UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

Commission file number: ~~000-55141~~001-40792

BTCS Inc.

(Exact name of registrant as specified in its charter)

Nevada

90-1096644

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

9466 Georgia Avenue #124

Silver Spring, MD

20910

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area ~~code~~ code: (202) 430-6576

~~(Former name, former address and former fiscal year, if changed since last report.)~~

Securities registered pursuant to Section 12(b) of the Act: ~~None~~

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001

BTCS

The Nasdaq Stock Market

(The Nasdaq Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of ~~August 5,~~November 4, 2021, there were ~~57,123,458~~10,275,258 shares of common stock, par value $0.001, issued and outstanding.

BTCS INC.

TABLE OF CONTENTS

		Page

PART I - FINANCIAL INFORMATION

ITEM 1	Financial Statements	4

	Condensed Balance Sheets as of ~~June~~September 30, 2021 (unaudited) and December 31, 2020	4

	Condensed Statements of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 (unaudited)	5

	Condensed Statements of Changes in Stockholders’ (Deficit) Equity for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 (unaudited)	6

	Condensed Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 (unaudited)	7

	Notes to the Unaudited Condensed Financial Statements	~~8-17~~8-21

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1822

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	2428

ITEM 4	Controls and Procedures	2428

PART II - OTHER INFORMATION

ITEM 1	Legal Proceedings	2529

ITEM 1A	Risk Factors	2529

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	2529

ITEM 3	Defaults Upon Senior Securities	2529

ITEM 4	Mine Safety Disclosures	2529

ITEM 5	Other Information	2529

ITEM 6	Exhibits	2529

	Signature	2630

BTCS INC.

As used in this Quarterly Report on Form 10-Q (this “Quarterly Report”), the terms “we,” “us,” “our,” the “Company,” the “Registrant,” and “BTCS Inc.,” mean BTCS Inc. and its consolidated subsidiaries, unless otherwise indicated.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements including our liquidity, our beliefs regarding our disclosure on the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, and future business plans. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “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. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are contained in our filings with the SEC, including our Form 10-K for the year ended December 31, 2020 and our Prospectus filed with the SEC on February 16, 2021 and the Prospectus Supplement dated September 14, 2021. Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

PART I - FINANCIAL INFORMATION

ITEM 1 Financial Statements

BTCS Inc.

Condensed Balance Sheets

	June 30,			December 31,			September 30,			December 31,
	2021			2020			2021			2020
	(Unaudited)						(Unaudited)
Assets:
Current assets:
Cash	$	2,915,842		$	524,135		$	658,931		$	524,135
Digital assets/currencies		2,649,607			995,652			3,159,976			995,652
Prepaid expense		598,212			31,875			472,389			31,875
Total current assets		6,163,661			1,551,662			4,291,296			1,551,662

Other assets:
Property and equipment, net		3,175			230			4,330			230
Staked digital assets/currencies		8,264,543			-			8,838,046			-
Total other assets		8,267,718			230			8,842,376			230

Total Assets	$	14,431,379		$	1,551,892		$	13,133,672		$	1,551,892

Liabilities and Stockholders’ Equity
Liabilities and Stockholders’ Equity:
Accounts payable and accrued expense	$	156,829		$	26,288		$	102,122		$	26,288
Accrued compensation		3,687			350,376			1,501			350,376
Convertible notes payable, net		1,266,712			131,941			848,685			131,941
Warrant liabilities								3,705,000			-
Total current liabilities		1,427,228			508,605			4,657,308			508,605

Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized at $0.001 par value:		-			-			-
Series B Convertible Preferred stock: 0 shares issued and outstanding at June 30, 2021 and December 31, 2020; Liquidation preference $0.001 per share		-			-
Series C-1 Convertible Preferred stock: 0 and 29,414 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively; Liquidation preference $0.001 per share		-			29
Series C-2 Convertible Preferred stock: 1,100,000 and 0 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively; Liquidation preference $0.001 per share		6,203,101			-
Common stock, 975,000,000 shares authorized at $0.001 par value, 57,123,458 and 42,011,617 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		57,122			42,010
Series C-1 Convertible Preferred stock: 0 and 29,414 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively; Liquidation preference $0.001 per share								-			29
Series C-2 Convertible Preferred stock: 0 shares issued and outstanding at September 30, 2021 and December 31, 2020; Liquidation preference $0.001 per share								-			-
Common stock, 97,500,000 shares authorized at $0.001 par value, 10,102,711 and 4,201,035 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively								10,103			4,201
Additional paid in capital		137,908,063			120,541,135			143,472,733			120,578,944
Accumulated deficit		(131,164,135	)		(119,539,887	)		(135,006,472	)		(119,539,887	)
Total stockholders’ equity		13,004,151			1,043,287			8,476,364			1,043,287

Total Liabilities and stockholders’ equity	$	14,431,379		$	1,551,892		$	13,133,672		$	1,551,892

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

BTCS Inc.

Condensed Statements of Operations

(Unaudited)

	2021			2020			2021			2020
	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020			2021			2020

Revenues
Staking revenue	$	380,499		$	-		$	453,023		$	-
Validator revenue													$	323,376		$	-		$	776,399		$	-
Total revenues		380,499			-			453,023			-			323,376			-			776,399			-

Cost of revenues
Staking expenses		59,249			-			74,245			-
Validator expense														71,690			-			145,935			-
Gross profit		321,250			-			378,778			-			251,686			-			630,464			-


Operating expenses:
General and administrative	$	312,967		$	160,841		$	866,948		$	285,069		$	282,558		$	650,049		$	1,149,506		$	935,118
Research and development		245,336			-			328,269			-			273,909			-			602,178			-
Compensation and related expenses		1,703,771			95,095			9,041,450			241,395			4,747,106			228,540			13,788,556			469,935
Marketing		1,365			1,365			2,786			4,055			7,559			1,365			10,345			5,420
Total operating expenses		2,263,439			257,301			10,239,453			530,519			5,311,132			879,954			15,550,585			1,410,473

Other (expenses) income:
Interest expense		(59,835	)		(102,792	)		(114,082	)		(108,814	)		(58,521	)		(96,068	)		(172,603	)		(35,289	)
Amortization on debt discount		(572,675	)		-			(1,134,771	)		(16,606)			(581,973	)		-			(1,716,744	)		(186,199	)
Change in fair value of warrant liabilities														2,066,250			-			2,066,250			-
Impairment loss on digital assets/currencies		(2,267,374	)		(58,527	)		(3,569,138	)		(132,952	)		(208,647	)		(29,302	)		(3,777,785	)		(162,254	)
Realized gains (loss) on digital asset/currency transactions		-			(1,682	)		3,054,418			(1,682	)		-			-			3,054,418			(1,682	)
Total other expenses		(2,899,884	)		(163,001	)		(1,763,573	)		(260,054	)
Total other income (expenses)														1,217,109			(125,370	)		(546,464	)		(385,424	)

Net loss	$	(4,842,073	)	$	(420,302	)	$	(11,624,248	)	$	(790,573	)	$	(3,842,337	)	$	(1,005,324	)	$	(15,466,585	)	$	(1,795,897	)
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock		(16,177	)		-			(32,353	)		-			(13,188	)		-			(45,541	)		-
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock		(198,663	)		-			(5,020,883	)		-			-			-			(5,020,883	)		-
Net loss attributable to common stockholders	$	(5,056,913	)	$	(420,302	)	$	(16,677,484	)	$	(790,573	)	$	(3,855,525	)	$	(1,005,324	)	$	(20,533,009	)	$	(1,795,897	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.09	)	$	(0.02	)	$	(0.32	)	$	(0.03	)	$	(0.59	)	$	(0.33	)	$	(3.63	)	$	(0.66	)

Weighted average number of common shares outstanding, basic and diluted		56,673,599			27,151,776			52,251,479			25,078,068			6,518,645			3,083,246			5,660,966			2,700,947

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

BTCS Inc.

Statements of Changes in Stockholders’ (Deficit) Equity

(Unaudited)

For the Three Months Ended ~~June~~September 30, 2021

Series C-1 Convertible Series C-2 Convertible Additional Total Stockholders’
Preferred Stock Preferred Stock Common Stock Paid-in Accumulated Equity
Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit)
Balance June 30, 2021 - $ - 1,100,000 $ 6,203,101 5,712,215 $ 5,712 $ 137,959,473 $ (131,164,135 ) $ 13,004,151
Common stock issued including equity commitment fee, net                  -                    - - - 32,963 33 199,839 - 199,872
Conversion of convertible notes
Conversion of convertible notes, shares
Beneficial conversion features associated with convertible notes payable
Issuance of common stock, net of offering cost / At-the-market offering - - - - 41,290 41 219,705 - 219,746
Issuance of common stock and warrants for cash, net
Issuance of common stock and warrants for cash, net, shares
Warrant liabilities value related to Issuance of common stock - - - - (5,771,250 ) - (5,771,250 )
Issuance of Series C-2 convertible preferred stock
Issuance of Series C-2 convertible preferred stock, shares
Conversion of Series C-2 Convertible Preferred stock (1,100,000 ) (6,216,289 ) 4,011,766 4,012 6,212,277 - -
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock - - - 13,188 - - (13,188 ) - -
Conversion of Series C-1 Convertible Preferred stock
Conversion of Series C-1 Convertible Preferred stock, shares
Beneficial conversion features associated with convertible notes payable
Beneficial conversion feature of Series C-2 convertible preferred stock
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock
Fractional shares adjusted for reverse split - 14,477 15 (15 ) - -
Warrant exercise
Warrant exercise, shares
Stock-based compensation - - - - 290,000 290 4,665,892 - 4,666,182
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock
Net loss - - - - - - - (3,842,337 ) (3,842,337 )
Balance September 30, 2021 - $ - - $ - 10,102,711 $ 10,103 $ 143,472,733 $ (135,006,472 ) $ 8,476,364
For the Three Months Ended September 30, 2020

Series C-1 Convertible Additional Total Stockholders’
Preferred Stock Common Stock Paid-in Accumulated Equity
Shares Amount Shares Amount Capital Deficit (Deficit)
Balance June 30, 2020 29,414 $ 29 - 2,819,025 $ 2,819 $ 117,834,086 $ (117,774,366 ) $ 62,568
Common stock issued including equity commitment fee, net                  -             - 485,395 485 828,796 - 829,281
Net loss - - - - - - (1,005,324 ) (1,005,324 )
Balance September 30, 2020 29,414 $ 29 - 3,304,420 $ 3,304 $ 118,662,882 $ (118,779,690 ) $ (113,475 )
For the Nine Months Ended September 30, 2021

Series C-1
Shares

Series C-1
Amount

Series C-2
Shares

Series C-2 Amount

Common Stock
Shares

Common Stock
Amount
Capital Deficit (Deficit)
Series C-1 Convertible Series C-2 Convertible Additional
Total
Stockholders’

Preferred Stock Preferred Stock Common Stock Paid-in Accumulated Equity
Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit)
Balance March 31, 2021 - $ - 1,100,000 $ 5,988,261 55,891,645 $ 55,890 $ 135,637,119 $ (126,322,062 ) $ 15,359,208
Common stock issued including equity commitment fee, net - - - - 1,169,632 1,170 $ 798,830.00 - 800,000
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock - - - 16,177 - - (16,177 ) - -
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock - - - 198,663 - - (198,663 ) - -
Stock-based compensation - - - 62,181 62 1,686,954 - 1,687,016
Conversion of convertible notes
Conversion of convertible notes, Shares
Beneficial conversion features associated with convertible notes payable
Issuance of common stock and warrants for cash, net
Issuance of common stock and warrants for cash, net, shares
Issuance of Series C-2 convertible preferred stock
Issuance of Series C-2 convertible preferred stock, Shares
Conversion of Series C-1 Convertible Preferred stock
Conversion of Series C-1 Convertible Preferred stock, Shares
Beneficial conversion feature of Series C-2 convertible preferred stock
Beneficial conversion feature of Series C-2 convertible preferred stock, Shares
Warrant exercise
Warrant exercise, Shares
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock, Shares
Net loss - - - - - - - (4,842,073 ) (4,842,073 )
Balance June 30, 2021 - $ - 1,100,000 $ 6,203,101 57,123,458 $ 57,122 $ 137,908,063 $ (131,164,135 ) $ 13,004,151

