What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-11 · 172 added, 120 removed, 98 unchanged (75% of the section changed)

9 unchanged sentences

When we refer to the “2023 Quarter” and the “2022 Quarter” we are referring to

the three months ended June 30, 2023 and June 30, 2022 quarters, respectively.

the three months ended September 30, 2023 and September 30, 2022, respectively.

When we refer to the “2023 Period” and the

“2022 Period” we are referring to the six months ended June 30, 2023 and June 30, 2022, respectively.

is an early entrant in the cryptocurrency market and a publicly-traded U.S.

“2022 Period” we are referring to the nine months ended September 30, 2023 and September 30, 2022, respectively.

is an early entrant in the crypto asset market and a publicly-traded U.S.

company focused on blockchain infrastructure and staking.

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validation of transactions occurring on those blockchain networks.

BTCS plans to expand its PoS operations to secure other disruptive

blockchain protocols that allow for delegating, which presents a significant growth opportunity for the Company.

business model is focused on Staking-as-a-Service (StaaS), allowing crypto asset holders to earn rewards by participating in network

consensus mechanisms through staking and delegating their crypto assets to Company operated validator nodes.

As a non-custodial validator

operator, the Company receives a percentage of token holders’ staking rewards generated as a validator node fee, for our ministerial

role in hosting the validator node.

This creates an opportunity for scalable revenue and business growth with limited additional costs.

The Company’s StaaS strategy provides a more accessible and cost-effective way for crypto asset holders to participate in blockchain

networks’ consensus mechanisms, promoting the growth and adoption of blockchain technology.

The Company’s internally-developed

dashboard, StakeSeeker, is a non-custodial platform that allows users to learn how to earn staking rewards through direct participation

in blockchain consensus algorithms and analyze their crypto portfolios across exchanges and wallets through a comprehensive crypto dashboard

and education center.

Subject to available capital and the restrictions of certain blockchains

BTCS plans to expand its PoS operations to secure other disruptive blockchain protocols that allow for delegating, which presents a significant

growth opportunity for the Company.

We evaluate blockchain networks through various due diligence procedures, including consideration

of blockchain quality, reward potential, and technical difficulty of running a validator node.

Considerations of the quality of a blockchain

include inspection of i) market and on-chain statistics, ii) liquidity, iii) potential blockchain utility, iv) history and milestones,

v) growth and development roadmap, vi) use cases, vii) community interest, vii) quality of documentation, viii) decentralization, and

ix) any other publicly available information.

business model is focused on Staking-as-a-Service (“StaaS”), allowing crypto asset holders to earn rewards by participating

in network consensus mechanisms through staking and delegating their crypto assets to Company operated validator nodes.

As a non-custodial

validator operator, the Company receives a percentage of token holders’ staking rewards generated as a validator node fee, for

our ministerial role in hosting the validator node.

This creates an opportunity for scalable revenue and business growth with limited

additional costs.

The Company’s StaaS strategy provides a more accessible and cost-effective alternative for crypto asset holders

to participate in blockchain networks’ consensus mechanisms, promoting the growth and adoption of blockchain technology.

The Company’s

internally-developed dashboard, StakeSeeker, is a non-custodial platform that allows users to learn how to earn staking rewards through

direct participation in blockchain consensus algorithms and analyze their crypto portfolios across exchanges and wallets through a comprehensive

crypto dashboard and education center.

table below describes BTCS’s quarterly crypto asset holdings as of the 2022 Quarter through the 2023 Quarter.

Assets Held at Period End

Infinity (AXS)

Protocol (BAND)

Network (ROSE)

Protocol (NEAR)

Ethereum (ETH)

Cardano (ADA)

Polkadot (DOT)

Cosmos (ATOM)

Polygon (MATIC)

Avalanche (AVAX)

Algorand (ALGO)

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

Evmos (EVMOS)

Value of Crypto Assets at Period End

Infinity (AXS)

Protocol (BAND)

Network (ROSE)

Protocol (NEAR)

of Crypto Assets at Period End

Bitcoin (BTC)

Ethereum (ETH)

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NEAR Protocol (NEAR)

Evmos (EVMOS)

of Crypto Assets at Period End

Infinity (AXS)

Protocol (BAND)

Network (ROSE)

Protocol (NEAR)

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

following table presents the Fair Value of Crypto Assets held compared to the GAAP Book Value reported on the Company’s balance

June 30, 2023

September 30, 2023

December 31, 2022

Bitcoin (BTC)

Ethereum (ETH)

