revenue is recognized. Ethereum
Block Building (Builder+) The
Company participates in the Ethereum blockchain network by engaging in the construction of blocks (“block building”) containing
strategically bundled transactions from the Ethereum mempool and from searchers who connect to the Company’s endpoint with the
intent of the Company’s builder proposing their transactions. Revenue recognition for these activities, conducted through Builder+,
entails the recognition of gas fees (or “transaction fees”) earned in exchange for successfully constructing blocks of bundled
transactions and having these blocks selected and proposed by a validator to the Ethereum network for validation and successfully finalized
on the network. These
gas fees are earned as a direct result of the Company’s fulfillment of its performance obligations, which include the construction
of blocks by bundling transactions to maximize the value of the included fees and the proposal of that block by a Validator. Each constructed
block under a smart contract with the Ethereum network signifies a distinct performance obligation. As
part of the block construction and proposal process, the Company’s Builder purchases block space through a fixed non-negotiable
fee paid to a Validator (a “Validator Payment”) embedded in each proposed block. The Validator Payment, predetermined by
the Builder, is paid to Validators as compensation for selecting and proposing the Company’s block to the network for validation.
The Validator Payment is intrinsically linked to the Company’s performance obligations and is disbursed in the block constructed
by the Builder if our Builder’s block is both selected by a Validator and successfully proposed to, and finalized on, the Ethereum
network; otherwise, our Validator Payment may be included in a subsequent block. The Validator Payment represents a direct and fixed
pre-determined cost. The
satisfaction of the performance obligation occurs at a point in time when the constructed block is both proposed by a Validator and successfully
finalized on the Ethereum network. At this juncture, the Company has fulfilled its obligations, and the gas fees associated with the
transactions included in the block become available and are transferred to the Company’s digital wallet. The
Company recognizes revenue, reflecting the fair value of the total gas fees earned from the constructed block. The
following table summarizes the revenues earned from the Company’s operations for the three and six months ended June 30, 2024 and
2023. Schedule of Revenues Earned from Company’s Operations
2024 2023 2024 2023
For the Three Months Ended June 30, For the Six Months Ended June 30,
2024 2023 2024 2023
Revenues from blockchain infrastructure operations
Staking to BTCS nodes $ 407,287 $ 346,721 $ 751,198 $ 607,429
Staking to third-party nodes 78,052 39,032 152,494 89,832
Builder+ 75,853 - 108,886 -
Total revenues $ 561,192 $ 385,753 $ 1,012,578 $ 697,261 The
following tables detail the native token rewards and their respective fair market value recognized as revenue for the three and six
months ended June 30, 2024 and 2023. Revenues are derived from three primary sources: (1) token rewards earned from the delegation
of cryptocurrency assets to third-party validator nodes; (2) token rewards derived from BTCS-operated validator nodes, which include
staking of the Company’s crypto assets to BTCS nodes as well as Validator Fees earned from third parties asset delegations to
our nodes; and (3) block rewards generated by BTCS Builders. Crypto
assets earned from BTCS validator nodes Schedule of Crypto Assets Earned From Validator Nodes
For the Three Months Ended June 30, For the Six Months Ended June 30,
2024 2023 2024 2023
Asset Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD)
Ethereum (ETH) 72 $ 241,588 108 $ 201,121 138 $ 429,666 206 $ 355,755
Cosmos (Atom) 12,565 $ 104,580 10,662 $ 109,787 23,731 $ 225,654 16,642 $ 185,256
Akash (AKT) 6,246 $ 26,740 2,851 $ 1,159 10,820 $ 45,486 5,658 $ 2,204
Kava (KAVA) 6,632 $ 4,305 10,394 $ 9,351 12,924 $ 9,557 23,403 $ 21,086
Mina (MINA) 2,880 $ 2,439 1,440 $ 1,070 5,760 $ 6,085 7,200 $ 4,907
Oasis Network (ROSE) 10,431 $ 1,036 30,287 $ 1,735 26,567 $ 3,254 50,651 $ 2,931
Kusama (KSM) 279 $ 8,108 180 $ 4,960 289 $ 8,583 453 $ 14,372
Avalanche (Avax) 668 $ 18,491 646 $ 8,403 668 $ 18,491 646 $ 8,403
NEAR Protocol (NEAR) - $ - 1,665 $ 2,841 714 $ 4,422 2,687 $ 4,952
Tezos (XTZ) - $ - 435 $ 432 - $ - 1,614 $ 1,701
Evmos (EVMOS) - $ - 32,236 $ 5,862 - $ - 32,236 $ 5,862