Series C-1 Convertible Series C-2 Convertible Additional Total Stockholders’
Preferred Stock Preferred Stock Common Stock Paid-in Accumulated (Deficit)
Shares Amount Shares Amount Shares Amount Capital Deficit Equity
Balance December 31, 2020 29,414 $ 29 - $ - 4,201,035 $ 4,201 $ 120,578,944 $ (119,539,887 ) $ 1,043,287
Common stock issued including equity commitment fee, net              -                      - - - 321,738 322 3,013,683 - 3,014,005
Issuance of common stock, net of offering cost / At-the-market offering - - - - 41,290 41 219,705 - 219,746
Issuance of common stock and warrants for cash, net - - - - 950,000 950 8,864,050 - 8,865,000
Warrant liabilities value related to Issuance of common stock - - - - - - (5,771,250 ) - (5,771,250 )
Issuance of Series C-2 convertible preferred stock - - 1,100,000 1,100,000 - - - - 1,100,000
Conversion of Series C-1 Convertible Preferred stock (29,414 ) (29 ) - - 19,609 20 9 - -
Conversion of Series C-2 Convertible Preferred stock - - (1,100,000 ) (6,216,289 ) 4,011,766 4,012 6,212,277 - -
Beneficial conversion features associated with convertible notes payable - - - - - - 1,000,000 - 1,000,000
Beneficial conversion feature of Series C-2 convertible preferred stock - - - (129,412 ) - - 129,412 - -
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock - - - 45,541 - - (45,541 ) - -
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock - - - 5,020,883 - - (5,020,883 ) - -
Fractional shares adjusted for reverse split - - 14,477 15 (15 ) - -
Warrant exercise - - - - 200,000 200 399,800 - 400,000
Stock-based compensation - - - - 342,796 342 13,892,542 - 13,892,884
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock - - - 179,277 - - - - 179,277
Net loss - - - - - - - (15,466,585 ) (15,466,585 )
Balance September 30, 2021 - $ - - $ - 10,102,711 $ 10,103 $ 143,472,733 $ (135,006,472 ) $ 8,476,364

For the ~~Three~~Nine Months Ended ~~June~~September 30, 2020

Series C-1 Convertible Series C-2 Convertible Additional
Total
Stockholders’

Preferred Stock Preferred Stock Common Stock Paid-in Accumulated Equity Series C-1 Convertible Additional Total
Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Preferred Stock Common Stock Paid-in Accumulated Stockholders’
Balance March 31, 2020 29,414 $ 29 - - - - - - 26,018,154 $ 26,017 $ 117,186,998 $ (117,354,064 ) $ (141,020 )
Shares Amount Shares Amount Capital Deficit Deficit
Balance December 31, 2019 29,414 $ 29 - 1,983,047 $ 1,983 $ 116,798,021 $ (116,983,793 ) $ (183,760 )
Balance 29,414 $ 29 - 1,983,047 $ 1,983 $ 116,798,021 $ (116,983,793 ) $ (183,760 )
Common stock issued including equity commitment fee, net - - - 769,369 769 142,433 - 143,202                -                - 1,180,989 1,181 1,384,313 - 1,385,494
Conversion of convertible notes - - 1,403,854 1,403 210,054 - 211,457 - - 140,384 140 211,317 - 211,457
Beneficial conversion features associated with convertible notes payable - - 269,231 269,231 - - - - 269,231 - 269,231
Net loss - - - - - (420,302 ) (420,302 ) - - - - - - (1,795,897 ) (1,795,897 )
Balance June 30, 2020 29,414 $ 29 - - - - - 28,191,377 $ 28,189 $ 117,808,716 $ (117,774,366 ) $ 62,568
Balance September 30, 2020 29,414 $ 29 - 3,304,420 $ 3,304 $ 118,662,882 $ (118,779,690 ) $ (113,475 )
Balance 29,414 $ 29 - 3,304,420 $ 3,304 $ 118,662,882 $ (118,779,690 ) $ (113,475 )

~~For the Six Months Ended June 30, 2021~~
Series C-1 Convertible Series C-2 Convertible Additional Total
Stockholders’
Preferred Stock Preferred Stock Common Stock Paid-in Accumulated (Deficit)
Shares Amount Shares Amount Shares Amount Capital Deficit Equity
Balance December 31, 2020 29,414 $ 29 - $ - 42,011,617 $ 42,010 $ 120,541,135 $ (119,539,887 ) $ 1,043,287
Common stock issued including equity commitment fee, net - - - - 2,887,776 2,888 2,811,245 - 2,814,133
Issuance of common stock and warrants for cash, net - - - - 9,500,000 9,500 8,855,500 - 8,865,000
Issuance of Series C-2 convertible preferred stock - - 1,100,000 1,100,000 - - - - 1,100,000
Conversion of Series C-1 Convertible Preferred stock (29,414 ) (29 ) - - 196,094 196 (167 ) - -
Beneficial conversion features associated with convertible notes payable - - - - - - 1,000,000 - 1,000,000
Beneficial conversion feature of Series C-2 convertible preferred stock - - - (129,412 ) - - 129,412 - -
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock - - 32,353 - - (32,353 ) - -
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock - - 5,020,883 - - (5,020,883 ) - -
Warrant exercise - - - - 2,000,000 2,000 398,000 - 400,000
Stock-based compensation - - - - 527,971 528 9,226,174 - 9,226,702
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock - - - 179,277 - - - - 179,277
Net loss - - - - - - - (11,624,248 ) (11,624,248 )
Balance June 30, 2021 - $ - 1,100,000 $ 6,203,101 57,123,458 $ 57,122 $ 137,908,063 $ (131,164,135 ) $ 13,004,151
~~For the Six Months Ended June 30, 2020~~
Series C-1 Convertible Series C-2 Convertible Additional Total Stockholders’
Preferred Stock Preferred Stock Common Stock Paid-in Accumulated (Deficit)
Shares Amount Shares Amount Shares Amount Capital Deficit Equity
Balance December 31, 2019 29,414 $ 29 - - 19,831,521 $ 19,830 $ 116,780,174 $ (116,983,793 ) $ (183,760 )
Common stock issued including equity commitment fee, net - - - - 6,956,002 6,956 549,257 - 556,213
Conversion of convertible notes - - - - 1,403,854 1,403 210,054 - 211,457
Beneficial conversion features associated with convertible notes payable - - - - - - 269,231 - 269,231
Net loss - - - - - - - (790,573 ) (790,573 )
Balance June 30, 2020 29,414 $ 29 - - 28,191,377 $ 28,189 $ 117,808,716 $ (117,774,366 ) $ 62,568
The accompanying notes are an integral part of these unaudited condensed financial statements.

6

BTCS Inc.
Condensed Statements of Cash Flows
(Unaudited)

2021 2020 2021 2020
For the Six Months Ended For the Nine Months Ended
June 30, September 30,
2021 2020 2021 2020

Net Cash flows used from operating activities:
Net loss $ (11,624,248 ) $ (790,573 ) $ (15,466,585 ) $ (1,795,897 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense 299 678 443 895
Amortization on debt discount 1,134,771 105,254 1,716,744 186,199
Stock-based compensation 9,226,702 - 13,892,884 -
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock 179,277 179,277
Staking revenue (453,023 ) -
Validator revenue (776,399 ) -
Change in fair value of warrant liabilities (2,066,250 )
Purchase of non-productive digital assets/currencies (5,761,549 ) (608,355 ) (5,761,550 ) (808,355 )
Sale of non-productive digital assets/currencies 4,274,491 - 4,274,491 -
Realized gain on digital assets/currencies transactions (3,054,418 ) - (3,054,418 ) -
Impairment loss on digital assets/currencies 3,569,138 132,952 3,777,785 162,254
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (566,337 ) (25,941 ) (440,514 ) (11,466 )
Accounts payable and accrued expenses 130,541 3,666 168,546 13,015
Accrued compensation (346,689 ) 66,796 (348,875 ) 589,466
Net cash used in operating activities (3,291,045 ) (1,115,523 ) (3,904,421 ) (1,663,889 )

Net cash used in investing activities:
Purchase of productive digital assets/currencies for staking (8,493,136 ) -
Purchase of productive digital assets/currencies for validating (9,462,279 ) - ��
Purchase of property and equipment (3,245 ) - (4,543 ) -
Net cash used in investing activities (8,496,381 ) - (9,466,822 ) -

Net cash provided by financing activities:
Proceeds from short term loan - 500,000 - 500,000
Proceeds from exercise of warrants 400,000 - 400,000 -
Proceeds from issuance of Series C-2 convertible preferred stock 1,100,000 -
Net proceeds from issuance of convertible notes 1,000,000 - 1,000,000 -
Net proceeds from issuance of common stock and warrants for cash 8,865,000 - 8,865,000 -
Net proceeds from issuance of common stock 2,814,133 556,213 3,014,005 1,385,494
Proceeds from issuance of Series C-2 convertible preferred stock 1,100,000 -
Net proceeds from issuance common stock/ At-the-market offering 219,746 -
Payment to convertible notes principle and accrued interest (1,092,712 ) -
Net cash provided by financing activities 14,179,133 1,056,213 13,506,039 1,885,494

Net increase (decrease) in cash 2,391,707 (59,310 )
Net increase in cash 134,796 221,605
Cash, beginning of period 524,135 143,098 524,135 143,098
Cash, end of period $ 2,915,842 $ 83,788 $ 658,931 $ 364,703

Supplemental disclosure of non-cash financing and investing activities:
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock $ 32,353 $ - $ 45,541 $ -
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock $ 5,020,883 $ - $ 5,020,883 $ -
Conversion of Series C-1 Preferred Stock $ 196 $ - $ 20 $ -
Conversion of Series C-1 Preferred Stock $ 6,216,289
Beneficial conversion feature of Series C-2 convertible preferred stock $ 129,412 $ - $ 129,412 $ -
Beneficial conversion features associated with convertible notes payable $ 1,000,000 $ 269,231 $ 1,000,000 $ 269,231
Conversion of convertible note to common stock $ - $ 211,457 $ - $ 211,457

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

7


BTCS Inc.
Notes to Unaudited Condensed Financial Statements

Note 1 - Business Organization and Nature of Operations

BTCS Inc. (formerly Bitcoin Shop, Inc.), a Nevada corporation (the “Company”) was incorporated in 2008. In February 2014, the Company entered the business of hosting an online e-commerce marketplace where consumers could purchase merchandise using digital assets, including Bitcoin. The Company is currently focused on blockchain and digital currency ecosystems. In late 2014 we shifted our focus towards our transaction verification service business, also known as bitcoin mining, though in mid-2016 we ceased our mining operation at our North Carolina facility due to capital constraints. In January 2015, the Company began a rebranding campaign using its BTCS.com domain to better reflect its broadened strategy. The Company recently released its new website which included broader information on its strategy.

In the first quarter of 2021, the Company resumed its blockchain infrastructure operations (previously referred to as transaction verification services) with a focus on securing proof-of-stake blockchains and anticipates this will be a core focus going forward. Blockchain infrastructure operations can broadly be defined as earning a reward for securing a blockchain by ~~processing and~~ validating transactions on that blockchain. The Company is developing a proprietary staking-as-a-service platform that would enable clients to stake and delegate supported cryptocurrencies through a non-custodial platform.

