What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-19 compared with 2024-05-14 · 178 added, 118 removed, 200 unchanged (60% of the section changed)

9 unchanged sentences

When we refer to the “2024 Quarter” and the “2023 Quarter” we are referring to

the three months ended March 31, 2024 and March 31, 2023, respectively.

the three months ended June 30, 2024 and June 30, 2023, respectively.

When we refer to the “2024 Period” and the “2023

Period” we are referring to the six months ended June 30, 2024 and June 30, 2023, respectively.

is a Nasdaq listed company operating in the blockchain technology sector since 2014 and is one of the only U.S.

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Infrastructure

Company operates validator nodes on various delegated proof-of-stake and proof-of-stake based blockchain networks, with

an emphasis on Ethereum.

We earn native token rewards by validating transactions across various blockchain networks by staking our crypto

assets on validator nodes operated by BTCS and third parties.

Company operates validator nodes on various delegated proof-of-stake and proof-of-stake based blockchain networks, with an emphasis on

We earn native token rewards by validating transactions across various blockchain networks by staking our crypto assets on

validator nodes operated by BTCS and third parties.

evaluation of blockchain networks involves comprehensive due diligence procedures, including assessments of blockchain quality, reward

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Company is not a broker-dealer or an investment advisor and does not provide any such related services.

StaaS provider maintains a ministerial role in validating transactions on a given dPoS network on behalf of its Delegators by (1)

using open-source software to stake the relevant crypto assets;

(2) monitoring and maintaining the nodes it is operating to ensure

the computers remain online to validate transactions;

StaaS provider maintains a ministerial role in validating transactions on a given dPoS network on behalf of its Delegators by (1) using

open-source software to stake the relevant crypto assets;

(2) monitoring and maintaining the nodes it is operating to ensure the computers

remain online to validate transactions;

and (3) verifying transactions on the network when required.

a non-custodial StaaS provider, we do not hold or take possession of any Delegator funds, crypto assets, or crypto asset rewards at

any point during the staking or delegation process.

Delegation does not involve the transfer of crypto asset ownership to a

During the process of staking, delegated crypto assets remain in the Delegator’s digital wallets.

The blockchain

network calculates rewards earned, which are then distributed directly to the Delegator’s wallet (not BTCS).

At no point does the

Validator gain access, control, or custody of the original staked crypto assets or the earned crypto rewards through staking to its

Therefore, the Company does not have any exposure to the custodial risks that a crypto exchange would have related to

excessive redemptions or withdrawals of crypto assets, suspension of redemptions, or withdrawals.

Further, we do not issue or hold

crypto assets on behalf of third parties and have no exposure to the risks an exchange would have with respect to loans,

rehypothecation, or margin.

a non-custodial StaaS provider, we do not hold or take possession of any Delegator funds, crypto assets, or crypto asset rewards at any

point during the staking or delegation process.

Delegation does not involve the transfer of crypto asset ownership to a Validator.

the process of staking, delegated crypto assets remain in the Delegator’s digital wallets.

The blockchain network calculates rewards

earned, which are then distributed directly to the Delegator’s wallet.

The blockchain network does not distribute any of the Delegator’s

earned crypto rewards to BTCS.

At no point does the Validator gain access, control, or custody of the original staked crypto assets or

the earned crypto rewards through staking to its node.

Therefore, the Company does not have any exposure to the custodial risks that

a crypto exchange would have related to excessive redemptions or withdrawals of crypto assets, suspension of redemptions, or withdrawals.

Further, we do not issue or hold crypto assets on behalf of third parties and have no exposure to the risks an exchange would have with

respect to loans, rehypothecation, or margin.

following table details the blockchain networks on which BTCS operates nodes that support third-party delegations as part of our staking-as-a-service

operations, including the amount of third-party crypto assets delegated to our non-custodial validator nodes, as of March 31, 2024:

operations, including the amount of third-party crypto assets delegated to our non-custodial validator nodes, as of June 30, 2024:

Validator Fee

Delegated Crypto Assets

Crypto Assets

Delegated Crypto Assets

Blockchain Network

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January 2024, we introduced “Builder+”, an Ethereum block builder.

Builder+ utilizes algorithms to construct optimized blocks

for on-chain validation.

While we anticipate scalable revenue from Builder+, it may not materialize in the near future under current

interpretations of ASC 606, “ Revenue from Contracts with Customers ,” as described in Note 3 to our financial statements.

For the Three Months Ending

March 31, 2024

Builder+ utilizes algorithms to construct optimized

blocks for on-chain validation.

The Company aims to maximize the value of gas fees earned by increasing the number of blocks we

purchase while minimizing Validator Payments required for purchasing block space.

following table further details the operational results of Builder+ for the three and six months ended June 30, 2024.

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Token Rewards

Revenue ($USD)

Token Rewards

Revenue ($USD)

Token Rewards

Revenue ($USD)

Token Rewards

Revenue ($USD)

Ethereum (ETH)

Gas fees earned from blocks proposed

Validator payments for block space

Revenue earned from Ethereum block building through Builder+

Company aims to maximize the value of gas fees earned by increasing block production while minimizing Validator Payments required for

purchasing block space from validators to propose blocks to the Ethereum network.

Net ETH earned from Ethereum block building through Builder+

– AI Analytics

is an AI-powered blockchain data and analytics platform, designed to allow users to query real-time and historical on-chain

blockchain data.

Through comprehensive indexing of public blockchain data from our Blockchain Infrastructure operations, ChainQ is intended

to provide an intuitive and straightforward platform for users to access on-chain data.

ChainQ is currently under development with target beta release in 2024.

tables below detail BTCS’s quarterly crypto asset holdings as of the 2023 Quarter through the 2024 Quarter.

Assets Held at Period End

July 10, 2024, the Company announced the public launch of the ChainQ beta.

ChainQ is an AI-powered blockchain data and analytics platform,

designed to allow users to query real-time and historical on-chain blockchain data.

Through comprehensive indexing of public blockchain

data from our Blockchain Infrastructure operations, ChainQ is intended to provide an intuitive and straightforward platform for users

to access on-chain data.

tables below detail BTCS’s quarterly crypto asset holdings as of the end of each quarter beginning with the 2023 Quarter and ending

the 2024 Quarter.

Assets Held at the End of the Following Calendar Quarters:

Ethereum (ETH)

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Evmos (EVMOS)

Market Value of Crypto Assets at Period End

Market Value of Crypto Assets at the End of the Following Calendar Quarters:

Ethereum (ETH)

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Evmos (EVMOS)

of Crypto Assets at Period End*

of Crypto Assets at the End of the Following Calendar Quarters:*

Ethereum (ETH)

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Asset Rewards

tables below detail BTCS’s quarterly crypto assets earned during the 2023 Quarter through the 2024 Quarter.

tables below detail BTCS’s quarterly crypto assets earned during each of the following quarters:

assets earned from BTCS validator nodes

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Cosmos (ATOM)

NEAR Protocol (NEAR)

Oasis Network (ROSE)

Avalanche (AVAX)

NEAR Protocol (NEAR)

Evmos (EVMOS)

Crypto assets earned from Ethereum block building through Builder+

assets earned from Ethereum block building through Builder+

Ethereum (ETH)

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Cardano (ADA)

NEAR Protocol (NEAR)

Market Value of Crypto Asset Rewards Earned Recognized as Revenue

tables below detail the fair market value of BTCS’s quarterly crypto assets earned as revenue during the 2023 Quarter through the

2024 Quarter.

tables below detail the fair market value of BTCS’s quarterly crypto assets earned as revenue during the following calendar quarters:

earned from BTCS validator nodes

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Cosmos (ATOM)

NEAR Protocol (NEAR)

Oasis Network (ROSE)

Avalanche (AVAX)

NEAR Protocol (NEAR)

Evmos (EVMOS)

Total revenue earned from BTCS validator nodes

Total revenue earned from BTCS blockchain infrastructure operations

earned from Ethereum block building through Builder+

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Total revenue earned from Ethereum block building through Builder+

Revenue earned from staking to third-party validator nodes

earned from staking to third-party validator nodes

Axie Infinity (AXS)

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Cardano (ADA)

NEAR Protocol (NEAR)

Total revenue earned from staking to third-party validator nodes

Total revenue earned

of Operations for the Three Months Ended March 31, 2024 and 2023

following tables reflect our operating results for the three months ended March 31, 2024 and 2023:

of Operations for the Three and Six Months Ended June 30, 2024 and 2023

following tables reflect our operating results for the three and six months ended June 30, 2024 and 2023:

For the Three Months Ended

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Total other income (expenses)

increase in revenue during the 2024 Quarter as compared to the 2023 Quarter is primarily due to the increase in fair value of our crypto

assets earned as rewards for staking as the market prices of crypto assets continued to rise throughout the 2024 Quarter.

This is partially

offset by the negative revenue we recognized related to our Ethereum block building activities during the 2024 Quarter.

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.

increase in the cost of revenues during the 2024 Quarter as compared to the 2023 Quarter is due to new costs associated with our launch

of our Ethereum block building activities during the 2024 Quarter as part of Builder+.

We believe our cost of revenues will increase

as we continue to ramp up our business.

Net income (loss)

$ (6,727,869 )

$ (1,178,048 )

For the Six Months Ended

Validator revenue

Total revenues

Cost of revenues

Validator expense

Operating expenses:

General and administrative

Research and development

Compensation and related expenses

Realized gains on crypto asset transactions

Total operating expenses

Other income (expenses):

Change in unrealized appreciation (depreciation) on crypto assets

Change in fair value of warrant liabilities

Total other income (expenses)

increase in revenue during the 2024 Quarter and Period as compared to the 2023 Quarter and Period is primarily due to the increase

in fair value of our crypto assets earned as rewards for staking as the market prices of crypto assets continued to be elevated

during 2024 Period compared to 2023 Period.

The increase is also partially due to an increase in the block rewards earned from our

Ethereum block building activities during the 2024 Quarter and 2024 Period.

Although we believe the number of block rewards and

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

increase in the cost of revenues during the 2024 Period as compared to the 2023 Period is due to the Validator Payments made to purchase block space as part of our Ethereum block building activities during the

2024 Quarter and Period.

Thes additional costs are partially offset by the efficiencies realized in our blockchain

infrastructure validating operating costs, including streamlining of web service hosting fees and reduction of services provided by vendors.

We believe our cost of revenues will increase as we continue to ramp up our business, particularly our strategy to increase the number and value of block production, requiring additional purchases

of block space from Validators.

Summary of Accounting Principle Change

in Ethereum Block Building Revenues and Costs

During the second 2024 Quarter,

the Company implemented a change in accounting principle related to the presentation of revenues and costs associated with our Ethereum

block building operations.

This change, made under ASC 606, now presents gas fees earned as gross revenue and Validator Payments as cost

of revenues, rather than netting them against each other.

This correction, applied retrospectively, better reflects the economic substance

of our transactions and provides enhanced transparency.

The change does not impact gross profit, net income, or balance sheet items, but

it does result in increased reported revenues and costs for the three months ended March 31, 2024.

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

decrease in the 2024 Quarter was primarily due to a decrease of approximately $110,000 in legal service and related administrative costs

from the 2023 Quarter, driven primarily by services surrounding the Series V Preferred Distribution and related listing on Upstream Exchange

incurred during the 2023 Quarter.

We recently announced that the Company is being investigated by the SEC.

To date, our legal and other expenses related

to this investigation have not been material.

We are uncertain as to whether our future investigation expenses will have a material impact

on our operating expenses during the balance of 2024 or thereafter.

and development expenses decreased during the 2024 Quarter from the 2023 Quarter as the Company focused on the beta release of our proprietary

decrease in the 2024 Period was primarily due to a decrease of approximately $140,000 in legal service and related administrative costs

from the 2023 Period, driven primarily by services surrounding the Series V Preferred Distribution and related listing on Upstream Exchange

incurred during the first half of 2023.

We are uncertain as to whether our future investigation legal expenses related to the SEC’s

current investigation of the Company will have a material impact on our operating expenses during the balance of 2024 or thereafter.

Additionally, we incurred higher accounting fees related to our audits and Form S-3 registration during the 2024 Period, which is partially

offset by other reduced costs resulting from cost cutting measures for other professional fees during the 2024 Period.

and development expenses decreased during the 2024 Period from 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 platform.

Research and development in the 2024 Quarter focused on the launch of Builder+ operations as well as the further development

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 remained consistent during the 2024 Quarter.

We believe our compensation expenses will increase from those reported

in the 2024 Quarter as the Company continues to utilize equity-based compensation incentives as a core part of our compensation strategy

and anticipates accruals for 2024 performance-based bonus incentives in future reporting periods.

costs increased during the 2024 Quarter as the Company incurred costs associated with the purchase of transaction traffic to bolster

Ethereum block production as part of the ramp up of Builder+ operations.

The Company anticipates additional expenditures for transaction

traffic in order to further increase Ethereum block building activities.

Research and development in the 2024 Period focused on the launch of Builder+ operations as well as the further development

of ChainQ, which launched in July 2024.

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 increased during the 2024 Period resulting from the addition of employee headcount during the 2024 Quarter.

our compensation expenses will increase from those reported in the 2024 Period as the Company continues to utilize non-cash equity-based

compensation incentives as a core part of our compensation strategy and anticipate accruals for 2024 performance-based bonus incentives

in future reporting periods.

costs increased during the 2024 Period as the Company incurred costs associated with the purchase of transaction traffic to bolster Ethereum

block production as part of the ramp up of Builder+ operations.

The Company may have additional expenditures for transaction traffic

in order to further increase Ethereum block building activities.

realized gains on crypto asset transactions increased during the 2024 Period as the Company sold certain crypto assets from our blockchain

infrastructure operations in order to fund operating activities.

The Company may realize additional gains (losses) in the future resulting

from the sale of crypto assets earned are sold to meet cash needs.

Income (Expenses)

changes in other income for the 2024 Quarter were primarily attributed to the recognition of the change in unrealized appreciation on

crypto assets resulting from the increase in the fair market value of the Company’s crypto assets.

Changes in the unrealized appreciation

or depreciation of crypto assets are directly influenced by the volatility in crypto markets, which can be challenging for management

the changes in other income for the 2023 Quarter were primarily driven by the decrease in the fair value of warrant liabilities throughout

changes in other income for the 2024 Quarter and Period were primarily attributed to the recognition of the change in unrealized appreciation

on crypto assets resulting from the increase in the fair market value of the Company’s crypto assets during the 2024 Period compared

to the 2023 Period and the decrease in the fair market value of the Company’s crypto assets during the 2024 Quarter.

the unrealized appreciation or depreciation of crypto assets are directly influenced by the volatility in crypto markets, which can be

challenging for management to predict.

the changes in other income for the 2024 Quarter were partially driven by the decrease in the fair value of warrant liabilities throughout

This non-cash expense is influenced by the value of our stock price at the end of each quarter, a factor that we cannot predict.

increase in net income for the 2024 Quarter compared to the 2023 Quarter is primarily attributable to larger

increases in fair value of our crypto assets during the 2024 Quarter compared to the 2023 Quarter.

We acknowledge that our net

income (loss) may exhibit significant fluctuations due to the volatility in the crypto asset markets, impacting changes in the fair

value of crypto assets during future reporting periods.

income (loss)

increase in net income for the 2024 Period compared to the 2023 Period is primarily attributable to larger increases in fair value of

our crypto assets during the 2024 Period compared to the 2023 Period.

The decrease in net loss for the 2024 Quarter compared to the 2023

Quarter is primarily attributable to the peel back of the crypto market during the 2024 Quarter, resulting in declines in the market

prices of our crypto assets and reporting of unrealized depreciation in the 2024 Quarter.

We acknowledge that our net income (loss) may

exhibit significant fluctuations due to the volatility in the crypto asset markets, impacting changes in the fair value of crypto assets

during future reporting periods.

and Capital Resources

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 May 10, 2024, the Company sold a total of 4,346,748 shares of Common Stock under the ATM Agreement for

aggregate total gross proceeds of approximately $17,256,000 at an average selling price of $3.97 per share, resulting in net proceeds

of approximately $16,696,000 after deducting commissions and other transaction costs.

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

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

Wainwright”), pursuant to which the Company may offer and sell (assuming

an effective registration statement on Form S-3), 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 16, 2024, the Company sold a

total of 4,790,475 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $17,938,000 at an

average selling price of $3.74 per share, resulting in net proceeds of approximately $17,350,000 after deducting commissions and other

transaction costs.

Our Form S-3 expired on August 14, 2024.

The Company filed a new Form S-3 on February 14, 2024.

of SEC comments, the new Form S-3 has not yet gone effective and therefore we may not sell shares under the ATM Agreement.

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

2 unchanged sentences

on an ongoing basis.

As of March 31, 2024, the Company had approximately $671,000 of cash and working capital of approximately $39,263,000.

of May 10, 2024, the Company had approximately $431,000 of cash and cash equivalents and the fair market value of the Company’s

As of June 30, 2024, the Company had approximately $537,000 of cash and working capital of approximately $33,005,000.

of August 16, 2024, the Company had approximately $562,000 of cash and cash equivalents and the fair market value of the Company’s

liquid crypto assets was approximately $25,291,000.

The Company has no outstanding debt.

The Company believes that the existing

cash and liquid crypto assets held by us provide sufficient liquidity to meet working capital requirements, anticipated capital expenditures and contractual

obligations for at least the next 12 months.

The Company believes that the existing cash

and liquid crypto assets held by us provide sufficient liquidity to meet working capital requirements, anticipated capital expenditures

and contractual obligations for at least the next 12 months.

of our staked crypto assets may be locked up for varying durations, depending on the specific blockchain protocol, and we may be unable

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as cash and cash equivalents.

used in operating activities was approximately $769,000 during the 2024 Quarter compared to approximately $1,126,000 for the 2023 Quarter.

used in operating activities was approximately $1,693,000 during the 2024 Period compared to approximately $2,046,000 for the 2023 Period.

The largest non-cash adjustment to our operating cash flows consisted of approximately $7,159,000 change in in unrealized appreciation

on crypto assets during the 2024 Quarter, which is based on volatility in the crypto asset market and cannot be accurately predicted.

used in investing activities was approximately $19,000 during the 2024 Quarter compared to approximately $86,000 for the 2023 Quarter.

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 2024 Quarter as we focus our strategies

on technical developments.

provided by financing activities was approximately $0 during the 2024 Quarter compared to approximately $509,000 for the 2023 Quarter.

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

the 2023 Quarter.

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

on crypto assets during the 2024 Period, which is based on volatility in the crypto asset market and cannot be accurately predicted.

provided by investing activities was approximately $531,000 during the 2024 Period compared to cash used in investing activities of approximately

$84,000 for the 2023 Period.

Net cash inflows from investing activities resulted from the sale of crypto assets.

We anticipate similar

levels of sales of additional crypto assets in future quarters as we fund operating activities from crypto earned as staking revenues.

provided by financing activities was approximately $240,000 during the 2024 Period compared to approximately $927,000 for the 2023 Period.

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

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

Balance Sheet Transactions

of March 31, 2024, there were no off-balance sheet arrangements and we were not a party to any off-balance sheet transactions.

of June 30, 2024, 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.

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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 business, including but not limited to Builder+, StakeSeeker, and Chain, plans to expand our PoS operations,

the core growth for our business, including but not limited to Builder+, StakeSeeker, and ChainQ, plans to expand our PoS operations,

growth opportunities for the Company, our belief regarding blockchain, expected increase in our revenues and gross margins and future

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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