Total earned from BTCS blockchain infrastructure operations $ 407,287 $ 346,721 $ 751,198 $ 607,429 Crypto
assets earned from Ethereum block building through Builder+ Schedule of Crypto Assets Earned From
Ethereum
For the Three Months Ended June 30, For the Six Months Ended June 30,
2024 2023 2024 2023
Asset Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD)
Ethereum (ETH) 23 $ 75,853 - $ - 34 $ 108,886 - $ -
Total earned from Ethereum block building through Builder+ 23 $ 75,853 - $ - 34 $ 108,886 - $ - Crypto
assets earned from staking to third-party validator nodes Schedule of Crypto Assets Earned From Third Party
For the Three Months Ended June 30, For the Six Months Ended June 30,
2024 2023 2024 2023
Asset Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD) Token Rewards Revenue ($USD)
Axie Infinity (AXS) 5,772 $ 36,379 4,474 $ 29,313 11,152 $ 84,701 8,926 $ 69,341
Solana (SOL) 139 $ 21,353 128 $ 2,581 259 $ 36,725 249 $ 5,112
Polygon (MATIC) 6,314 $ 3,758 6,158 $ 5,057 12,544 $ 9,489 12,140 $ 11,794
Polkadot (DOT) 376 $ 2,619 356 $ 1,957 736 $ 5,576 602 $ 3,461
Evmos (EVMOS) 6,834 $ 268 - $ - 18,260 $ 1,208 - $ -
Cardano (ADA) 2,039 $ 837 433 $ 124 3,328 $ 1,590 433 $ 124
Tezos (XTZ) 354 $ 338 - $ - 671 $ 705 - $ -
NEAR Protocol (NEAR) 1,886 $ 12,500 - $ - 1,886 $ 12,500 - $ -
Total earned from staking to third-party validator nodes $ 78,052 $ 39,032 $ 152,494 $ 89,832
Total revenue earned $ 561,192 $ 385,753 $ 1,012,578 $ 697,261 Cost
of Revenues The
Company’s cost of revenues related to its blockchain infrastructure operations primarily includes direct production costs
associated with transaction validation on the network, cloud-based server hosting expenses related to our validator nodes and
Builders, and allocated employee salaries dedicated to node maintenance and support. Additionally, the cost of revenues encompasses
Validator Payments made from our Builder to Validators as well as fees paid to third parties for their assistance in software
maintenance and node operations. These costs directly related to the production of revenues are collectively termed
‘ Blockchain infrastructure expenses The
following table further details the costs of revenues for the three and six months ended June 30, 2024 and 2023. Schedule of Costs of Revenues
2024 2023 2024 2023
For the Three Months Ended June 30, For the Six Months Ended June 30,
2024 2023 2024 2023
Cost of staking revenues $ 47,414 $ 113,612 $ 99,367 $ 195,626
Cost of Builder revenues 121,434 - 230,106 -
Total cost of revenues $ 168,848 $ 113,612 $ 329,473 $ 195,626 Internally
Developed Software Internally
developed software consists of the core technology of the Company’s StakeSeeker and ChainQ platforms. For internally developed
software, the Company uses both its own employees as well as the services of external vendors and independent contractors. The Company
accounts for computer software used in the business in accordance with ASC 985-20 and ASC 350. ASC
985-20, Software-Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, ASC
350, Intangibles-Goodwill and Other Property
and Equipment Property
and equipment consists of computer, equipment and office furniture and fixtures, all of which are recorded at cost. Depreciation and
amortization are recorded using the straight-line method over the respective useful lives of the assets ranging from three five years Use
of Estimates The
accompanying financial statements have been prepared in conformity with U.S. GAAP. This requires management to make estimates and assumptions
that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during the period. The Company’s significant estimates and
assumptions include the recoverability and useful lives of indefinite life intangible assets, stock-based compensation, and the valuation
allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates, including the carrying amount
of the indefinite life intangible assets, could be affected by external conditions, including those unique to the Company and general
economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and
could cause actual results to differ from those estimates and assumptions. Income
Taxes The
Company recognizes income taxes on an accrual basis based on tax positions taken or expected to be taken in its tax returns. A tax position
is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected
in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not
(i.e., likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities.