The Company is also developing a proprietary digital asset data analytics platform aimed at enabling users to aggregate their 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.

The Company employs a digital asset treasury strategy with a primary focus on disruptive non-security protocol layer assets such as Bitcoin and Ethereum. The Company receives digital assets from its blockchain infrastructure ~~solutions~~ business and acquires digital assets through open market purchases. The Company is not limiting its assets to a single type of digital asset and may hold a variety of digital assets. The Company will carefully review its purchases of digital securities to avoid violating the 1940 Act and seek to reduce potential liabilities under the federal securities laws.

The market is rapidly evolving and there can be no assurances that we will be competitive with industry participants that have or may have greater resources than us.
Amendment to Articles of Incorporation
On August 12, 2021, the Company filed a Certificate of Change with the Nevada Secretary of State to affect a 1-for-10 reverse split of the Company’s class of common stock (the “Reverse Split”). The Certificate of Change became effective on August 13, 2021.
No fractional shares were issued in connection with the Reverse Split and all such fractional interests were rounded up to the nearest whole number of shares of common stock. The Company now has 97,500,000 shares of common stock authorized. Numbers of shares of the Company’s preferred stock were not affected by the Reverse Split; however, the conversion ratios have been adjusted to reflect the Reverse Split. The financial statements have been retroactively restated to reflect the Reverse Split.
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Note 2 - Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions to Form 10-Q and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying unaudited condensed financial statements do not include all of the information and notes required by GAAP for annual financial statements, but in the opinion of the Company’s management, reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The unaudited condensed financial statements and notes should be read in conjunction with the financial statements and notes for the year ended December 31, 2020.

Note 3 - Liquidity, Financial Condition and Management’s ~~Plan~~Planss

The Company has commenced its planned operations but has limited operating activities to date. The Company has financed its operations since inception using proceeds received from investments from third-party investors as well as from officers and directors of the Company.The Company has plans to continue to raise proceeds from sale of common stock and issuance of debt to fund operations as needed for the next twelve months.

During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company received net proceeds of approximately $~~14.2~~14.6 million from the issuance ofof: Series C-2 convertible preferred stock, a convertible note, common stock and warrants issued pursuant to the Purchase agreement, common stock issued pursuant to the Equity Line Purchase Agreement, the cash exercise of warrants, and ~~Series C-2 convertible preferred stock.~~the proceeds from the common stock sold pursuant to the ATM Agreement. On September 30, 2021, the fair market value of the Company’s liquid digital assets was approximately $6.2 million and the Company had approximately $0.66 million of cash. As such, the Company has adequate cash to fund operations for at least the next twelve months.
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Note 4 - Summary of Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2020 Annual Report.

~~Staking~~Validator Revenue

The Company runs its own digital asset ~~validating~~validator nodes and has entered into network-based smart contracts. Through these contracts, the Company provides cryptocurrency to stake a node for the purpose of ~~processing and~~ 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 cancelled by the operator and requires that the cryptocurrency staked remain locked up during the duration of the smart contract. In exchange for validating transactions and staking the cryptocurrency, the Company is entitled to all of the fixed cryptocurrency award for running the Company’s own node and successfully processing, validating and/or adding a block to the blockchain.

The provision of ~~processing and~~ validating blockchain transactions is an output of the Company’s ordinary activities. Each separate block creation or validation under a smart contract with a network represents a performance obligation. The transaction consideration the Company receives – the fixed cryptocurrency awards – is a non-cash consideration, which the Company measures at fair value on the date received. The fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency on the date of receipt. The satisfaction of the performance obligation for processing and validating blockchain transactions occurs at a point in time when confirmation is received from the network indicating that the validation is complete, and the awards are available for transfer. At that point, revenue is recognized.

Cost of ~~revenue~~Revenue

The Company’s cost of revenue consists primarily of direct production costs related to the operations of ~~processing and~~ validating transactions on the network, rent and utilities for locations housing server nodes to the extent applicable, hosting costs if cloud-based servers are utilized and fees (including stock-based fees) paid to 3rd parties to assist in the software maintenance and operations of its nodes.

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Digital Assets Translations and Impairments

Digital assets are included in the balance sheets as either current assets or other assets if they are staked and locked up for over one year. Digital assets are recorded at cost less impairment.

An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.

Realized gain (loss) on sale of digital assets are included in other income (expense) in the statements of operations. We assign costs to transactions on a first-in, first-out basis.

The Company assesses impairment of digital assets quarterly if the fair value of digital assets is less than its cost basis. The Company recognizes impairment losses on digital assets caused by decreases in fair value using the lowest U.S. dollar spot price of the related digital asset as of each impairment date. Such impairment in the value of digital assets are recorded as a component of costs and expenses in our statements of operations.

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Internally Developed Software

Internally developed software consisting of the core technology of the Company’s digital asset data analytics platform which is being designed to allow user to aggregate and analyze data from digital asset exchanges. For internally developed software, the Company uses both its own employees as well as the services of external vendors and independent contractors. The Company accounts for computer software used in the business in accordance with ASC 985-20 and ASC 350.

ASC 985-20, Software-Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product. Some companies use a “tested working model” approach to establishing technological feasibility (i.e., beta version). Under this approach, software under development will pass the technological feasibility milestone when the Company has completed a version that contains essentially all the functionality and features of the final version and has tested the version to ensure that it works as expected.

ASC 350, Intangibles-Goodwill and Other, requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. Costs incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment, and software. These costs generally consist of internal labor during configuration, coding, and testing activities. Capitalization begins when (i) the preliminary project stage is complete, (ii) management with the relevant authority authorizes and commits to the funding of the software project, and (iii) it is probable both that the project will be completed and that the software will be used to perform the function intended.

Use of Estimates

The accompanying unaudited condensed financial statements have been prepared in conformity with GAAP. This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. The Company’s significant estimates and assumptions include the recoverability and useful lives of intangible assets, stock-based compensation, the valuation of derivative liabilities, the valuation of convertible preferred stock and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates, including the carrying amount of the intangible assets, if any, could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates and assumptions.

10
Accounting for Warrants
The Company accounts for the issuance of common stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of ASC 815, Derivatives and Hedging (“ASC 815”). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). In addition, Under ASC 815, registered common stock warrants that require the issuance of registered shares upon exercise and do not expressly preclude an implied right to cash settlement are accounted for as derivative liabilities. The Company classifies these derivative warrant liabilities on the balance sheet as a current liability.
The Company assessed the classification of common stock purchase warrants as of the date of each offering and determined that such instruments originally met the criteria for equity classification; however, as a result of the Company no longer being in control of whether the warrants may be cash settled, the instruments no longer qualify for equity classification. Accordingly, the Company classified the warrants as a liability at their fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as “change in the fair value of warrant liabilities” in the statements of operations. The fair value of the warrants has been estimated using a Black-Scholes valuation model (see Note 6).
Stock-based Compensation

The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options ~~generally~~often vest over a one-year period.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Expected Term - The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term.

10
Expected Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading prices.

Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U. S. Treasury zero-coupon issues with an equivalent remaining term.

Expected Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

Effective January 1, 2017, the Company elected to account for forfeited awards as they occur, as permitted by ASU 2016-09. Ultimately, the actual expenses recognized over the vesting period will be for those shares that vested. Prior to making this election, the Company estimated a forfeiture rate for awards at 0%, as the Company did not have a significant history of forfeitures.
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Convertible Preferred Stock

The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred stock subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ equity. The Company evaluated the classification of its convertible preferred stock and determined that such instruments meet the criteria for equity classification.

The Company has also evaluated its convertible preferred stock in accordance with the provisions of ASC 815, Derivatives and Hedging, including consideration of embedded derivatives requiring bifurcation. The issuance of the convertible preferred stock could generate a beneficial conversion feature, which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date.

Beneficial Conversion Feature of Convertible Notes Payable

The Company accounts for convertible notes payable in accordance with the guidelines established by the FASB Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options. The beneficial conversion feature of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a beneficial conversion feature related to the issuance of a convertible note when issued.

The discounted face value is then used to measure the effective conversion price of the note. The effective conversion price and the market price of the Company’s common stock are used to calculate the intrinsic value of the conversion feature. The intrinsic value is recorded in the financial statements as a debt discount from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense.

Net Loss per Share

Basic loss per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the Company’s convertible preferred stock, convertible notes and warrants. Diluted loss per share excludes the shares issuable upon the conversion of preferred stock, notes and warrants from the calculation of net loss per share if their effect would be anti-dilutive.

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The following financial instruments were not included in the diluted loss per share calculation as of ~~June~~September 30, 2021 and 2020 because their effect was anti-dilutive:
Schedule of Earnings Per Share Anti-diluted
As of June 30, As of September 30,
2021 2020 2021 2020
Warrants to purchase common stock 9,627,915 502,915 962,823 50,323
Series C-1 Convertible Preferred stock - 196,093 - 19,609
Series C-2 Convertible Preferred stock 40,117,648 -
Convertible notes 2,392,631 4,048,583 285,429 466,201
Total 52,138,194 4,747,591 1,248,252 536,133

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Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

Note 5 - Note Payable

2020 December Promissory Note (Retired)

On December 16, 2020, the Company issued Cavalry Fund I LP (“Cavalry”) a $1,000,000 promissory note (the “2020 December Promissory Note”) in consideration for $1,000,000. The 2020 December Promissory Note is (i) due on October 16, 2021, (ii) convertible at a 35% discount to the closing price of the Company’s common stock on the date before exercise with a floor price of $~~0.04~~0.40 per share and (iii) shall bear interest at 12% per annum (payable at maturity). Subject to certain limitations, the Company may force conversion of the 2020 December Promissory Note. In connection with issuance of the 2020 December Promissory Note, the Company issued a Series C warrant to purchase ~~2,000,000~~200,000 shares of the Company’s common stock at an exercise price of $~~0.20~~2.00, the Series C warrants were exercised for cash on January 15, 2021, resulting in proceeds of $400,000 to the Company.

During the ~~six~~nine months ended ~~June 30, 2021, the Company recorded interest expense of approximately $60,000~~ for the 2020 December Promissory Note. As of June 30, 2021, the principal balance of the 2020 December Promissory Note was $1 million and accrued interest on the note payable amounted to approximately $~~64,000~~.
~~During the six months ended June~~September 30, 2021, the Company recorded approximately $~~589,000~~868,000 amortization of debt discount related to the 2020 December Promissory Note.

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During the nine months ended September 30, 2021, the Company recorded interest expense of approximately $88,000 for the 2020 December Promissory Note.
On September 24, 2021, the Company paid off in full the 2020 December Promissory Note. Repayment to Cavalry consisted of $1,000,000 in principal and $92,712 in accrued interest, for a total of $1,092,712. Cavalry confirmed the 2020 December Promissory Note had been fully paid and the Company has no further obligations with respect to the note.
2021 January Promissory Note

On January 15, 2021, the Company issued Calvary ~~the 2021~~a $1,000,000 promissory note (the “2021 Promissory ~~Note~~Note”) in consideration for $1,000,000. The 2021 Promissory Note is (i) due on November 15, 2021, (ii) convertible at a 35% discount to the closing price of the Company’s common stock on the date before exercise with a floor price of $~~0.75~~7.50 per share and (iii) shall bear interest at 12% per annum (payable at maturity). Subject to certain limitations, the Company may force conversion of the 2021 Promissory Note.

