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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2025

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 2024 Annual Report on the Company’s Form 10-K filed with the Securities and Exchange Commission.

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, 2025 and December 31, 2024, the Company had approximately $639,000 and $1,978,000 in cash. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of June 30, 2025 and December 31, 2024, the Company had approximately $351,000 and $1,474,000 in excess of the FDIC insured limit, respectively.

Stablecoins

The Company holds stablecoins, including, but not limited to, USDT (Tether) and USDC (USD Coin), which are crypto assets that are pegged to the value of designed to maintain a value equivalent to 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

The Company’s crypto assets primarily consist of Ethereum and other crypto assets held in non-custodial wallets.

Fair Value Measurement

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

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

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

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

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

Accounting for Crypto Assets

Fair Market Value

Crypto assets are measured at their respective fair market values using the last close price of the day in the UTC time zone 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 28 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

Cost Basis

Effective January 1, 2025, the Company enhanced its accounting systems and processes related to the receipt and valuation of crypto assets. As a result of these enhancements, the Company updated its accounting policy for determining the cost basis of crypto assets received. The cost basis is now measured at fair value based on the spot price at the time of receipt, consistent with the applicable guidance under ASC 350-60.

Prior to January 1, 2025, the cost basis of crypto assets was measured using the last close price of the day in the UTC (Coordinated Universal Time) time zone on the date of receipt.

The change has been applied prospectively and did not have a material impact on the Company’s financial statements.

Cost Relief in Determining Realized Gains and Losses

In conjunction with ongoing system and process enhancements, the Company updated its method for determining the cost basis of crypto assets used in computing realized gains and losses. Effective January 1, 2025, the Company adopted the Last-In, First-Out (“LIFO”) method for determining the cost basis of crypto assets disposed of. This method assumes that the most recently acquired assets are sold or used first and replaces the Company’s previous use of the specific identification method, which tracked the actual cost of each individual asset sold.

The Company determined that the change in accounting principle is preferable as it better aligns with the Company’s operational systems and financial reporting objectives. The change has been applied prospectively beginning January 1, 2025, as retrospective application was deemed impracticable due to the nature of prior lot-level selection processes under the specific identification method.

Realized gains (losses) on sale of crypto assets are included in other income (expenses) in the consolidated statements of operations. The Company recorded realized gains (losses) on crypto assets of approximately ($2,778,000) and $287,000 for the three months ended June 30, 2025 and 2024, respectively, and approximately ($4,160,000) and $298,000 for the six months ended June 30, 2025 and 2024, respectively.

The Company does not believe the change materially impacts comparability of results. While the realized loss for the three and six months ended June 30, 2025, reflects application of the new LIFO method, it is not practicable to quantify the exact impact of the change as compared to the prior method, given the subjective lot selection involved in specific identification. Based on this assessment, the Company does not believe the change has a material effect on the consolidated financial statements.

Presentation of Crypto Assets in Financial Statements

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

Crypto assets used as collateral for DeFi borrowings remain on the Company’s balance sheet, as the Company retains ownership and control of the associated wallet and the assets are not transferred to a counterparty. While deposited into a smart contract and restricted from use, the crypto assets are not derecognized. These assets are presented within “Crypto Assets” on the balance sheet and disclosed separately in the footnotes when serving as collateral.

In arrangements such as Aave, ETH is deposited as collateral into a smart contract, which remains in the Company’s wallet but is restricted from transfer until the associated borrowing is repaid. The Company continues to recognize the underlying ETH as a crypto asset on its balance sheet, with a corresponding disclosure of its restricted status.

Operating Segments

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

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

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

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

Consistent with ASU 2023-07, the Company discloses significant segment expenses that are regularly provided to the CODM for decision-making purposes. See Note 11 – Segment Information for more information.

Revenue Recognition

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

	●	Step 1: Identify the contract with the customer
	●	Step 2: Identify the performance obligations in the contract
	●	Step 3: Determine the transaction price
	●	Step 4: Allocate the transaction price to the performance obligations in the contract
	●	Step 5: Recognize revenue when the Company satisfies a performance obligation

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

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

Blockchain Infrastructure (NodeOps)

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 lasts from a few days to several weeks after it is cancelled (or “un-staked”) by the delegator and requires that the crypto assets staked remain locked up during the duration of the smart contract.

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

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

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

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

Block-Building (Builder+)

The Company earns revenue by participating as a Builder on blockchain networks that have implemented a Proposer-Builder Separation (PBS) framework, including Ethereum and Binance Smart Chain (“BSC”). In these roles, the Company bundles and proposes transaction blocks for submission to network Validators (“block building”), and is compensated when its blocks are selected, proposed, and successfully finalized on the applicable network.

Ethereum Block Building

The Company participates in the Ethereum blockchain network by engaging in the construction of blocks 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”) and priority fees (or “tips”) 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 and tips 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 and tips earned from the constructed block.

Binance Smart Chain (BSC) Block Building

The Company also operates as a Builder on Binance Smart Chain (BSC), which uses a Proof-of-Staked-Authority (“PoSA”) consensus and a distinct block-building and reward structure. The native token of BSC is BNB, which is used for both gas fees and transaction-based payments.

Builders on BSC construct block bids composed of transactions and optional searcher tips. Unlike Ethereum, gas fees on BSC are paid directly to the Validator’s coinbase and are not received by the Builder. Instead, the Builder earns revenue in the form of BNB-denominated tips, which are voluntarily sent by searchers to a Builder-controlled smart contract as priority fees. These tips accumulate in the smart contract and are periodically withdrawn to the Company’s Builder wallet.

The Company recognizes revenue from BSC block building at the time the BNB tips are withdrawn from the tip smart contract to the Company’s wallet, measured at the fair value of BNB on the withdrawal date. Because BSC validator payments are embedded in the gas fees of a self-transfer transaction appended by the Builder, the associated gas cost is treated as cost of revenue.

Builder performance obligations on BSC are satisfied when the constructed block is selected and proposed by a Validator and finalized on-chain. Similar to Ethereum, each block is considered a separate performance obligation.

The following table summarizes the revenues earned from the Company’s operations for the three and six months ended June 30, 2025 and 2024.


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2025		2024		2025		2024
Revenue from blockchain infrastructure operations
NodeOps	$	262,972	$	485,339	$	602,263	$	903,692
Builder+		2,509,226		75,853		3,858,870		108,886
Total revenue	$	2,772,198	$	561,192	$	4,461,133	$	1,012,578

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, 2025 and 2024. Revenues earned from blockchain infrastructure staking activities through NodeOps include token rewards earned from the delegation of cryptocurrency assets to third-party validator nodes as well as token rewards derived from BTCS-operated validator nodes, which include staking of the Company’s crypto assets to BTCS nodes and Validator Fees earned from third-parties asset delegations to our nodes. Revenues earned from block-building through Builder+ includes block rewards generated by BTCS Builders.

Crypto assets earned from blockchain infrastructure staking activities through NodeOps

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2025				2024				2025				2024
Asset	Token Rewards		Revenue ($USD)		Token Rewards		Revenue ($USD)		Token Rewards		Revenue ($USD)		Token Rewards		Revenue ($USD)
Ethereum (ETH)		69	$	148,351		72	$	241,588		139	$	334,546		138	$	429,666
Cosmos (ATOM)		16,990	$	74,636		12,565	$	104,580		33,303	$	159,486		23,731	$	225,654
Solana (SOL)*		92	$	14,184		139	$	21,353		209	$	34,787		259	$	36,725
Axie Infinity (AXS)*		4,569	$	11,953		5,772	$	36,379		10,887	$	30,476		11,152	$	84,701
Akash (AKT)		2,272	$	3,367		6,246	$	26,740		8,229	$	15,202		10,820	$	45,486
NEAR Protocol (NEAR)*		1,450	$	3,826		1,886	$	12,500		3,482	$	11,298		2,600	$	16,922
Avalanche (AVAX)		253	$	4,917		668	$	18,491		543	$	11,322		668	$	18,491
Kava (KAVA)		4,020	$	1,738		6,632	$	4,305		11,031	$	4,983		12,924	$	9,557
Stader (SD)*		-	$	-		-	$	-		126	$	89		-	$	-
Polkadot (DOT)*		-	$	-		376	$	2,619		9	$	40		736	$	5,576
Rocket Pool (RPL)*		-	$	-		-	$	-		10	$	34		-	$	-
Kusama (KSM)		-	$	-		279	$	8,108		-	$	-		289	$	8,583
Polygon (POL)*		-	$	-		6,314	$	3,758		-	$	-		12,544	$	9,489
Tezos (XTZ)*		-	$	-		354	$	338		-	$	-		671	$	705
Mina (MINA)		-	$	-		2,880	$	2,439		-	$	-		5,760	$	6,085
Oasis Network (ROSE)		-	$	-		10,431	$	1,036		-	$	-		26,567	$	3,254
Cardano (ADA)*		-	$	-		2,039	$	837		-	$	-		3,328	$	1,590
Evmos (EVMOS)*		-	$	-		6,834	$	268		-	$	-		18,260	$	1,208
Total earned from blockchain infrastructure staking activities through NodeOps			$	262,972			$	485,339			$	602,263			$	903,692

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

Crypto assets earned from block-building through Builder+

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2025				2024				2025				2024
Asset	Token Rewards		Revenue ($USD)		Token Rewards		Revenue ($USD)		Token Rewards		Revenue ($USD)		Token Rewards		Revenue ($USD)
Ethereum (ETH)		912	$	2,101,709		23	$	75,853		1,406	$	3,451,353		34	$	108,886
BNB Chain (BNB)		638	$	407,517		-	$	-		638	$	407,517		-	$	-
Total earned from block-building through Builder+			$	2,509,226			$	75,853			$	3,858,870			$	108,886

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, for Ethereum block building, cost of revenues includes Validator Payments made by the Company’s Builder to Validators as compensation for proposing constructed blocks. These are fixed amounts embedded in the proposed blocks and are only paid when the block is successfully finalized on-chain.

For Binance Smart Chain (BSC) block building, although the Builder does not receive the gas fees from the bundled transactions included in a finalized block, it must still compete for inclusion by proposing an additional bid, structured as a self-transaction, that specifies extra gas fees intended to incentivize the Validator to select its block. This self-transaction results in a direct payment to the Validator’s coinbase address. These Builder-specified bids are separate from the gas fees attached to user transactions and represent incremental value added by the Builder to increase the likelihood of block inclusion. The Company records these Builder-specified bid payments as cost of revenues, as they are a direct cost of attempting to fulfill performance obligations under the BSC block-building arrangement.

The Company also includes in cost of revenues any fees paid to third parties for assistance with infrastructure hosting, software maintenance, or other operational support. These direct expenses are collectively presented as ‘Blockchain infrastructure expenses’ in the consolidated statements of operations.

The following table further details the costs of revenues for the three and six months ended June 30, 2025 and 2024.

Schedule of Costs of Revenues


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2025		2024		2025		2024
Cost of staking revenues (NodeOps)	$	13,255	$	47,414	$	60,021	$	99,367
Cost of block-building revenues (Builder+)		2,839,878		121,434		4,361,771		230,106
Total cost of revenues	$	2,853,133	$	168,848	$	4,421,792	$	329,473

Internally Developed Software

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

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

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

Property and Equipment

Property and equipment consists of computers, equipment and office furniture and fixtures, all of which are recorded at cost. Depreciation and amortization are recorded using the straight-line method over the respective useful lives of the assets ranging from three3 to five years. Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable.

Use of Estimates

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

Income Taxes

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

Accounting for Warrants

The Company accounts for the issuance of Common Stock purchase warrants issued in accordance with ASC 815, Derivatives and Hedging. Warrants are evaluated for liability or equity classification at the time of issuance based on the specific terms of the arrangement and settlement features.

Liability-Classified Warrants

Warrants are classified as liabilities when they: (i) require net cash settlement (including upon occurrence of an event outside the Company’s control), or (ii)provide the counterparty with a choice of cash or share settlement, or (iii) require the issuance of registered shares and do not explicitly preclude a right to cash settlement.

In accordance with ASC 815-40, these instruments are measured at fair value upon issuance and at each subsequent reporting period, with changes in fair value recognized in the consolidated statements of operations as “Change in fair value of warrant liabilities.” These warrants are classified as Level 3 liabilities within the fair value hierarchy due to the use of unobservable inputs in the valuation model (see Note 5 - Fair Value of Financial Assets and Liabilities).

The Company estimates the fair value of these warrants using a Black-Scholes option pricing model, with key inputs including the Company’s stock price, the warrant exercise price, expected term, expected stock price volatility, risk-free interest rate, and expected dividend yield. The warrant liability is presented as a current liability on the Company’s consolidated balance sheet.

Equity-Classified Warrants

The Company also issues warrants that qualify for equity classification under ASC 815-40. Warrants are classified in equity when they: (i) require physical or net-share settlement, and (ii) do not include terms that could require cash settlement outside the control of the Company, and (iii) do not include contingent provisions or other features that would cause the instruments to be classified as liabilities.

For equity-classified warrants, the Company estimates the grant-date fair value using a Black-Scholes option pricing model. The fair value is recognized in additional paid-in capital (APIC) at the time of issuance and is not subsequently remeasured. If the warrants are issued in connection with a financing transaction (e.g., convertible notes), the fair value is allocated to APIC and, when applicable, also recorded as a debt discount in accordance with ASC 470-20 and amortized over the term of the related debt instrument using the effective interest method.

Once classified in equity, these warrants remain in equity unless modified in a way that results in liability classification. These instruments are not included in the fair value measurements disclosure under ASC 820, as they are not remeasured on a recurring basis.

Stock-based compensation

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

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

Options

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

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

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

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

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

Restricted Stock Units (RSUs)

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

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

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

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

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

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

Convertible Notes Payable

Convertible notes are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options. Upon issuance, the Company evaluates embedded features and freestanding instruments for separate accounting. If applicable, proceeds are allocated between the debt host and any freestanding equity-classified instruments, such as warrants, using a relative fair value method. Issuance costs and any original issue discount are recorded as a reduction to the carrying amount of the debt and amortized over the term of the notes using the effective interest method. Interest expense includes both cash interest and amortization of debt discounts.

Defi Lending Arrangements

The Company accounts for borrowings under decentralized finance (“DeFi”) protocols, such as Aave, in accordance with ASC 470, Debt. These borrowings are recognized as financial liabilities when proceeds are received and are measured at their principal amount, net of repayments. The Company classifies these borrowings as liabilities on the balance sheet under “Loan Payable – DeFi Protocol.”

DeFi borrowings are collateralized by digital assets, such as Ethereum (ETH), which are deposited into protocol-specific smart contracts as interest-bearing collateral. The collateral tokens remain in the Company’s wallet but are effectively restricted from transfer while borrowings remain outstanding. Although the underlying ETH is restricted and subject to liquidation risk, the Company retains both custody and beneficial ownership, and continues to recognize the ETH on its balance sheet within “Crypto Assets” in accordance with ASC 350 and ASC 805-10-25 for nonfinancial assets. Fair value measurement of the collateralized ETH follows the guidance in ASC 820. These assets are disclosed in the footnotes as restricted from use while serving as collateral.

Interest on DeFi borrowings is accrued over the borrowing term and recognized as an expense within “Interest Expense” in the consolidated statements of operations. Interest earned on collateralized ETH is recognized as “Interest Income” when realized or earned under the terms of the DeFi protocol.

Advertising Expense

Advertisement costs are expensed as incurred and included in marketing expenses. Advertising and marketing expenses amounted to approximately $23,000 and $28,000 for the three months ended June 30, 2025 and 2024, respectively and approximately $268,000 and $86,000 for the six months ended June 30, 2025 and 2024, respectively.

Net Income (Loss) per Share

Basic income (loss) per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the Company’s restricted stock units, restricted common stock, options, warrants and shares issuable upon conversion of outstanding convertible notes.

In periods when the Company reports a net loss, diluted loss per share excludes the effect of all potential common shares, including those issuable upon the exercise of warrants and options, the vesting of restricted stock units and restricted common stock, and the conversion of preferred stock or convertible notes—since their inclusion would be anti-dilutive.

For the three months ended June 30, 2024 and the six months ended June 30, 2025, the Company reported net losses; therefore, all potentially dilutive securities were excluded from the computation of diluted loss per share.

For the three months ended June 30, 2025 and the six months ended June 30, 2024, the Company reported net income, and diluted net income per share reflects the inclusion of dilutive potential common shares, where applicable.

The following financial instruments were excluded from the calculation of diluted loss per share during periods of net loss, as their effect was anti-dilutive:


	As of June 30,
	2025		2024
Warrants to purchase common stock		2,614,416		712,500
Options		2,661,410		1,302,500
Non-vested restricted stock unit awards		-		1,806,373
Non-vested restricted common stock		1,312,301		-
Shares issuable upon conversion of convertible notes		1,334,679		-
Total		7,922,806		3,821,373
Anti-dilutive securities		7,922,806		3,821,373

Recent Accounting Pronouncements

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is intended to enhance reportable segment disclosures by requiring disclosures of significant segment expenses regularly provided to the CODM, requiring disclosure of the title and position of the CODM and explanation of how the reported measures of segment profit and loss are used by the CODM in assessing segment performance and a location of resources. ASU 2023-07 is effective for the Company for annual periods beginning after December 31, 2023. The Company adopted ASU 2023-07 for the year ended December 31, 2024. As a result of the adoption, the Company expanded its disclosures in Note 11 – Segment Information, to present significant expenses that are included within cost of revenue, by reportable segment, which are presented to the CODM.

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide improvements primarily related to the rate reconciliation and income taxes paid information included in income tax disclosures. The Company is required to disclose additional information regarding reconciling items equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory tax rate. Similarly, the Company is required to disclose income taxes paid (net of refunds received) equal to or greater than five percent of total income taxes paid (net of refunds received). The amendments in ASU 2023-09 are effective January 1, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impacts of ASU 2023-09 on its financial statements.

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

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