Tax positions that meet the more likely than not threshold are measured using a probability-weighted approach as the largest amount of
tax benefit that is greater than 50% likely of being realized upon settlement Accounting
for Warrants The
Company accounts for the issuance of Common Stock purchase warrants issued in connection with the equity offerings in accordance with
the provisions of ASC 815, Derivatives and Hedging The
Company assessed the classification of Common Stock purchase warrants as of the date of each offering and determined that such instruments
originally met the criteria for equity classification; however, as a result of the Company no longer being in control of whether the
warrants may be cash settled, the instruments no longer qualify for equity classification. Accordingly, the Company classified the warrants
as a liability at their fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement
at each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as “change in
the fair value of warrant liabilities” in the statements of operations. The fair value of the warrants has been estimated using
a Black-Scholes valuation model (see Note 6). Stock-based
compensation The
Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation Share-based
payment awards exchanged for services are accounted for at the fair value of the award on the estimated grant date. Options Stock
options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market
price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options often vest over
a one-year period. The
Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating
the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application
of management’s judgment. Restricted
Stock Units (RSUs) For
awards vesting upon the achievement of a service condition, compensation cost measured on the grant date will be recognized on a straight-line
basis over the vesting period. Stock-based compensation expense for the market-based restricted stock units with explicit service conditions
is recognized on a straight-line basis over the longer of the derived service period or the explicit service period, regardless of whether
the market condition is satisfied. However, in the event that the explicit service period is not met, previously recognized compensation
cost would be reversed. Market-based restricted stock units subject to market-based performance targets require achievement of the performance
target as well as a service condition in order for these RSUs to vest. The
Company estimates the fair value of market-based RSUs as of the grant date and expected derived term using a Monte Carlo simulation that
incorporates pricing inputs covering the period from the grant date through the end of the derived service period. Dividends Effective
January 27, 2023, the Company’s Board of Directors (the “Board”) approved the issuance of a newly designated Series
V Preferred Stock (“Series V”) on a one-for-one basis to the Company’s shareholders (including restricted stock unit
holders and warrant holders who were entitled to such distribution). The distribution of Series V shares was approved and completed on
June 2, 2023 to shareholders as of the record date of May 12, 2023. The Series V: (i) is non-convertible, (ii) has a 20% liquidation
preference over the shares of common stock, (iii) is non-voting and (iv) has certain rights to dividends and distributions (at the discretion
of the Board). 14,542,803 The
Company will evaluate the appropriateness of potential future dividends as the Company continues to grow its operations. Advertising
Expense Advertisement
costs are expensed as incurred and included in marketing expenses. Advertising and marketing expenses amounted to approximately $ 28,000 3,000 86,000 9,000 Net
Income (Loss) per Share Basic
income (loss) per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares
and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the Company’s restricted
stock units, options and warrants. Diluted income (loss) per share excludes the shares issuable upon the conversion of preferred stock,
notes and warrants from the calculation of net income (loss) per share if their effect would be anti-dilutive. The
following financial instruments were not included in the diluted loss per share calculation for the three months ended June 30, 2024
and 2023 because their effect was anti-dilutive: Schedule
of Earnings Per Share Anti-diluted
2024 2023
As of June 30,
2024 2023
Warrants to purchase common stock 712,500 712,500
Options 1,302,500 1,135,000
Non-vested restricted stock awards units 1,806,373 1,631,399
Total 3,821,373 3,478,899
Anti-dilutive securities 3,821,373 3,478,899 Recent
Accounting Pronouncements In
December 2023, the FASB issued ASU No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60) Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s
present or future financial statements. |
