What changed in this filing

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Item 1. Financial Statements

2022-08-11 compared with 2022-05-13 · 145 added, 126 removed, 569 unchanged (32% of the section changed)

ITEM 1 Financial Statements

1 Financial Statements

assets/currencies

5 unchanged sentences

payable and accrued expense

shares payable

current liabilities

Stockholders’

stock, 97,500,000 shares authorized at $ 0.001 par value, 12,616,010 and 10,528,212 shares issued and outstanding at March 31, 2022

stock, 97,500,000 shares authorized at $ 0.001 par value, 12,703,794 and 10,528,212 shares issued and outstanding at June 30, 2022

and December 31, 2021, respectively

7 unchanged sentences

the Three Months Ended

the Six Months Ended

revenue (net of fees)

and administrative

1 unchanged sentence

and related expenses

loss on digital assets/currencies

gains on digital asset/currency transactions

( 3,054,418 )

operating expenses

1 unchanged sentence

on debt discount

( 1,134,771 )

in fair value of warrant liabilities

1 unchanged sentence

to warrant holders

loss on digital assets/currencies

other income (expenses)

( 1,248,853 )

$ ( 7,724,673 )

gains (loss) on digital asset/currency transactions

other income (expenses)

$ ( 4,842,073 )

7 unchanged sentences

$ ( 5,056,913 )

$ ( 13,465,416 )

$ ( 16,677,484 )

loss per share attributable to common stockholders, basic and diluted

2 unchanged sentences

of Changes in Stockholders’ Equity

the Three Months Ended March 31, 2022

the Six Months Ended June 30, 2022

Stockholders’

6 unchanged sentences

( 13,465,416 )

March 31, 2022

June 30, 2022

$ 159,432,894

$ ( 149,054,886 )

the Three Months Ended March 31, 2021

the Six Months Ended June 30, 2021

C-1 Convertible

16 unchanged sentences

( 11,624,248 )

June 30, 2021

$ 137,945,872

$ ( 131,164,135 )

the Three Months Ended June 30, 2022

Stockholders’

March 31, 2022

1 unchanged sentence

$ ( 141,330,213 )

of common stock, net of offering cost / At-the-market offering

distributions

( 7,724,673 )

June 30, 2022

$ 159,432,894

$ ( 149,054,886 )

the Three Months Ended June 30, 2021

C-1 Convertible

C-2 Convertible

Stockholders’

March 31, 2021

$ 135,674,928

$ ( 126,322,062 )

stock issued including equity commitment fee, net

dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock

dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock

( 4,842,073 )

June 30, 2021

$ 137,945,872

$ ( 131,164,135 )

accompanying notes are an integral part of these unaudited condensed financial statements.

of Cash Flows

the Three Months Ended

the Six Months Ended

Cash flows used from operating activities:

1 unchanged sentence

$ ( 11,624,248 )

to reconcile net loss to net cash used in operating activities:

to reconcile net loss to net cash provided by (used in) operating activities:

on debt discount

compensation in connection with issuance of Series C-2 convertible preferred stock

( 1,077,364 )

network fees (non-cash)

in fair value of warrant liabilities

( 1,068,750 )

of non-productive digital assets/currencies

1 unchanged sentence

of non-productive digital assets/currencies

gain on digital assets/currencies transactions

gains on digital assets/currencies transactions

( 3,054,418 )

3 unchanged sentences

payable and accrued expenses

shares payable

payable - distributions to warrant holders

cash used in operating activities

( 1,055,243 )

cash provided by (used in) operating activities

( 3,291,045 )

42 unchanged sentences

its strategy.

Company’s blockchain infrastructure operations with a focuses on securing next-generation blockchains and operating validator nodes

on various proof of stake-based blockchain networks, earning rewards of additional Digital Assets by actively validating transactions

on the networks.

The Company is developing a Digital Asset Platform that would enable users to aggregate their Digital Asset portfolio

holdings from multiple exchanges and wallets into a single platform to view and analyze performance, risk metrics, and potential tax

implications.