In connection with issuance of the 2021 Promissory Note, the Company issued a Series D warrant to purchase ~~2,000,000~~200,000 shares of the Company’s common stock at an exercise price of $~~2.16~~21.60 per share (the ~~“Warrant”~~“Series D Warrant”). Detachable warrants issued in a bundled transaction with debt and equity offerings are accounted for on a separate basis. The allocation of the issuance proceeds to the base instrument and to the warrants depends on the accounting classification of the separate warrant as equity or liability. If the warrants are classified as equity, then the allocation is made based upon the relative fair values of the base instrument and the warrants following the guidance in ASC 470-20-25-2. In this case, the Series D Warrant is equity-classified, with the fair value at issuance was approximately $3,580,000. As such, the Company recognized a beneficial conversion feature, resulting in a discount to the 2021 Promissory Note of approximately $782,000 with a corresponding credit to additional paid-in capital.

13
In addition, the 2021 Promissory Note does not contain any embedded features that require bifurcation pursuant to ASC 815-15. At the issuance date, the 2021 Promissory Note was convertible into ~~705,716~~70,572 shares of common stock at $~~1.41~~14.10 per share, but the Company’s fair value of underlying common stock was $~~2.18~~21.8 per share. As such, the Company recognized a beneficial conversion feature, resulting in an additional discount to the 2021 Promissory Note of approximately $218,000 with a corresponding credit to additional paid-in capital.

During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company recorded approximately $848,000 amortization of debt discount related to the 2021 Promissory Note.
During the nine months ended September 30, 2021, the Company recorded interest expense of approximately $~~55,000~~85,000 for the 2021 Promissory Note. As of ~~June~~September 30, 2021, the principal balance of the 2021 Promissory Note was $1 million and accrued interest on the note payable amounted to approximately $~~55,000~~85,000.

~~During~~Note 6 - Fair Value of Financial Assets and Liabilities
Financial instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the ~~six months ended June~~short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.
The Company uses three levels of inputs that may be used to measure fair value:
Level 1 - quoted prices in active markets for identical assets or liabilities
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
The following table presents the Company’s assets and liabilities that are measured at fair value at September 30, 2021 and December 31, 2020:
Schedule of Fair Value of Assets and Liabilities Valued on Recurring Basis
Fair value measured at September 30, 2021
Total at September 30, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs
2021 (Level 1) (Level 2) (Level 3)
Liabilities
Warrant Liabilities $ 3,705,000 $    - $       - $ 3,705,000
Fair value measured at December 31, 2020
Total at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs
2020 (Level 1) (Level 2) (Level 3)
Liabilities
Warrant Liabilities $ - $ - $ - $ -
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Level 3 Valuation Techniques
Level 3 financial liabilities consist of the warrant liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement. Changes in the values of the warrant liabilities are recorded in “change in fair value of warrant liabilities” in the Company’s statements of operations.
On March 2, 2021, the Company entered into a securities purchase agreement (the “Offering”) with certain purchasers pursuant to which the Company agreed to sell an aggregate of (i) 950,000 shares of common stock, and (ii) common stock warrants (the “Warrants”) to purchase up to 712,500 shares of common stock for gross proceeds of $9.5 million in a private placement. The closing of the Offering occurred on March 4, 2021.
The Warrants require, at the option of the holder, a net-cash settlement following certain fundamental transactions (as defined in the Warrants) at the Company. At the time of issuance, the Company maintained control of certain fundamental transactions and as such the Warrants were initially classified in equity. As of September 30, 2021, the Company no longer maintained control of certain fundamental transactions as they did not control a majority of shareholder votes. As such, the Company may be required to cash settle the Warrants if a fundamental transaction occurs which is outside the Company’s control. Accordingly, the Warrants are classified as liabilities. The Warrants have been recorded ~~approximately $~~at their fair value using the Black-Scholes valuation model, and will be recorded at their respective fair value at each subsequent balance sheet date. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility.
~~546,000~~ ~~amortization~~
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The Warrants require the issuance of ~~debt discount related~~registered shares upon exercise, do not expressly preclude an implied right to cash settlement and are therefore accounted for as derivative liabilities. The Company classifies these derivative warrant liabilities on the balance sheet as a current liability.
A 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 September 30, 2021, ~~Promissory Note.~~is as follows:
Summary of Valuation Methodology and Significant Unobservable Inputs Warrant Liabilities
September 14, 2021 September 30, 2021
Risk-free rate of interest 0.79 % 0.98 %
Expected volatility 192.2 % 169.4 %
Expected life (in years) 4.47 4.43
Expected dividend yield - -
The risk-free interest rate was based on rates established by the Federal Reserve Bank. For the Warrants, the Company estimates expected volatility giving primary consideration to the historical volatility of its common stock. The general expected volatility is based on the standard deviation of the Company’s underlying stock price’s daily logarithmic returns. The expected life of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based on the fact that the Company has not historically paid dividends on its common stock and does not expect to pay dividends on its common stock in the future.
The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the nine months ended September 30, 2021 and 2020, that are measured at fair value on a recurring basis:
Schedule of Changes in Fair Value and Other Adjustments of Warrants
Fair Value of Level 3 financial liabilities
September 30, September 30,
2021 2010
Beginning balance $ - $ -
Warrant liabilities classification 5,771,250 -
Fair value adjustment of warrant liabilities (2,066,250 ) -
Ending balance $ 3,705,000 $ -

Note 67 - Stockholders’ Equity

Preferred Stock

The Company is authorized to issue up to ~~20,000,000~~2,000,000 shares of preferred stock. This preferred stock may be issued in one or more series, and shall have such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as shall be determined at the time of issuance by the Company’s board of directors without further action by the Company’s shareholders.

On January 1, 2021, members of the Company’s management subscribed for ~~1,100,000~~110,000 shares of the Company’s ~~to be designated~~ Series C-2 Convertible Preferred Stock (the “Series C-2”), for a total of $1,100,000 at $~~1.00~~10.00 per Share of Series C-2. The Company obtained an independent valuation of the Series C-2 and $179,277 of compensation expense was recognized, representing the difference between the fair value and the proceeds received.

The Series C-2 is not mandatorily redeemable and is not unconditionally redeemable. The Series C-2 is callable by the Company. The Certificate of Designation required that the Company, within 180 days of the Initial Issuance Date, call a special meeting of stockholders seeking shareholder ratification of the issuance of the Series C-2. If the ratification of the issuance was not approved prior to the twelve-month anniversary of the Initial Issuance Date (the “Vote Deadline”), the Series C-2 would be redeemed at a price equal to 107% of (i) the Stated Value per share plus (ii) all unpaid dividends thereon. Provided; further, if the Company had filed a proxy with the SEC prior to the Vote Deadline but was unable to conduct a vote prior to the Vote Deadline then the Vote Deadline would have been extended until such time as the vote iswas conducted. The Series C-2 holders were not entitled to vote on the ratification. The call provision would have been automatically triggered if the ratification of the issuance was not approved in a special meeting of stockholders prior to the twelve-month anniversary of the Initial Issuance Date. The Company held the meeting within the required period and the Series C-2 is no longer redeemable.

1316

Based on the guidance in ASC 480-10-S99 (“ASR 268”), a redeemable equity instrument is not to be included in permanent equity. Rather, it should be reported between long-term debt and stockholders’ equity, without a subtotal that might imply it is a part of stockholders’ equity (i.e., “temporary equity” or “mezzanine capital”). ASR 268 specifies that redeemable stock is any type of equity security, including common or preferred stock, when it has any condition for redemption which is not solely within the control of the issuer without regard to probability.

The Series C-2 Certificate of Designation required the Company to redeem the Series C-2 if stockholder approval was not received by the Vote Deadline. Stockholder approval was not considered to be “solely within the Company’s control.” Stockholder approval occurred on March 31, 2021, at which time the Series C-2 was no longer callable by the Company. As such, the Series C-2 was initially classified in temporary equity under ASR 268 and was reclassified to permanent equity upon stockholder approval on March 31, 2021.

The holders of Series C-2 shall be entitled to receive dividends or distributions on each share of Series C-2 on an “as-converted basis” into ~~Common Stock~~common stock when and if dividends are declared on the ~~Common Stock~~common stock by the Board of Directors. Dividends shall be paid in cash or property, as determined by the Board of Directors.

At any time or times on or after the two-year anniversary of the Initial Issuance Date, each Holder shall be entitled to convert any portion of the outstanding Series C-2 held by such Holder into validly issued, fully-paid and non-assessable shares of Common at the Conversion Rate. The Conversion Amount is subject to adjustment for certain capitalization and Anti-Dilution Events. The Series C-2 will automatically be converted at the earlier of: (i) the four-year anniversary of the Initial Issuance Date, and (ii) simultaneously with the Company’s ~~Common Stock~~common stock being listed on a national securities exchange. The Conversion Rate is based upon the Conversion Price of $~~0.17~~ 1.70which resulted in a beneficial conversion feature at the time of issuance. As such, the Company recognized a beneficial conversion amount of $129,412as a reduction to the carrying amount of the convertible instrument. This discount will be amortized as a dividend over two years, the earliest conversion date. Upon the conversion of Series C-2 into common stock on September 14, 2021, the total amortization of the beneficial conversion feature is $45,541 and the remaining discount is netted against additional paid in capital.

The Conversion Amount may be adjusted due to certain Anti-Dilution Events. If at any time after the Initial Issuance Date, the Company raises capital equal to or in excess of $5 million by issuing ~~Common Stock~~common stock or Common Stock Equivalents then the Anti-Dilution Amount per share of Series C-2 shall be the product of: (i) 0.0000004, and (ii) the aggregate amount of all capital raised by the Company after the Initial Issuance Date (the “Capital Raised”). Provided; further, for the determination of the Anti-Dilution Amount, the amount of Capital Raised shall be limited to $13 million, regardless of how much capital the Company raises. In the event capital is raised simultaneous with a listing on a national securities exchange and the automatic conversion of the Series C-2 then such funds shall be included in the Capital Raised for the purpose of determining the Anti-Dilution Amount. As of ~~June~~September 30, 2021, ~~$13,715,008~~over $13 million of ~~Capital Raised triggered an~~capital was raised and the adjustment to the Conversion ~~Amount.~~Amount was fully triggered. The Company recognized the effect of the down-round protection when ~~the~~ capital raises ~~occurred~~occur as the difference between: (1) the financial instrument’s fair value (without the down round feature) using the pre-trigger exercise price, and (2) the financial instrument’s fair value (without the down round feature) using the reduced exercise price. The value of the effect of the down round feature of $5,020,883 was treated as a dividend and a reduction to income available to common shareholders in the basic EPS ~~calculation~~calculation.~~. As of June 30,~~ On September 14, 2021, the Series C-2 was ~~convertible~~converted into ~~40,117,648~~ 4,011,766shares of common stock.

Common Stock
Reverse Stock Split
On August 25, 2021, the Company issued 14,477 shares of common stock in connection with the 1-for-10 Reverse Split resulting from the rounding up of fractional shares of common stock to the whole shares of common Stock.
17

Issuance of Shares Pursuant to Equity Line of Credit Purchase Agreement

On January 28, 2021, the Company filed a registration statement on Form S-1 seeking to register ~~4,000,000~~400,000 shares (the “Registration Statement”) pursuant to the equity line of credit purchase agreement with Cavalry (the “Equity Line Purchase Agreement”). The Registration Statement was declared effective by the SEC on February 1, 2021.

During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company issued approximately ~~2,887,776~~ 321,740shares of common stock (inclusive of approximately ~~164,212~~ 17,590pro-rata commitment shares) under the Registration Statement ~~pursuant to the equity line of credit purchase agreement with Cavalry (the “Equity Line”)~~ resulting in aggregate net proceeds of $~~2,814,133~~ 3,014,005~~(net~~ (net of $~~875~~ 1,000in transfer agent fees) and $~~2,815,008~~ 3,015,005in gross proceeds at a per share price of approximately $~~0.975~~ 9.37~~(inclusive~~ (inclusive of the pro-rata commitment shares).