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Evmos (EVMOS)

of Operations for the Three and Six Months Ended June 30, 2023 and 2022

following tables reflect our operating results for the three and six months ended June 30, 2023 and 2022:

the Three Months Ended June 30,

of Operations for the Three and Nine Months Ended September 30, 2023 and 2022

following tables reflect our operating results for the three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended

September 30,

Validator revenue

Total revenues

Cost of revenues

and administrative

and development

and related expenses

loss on digital assets/currencies

gains on digital asset/currency transactions

Validator expense

Operating expenses:

income (expenses):

in fair value of warrant liabilities

Distributions

to warrant holders

General and administrative

Research and development

Compensation and related expenses

Impairment loss on digital assets

Realized gains on digital asset transactions

Total operating expenses

Other income (expenses):

$ (1,018,453 )

Change in fair value of warrant liabilities

Total other income (expenses)

$ (1,030,248 )

the Six Months Ended June 30,

For the Nine Months Ended

September 30,

Validator revenue

Total revenues

Cost of revenues

and administrative

and development

and related expenses

loss on crypto assets/currencies

(11,322,716 )

gains on crypto asset/currency transactions

Validator expense

Operating expenses:

General and administrative

Research and development

Compensation and related expenses

Impairment loss on crypto assets

(11,095,522 )

income (expenses):

in fair value of warrant liabilities

Distributions

to warrant holders

Realized gains on crypto asset transactions

Total operating expenses

(12,758,457 )

Other income (expenses):

Change in fair value of warrant liabilities

Distributions to warrant holders

Total other income (expenses)

$ (3,071,893 )

1 unchanged sentence

decrease in revenue during the 2023 Period as compared to the 2022 Period is primarily due to a drop in the fair value of our crypto

assets earned as rewards for staking since the market’s highs in Q1 of 2022.

Although we believe the number of tokens we earn from

staking and revenue recognized will increase as we continue to expand our blockchain infrastructure efforts, we recognize that volatility

in the cryptocurrency markets may impact the market prices of the crypto assets we earn from staking.

assets earned as rewards for staking since the market’s highs in the first quarter of 2022.

Although we believe the number of tokens

we earn from staking and revenue recognized will increase as we continue to expand our blockchain infrastructure efforts, we recognize

that volatility in the crypto asset markets may impact the market prices of the crypto assets we earn from staking.

decrease in cost of revenues during the 2023 Period as compared to the 2022 Period is due to efficiencies realized in our blockchain

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to improved gross profits.

decrease in operating expenses in the 2023 Period is primarily due to the $12.2 million impairment loss on crypto assets (which we refer

to as a “Crypto Asset Impairment”) during the 2022 Period, compared to only a $0.9 million Crypto Asset Impairment during

the 2023 Period.

In addition, the decrease is also due to the non-cash $1.7 million equity-based contingent bonuses granted to employees

and our non-employee directors during the 2022 Period for the achievement of performance milestones compared to only $0.5 million equity-based

compensation during the 2023 Period.

believe operating expenses will increase as the Company continues to utilize equity-based compensation incentives as a core part of our

compensation strategy.

Additionally, volatility in the cryptocurrency markets will subject the Company to the possibility of additional

impairment charges on its crypto asset holdings.

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

decrease in the 2023 Period was primarily due to a decrease of $0.3 million in investor relation related costs compared to the 2022 Period

as the Company focused on cost management and transitioning related efforts in-house from third-party engagements.

These decreases were

partially offset by a $0.2 million increases in legal service costs during the 2023 Period compared to the 2022 Period, driven primarily by

services surrounding the Series V Preferred Distribution and related listing on Upstream Exchange.

and development expenses increased during the 2023 Period as the Company focused on the beta release of our proprietary StakeSeeker platform

in the first quarter 2023, including responding to user feedback and continued planned feature development and incorporation onto the

We anticipate research and development costs to remain consistent as we continue to expand on technological solutions in the

blockchain sector with a focus on cost management of our third-party development team.

and related expenses decreased during the 2023 Period primarily due non-cash $2.2 million equity-based contingent bonuses granted to

employees and our non-employee directors during the 2022 Period for the achievement of performance milestones compared to only $0.7 million

equity-based compensation during the 2023 Period.