The internally developed platform utilizes Digital Asset exchange APIs to read user data and does not allow for the trading

We also are developing and plan to integrate into the Digital Asset Platform a proprietary Staking-as-a-Service feature that

would enable users participate in asset leveraging through securing blockchain protocols and to stake and delegate supported cryptocurrencies

through a non-custodial platform to BTCS operated validator nodes.

Company’s blockchain infrastructure operations focuses on securing next-generation blockchains and operating validator nodes on

various proof of stake-based blockchain networks, earning rewards of additional Digital Assets by actively validating transactions on

the networks.

The Company is developing a Digital Asset Platform that would enable users to aggregate their Digital Asset portfolio holdings

from multiple exchanges and wallets into a single platform to view and analyze performance, risk metrics, and potential tax implications.

The internally developed platform utilizes Digital Asset exchange APIs to read user data and does not allow for the trading of assets.

We also are developing and plan to integrate into the Digital Asset Platform a proprietary Staking-as-a-Service feature that would enable

users participate in asset leveraging through securing blockchain protocols and to stake and delegating supported cryptocurrencies to

BTCS operated validator nodes through a non-custodial platform.

market is rapidly evolving and there can be no assurances that we will be competitive with industry participants that have or may have

18 unchanged sentences

results of operations and cash flows for the interim periods presented.

Interim results for the three months ended March 31, 2022

Interim results for the three and six months ended June 30, 2022

are not necessarily indicative of results for the full year ended December 31, 2022.

The unaudited condensed financial

statements and notes should be read in conjunction with the financial statements and notes for the year ended December 31, 2021.

The unaudited condensed financial statements and

notes should be read in conjunction with the financial statements and notes for the year ended December 31, 2021.

3 - Summary of Significant Accounting Policies

10 unchanged sentences

highly liquid investments with original maturities of six months or less when purchased to be cash and cash equivalents.

As of June 30,

2022 and December 31, 2021, the Company had approximately $ 3.2 million and $ 1.4 million 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.

The Company has not experienced any

losses in such accounts and believes it is not exposed to any significant credit risk on cash.

instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits.

1 unchanged sentence

institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 .

As of March 31, 2022 and December

As of June 30, 2022 and December

31, 2021, the Company had approximately $ 2.7 million and $ 0.9 million in excess of the FDIC insured limit, respectively.

12 unchanged sentences

The Company generates revenue through staking rewards.

Company has entered into network-based smart contracts by running its own Digital Asset validating nodes as well as by staking

Digital Assets with staking pools on nodes run by third-party operators (either directly or through exchanges).

Through these

contracts, the Company provides cryptocurrency to stake on 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 a few weeks

to months after it is canceled by the operator and requires that the cryptocurrency staked remain locked up during the duration of the

smart contract.

In exchange for staking the cryptocurrency and validating transactions on blockchain networks, the Company is entitled

to all of the fixed cryptocurrency award for running the Company’s own node and is entitled to a fractional share of the fixed

cryptocurrency award a third-party staking pool operator receives (less digital asset transaction fees payable to the pool operator or

exchanges, which are immaterial and are recorded as a deduction from revenue), for successfully adding a block to the blockchain.

Company’s fractional share of awards received by a third-party staking pool is based on the proportion of cryptocurrency the Company

staked to the staking pool node to the total cryptocurrency staked by all pool participants validating blockchain transactions.

Company has entered into network-based smart contracts by running its own Digital Asset validating nodes as well as by staking Digital

Assets with staking pools on nodes run by third-party operators (either directly or through exchanges).

Through these contracts, the

Company provides cryptocurrency to stake on a node for the purpose of validating transactions and adding blocks to a respective blockchain

The term of a smart contract can vary based on the rules of the respective blockchain and typically last a few weeks to months

after it is canceled by the operator and requires that the cryptocurrency staked remain locked up during the duration of the smart contract.