14
Issuance of Shares Pursuant to Registered Direct Offering

On March 4, 2021, the Company ~~closed on~~entered into a securities purchase agreement (the ~~“Purchase~~“RD Purchase Agreement”) with institutional investors, pursuant to which the Company sold and issued, in a registered direct offering, ~~9,500,000~~950,000 shares of the Company’s common stock, at a purchase price per share of $~~1.00~~10.00 and immediately exercisable ~~five~~five-year ~~-year~~ warrants to purchase ~~7,125,000~~712,500 shares of common stock at an exercise price of $~~1.15~~11.50 per ~~share (the “Warrants” and together with the common stock, the “Securities”).~~share. Gross proceeds from the ~~offering~~Offering was $9.5 million. Net proceeds were $8.9million after deducting placement agent fees and other offering expenses paid for by the Company.

The RD Purchase Agreement contains representations, warranties, indemnifications and other provisions customary for transactions of this nature. Pursuant to the RD Purchase Agreement, subject to limited exceptions, each of the Company and its officers and directors agreed not to, and not to publicly disclose the intention to, sell or otherwise dispose of, any shares of common stock or any securities convertible into, or exchangeable or exercisable for, common stock, for a period ending 60 days after the date of the prospectus supplement for this offering.

The Company also entered into a placement agent agreement ~~(the “PA Agreement”)~~ with A.G.P./Alliance Global Partners (“AGP”), pursuant to which AGP agreed to serve as the exclusive placement agent for the Company in connection with that offering. The Company paid AGP a cash placement fee equal to 7.0% of the aggregate gross proceeds raised in the offering (reduced to 3.5% for certain investors) and reimbursed the placement agent for its legal fees and other accountable expenses in the amount of $40,000.
At The Market Offering Agreement
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 million (the “Shares”). The Company will pay H.C. Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares.
During the nine months ended September 30, 2021, the Company sold a total of 41,290 shares of common stock under the ATM Agreement for aggregate total gross proceeds of approximately $279,000 at an average selling price of $6.76 per share, resulting in net proceeds of approximately $219,746 after deducting commissions and other transaction costs.

Issuance of Shares Pursuant to Cash Exercise of Series C Warrants

On January 15, 2021, the Company issued ~~2,000,000~~200,000 shares of the Company’s common stock to Cavalry upon the exercise of all their Series C warrants and payment of the exercise ~~price~~amount of $400,000. Cavalry and the Company entered into an agreement whereby Cavalry would exercise early for cash provided that the Company register the underlying shares of common stock within 30 days of exercise.

18
Issuance of Shares Due to Conversion of Series C-1 Preferred Stock

On March 30, 2021, the Company issued ~~196,094~~ 19,609shares of common stock upon the conversion of 29,414shares of Series C-1 Convertible Preferred stock. After this conversion, there were no Series C-1 shares outstanding so the Company filed a Certificate of Withdrawal with the Secretary of State of the State of Nevada. The Certificate of Withdrawal eliminated from the Articles of Incorporation of the Company all matters set forth in the Series C-1.

Issuance of Shares Due to Conversion of Series C-2 Preferred Stock
On September 14, 2021, the Series C-2 was converted into 4,011,766 shares of common stock. Please refer to the discussion above.
Issuance of Restricted Stock to Service Providers

During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company issued to four service providers ~~of the Company~~ a total of approximately ~~527,971~~ 52,800shares of restricted common stock, representing a total fair value of $0.6million.

2021 Equity Incentive Plan

The Company’s 2021 Equity Incentive Plan (the “2021 Plan”) was effective on January 1, 2021 and approved by shareholders on March 31, 2021. The Company has reserved ~~20,000,000~~2,000,000 shares of common stock for issuance pursuant to the 2021 Plan.

Options

On January 1, 2021, the Board of Directors of the Company approved the grant of 121.2 million stock options with an exercise price of $~~0.19~~1.90 under the Company’s 2021 Plan to Messrs. David Garrity a director, and Charles Allen and Michal Handerhan, executive officers and directors of the Company. Effective as of January 1, 2021, the Company and each optionee executed Stock Option Agreements evidencing the option grants. While stockholder approval (or ratification) of the grants was not required (under either the Stock Option Agreements or by the resolutions of the Board of Directors approving such grants), the Board of Directors voluntarily caused the Company to seek shareholder ratification of the grants to limit any potential exposure to breach of fiduciary duty claims. As a result, based on the guidance in ASC 718, the date the stockholders ratified the grants (March 31, 2021) is the deemed grant date solely with respect to GAAP for those stock options. Of the stock options: (i) ~~4.8~~480,000 ~~million~~ options will vest on January 1, 2022 and (ii) the remaining options vested (prior to March 31, 2021) based upon the Company’s stock price meeting certain milestones.

15
On April 1, 2021, the Company granted ~~350,000~~ 35,000stock options with an exercise price of $~~1.03~~ 10.30to Charles B. Lee and Carol Van Cleef, directors of the Company. Of the stock options: (i) ~~140,000~~ 14,000options will vest on April 1, 2022and (ii) the remaining ~~210,000~~21,000 options vest based upon the Company’s stock price meeting certain milestones.

The Company records compensation expense for the ~~140,000~~ 14,000options granted on April 1, 2021 based on the estimated fair value of the options on the deemed grant date using the Black-Scholes formula, utilizing assumptions laid out in the table below. The Company uses historical data to determine exercise behavior, volatility and forfeiture rate of the options. For the ~~210,000~~ 21,000options granted on April 1, 2021 that vest based upon the Company’s stock price meeting certain milestones, the Company records compensation expense based on the estimated fair value of the options using a Monte-Carlo simulation.

The following weighted-average assumptions were used to estimate the fair value of options granted during the ~~six~~nine months ended 2021 and 2020 for both the Black-Scholes formula and the Monte-Carlo simulation:
Summary of Weighted-average Assumptions Used to Estimate Fair Value

For the nine months ended
September 30,

2021 2020
Exercise price $ 2.1 -
Term (years) 2.25-3.05 -
Expected stock price volatility 185.9 % -
Risk-free rate of interest 0.34 % -

For the six months ended
June 30,

2021 2020
Exercise price $ 0.21 -
Term (years) 2.50-3.30 -
Expected stock price volatility 185.9 % -
Risk-free rate of interest 0.34 % -
19

Expected Volatility: The Company uses historical volatility as it provides a reasonable estimate of the expected volatility. Historical volatility is based on the most recent volatility of the stock price over a period of time equivalent to the expected term of the option.

Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. treasury zero-coupon yield curve in effect at the time of grant for the expected term of the option.

Expected Term: The Company’s expected term represents the weighted-average period that the Company’s stock options are expected to be outstanding. The expected term is based on the expected time to post-vesting exercise of options by employees. The Company uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise patterns.

For awards vesting upon the achievement of a service condition, compensation cost measured on the grant date will be recognized on a straight-line basis over the vesting period. For awards vesting upon the achievement of the market conditions which were met at the date of grant, compensation cost measured on the date of grant was immediately recognized. For awards vesting upon the achievement of the market conditions which were not met at the date of grant, compensation cost measured on the grant date will be recognized on a straight-line basis over the vesting period based on estimation using a Monte-Carlo simulation.

16
A summary of options activity under the Company’s stock option plan for ~~six~~nine months ended ~~June~~September 30, 2021 is presented below:
Summary of Option Activity
Number of Shares Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual
Life (in years) Number of Shares Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2020 - $ - $ - - - $ - $ - -
Employee options granted 12,350,000 0.21 5,436,000 4.8 1,235,000 2.14 4,188,000 4.5
Outstanding as of June 30, 2021 12,350,000 $ 0.21 $ 5,436,000 4.8
Outstanding as of September 30, 2021 1,235,000 $ 2.14 $ 4,188,000 4.5
Options vested and exercisable 7,200,000 $ 0.19 $ 3,261,600 4.8 720,000 $ 1.90 $ 2,512,800 4.5

RSUs

On January 1, 2021, the Board of Directors of the Company approved ~~2.75~~275,000 ~~million~~ restricted stock unit grants under the Company’s 2021 Equity Incentive Plan to Messrs. David Garrity a director, and Charles Allen and Michal Handerhan, executive officers and directors of the Company. Effective as of January 1, 2021, the Company and each recipient executed a Restricted Stock Agreement evidencing the stock grants. While stockholder approval (or ratification) of the grants was not required (under either the Restricted Stock Agreements or by the resolutions of the Board of Directors approving such grants), the Board of Directors voluntarily caused the Company to seek shareholder ratification of the grants to limit any potential exposure to breach of fiduciary duty claims. As a result, based on the guidance in ASC 718, the date the stockholders ratified the grants (March 31, 2021) is the deemed grant date solely with respect to GAAP for those restricted stock grants. The restricted stock units vest when the Company lists its ~~Common Stock~~common stock on a national securities exchange. As of ~~June~~September 30, 2021, ~~the~~all 275,000 restricted stock units ~~remained unvested.~~vested with a total fair value of approximately $2.8 million. The cost of stock-based compensation for restricted stock units is measured based on the closing fair market value of the Company’s common stock at the deemed grant ~~date. Because~~date and was recorded on the September 14, 2021 vesting date when the listing on a national securities exchange is not deemed probable of occurring until the event occurs, compensation cost measured on the deemed grant date will not be recognized until the listing actually occurs.occurred.

On April 1, 2021, the Company granted a total of ~~150,000~~15,000 restricted stock units to ~~Charles B. Lee and Carol Van Cleef,~~two non-employee directors of the Company. The restricted stock units vest when the Company lists its ~~Common Stock~~common stock on a national securities exchange. As of ~~June~~September 30, 2021, ~~the~~ all 15,000 restricted stock units ~~remained unvested.~~vested with a total fair value of approximately $0.2 million. The cost of stock-based compensation for restricted stock units is measured based on the closing fair market value of the Company’s common stock at the deemed grant ~~date. Because~~date and was recorded on the September 14, 2021vesting date when the listing on a national securities exchange is not deemed probable of occurring until the event occurs, compensation cost measured on the deemed grant date will not be recognized until the listing actually occurs.occurred.
20

On June 28, 2021, the Company granted ~~507,813~~50,781 restricted stock units to ~~Andrew Lee,~~ the Company’s then Chief Financial Officer. The restricted stock units ~~will~~were to vest over a ~~five-year~~five-year period as follows: 20% of the ~~507,813~~ 50,781restricted stock units ~~will~~were to vest on the one-year anniversary of the grant date, and the remaining 80% ~~will~~were to vest monthly over the following four years with vesting occurring on the last day of each respective month.The grant date fair value of restricted stock units was approximately $0.3 million.

A summary of the Company’s restricted stock units granted under the 2021 Plan during the ~~six~~nine months ended ~~June~~September 30, 2021 are as follows:
Summary of Restricted Stock
Number of Restricted
Stock Units Weighted Average
Grant Day Fair Value
Non-vested at December 31, 2020 - $ -
Granted 3,407,813 0.97
Non-vested at June 30, 2021 3,407,813 $ 0.97
Number of Restricted Stock Units Weighted Average Grant Day Fair Value
Nonvested at December 31, 2020 - $ -
Granted 340,781 9.72
Vested (290,000 ) 10.29
Nonvested at September 30, 2021 50,781 $ 6.42

Stock-based Compensation

Stock-based compensation expense for the ~~three~~nine months ended ~~June~~September 30, 2021 was approximately $~~8.8~~ 13.8million, comprised of $~~136,000~~ 203,000~~for the issuance of~~ restricted common stock issued to service providers not pursuant to the 2021 Plan and approximately $~~8.6~~ 10.3million in connection with options issued pursuant to the 2021 Plan. Unrecognized compensation expense for the Company was $~~3.7~~ 2.0million on ~~June~~September 30, 2021. Stock-based 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 nine months ended September 30, 2021 and 2020 was as follows:
Schedule of Stock-based Compensation Expense
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Employee stock option awards $ 1,638,516 $ - $ 10,298,844 $ -
Employee restricted stock units awards 3,027,665 - 3,029,040 -
Non-employee restricted stock awards 75,000 - 237,806 -
Series C-2 allocation - - 179,277 -
$ 4,741,181 $ - $ 13,744,967 $ -

Note 78 - Employee Benefit Plans

The Company maintains defined contribution benefit plans under Section 401(k) of the Internal Revenue Code covering substantially all qualified employees of the Company (the “401(k) Plan”). Under the 401(k) Plan, the Company may make discretionary contributions of up to 100% of employee contributions. During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company made contributions to the 401(k) Plan of $39,000.