We believe our compensation expenses will increase slightly from those reported in

the 2023 Period as the Company continues to utilize equity-based compensation incentives as a core part of our compensation strategy.

costs decreased during the 2023 Period as the Company focused on cost reduction efforts.

decrease in operating expenses in the 2023 Period is primarily due to the impairment loss on crypto assets (which we refer to as a “Crypto

Asset Impairment”) of $12.3 million during the 2022 Period, compared to only a $1.3 million Crypto Asset Impairment during the

Impairment charges are based on volatility in the crypto asset market and cannot be accurately predicted, but may subject

the Company to the possibility of additional impairment charges on its crypto asset holdings.

realized gain on crypto transactions increased during the 2023 Period as the Company sold approximately 968 ETH earned as rewards from

our staking operations after liquidity was unlocked in April 2023 as part of Ethereum’s Shanghai upgrade.

Income (Expenses)

changes in other income for the periods reported were primarily due to the increase in the fair value of warrant liabilities.

changes in other income for the periods reported were primarily due to the decrease in the fair value of warrant liabilities.

This non-cash

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We believe that our net loss may increase as the Company incurs increased costs related to the development of its

Digital Asset Platform and incurs additional Crypto Asset Impairment losses due to volatility in the cryptocurrency markets.

StakeSeeker platform and incurs additional Crypto Asset Impairment losses due to volatility in the crypto asset markets.

and Capital Resources

On September 14, 2021, the Company

entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with H.C.

Wainwright & Co., LLC, as agent (“H.C.

Wainwright”), pursuant to which the Company may offer and sell, from time-to-time through H.C.

Wainwright, shares of the Company’s

Common Stock having an aggregate offering price of up to $98,767,500.

From the period September 14, 2021 through August 9, 2023, the Company

sold a total of 3,442,181 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $15,626,000

at an average selling price of $4.54 per share, resulting in net proceeds of approximately $15,122,000 after deducting commissions and

other transaction costs.

September 14, 2021, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with H.C.

& Co., LLC, as agent (“H.C.

Wainwright”), pursuant to which the Company may offer and sell, from time-to-time through

Wainwright, shares of the Company’s Common Stock having an aggregate offering price of up to $98,767,500.

From the period

September 14, 2021 through November 7, 2023, the Company sold a total of 3,442,181 shares of Common Stock under the ATM Agreement

for aggregate total gross proceeds of approximately $15,626,000 at an average selling price of $4.54 per share, resulting in net

proceeds of approximately $15,122,000 after deducting commissions and other transaction costs.

Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity

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on an ongoing basis.

As of June 30, 2023, the Company had approximately $0.9 million of cash.

view our crypto assets as long-term holdings and we do not plan to engage in regular trading of crypto assets.

Further certain of our

staked crypto assets may be locked up depending on the specific blockchain protocol and we may be unable to unstake them in a timely

manner in order to liquidate to the extended desired.

During times of instability in the market of crypto assets, we may not be able

to sell our crypto assets at reasonable prices or at all.

As a result, our crypto assets may not be able to serve as a source of liquidity

for us to the same extent as cash and cash equivalents.

As of August 9, 2023, the Company

had approximately $0.8 million of cash and the fair value of the Company’s liquid crypto assets was approximately $18.7 million.

As of September 30, 2023, the Company had approximately $0.8 million of cash and working capital of approximately $8.4 million.

view our crypto assets as long-term holdings and we do not plan to engage in regular trading of crypto assets other than for meeting

operational cash needs.

Further certain of our staked crypto assets may be locked up depending on the specific blockchain protocol and

we may be unable to unstake them in a timely manner in order to liquidate to the extended desired.

During times of instability in the

market of crypto assets, we may not be able to sell our crypto assets at reasonable prices or at all.

As a result, our crypto assets

may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

of November 7, 2023, the Company had approximately $0.6 million of cash and cash equivalents and the fair value of the

Company’s liquid crypto assets was approximately $19.3 million.

The Company has no outstanding debt.

As of August 9, 2023, the Company also has approximately $5.8 million available under

the ATM Agreement over the next twelve months under the Form S-3 baby shelf rules, although, the amount that we may raise under the Form

S-3 may increase or decrease based upon our stock price.

The Company believes that the existing cash and liquid crypto assets held by

us, in addition to the funds available to the Company from the issuance of additional stock through the ATM Agreement, provide sufficient

liquidity to meet working capital requirements, anticipated capital expenditures and contractual obligations for at least the next twelve

Cash used in operating activities

was approximately $2.0 million during the 2023 Period compared to $0.7 million for the 2022 Period.

Cash used in investing activities

was $84,000 during the 2023 Period compared to $8.8 million for the 2022 Period.

Net cash outflow for investing activities was used primarily

for the purchase of crypto assets for our blockchain infrastructure operations.

Cash provided by financing activities

was $0.9 million during the 2023 Period compared to $10.0 million for the 2022 Period.