In exchange for staking the cryptocurrency and validating transactions on blockchain networks, the Company is entitled to all of the

fixed cryptocurrency award for running the Company’s own node and is entitled to a fractional share of the fixed cryptocurrency

award a third-party staking pool operator receives (less digital asset transaction fees payable to the pool operator or exchanges, which

are immaterial and are recorded as a deduction from revenue), for successfully adding a block to the blockchain.

The Company’s

fractional share of awards received by a third-party staking pool is based on the proportion of cryptocurrency the Company staked to

the staking pool node to the total cryptocurrency staked by all pool participants validating blockchain transactions.

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

38 unchanged sentences

impairment in the value of Digital Assets are recorded as a component of costs and expenses in our statements of operations.

recorded impairment losses of approximately $ 3.3 million and $ 1.3 million related to Digital Assets during the three months ended March

recorded impairment losses related to Digital Assets of approximately $ 12.2 million and $ 3.6 million during the six months ended June

30, 2022, and 2021, respectively

3 unchanged sentences

The Company recorded realized gains (losses)

on Digital Assets of approximately $ 70,000 and $ 3 million during the three months ended March 31, 2022 and 2021, respectively.

on Digital Assets of approximately $ 470,000 and $ 3.1 million during the six months ended June 30, 2022 and 2021, respectively.

presentation of purchases and sales of Digital Assets on the Statement of Cash Flows is determined by the nature of the Digital Assets,

126 unchanged sentences

Dividend distributions amounted to $ 635,000 and $ 0 during

the three months ended March 31, 2022 and 2021, respectively.

the six months ended June 30, 2022 and 2021, respectively.

1 unchanged sentence

Advertising and marketing expenses amounted to approximately $ 65,000

and $ 1,000 for the three months ended March 31, 2022 and 2021, respectively.

and $ 3,000 for the six months ended June 30, 2022 and 2021, respectively.

Loss per Share

7 unchanged sentences

of preferred stock, notes and warrants from the calculation of net loss per share if their effect would be anti-dilutive.

following financial instruments were not included in the diluted loss per share calculation as of March 31, 2022 and 2021 because their

following financial instruments were not included in the diluted loss per share calculation as of June 30, 2022 and 2021 because their

effect was anti-dilutive:

43 unchanged sentences

3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

following table presents the Company’s assets and liabilities that are measured at fair value at March 31, 2022 and December 31,

of Fair Value of Assets and Liabilities Valued on Recurring Basis

value measured at March 31, 2022

following table presents the Company’s assets and liabilities that are measured at fair value at June 30, 2022 and December 31,

Schedule of Fair Value of Assets and Liabilities Valued on Recurring Basis

value measured at June 30, 2022

prices in active markets

4 unchanged sentences

prices in active markets

other observable inputs

observable inputs

unobservable inputs

31 unchanged sentences

summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the Company’s

warrant liabilities that are categorized within Level 3 of the fair value hierarchy at the date of issuance and, as of March 31, 2022

warrant liabilities that are categorized within Level 3 of the fair value hierarchy at the date of issuance and, as of June 30, 2022

and December 31, 2021, is as follows:

of Valuation Methodology and Significant Unobservable Inputs Warrant Liabilities

Summary of Valuation Methodology and Significant Unobservable Inputs Warrant Liabilities

rate of interest

10 unchanged sentences

paid dividends on its Common Stock and does not expect to pay recurring dividends on its Common Stock in the future.

following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the three

months ended March 31, 2022 and 2021, that are measured at fair value on a recurring basis:

of Changes in Fair Value and Other Adjustments of Warrants

following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the six

months ended June 30, 2022 and 2021, that are measured at fair value on a recurring basis:

Schedule of Changes in Fair Value and Other Adjustments of Warrants

Value of Level 3 financial liabilities

1 unchanged sentence

value adjustment of warrant liabilities

( 1,068,750 )

5 - Stockholders’ Equity

10 unchanged sentences

Wainwright a commission rate equal to 3.0 % of the aggregate gross proceeds from each sale of Shares.

the three months ended March 31, 2022, the Company sold a total of 1,790,576 shares of Common Stock under the ATM Agreement for aggregate

the six months ended June 30, 2022, the Company sold a total of 1,830,588 shares of Common Stock under the ATM Agreement for aggregate

total gross proceeds of approximately $ 10,944,000 at an average selling price of $ 5.98 per share, resulting in net proceeds of approximately

4 unchanged sentences

The Company has reserved 2,000,000 shares of Common Stock for issuance pursuant to the 2021 Plan.

The Company is currently

seeking shareholder approval to increase the reserved amount under the 2021 Plan to 7,000,000 shares.

The Company received

shareholder approval on June 13, 2022 to increase the reserved amount under the 2021 Plan to 7,000,000 shares.

January 1, 2021, the Board of Directors of the Company approved the grant of 1.2 million stock options with an exercise price of $ 1.90

13 unchanged sentences

to March 31, 2021) based upon the Company’s stock price meeting certain milestones.

summary of option activity under the Company’s stock option plan for three months ended March 31, 2022 is presented below:

of Option Activity

summary of option activity under the Company’s stock option plan for six months ended June 30, 2022 is presented below:

Summary of Option Activity

Intrinsic Value

Average Remaining Contractual Life (in years)

Average Remaining Contractual Life

as of December 31, 2021

options granted

as of March 31, 2022

vested and exercisable as of March 31, 2022

as of June 30, 2022

vested and exercisable as of June 30, 2022

January 2, 2022, the Board of Directors of the Company ratified the following arrangements approved by its Compensation Committee:

14 unchanged sentences

RSUs granted to each executive employee are as follows:

of Restricted Stock Units

Schedule of Restricted Stock Units

Cap Vesting Thresholds

7 unchanged sentences

subject to the following five-year vesting schedule:

20 % of the LTI RSUs which have met a market capitalization criteria will vest on

the one-year anniversary of the grant date, and the remaining 80 % of the LTI RSUs which have met a market capitalization criteria will

vest monthly over the four years following the one year anniversary of the grant date.

addition to the vesting criteria set forth above, while the Company is listed on the Nasdaq, the vesting and delivery of the shares of

Common Stock underlying the LTI RSUs are subject to the receipt of shareholder approval approving an increase in the Plan or the creation

of a new plan as required under Nasdaq rules.

of the LTI RSUs which have met a market capitalization criteria will vest on the one-year anniversary of the grant date, and the remaining

of the LTI RSUs which have met a market capitalization criteria will vest monthly over the four years following the one year anniversary

of the grant date.

awards vesting upon the achievement of a service condition, compensation cost measured on the grant date will be recognized on a straight-line

9 unchanged sentences

incorporates pricing inputs covering the period from the grant date through the end of the derived service period.

following weighted-average assumptions were used to estimate the fair value of options granted during the three months ended March 31,

following weighted-average assumptions were used to estimate the fair value of options granted during the six months ended June 30, 2022

and 2021 for the Monte-Carlo simulation:

of Weighted-average Assumptions Used to estimate Fair Value

Three Months Ended

Vesting Hurdle Price

Expected stock price volatility

Risk-free rate of interest

Schedule of Weighted-average Assumptions Used to estimate Fair Value

stock price volatility

rate of interest

The Company uses historical volatility as it provides a reasonable estimate of the expected volatility.

7 unchanged sentences

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.

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.

Hurdle Price:

1 unchanged sentence

as of the valuation dates.

summary of the Company’s restricted stock units granted under the 2021 Plan during the three months ended March 31, 2022 are as

summary of the Company’s restricted stock units granted under the 2021 Plan during the six months ended June 30, 2022 are as follows:

Summary of Restricted Stock

Number of Restricted Stock Units

Weighted Average Grant Day Fair Value

Nonvested at December 31, 2021

Nonvested at March 31, 2022

of Restricted Stock Units

Average Grant Day Fair Value

at December 31, 2021

at June 30, 2022

Based Compensation

compensation expense for the three months ended March 31, 2022 was approximately $ 1.3

Stock-based compensation expense

is recorded as a part of selling, general and administrative expenses, compensation expenses and cost of revenues.

compensation expense for the three months ended March 31, 2022 and 2021 was as follows:

of Stock-based Compensation Expense

the Three Months Ended

Employee bonus stock awards

Employee stock option awards

Employee restricted stock unit awards

Non-employee restricted stock awards

Series C-2 Allocation

Stock-based compensation

compensation expense is recorded as a part of selling, general and administrative expenses, compensation expenses and cost of revenues.

Stock-based compensation expense for the three and six months ended June 30, 2022 and 2021 was as follows:

Schedule of Stock-based Compensation Expense

the Three Months Ended June 30,

the Six Months Ended June 30,

bonus stock awards

stock option awards

restricted stock unit awards

restricted stock awards

C-2 Allocation

6 – Accrued Expenses

expenses consist of the following:

of Accrued Expenses

March 31, 2022

December 31, 2021

Compensation and related expenses

Accounts Payable

Accrued Expenses

Schedule of Accrued Expenses

and related expenses

compensation and related expenses include approximately $ 139,000

related to performance bonus accruals as of June 30, 2022.

7 - Employee Benefit Plans

3 unchanged sentences

up to 100 % of employee contributions.

For the three months ended March 31, 2022, the Company made contributions to the 401(k) Plan of

For the six months ended June 30, 2022, the Company made contributions to the 401(k) Plan of $ 45,000 .

8 – Liquidity

Company follows “ Presentation of Financial Statements—Going Concern (Subtopic 205-40):

Disclosure of Uncertainties about

an Entity’s Ability to Continue as a Going Concern ”.

The Company’s financial statements have been prepared assuming

that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities

in the normal course of business.

reflected in the financial statements, the Company has historically incurred a net loss and has an accumulated deficit at June 30, 2022,

a net loss and net cash used in operating activities for the reporting period then ended.

The Company is implementing its business plan

and generating revenue;

however, the Company’s cash position and liquid Digital Assets are sufficient to support its daily operations

over the next twelve months.

9 - Subsequent Events

3 unchanged sentences

in the financial statements other than disclosed.

the period from March 31, 2022 to May 9, 2022, the Company sold a total of 11,375

shares of Common Stock under the ATM Agreement

for aggregate total gross proceeds of approximately $ 46,000

at an average selling price of $ 4.02

per share, resulting in net proceeds of approximately

after deducting commissions and other transaction

May 12, 2022, the Compensation Committee of the Board of Directors of the Company approved a performance based Annual Cash Incentive

Plan for the Company’s executives for fiscal year 2022.

If an executive meets their performance milestones, the executive will

receive a cash bonus in amount up to 48 % to 107 % of the applicable executive’s base salary, as detailed below:

Allen, the Company’s Chief Executive Officer is eligible to receive up to 107 % of his base salary.

Allen’s current

base salary is $ 393,702 ;

Handerhan, the Company’s Chief Operating Officer is eligible to receive up to 60 % of his base salary.

base salary is $ 275,000 ;

Prevoznik, the Company’s Chief Financial Officer is eligible to receive up to 50 % of his base salary.

base salary is $ 175,000 ;

Paranjape, the Company’s Chief Technology Officer is eligible to receive up to 48 % of his base salary.

base salary is $ 225,000 .

the period from July 1, 2022 to August 8, 2022, the Company sold a total of 261,743 shares of Common Stock under the ATM Agreement

for aggregate total gross proceeds of approximately $ 417,000 at an average selling price of $ 1.59 per share, resulting in net proceeds

of approximately $ 402,000 after deducting commissions and other transaction costs.

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

What changed 10-Q

Item 1. Financial Statements