Note 89 - Subsequent Events
~~None~~From October 1, 2021 to November 4, 2021, the Company sold a total of 172,547 shares of common stock under the ATM Agreement for aggregate total gross proceeds of $1,185,474 at an average selling price of $ $6.87 per share, resulting in net proceeds of approximately $1,147,886 after deducting commissions and other transaction costs.
On October 25, 2021, the Company received a filing acknowledgment with respect to a Certificate of Withdrawal with the Secretary of State of the State of Nevada. The Certificate of Withdrawal, was effective on October 25, 2021, and eliminated from the Articles of Incorporation of the Company all matters set forth in the Company’s Certificate of Designation with respect to the Company’s Series C-2 Preferred Stock that had been previously filed with the Secretary of State of the State of Nevada on January 5, 2021. No shares of the Series C-2 Preferred Stock were issued and outstanding at the time of the filing of the Certificate of Withdrawal, and none will be issued.
On November 4, 2021, Mr. Andrew Lee resigned as the Company’s Chief Financial Officer. In connection with the resignation, Mr. Charles Allen was appointed interim Chief Financial Officer.

1721

ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements that involve risks and uncertainties. Words such as may, will, should, would, anticipates, expects, intends, plans, believes, seeks, estimates and similar expressions identify such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements. Factors that could cause or contribute to these differences include those discussed in the Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2020 and our Prospectus filed with the SEC on February 16, 2021 and the Prospectus Supplement dated September 14, 2021.

Overview

~~We are~~BTCS is an early entrant in the digital asset market and one of the first U.S. ~~publicly traded~~publicly-traded companies to focus on digital assets and blockchain technologies. Through our ~~blockchain infrastructure~~blockchain-infrastructure operations, we secure disruptive next-generation blockchains by actively ~~processing and~~ validating ~~blockchain transactions and~~transactions. We are then rewarded with digital ~~assets. We~~assets, while this process is similar to bitcoin mining the consensus mechanism is different. Now we are ~~also developing~~building on the foundation of our pre-established infrastructure with the development of a digital asset data analytics ~~platform~~dashboard. The first feature of the dashboard, which is an open beta, allows users to ~~consolidate crypto trades~~evaluate their digital asset portfolios from multiple exchanges on a single platform. ~~Digital assets~~We also are ~~core~~developing and plan to ~~our corporate treasury strategy with~~integrate into the platform a ~~primary focus on disruptive non-security protocol layer assets.~~staking-as-a-service feature that, once launched, will allow users to participate in asset leveraging through securing blockchain protocols.

Blockchain Infrastructure

Blockchain infrastructure solutions can broadly be defined as earning a reward for securing a blockchain by ~~processing and~~ validating transactions on that blockchain. There are currently two main consensus mechanisms used to secure blockchains: i), proof-of-work (“PoW”), in which nodes dedicate computational resources, and ii) proof-of-stake (“PoS”), in which nodes dedicate financial resources. The intention behind both PoW and PoS is to make it practically infeasible for any single malicious actor to have enough computational power or ownership stake to successfully attack the blockchain.

In the case of PoW, a miner does “work” using ~~energy consuming~~energy-consuming computers and is rewarded for this “work” with digital assets. The miner, typically through pools running nodes, ~~is validating~~validates transactions on the blockchain, essentially converting electricity and computing power into a digital currency reward comprised of transaction fees and newly-minted digital assets. Bitcoin is an example of ~~this~~PoW and is by far the largest and most secure PoW blockchain.

~~With regards~~PoS miners, often referred to as validators in PoS ~~miners~~systems, actively operate nodes and validate ~~transactions and~~transactions. Validators are required to stake ~~their~~ holdings of a digital currency to participate in the consensus algorithm ~~such that bad~~and are rewarded in tokens for aligning behavior with the rules of the algorithm. Bad behavior can be penalized by “slashing” the ~~miners~~validator’s holdings and/or rewards. ~~PoS requires less energy/electricity to~~Validators can also be ~~consumed and can give cryptocurrency holders who actively operate nodes and validate transactions a reward in~~removed from the ~~native cryptocurrency, provided that they “stake” their holdings. Miners who break~~network for breaking the ~~rules or fail to do the required “work” can be penalized by “slashing” their rewards or staked digital assets; thus, ill-intentioned~~rules. Ill-intentioned behavior among ~~miners~~validators is discouraged, allowing for the blockchain to be properly maintained and secured. Compared to PoW, PoS blockchains ~~employ~~require less energy.
Depending on the PoS blockchain protocol, native token holders have the opportunity to leverage their asset holdings by either delegating their rights to a validator (“Delegating”), staking their token holdings in a staking pool (“Staking”), or running their own validator (“Pooling”). With Delegating, token holders indirectly participate by maintaining control of their private keys and delegating their tokens to an ~~environmentally-friendly technology used~~existing validator. Therefore, delegating is more akin to ~~process~~assigning voting rights of stock to another person or entity via a power of attorney. With Pooling, an operator and ~~validate digital asset transactions. Ethereum 2.0, Polkadot~~token holder combine tokens in order to improve the constituents’ collective odds of validating new blocks, and ~~Cardano are examples~~typically the operator takes custody of ~~PoS blockchains.~~token holders funds i.e. private keys. If chosen for validation, the group is rewarded in tokens. With both Delegating and Pooling, the validator operators earn a fee for providing the technical capabilities of running a node 24/7 that requires regular, active maintenance and industry expertise.

The Company built its foundation on securing PoS blockchains. Apart from Bitcoin and Ethereum, all of the Company’s digital asset holdings are in tokens secured by PoS or similar consensus mechanisms that allow for Delegating and asset leveraging. The Company is currently actively ~~operates 240~~operating validator nodes on ~~the Ethereum Beacon Chain,~~Ethereum’s beacon chain, Cardano, Tezos, Avalanche, and ~~has deployed its own Cardano pool. The~~Cosmos. Building on that base, the Company plans to expand its PoS operations to secure other disruptive blockchain protocols.
The Company’s plan is that this blockchain infrastructure will form the core for the growth of its platform. The Company utilizes cloud infrastructure to operate and run its validator nodes and does not maintain its own physical assets, but may add this infrastructure in the future. The Company is not currently securing PoW blockchains, such as Bitcoin’s blockchain, but may in the future.

The Company currently holds the following digital assets which are core to its blockchain infrastructure efforts. The table also includes bitcoin which is ~~developing a proprietary staking-as-a-service platform~~not core to ~~allow users to stake and delegate supported cryptocurrencies through a non-custodial platform.~~our infrastructure operations.
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Digital Assets Held at Period End
Digital Assets
Asset 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1 2021Q2 2021Q3
Bitcoin (BTC) 14.9 20.6 20.6 54.3 63.6 66.9 90.0 90.0 90.0
Ethereum (ETH) 584.7 985.0 985.0 2,304.6 2,554.7 2,674.2 7,732.5 7,878.6 7,992.4
Cardano (ADA) 257,757.4 257,757.4
Kusama (KSM) 123.4 374.2
Tezos (XTZ) 14,965.6 24,171.9
Solana (SOL) 4,787.5
Polkadot (DOT) 8,032.1
Terra (Luna) 3,584.2
Cosmos (Atom) 3,072.4
Polygon (Matic) 67,114.1
Avalanche (Avax) 2,024.7
Algorand (Algo) 50,583.9
Fair Market Value of Digital Assets at Period End
Fair Market Value of Digital Assets
Asset 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1 2021Q2 2021Q3
Bitcoin (BTC) $ 123,733 $ 148,406 $ 132,831 $ 496,027 $ 686,580 $ 1,962,572 $ 5,302,695 $ 3,153,675 $ 3,941,180
Ethereum (ETH)* $ 105,175 $ 127,662 $ 131,582 $ 521,552 $ 919,748 $ 1,976,126 $ 14,833,709 $ 17,920,148 $ 23,990,541
Cardano (ADA) $ 356,600 $ 545,028
Kusama (KSM) $ 26,501 $ 123,957
Tezos (XTZ) $ 45,495 $ 146,914
Solana (SOL) $ 675,373
Polkadot (DOT) $ 229,558
Terra (Luna) $ 138,351
Cosmos (Atom) �� $ 111,252
Polygon (Matic) $ 75,644
Avalanche (Avax) $ 135,191
Algorand (Algo) $ 82,381
Total $ 228,908 $ 276,068 $ 264,413 $ 1,017,579 $ 1,606,328 $ 3,938,698 $ 20,136,404 $ 21,502,420 $ 30,195,370
QoQ Change 21 % -4 % 285 % 58 % 145 % 411 % 7 % 40 %
YoY Change 1,327 % 7,516 % 2,013 % 1,780 %
* Approximately 9 ETH is not staked on Ethereum 2.0’s Beacon Chain.

As of November 4, 2021 the fair market value of our digital assets was approximately $45.7 million.
Digital Asset ~~Data Analytics~~ Platform
~~We are~~The Company is also developing a proprietary digital asset data analytics ~~platform~~dashboard aimed at ~~enabling~~allowing users to ~~aggregate~~evaluate their crypto portfolio holdings ~~from~~across multiple exchanges and ~~wallets into~~chains on a single ~~platform to view and analyze performance, risk metrics, and potential tax implications.~~platform. The ~~internally developed platform~~internally-developed dashboard utilizes digital asset exchange APIs to read user data and does not allow for the trading of assets. AsIn addition to portfolio monitoring, we are also working to integrate a ~~result~~full suite of other features including decentralized exchanges, wallets, risk metrics and potentially a way for users to calculate end-of year-reports for tax purposes. We believe that increasing the ~~pandemic,~~number of features we have experienced delays in the development of the platform, however, on April 1, 2021 we engaged an information technology service provider to assist with the further development and acceleration of the platform.offer may create a sticky user experience across multiple, interrelated products.

18
Additionally, the Company is currently developing and plans to integrate into the platform a proprietary staking-as-a-service feature aimed at allowing users to delegate their tokens on next-generation PoS blockchains to Company operated validator nodes.

Digital Asset Treasury Strategy
The Company employs a digital asset treasury strategy with a primary focus on disruptive ~~non-security~~ protocol layer assets such as Bitcoin ~~and Ethereum. The Company receives~~which are not able to be staked (i.e. non-productive). They are distinct from digital assets ~~from its~~used as the foundation for our blockchain infrastructure ~~solutions business and acquires~~operations previously discussed. The Company’s digital ~~assets through open market purchases.~~ asset treasury holding is comprised of 90 bitcoins as set forth above.
The Company is not limiting its assets to a single type of digital asset and may hold a variety of digital assets. The Company will carefully review its purchases of digital securities to avoid violating the 1940 Act and seek to reduce potential liabilities under the federal securities laws.

The ~~following tables reflect our digital assets held and their fair market values at period end:~~
~~Digital Assets Held at Period End~~
Asset 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1 2021Q2
Bitcoin (BTC) 14.9 20.6 20.6 54.3 63.6 66.9 90.0 90.0
QoQ Change 38 % 0 % 163 % 17 % 5 % 34 % 0 %
Ethereum (ETH) 584.7 985.0 985.0 2,304.6 2,554.7 2,674.2 7,732.5 7,878.6 *
QoQ Change 68 % 0 % 134 % 11 % 5 % 189 % 2 %
Cardano (ADA) 257,757.4
QoQ Change NA
Kusama (KSM) 123.4
QoQ Change NA
Tezos (XTZ) 14,965.6
QoQ Change NA
~~Fair Market Value of Digital Assets at Period End~~
Asset 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1 2021Q2
Bitcoin (BTC) $ 123,733 $ 148,406 $ 132,831 $ 496,027 $ 686,580 $ 1,962,572 $ 5,302,695 $ 3,153,675
QoQ Change 20 % -10 % 273 % 38 % 186 % 170 % -41 %
YoY Change 1,222 % 3,892 % 536 %
Ethereum (ETH) $ 105,175 $ 127,662 $ 131,582 $ 521,552 $ 919,748 $ 1,976,126 $ 14,833,709 $ 17,920,148
QoQ Change 21 % 3 % 296 % 76 % 115 % 651 % 21 %
YoY Change 1,448 % 11,173 % 3,336 %
Cardano (ADA) $ 356,600
QoQ Change NA
YoY Change NA
Kusama (KSM) $ 26,501
QoQ Change NA
YoY Change NA
Tezos (XTZ) $ 45,495
QoQ Change NA
YoY Change NA
Total $ 228,908 $ 276,068 $ 264,413 $ 1,017,579 $ 1,606,328 $ 3,938,698 $ 20,136,404 $ 21,502,419
QoQ Change 21 % -4 % 285 % 58 % 145 % 411 % 7 %
YoY Change 1,327 % 7,516 % 2,013 %
* Approximately 9 ETH is not staked on Ethereum 2.0’s Beacon Chain.
~~As of August 5, 2021 the fair market value of our digital assets was $26.5 million.~~
~~The~~ market is rapidly evolving and there can be no assurances that we will be competitive with industry participants that have or may have greater resources than us.
19
Non-GAAP financial measure

In addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance. We believe that Adjusted EBITDA may be helpful to investors because it provides consistency and comparability with past financial performance and the economic realities of our business specifically, but not limited to, the accounting for digital assets. However, Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Among other non-cash and non-recurring items, Adjusted EBITDA excludes stock-based compensation expense (including stock-based compensation issued to service providers), which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

23
We calculate Adjusted EBITDA as net income (loss), adjusted to exclude, depreciation and amortization, interest expense, change in fair value of warrant liabilities, stock-based compensation expense (including stock-based compensation issued to service providers), and impairment of intangible digital assets.

The following table provides a reconciliation of net income (loss) to Adjusted EBITDA:

Six Months Ended June 30, Nine Months Ended September 30,
2021 2020 2021 2020

Net income (loss) $ (11,624,248 ) $ (790,573 ) $ (15,466,585 ) $ (1,795,897 )
Adjusted to exclude the following:
Depreciation and amortization 1,134,771 - 1,716,744 16,606
Interest expense 114,082 125,420 172,603 204,882
Change in fair value of warrant liabilities (2,066,250 ) -
Stock-based compensation 9,003,786 - 13,744,967 -
Impairment of intangible digital assets 3,569,138 132,952 3,777,785 162,254
Adjusted EBITDA 2,197,528 (532,201 ) 1,879,264 (1,412,155 )

20
Results of Operations for the Three Months Ended ~~June~~September 30, 2021 and 2020

The following table reflects our operating results for the three months ended ~~June~~September 30, 2021 and 2020:

Three Months Ended June 30, Three Months Ended September 30,
2021 2020 2021 2020

Revenues
Staking revenue $ 380,499 $ -
Validator revenue $ 323,376 $ -
Total revenues 380,499 - 323,376 -

Cost of revenues
Staking expenses 59,249 -
Validator expense 71,690 -
Gross profit 321,250 - 251,686 -

Operating expenses:
General and administrative $ 312,967 $ 160,841 $ 282,558 $ 650,049
Research and development 245,336 - 273,909 -
Compensation and related expenses 1,703,771 95,095 4,747,106 228,540
Marketing 1,365 1,365 7,559 1,365
Total operating expenses 2,263,439 257,301 5,311,132 879,954

Other (expenses) income:
Interest expense (59,835 ) (102,792 ) (58,521 ) (96,068 )
Amortization on debt discount (572,675 ) - (581,973 ) -
Change in fair value of warrant liabilities 2,066,250 -
Impairment loss on digital assets/currencies (2,267,374 ) (58,527 ) (208,647 ) (29,302 )
Realized gains (loss) on digital asset/currency transactions - (1,682 )
Total other expenses (2,899,884 ) (163,001 )
Total other income (expenses) 1,217,109 (125,370 )

Net loss $ (4,842,073 ) $ (420,302 ) $ (3,842,337 ) $ (1,005,324 )
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock (16,177 ) - (13,188 ) -
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock (198,663 ) -
Net loss attributable to common stockholders $ (5,056,913 ) $ (420,302 ) $ (3,855,525 ) $ (1,005,324 )

Net loss per share attributable to common stockholders, basic and diluted $ (0.09 ) $ (0.02 )

Weighted average number of common shares outstanding, basic and diluted 56,673,599 27,151,776
24

Revenue

Revenue for the three months ended ~~June~~September 30, 2021 and 2020 were approximately ~~$0.4~~$0.3 million and $0, respectively. The increase is from our blockchain infrastructure solutions ~~staking~~validating revenue.

Cost of Revenues

Cost of revenues for the three months ended ~~June~~September 30, 2021 and 2020 were approximately ~~$59,000~~$72,000 and $0, respectively. The increase is from our blockchain infrastructure ~~staking~~validating operating costs, including, web service hosting fees, and cash and stock-based compensation related to services provided by vendor.

21
Operating Expenses

Operating expenses for the three months ended ~~June~~September 30, 2021 and 2020 were approximately ~~$2.3~~$5.3 million and ~~$0.3~~$0.9 million, respectively. The increase is primarily due to the issuance of 121.2 million options and issuance of 290,000 RSUs, which vested in September, rendering ~~$1.6~~$4.7 million in stock-based compensation expense during the three months ended ~~June~~September 30, 2021.

Other ~~Expenses~~Income (Expenses)

Other ~~expenses~~income (expenses) for the three months ended ~~June~~September 30, 2021 and 2020 was approximately ~~$2.9~~$1.2 million and ~~$0.2~~$(0.1) million, respectively. The ~~increase~~decrease in other expenses is primarily due to a ~~$2.3~~$2.0 million change in the fair value of warrant liabilities, partially offset by $0.6 million increase in amortization of debt discount on our convertible notes and $0.2 million increase in impairment loss on digital assets/~~currencies and $0.6 million amortization of debt discount and interest expense on our convertible notes.~~currencies.

Net loss

Net loss for the three months ended ~~June~~September 30, 2021 and 2020 was approximately ~~$4.8~~$3.8 million and ~~$0.4~~$1.0 million, respectively. The increase is primarily due to an increase of operating expenses, as discussed above.

Net loss attributable to common stockholders

We incurred approximately ~~$16,000~~$13,000 and $0 related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock ~~and $0.2 million and $0 of deemed dividends related to recognition of anti-dilution adjustment to conversion amount for Series C-2 convertible preferred stock~~ for the three months ended ~~June~~September 30, 2021 and 2020, respectively.
Digital Asset Rewards Fair Market Value
The fair market value as of September 30, 2021 of earned digital assets rewards for operating validator nodes for the three months ended September 30, 2021 was $343,725.
25

Results of Operations for the ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020

The following table reflects our operating results for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:

Six Months Ended June 30, Nine Months Ended September 30,
2021 2020 2021 2020

Revenues
Staking revenue $ 453,023 $ -
Validator revenue $ 776,399 $ -
Total revenues 453,023 - 776,399 -

Cost of revenues
Staking expenses 74,245 -
Validator expense 145,935 -
Gross profit 378,778 - 630,464 -

Operating expenses:
General and administrative $ 866,948 $
285,069
$ 1,149,506 $ 935,118
Research and development 328,269 - 602,178 -
Compensation and related expenses 9,041,450
241,395
13,788,556 469,935
Marketing 2,786 4,055 10,345 5,420
Total operating expenses 10,239,453 530,519 15,550,585 1,410,473

Other (expenses) income:
Interest expense (114,082 ) (108,814 ) (172,603 ) (204,882 )
Amortization on debt discount (1,134,771 )
(16,606
) (1,716,744 ) (16,606 )
Change in fair value of warrant liabilities 2,066,250 -
Impairment loss on digital assets/currencies (3,569,138 ) (132,952 ) (3,777,785 ) (162,254 )
Realized gains (loss) on digital asset/currency transactions 3,054,418 (1,682 ) 3,054,418 (1,682 )
Total other expenses (1,763,573 ) (260,054 ) (546,464 ) (385,424 )

Net loss $ (11,624,248 ) $ (790,573 ) $ (15,466,585 ) $ (1,795,897 )
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock (32,353 ) - (45,541 ) -
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock (5,020,883 ) - (5,020,883 ) -
Net loss attributable to common stockholders $ (16,677,484 ) $ (790,573 ) $ (20,533,009 ) $ (1,795,897 )

Net loss per share attributable to common stockholders, basic and diluted $ (0.32 ) $ (0.03 )

Weighted average number of common shares outstanding, basic and diluted 52,251,479 25,078,068

Revenue

Revenue for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 were approximately ~~$0.5~~$0.8 million and $0, respectively. The increase is from our blockchain infrastructure ~~solutions staking~~validating revenue.

Cost of Revenues

Cost of revenues for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 were approximately ~~$74,000~~$146,000 and $0, respectively. The increase is from our blockchain infrastructure ~~staking~~validating operating costs, including, web service hosting fees, and cash and stock-based compensation related to services provided by vendor.

Operating Expenses

Operating expenses for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 were approximately ~~$10.2~~$15.6 million and ~~$0.5~~$1.4 million, respectively. The increase is primarily due to the issuance of 121.2 million options, ~~7.2~~0.7 million of which ~~have~~ vested during the ~~six~~nine months ended ~~June~~September 30, 2021, and issuance of 340,782 RSUs, 290,000 of which vested during the nine months ended September 30, 2021, rendering ~~$8.7~~$13.3 million in stock-based compensation expense.
2226

Other Expenses

Other expenses for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was approximately ~~$1.8~~$0.5 million and ~~$0.3~~$0.4 million, respectively. The increase in other expenses is primarily due to a ~~$3.6~~$3.8 million impairment loss on digital assets/currencies and ~~$1.1~~$1.7 million amortization of debt discount and interest expense on our convertible notes, partially offset by $3.1 million in realized gains on digital assets/currency transactions.

Net loss

Net loss for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was approximately ~~$11.6~~$15.5 million and ~~$0.8~~$1.8 million, respectively. The increase is primarily due to increase of operating expenses, as mentioned above.

Net loss attributable to common stockholders

We incurred approximately ~~$32,000~~$46,000 and $0 related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock, and $5.0 million and $0 of deemed dividends related to recognition of anti-dilution adjustment to conversion amount for Series C-2 convertible preferred stock for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.
Digital Asset Rewards Fair Market Value
The fair market value as of September 30, 2021 of earned digital assets rewards for operating validator nodes for the nine months ended September 30, 2021 was $906,339.

Liquidity and Capital Resources

Net Cash from Operating Activities

For the ~~six~~nine months ended ~~June~~September 30, 2021, net cash used in operating activities was ~~$3.3~~$3.9 million, which was primarily driven by a ~~$11.6~~$15.5 million net loss and $5.8 million purchase of non-productive digital currencies, a $3.1 million realized gain on non-productive digital assets/currencies transaction; this was partially offset by the sale of non-productive digital assets/currencies of $4.3 million, a ~~$3.6~~$3.8 million impairment loss on digital currencies, and ~~$9.2~~$13.9 million in stock-based compensation.

