BTCS (BTCS) risk factors, FY2025 10-K

Risks Related to Our Business Model, Strategy, and Operating Environment

1. 01We operate in a rapidly evolving industry, and our business model and strategy may not be successful
2. 02Our business is highly dependent on Ethereum, and our concentration in ETH exposes us to significant risks that could materially adversely affect our business, financial condition, and results of operations
3. 03We may not be able to successfully execute our strategy to scale our blockchain infrastructure operations and DeFi activities
4. 04We may be required to sell digital assets to fund operations, meet obligations, or respond to market conditions, which could result in realized losses and adversely affect our financial condition and results of operations
5. 05Digital asset market disruptions, exchange failures, or loss of liquidity could impair our ability to access or convert digital assets

Risks Related to Validator Node Operations (NodeOps)

1. 06Our validator node operations, including operations through pooled staking protocols, depend on reliable infrastructure, may be subject to reduced rewards, penalties, or slashing
2. 07Risks related to our validator node operations through pooled staking protocols such as Rocket Pool could adversely affect our business, results of operations, and financial condition
3. 08Changes to Ethereum staking economics, validator requirements, or protocol rules could reduce our staking revenues
4. 09Staked ETH may be subject to withdrawal delays or other constraints that could adversely affect liquidity

Risks Related to Block Building (Builder+), MEV, and Transaction Execution

1. 10Our Builder+ revenues depend on highly competitive and rapidly evolving transaction execution markets
2. 11Our Builder+ operations depend on the continued functioning and adoption of the broader block-building and MEV relay ecosystem, and disruptions to that ecosystem could materially reduce our revenues
3. 12Changes to the Ethereum protocol could adversely affect the economics of our Builder+ operations
4. 13Our block-building activities may be subject to reputational risks, regulatory scrutiny, and evolving market norms

Risks Related to DeFi Operations (Imperium), Smart Contracts, and Protocol Participation

1. 14Our participation in DeFi protocols and pooled staking arrangements exposes us to smart contract risk, oracle risk, governance risk, and protocol failure risk, which could result in the loss of digital assets
2. 15DeFi revenue is variable, may decline, and may not be sustainable
3. 16DeFi protocols may change their rules, parameters, or governance decisions in ways that adversely affect our revenue

Risks Related to ETH-Backed DeFi Borrowing, Leverage, and Liquidation

1. 17Our ETH-backed borrowings through DeFi protocols subject us to liquidation risk and declines in ETH prices or adverse protocol conditions could result in forced liquidations, material losses, and potential defaults under our Senior Convertible Notes
2. 18Variable interest rates and protocol-level changes may increase our cost of capital

Risks Related to Capital Markets, Financing Strategy, and Dilution

1. 19Our ability to raise capital may be limited, and we may need additional capital to execute our strategy
2. 20Our business depends on access to banking services and financial infrastructure and the loss of banking relationships could materially adversely affect our business
3. 21Sales of our common stock through our ATM program or other offerings may result in substantial dilution to existing shareholders
4. 22Our Senior Convertible Notes may result in dilution and contain provisions that may adversely affect shareholders
5. 23Our share repurchase program may not enhance shareholder value and may reduce liquidity

Risks Related to Cybersecurity, Custody, and Digital Asset Security

1. 24If we experience a cybersecurity incident, theft, loss of private keys, or compromise of wallet controls, we could lose digital assets and suffer significant harm
2. 25We rely on third-party vendors, service providers, and infrastructure providers, and disruptions or failures involving these third parties could materially adversely affect our business
3. 26We do not maintain insurance coverage for losses of digital assets

Risks Related to Regulation, Legal Uncertainty, and Government Oversight

1. 27The regulatory landscape for digital assets, blockchain infrastructure, DeFi, and related activities is rapidly evolving, and regulatory developments could materially adversely affect our business
2. 28Our validator node operations, block-building activities, and DeFi participation may be subject to increased regulatory scrutiny and could be deemed to involve regulated activities
3. 29For example, regulatory authorities may assert that certain DeFi protocols operate as unregistered exchanges, broker-dealers, clearing agencies, or other regulated entities, or that participants in such protocols, including liquidity providers or borrowers, may be subject to regulatory obligations
4. 30Regulatory actions, enforcement proceedings, or legal restrictions affecting third parties and protocols we rely on could materially adversely affect our business
5. 31Regulatory authorities may take enforcement actions or adopt rules that could materially adversely affect our operations
6. 32Regulatory requirements related to anti-money laundering (“AML”), sanctions, and financial crime compliance could adversely affect our business
7. 33We may be subject to state money transmission laws or other licensing requirements
8. 34Regulation of stablecoins could materially adversely affect our DeFi activities
9. 35Tax laws and reporting requirements related to digital assets are evolving and could adversely affect our business
10. 36Accounting standards, SEC disclosure expectations, and audit practices for digital assets may evolve and could materially adversely affect our reporting obligations
11. 37International regulatory developments could adversely affect our business