The cash inflows from financing activities were

entirely from proceeds from the Common Stock sold pursuant to the ATM Agreement.

The Company has plans to continue to raise proceeds from

the sale of Common Stock to fund operations as needed.

As of November 7,

2023, the Company also has approximately $5.8 million available under the ATM Agreement over the next twelve months under the Form

S-3 baby shelf rules, although, the amount that we may raise under the Form S-3 may increase or decrease based upon our stock price.

The Company believes that the existing cash and liquid crypto assets held by us, in addition to the funds available to the Company

from the issuance of additional stock through the ATM Agreement, provide sufficient liquidity to meet working capital requirements,

anticipated capital expenditures and contractual obligations for at least the next 12 months.

used in operating activities was approximately $2.6 million during the 2023 Period compared to approximately $129,000 for the 2022

The sale of our remaining bitcoin holdings by the end of 2022 was the primary contributor to the $2.6 million operating cash

inflows from the sale of non-productive crypto assets during the 2022 Period compared to $0 in the 2023 Period.

We do not anticipate

any future material cash inflows from the sale of non-productive assets, as our blockchain infrastructure strategy focuses primarily

on acquiring and staking productive proof-of-stake blockchain networks.

Additional non-cash adjustments to our operating cash flows

consisted of approximately $1.3 million impairment loss on crypto assets (“Crypto Asset Impairment”) during the 2023

Period compared to approximately $12.3 million Crypto Asset Impairment during the 2022 Period.

Impairment charges are based on

volatility in the crypto asset market and cannot be accurately predicted.

This is partially offset by the approximately $2.2 million

equity-based contingent bonuses granted to employees and our non-employee directors during the 2022 Period for the achievement of

performance milestones compared to only approximately $1.1 million equity-based compensation in the 2023 Period.

We anticipate

similar levels of equity-based compensation in future periods as reported in the 2023 Period.

used in investing activities was approximately $186,000 during the 2023 Period compared to approximately $8.8 million for the 2022

Net cash outflow for investing activities was used primarily for the purchase of crypto assets for our blockchain

infrastructure operations.

We anticipate purchase activity to remain lower and consistent with the levels reported during the 2023

Period as we focus our strategies on technical developments.

The 2022 Period included large purchases of productive crypto assets to

build on our blockchain infrastructure operations.

provided by financing activities was approximately $1.1 million during the 2023 Period compared to approximately $10.5 million for

the 2022 Period.

The cash inflows from financing activities were entirely from proceeds from the Common Stock sold pursuant to the

ATM Agreement during the 2023 Period.

The cash inflows from financing activities during the 2022 Period was partially offset by a

one-time return of capital distribution of approximately $631,000 made to record holders as of March 17, 2022.

The Company plans to

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

Balance Sheet Transactions

of June 30, 2023, there were no off-balance sheet arrangements and we were not a party to any off-balance sheet transactions.

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

Critical Accounting

of September 30, 2023, there were no off-balance sheet arrangements and we were not a party to any off-balance sheet transactions.

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

Accounting Policies and Estimates

discussed the material accounting policies that are critical in making the estimates and judgments in our Annual Report on Form 10-K

for the fiscal year ended December 31, 2022, under the caption “Management’s Discussion and Analysis—Critical Accounting

Policies and Estimates”.

the material accounting policies that are critical in making the estimates and judgments in our Annual Report on Form 10-K for the fiscal

year ended December 31, 2022, under the caption “Management’s Discussion and Analysis—Critical Accounting Policies and

There has been no material change in critical accounting policies or estimates during the period covered by this report.

There has been no material change in critical accounting policies or estimates during the period covered

by this report.

ACCOUNTING PRONOUNCEMENTS

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

the core growth for our Digital Asset Platform, our plans and development of our Digital Asset Platform and the integration of Staking-as-a-Service,

our belief regarding blockchain, expected increase in our revenues and gross margins and future business plans.

Forward-looking statements

can be identified by words such as “anticipates,” “intends,” “may,” “potential,” “continues,”

“plans,” “seeks,” “believes,” “estimates,” “expects” and similar references

to future periods.

the core growth for our StakeSeeker platform, our plans and development of our StakeSeeker platform and the integration of Staking-as-a-Service,

increase in the number of tokens we earn, plans to expand our PoS operations, growth opportunities for the Company, consistent purchase

activity, our belief regarding blockchain, expected increase in our revenues and gross margins and future business plans.

Forward-looking

statements can be identified by words such as “anticipates,” “intends,” “may,” “potential,”

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

and similar references to future periods.

Forward-looking

statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions.

17 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis