BTCS Inc

Previous wording

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our historical financial statements and the notes to those statements that appear elsewhere in this report. Certain statements in the discussion contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those discussed in the Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2023. 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.

Current wording

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our historical financial statements and the notes to those statements that appear elsewhere in this report. Certain statements in the discussion contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those discussed in the Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2023. When we refer to the “2024 Quarter” and the “2023 Quarter” we are referring to 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.

Previous wording

As 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. 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 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.

Current wording

As 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. 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. 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.

Previous wording

The 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.

Current wording

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

Previous wording

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

Current wording

On 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.

Previous wording

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

Current wording

The 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.

Previous wording

Crypto Assets Held at Period End

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The tables below detail the fair market value of BTCS’s quarterly crypto assets earned as revenue during the 2023 Quarter through the 2024 Quarter.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The 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.

Current wording

The 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 staking.

Previous wording

The 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.

Current wording

The 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.

Previous wording

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

Current wording

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

Previous wording

Research and development expenses decreased during the 2024 Quarter from the 2023 Quarter 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 of ChainQ. 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.

Current wording

Research 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 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.

Previous wording

Compensation 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.

Current wording

Compensation and related expenses increased during the 2024 Period resulting from the addition of employee headcount during the 2024 Quarter. We believe 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.

Previous wording

Marketing 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.

Current wording

Marketing 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.

Previous wording

The 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 to predict.

Current wording

The 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. 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 to predict.

Previous wording

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

Current wording

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

Previous wording

The 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.

Current wording

The 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.

Previous wording

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 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.

Current wording

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 (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.

Previous wording

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate 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.

Current wording

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. As of June 30, 2024, the Company had approximately $537,000 of cash and working capital of approximately $33,005,000.

Previous wording

As of May 10, 2024, the Company had approximately $431,000 of cash and cash equivalents and the fair market value of the Company’s liquid crypto assets was approximately $30,301,000. 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.

Current wording

As 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.

Previous wording

Cash used in operating activities was approximately $769,000 during the 2024 Quarter compared to approximately $1,126,000 for the 2023 Quarter. The largest non-cash adjustment to our operating cash flows consisted of approximately $13,103,000 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.

Current wording

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

Previous wording

Cash 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.

Current wording

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

Previous wording

This 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, growth opportunities for the Company, 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.

Current wording

This 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 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 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.