Risks Related to Our Public Company Status, Internal Controls, and Reporting

1. 38We face increased financial reporting and internal control risks due to the complexity of our operations, and any failure to maintain effective internal control over financial reporting could adversely affect our business
2. 39Our stock price may be volatile, and investors may lose all or part of their investment

Risks Related to Intellectual Property, Personnel, and Operations

1. 40We depend on key personnel, and the loss of key personnel could harm our business

Risks Related to Litigation

1. 41We may be subject to litigation, regulatory proceedings, and other legal actions, which could result in significant costs and adversely affect our business

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1. 42Disclosure Controls and Procedures
2. 43Management’s Annual Report on Internal Control Over Financial Reporting
3. 44Changes in Internal Control Over Financial Reporting
4. 45ITEM 9B. OTHER INFORMATION
5. 46The information required by this item is incorporated by reference to our Definitive Proxy Statement for the 2026 Annual Meeting of Stockholders, which will be filed with the SEC pursuant to Regulation 14A within 120 days after the year ended December 31, 2025
6. 47ITEM 11. EXECUTIVE COMPENSATION
7. 48ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
8. 49ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
9. 50ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
10. 51(1) Financial Statements
11. 52(2) Financial Statements Schedules
12. 53104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). (1)
13. 54Opinion on the Financial Statements
14. 55Change in Accounting Principle
15. 56Critical Audit Matter Description
16. 57How the Critical Audit Matter Was Addressed in the Audit
17. 58Total current assets 214,017,432 38,137,940
18. 59Total Assets $ 214,631,822 $ 38,245,389
19. 60Total current liabilities 63,372,848 4,245,435
20. 61Commitments and contingencies (Note 11) - -
21. 62Preferred Stock value $ 1,975,701 $ 2,646,314
22. 63Gross profit 2,009,930 946,009
23. 64Total operating expenses 31,902,502 2,191,033
24. 65(1) Includes 278,375 restricted shares of Series V Preferred Stock held by employees that remain subject to forfeiture based on time-based vesting conditions. See Note 9 – Stockholders’ Equity (Deficit) for further details
25. 66(1) Includes 98,294 restricted shares of Series V Preferred Stock held by employees that remain subject to forfeiture based on time-based vesting conditions. See Note 9 – Stockholders’ Equity (Deficit) for further details
26. 67Net loss $ ( 33,353,433 ) $ ( 1,271,174 )
27. 68Loss on extinguishment of debt 8,731 -
28. 69Net cash used in operating activities ( 9,783,943 ) ( 3,530,108 )
29. 70Net cash used in investing activities ( 197,497,320 ) ( 2,632,218 )
30. 71Cash and stablecoins paid for interest $ 1,795,557 $ -
31. 72Note 1 – Business Organization and Nature of Operations
32. 73Together, these business lines represent complementary components of the Company’s blockchain technology strategy, designed to generate recurring on-chain revenues, enhance operational scalability, and increase long-term value
33. 74Capital Strategy and Operations
34. 75Risks and Dependence on the Ethereum Ecosystem
35. 76Cash and Cash Equivalents
36. 77The fair value of digital 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
37. 78The Company measures its digital assets at fair value in accordance with ASC 820, Fair Value Measurement , using the last closing price of the day in the UTC time zone
38. 79All digital assets measured at fair value under ASC 350-60 and are presented as current assets unless they are subject to protocol-imposed restrictions exceeding twelve months. Staked digital assets are classified as non-current if their lock-up periods extend beyond one year
39. 80Cost Relief in Determining Realized Gains and Losses
40. 81Realized gains (losses) on sale of digital assets are included in operating expenses in the statements of operations. The Company recorded realized losses on digital assets of approximately $ 8,184,000 and $ 767,000 for the years ended December 31, 2025 and 2024, respectively
41. 82Presentation of Digital Assets in the Statements of Cash Flows
42. 83ETH Deployed in DeFi Arrangements
43. 84Any reward earned from such DeFi deployments is recognized as DeFi revenues on the statements of operations in accordance with ASC 606, as discussed in Revenue Recognition section of Note 3 as well as Note 7 – Revenues and Cost of Revenues
44. 85Digital Assets (Non-Fungible and Other Intangible Digital Assets)
45. 86The Company accounts for NFTs and similar digital assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other
46. 87The Company’s blockchain operations include three primary revenue-generating activities: validator node operations (NodeOps), block building (Builder+), and DeFi operations (Imperium)
47. 88Consistent with ASU 2023-07, Segment Reporting (Topic 280)
48. 89Warrants are classified as liabilities when they
49. 90Equity-Classified Warrants
50. 91The 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
51. 92Risk-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
52. 93Restricted Stock and Restricted Stock Units (RSUs)
53. 94The Company estimates the fair value of market-based Restricted Stock and 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
54. 95Risk-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
55. 96Convertible Notes Payable
56. 97When the Company borrows digital assets under a DeFi protocol, the arrangement is recognized as a financial liability measured at the principal amount of the borrowed tokens, net of repayments, in accordance with ASC 470. Such borrowings are presented on the balance sheet as Loans payable – DeFi protocol
57. 98Debt modifications and extinguishments
58. 99Net Income (Loss) per Share
59. 100Recent Accounting Pronouncements
60. 101In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)
61. 102In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740)
62. 103In December 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”)
63. 104Note 4 – Digital Assets (Fair Value)
64. 105Total $ 215,387,810 $ 210,764,252 $ 24,942,504 $ 36,056,683
65. 106Note 6 - Fair Value of Financial Assets and Liabilities
66. 107The Company’s digital assets (treasury, DeFi, and staked) are measured at fair value in accordance with ASC 350-60 using quoted prices in active markets for the underlying tokens, primarily on major digital-asset exchanges. These quoted prices represent Level 1 inputs within the fair-value hierarchy
67. 108Other financial instruments, including cash and cash equivalents, stablecoins, accounts and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments
68. 109Warrant Liabilities $ 267,900 $ - $ - $ 267,900
69. 110Level 3 Valuation Techniques
70. 111Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate
71. 112Expected dividend yield - -
72. 113Ending balance $ - * $ 267,900
73. 114The transaction consideration the Company receives in the form of native digital assets, such as ETH or other network tokens, represents non-cash consideration at fair value on the date the digital assets are earned
74. 115On blockchain networks on which the Company operates a validator node, the Company may earn a validator node fee (“Validator Fee”) based on the digital asset rewards generated by those validator nodes
75. 116The 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 transaction fees and transaction-based payments
76. 117Disaggregation of Revenues
77. 118Blockchain Infrastructure Operations (NodeOps and Builder+)
78. 119Additionally, 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 within the proposed blocks and are paid only when the block is successfully finalized on-chain
79. 120Disaggregation of Cost of Revenues
80. 121The Company operates within a single 1 reportable segment under ASC 280, Segment Reporting , focused on blockchain based revenue generation through its blockchain infrastructure and DeFi operations
81. 1222. Block Building (“Builder+”) – generates execution-layer transaction fees and MEV rewards from the construction and submission of optimized transaction blocks to validators on Ethereum and Binance Smart Chain (BSC)
82. 123Consistent with ASU 2023-07 , the Company discloses the significant segment expenses regularly provided to the CODM for decision-making purposes, including validator payments, infrastructure hosting costs, and allocated employee compensation
83. 124Gross profit (loss) $ 1,433,636 $ ( 487,627 ) $ - $ 946,009
84. 125Performance-Based Compensation
85. 126At The Market Offering Agreement
86. 127On October 4, 2024, a new Form S-3 registration statement became effective, increasing the total amount of securities that may be offered and sold under the base prospectus to $ 250,000,000
87. 128All other terms and conditions of the original ATM Agreement and prior engagement letters remain in full force and effect
88. 129Shares Issued in Lieu of Cash Compensation
89. 130Performance Bonus Payments
90. 131The fair value of the Preferred stock as of the record date, May 12, 2023, amounted to approximately $ 2,560,000 . The Company used a probability valuation model to determine the fair value of the preferred stock
91. 132Restricted Series V Issuances and Activity
92. 1332021 Equity Incentive Plan
93. 134The Company grants stock options to employees and officers under its equity incentive plans as part of its overall compensation and retention strategy. Stock options are generally granted with service-based vesting conditions and contractual terms of up to seven years
94. 135Options vested and exercisable as of December 31, 2025 1,338,910 $ 2.52 $ 298,490 5.8
95. 136Options vested and exercisable as of December 31, 2024 1,141,250 $ 2.02 $ 649,125 1.3
96. 137On January 12, 2024, Messrs
97. 138In addition to the market capitalization thresholds, certain of these LTI RSUs were also subject to continued service requirements, such that vesting required both achievement of the applicable market capitalization condition and satisfaction of the related time-based vesting criteria
98. 139On January 1, 2025, the Board approved the grant of 150,000 RSUs under the Company’s Long-Term Incentive Plan (“LTI”) to a non-officer employee. These RSUs are subject to both market capitalization and time-based vesting conditions
99. 140Any RSUs for which the market capitalization condition is not met by December 31, 2026, will be forfeited and automatically terminate without consideration
100. 141Additionally, 65,026 shares of unrestricted Common Stock and, due to dividend eligibility, 25,026 unrestricted shares of Series V preferred stock were issued as a result of the Board-approved accelerated vesting of outstanding RSUs originally scheduled to vest on December 31, 2024
101. 142On December 12, 2024, the Company determined that the market capitalization vesting condition for the $50 million threshold had been satisfied. Under the applicable award agreements, vesting required the Company to maintain a market capitalization in excess of $50 million for 30 consecutive days
102. 143On August 18, 2025, upon the transition of the Company’s Chief Operating Officer to the role of Operations Specialist, 333,333 restricted shares of Common Stock were forfeited in accordance with the terms of the applicable award agreements
103. 144Restricted Shares of Common Stock Activity Summary
104. 145Total stock-based compensation $ 657,076 $ 5,504,156
105. 146Loans Payable – Defi Protocol
106. 147As of December 31, 2025, the Company’s outstanding borrowings consisted primarily of USD-pegged stablecoins, including USDT and GHO, obtained through the Aave protocol. The use of USD-pegged tokens does not materially impact the economic characteristics or risk profile of the borrowings
107. 148For the year ended December 31, 2025, the Company recognized approximately $ 1,454,000 in interest expense, of which approximately $ 225,000 remained unpaid and is included in Accrued interest payable on the balance sheet at period end
108. 149For the year ended December 31, 2025, the Company recognized total interest expense of approximately $ 3,518,000 , which includes contractual interest, the amortization of debt discounts and issuance costs using the effective interest method , and variable interest on DeFi loans
109. 150Dividends Declared and Paid
110. 151Convertible Notes Eligible for Capital Distributions – Contingent Liability
111. 152Loyalty Payment – Contingent Liability
112. 153As of December 31, 2025, approximately 3,844,190 shares of common stock had completed the opt-in process and remained eligible for the Loyalty Payment. Because eligibility was contingent upon continued ownership through January 26, 2026, no liability was recorded as of December 31, 2025, in accordance with ASC 450-20
113. 154Note 12 – Employee Benefit Plans
114. 155The Company follows “ Presentation of Financial Statements—Going Concern (Subtopic 205-40)
115. 156The Company had no income tax expense due to operating loss incurred for the years ended December 31, 2025 and 2024
116. 157Total deferred tax assets 8,834,941 5,331,273
117. 158Deferred tax assets, net $ - $ -
118. 159Accordingly, the Company’s federal NOL carryforwards by year of generation are as follows
119. 160Therefore, Management of the Company has recorded a Full Valuation Reserve, since it is more likely than not that no benefit will be realized for the Deferred Tax Assets
120. 161The Company’s income taxes payable, net of refunds, for the year ended December 31, 2025, were $ 10,599 . These payments primarily relate to state income taxes
121. 162Related parties include the Company’s executive officers, directors, and entities in which such persons have a beneficial interest
122. 163Note 16 - Subsequent Events
123. 164As of March 22, 2026, the Company had approximately $ 43,965,000 in outstanding DeFi borrowings, inclusive of accrued interest, collateralized by approximately 49,949 ETH with a fair market value of approximately $ 103,000,000 , based on the ETH closing price of $ 2,062 on that date
124. 165Appointment of Chief Technology Officer
125. 166Increase in Board Cash Compensation
126. 167Payment of 2025 Performance Bonuses
127. 168The cash and common stock portions of the 2025 performance bonuses represent compensation for services rendered during the year ended December 31, 2025 and were accrued as of December 31, 2025 in accordance with ASC 710 – Compensation and ASC 718 – Share-Based Compensation
128. 169Approval of 2026 Performance Bonuses
129. 170Aggregate RSU Awards and Share Availability
130. 171Total 2,712,108 2,712,140 5,424,248
131. 172Vesting Framework Applicable to 2026 Long-Term Incentive RSUs
132. 173Continued service milestones vest solely based on the recipient’s continued employment with the Company through the applicable vesting date, subject to the terms of the applicable RSU award agreement and the Plan
133. 174Accelerated Vesting of RSUs and Conversion to Restricted Common Stock
134. 175Effective March 23, 2026, the Company entered into an Amended and Restated Employment Agreement with Charles W. Allen, the Company’s Chief Executive Officer and Chairman of the Board