Net cash used in operating activities was approximately ~~$1.1~~$1.7 million for the ~~six~~nine months ended ~~June~~September 30, 2020. Net cash used in operating activities for the ~~six~~nine months ended ~~June~~September 30, 2020 was primarily driven by a ~~$790,573~~$1.8 million net loss and ~~$608,000~~$0.8 million purchase of digital currencies, and partially offset by an impairment loss on digital currencies of ~~$132,952.~~$0.2 million.

Net Cash from Investing Activities

For the ~~six~~nine months ended ~~June~~September 30, 2021, net cash used in investing activities was ~~$8.5~~$9.5 million, which stemmed from the ~~$8.5~~$9.5 million purchase of productive digital assets/currencies for ~~staking.~~our blockchain infrastructure validator operations.

For the ~~six~~nine months ended ~~June~~September 30, 2020, there were no investing activities.

Net Cash from Financing Activities

For the ~~six~~nine months ended ~~June~~September 30, 2021, net cash provided by financing activities was approximately ~~$14.2~~$13.5 million, which was primarily driven by approximately ~~$2.8~~$3.0 million in aggregate proceeds from ~~the issuance of 2,887,776 shares of~~ common stock sold under our Equity Line Purchase Agreement, $1.0 million proceeds from the issuance of convertible notes, $8.9 million in net proceeds from the issuance of common stock and warrants for cash, $0.4 million from the cash exercise of Series C Warrants, ~~and~~ $1.1 million in proceeds from the issuance of Series C-2 convertible preferred ~~stock.~~stock, and $0.2 million in proceeds from common stock sold pursuant to the ATM Agreement.

~~Net~~For the nine months ended September 30, 2020, net cash provided by financing activities was approximately ~~$1.1~~$1.9 million, for the six months ended June 30, 2020. During the six months ended June 30, 2020, Company issued 6,956,002 shares of common stock (including 32,588 pro-rata commitment shares) under the Purchase Agreement with Cavalry resultingwhich was primarily driven by approximately $1.4 million in aggregate proceeds ~~of approximately $556,000. In addition,~~from common stock sold under our Equity Line Purchase Agreement, and the ~~Company entered into~~issuance of a $500,000 short term convertible note payable in April 2020. ~~The convertible note bears interest at 12% per annum.~~

2327

Liquidity

As of ~~August 5,~~November 4, 2021, the Company had approximately ~~$2.7~~$1.4 million of ~~cash.~~cash, approximately $97 million available under the ATM Agreement, and the fair market value of the Company’s liquid digital assets was approximately $8.8 million.

On ~~June~~September 30, 2021, we had current assets of ~~$6.2~~$4.3 million, long term assets of ~~$8.3~~$8.8 million, and current liabilities of ~~$1.4~~$4.7 million; working capital amounted to ~~$4.8~~$(0.4) million.

During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company received net proceeds of approximately ~~$14.2~~$14.6 million from the issuance ofof: Series C-2 convertible preferred stock, a convertible note, common stock and warrants issued pursuant to the Purchase agreement, common stock issued pursuant to the Equity Line Purchase Agreement, the cash exercise of warrants, and ~~Series C-2 convertible preferred stock.~~the proceeds from the common stock sold pursuant to the ATM Agreement. On September 30, 2021, the fair market value of the Company’s liquid digital assets was approximately $6.2 million. As such, the Company has adequate cash to fund operations for at least the next twelve months.

Off Balance Sheet Transactions

We are not a party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.

RECENT ACCOUNTING PRONOUNCEMENTS

For information on recent accounting pronouncements, see Note 4 to the Unaudited Condensed Financial Statements.

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of ~~June~~September 30, 2021 to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on ~~that~~their evaluation, our ~~Chief Executive Officer and Chief Financial Officer~~management has concluded that as of June 30, 2021, our disclosure controls and procedures were not effective at the reasonable assurance level due to the following material weakness in our internal control over financial reporting:
● ~~Due to our small number of employees, we have limited segregation of duties, as a result of which there is insufficient independent review of duties performed.~~
~~Remediation Plan~~
On June 28, 2021, near the end of our most recently completed fiscal quarter, we hired a full-time Chief Financial Officer. Since then, our new Chief Financial Officer has been implementing controls to provide segregation of duties and other controls to remediate our disclosure controls and internal control over financial reporting. We believe that our implementation of the remediation plan has removed the material weakness and that our disclosure controls and procedures are ~~now effective.~~effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

28
Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

24
PART II - OTHER INFORMATION

ITEM 1 Legal Proceedings

None.

ITEM 1A Risk Factors

Not applicable to smaller reporting companies.

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

In addition to those unregistered securities previously disclosed in reports filed with the Securities and Exchange Commission, we have issued securities without registration under the Securities Act of 1933 (the “Securities Act”), as described below.

Name or Class of Investor Date of Issuance No. of ~~Securities~~Securities(1) Reason for Issuance ~~(1)~~(2)
Investor Relations January 2021 ~~400,000 shares of common stock~~40,000 Investor Relation Services

Consultant February 2021 65,790 ~~shares of common stock~~ Staking Solution Services

Series C-1 Holder March 2021 ~~196,094 shares of common stock~~19,610 Conversion of Series C-1 Preferred Stock

Legal Counsel April 2021 ~~48,544 shares of common stock~~4,855 ~~Shares issued in~~In lieu of cash payment for legal services

Digital Analytics Consultant April 2021 ~~13,637 shares of common stock~~1,364 Digital Analytics Services
Series C-2 Holders (Related party) September 2021 4,011,766 Conversion of Series C-2 Preferred Stock

(1)
Approximate as a result of rounding for Reverse Split. Represents shares of common stock.
(2) Unless otherwise noted, exempt under Section 4(a)(2) of the Securities Act and Regulation 506(b) thereunder. The securities were issued to accredited investors and there was no general solicitation. The conversion of the Series C-1 was exempt under Section 3(a)(9) of the Securities Act.

ITEM 3 Defaults Upon Senior Securities

None.

ITEM 4 Mine Safety Disclosures

Not applicable.

ITEM 5 Other Information

~~None.~~On November 4, 2021, Mr. Andrew Lee resigned as the Company’s Chief Financial Officer. In connection with the resignation, the Board of Directors appointed Mr. Charles Allen, the Company’s current Chairman of the Board and Chief Executive Officer as the Company’s interim Chief Financial Officer. Mr. Allen will not receive any additional compensation for his interim role as Chief Financial Officer. The Company anticipates hiring a new Chief Financial Officer by December 31, 2021.
Mr. Allen has served as our Chief Executive Officer since February 2014 and as our Chairman of the Board since September 2014. Mr. Allen previously served as the Company’s Chief Financial Officer from February 2014 until June 28, 2021.

ITEM 6 Exhibits

The exhibits listed in the accompanying “Exhibit Index” are filed or incorporated by reference as part of this Form 10-Q.

25
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BTCS Inc.

~~August 6,~~November 9, 2021
By: /s/ Charles Allen
Charles Allen
Chief Executive Officer
~~(Principal Executive Officer)~~
~~By:~~ ~~/s/ Andrew Lee~~
~~Andrew Lee~~
and Chief Financial Officer
(Principal Executive Officer and Principal Financial Officer)

2630

EXHIBIT INDEX

Incorporated by Reference Filed or Furnished
Exhibit # Exhibit Description Form Date Number Herewith
3.1 Amended and Restated Articles of Incorporation, as of May 2010 10-K 3/31/11 3.1
3.1(a) Certificate of Amendment to Articles of Incorporation - Increase Authorized Capital 8-K 3/25/13 3.1
3.1(b) Certificate of Amendment to Articles of Incorporation - Increase Authorized Capital 8-K 2/5/14 3.1
3.1(c) Certificate of Amendment to Articles of Incorporation - Reverse Stock Split 8-K 2/16/17 3.1
3.1(d) Certificate of Amendment to Articles of Incorporation - Reverse Stock Split 8-K 4/9/19 3.1
3.1(e) Certificate of Designation for Series A Preferred Stock 8-K 12/9/16 3.1
3.1(f) Certificate of Withdrawal of Certificate of Designation for Series A Preferred Stock 8-K 1/22/21 3.1
3.1(g) Certificate of Designation for Series B Convertible Preferred Stock 8-K 3/15/17 3.1
3.1(h) Certificate of Correction to Series B Convertible Preferred Stock 8-K 3/30/17 3.1
3.1(i) Certificate of Withdrawal of Certificate of Designation for Series B Convertible Preferred Stock 8-K 1/22/21 3.2
3.1(j) Certificate of Designation for Series C-1 Convertible Preferred Stock 8-K 10/10/17 3.1
3.1(k) Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series C-1 Convertible Preferred Stock 8-K 12/7/17 3.2
3.1(l) Certificate of Amendment to the Series C-1 Certificate of Designation 8-K 12/3/19 4.1
3.1(m) Certificate of Withdrawal of Certificate of Designation for Series C-1 Preferred Stock 8-K 3/31/21 3.1
3.1(n) Certificate of Designation for Series C-2 Convertible Preferred Stock 8-K 1/4/21 4.1
3.1(o) Certificate of Correction to Series C-2 Convertible Preferred Stock 8-K 1/22/21 3.3
3.2 Bylaws S-1 5/29/08 3.2
4.1 Convertible Note dated as of January 15, 2021 8-K 1/22/21 4.1
4.2 2021 Equity Incentive Plan 10-Q 5/13/21 4.2
10.1 Form of Subscription Agreement – Series C-2 Convertible Preferred Stock 8-K 1/4/21 10.1
10.2 Series D Warrant dated January 15, 2021 8-K 1/22/21 10.1
10.3 Form of Securities Purchase Agreement, dated March 2, 2021, by and between the Company, the Purchasers and the Placement Agent+ 8-K 3/4/21 10.1
10.4 Placement Agent Agreement dated March 2, 2021 by and between the Company and A.G.P./Alliance Global Partners 8-K 3/4/21 10.2
10.5 Common Stock Purchase Warrant dated March 2, 2021, by and between the Company and the Purchasers 8-K 3/4/21 10.3
10.6 Employment Agreement - CFO Filed
31.1 Certification of Principal Executive Officer (302) Filed
31.2 Certification of Principal Financial Officer (302) Filed
32.1 Certification of Principal Executive and Principal Financial Officer (906) Furnished**
101.INS XBRL Instance Document Filed
101.SCH XBRL Taxonomy Extension Schema Document Filed
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed
101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed
101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed
Incorporated by Reference Filed or Furnished
Exhibit # Exhibit Description Form Date Number Herewith
1.1 At-The-Market Offering Agreement, dated September 14, 2021, 2020, by and between BTCS Inc. and H.C. Wainwright & Co., LLC. 8-K
9/14/21
1.1
3.1 Amended and Restated Articles of Incorporation, as of May 2010 10-K 3/31/11 3.1
3.1(a) Certificate of Amendment to Articles of Incorporation - Increase Authorized Capital 8-K 3/25/13 3.1
3.1(b) Certificate of Amendment to Articles of Incorporation - Increase Authorized Capital 8-K 2/5/14 3.1
3.1(c) Certificate of Amendment to Articles of Incorporation - Reverse Stock Split 8-K 2/16/17 3.1
3.1(d) Certificate of Amendment to Articles of Incorporation - Reverse Stock Split 8-K 4/9/19 3.1
3.1(e) Certificate of Designation for Series A Preferred Stock 8-K 12/9/16 3.1
3.1(f) Certificate of Withdrawal of Certificate of Designation for Series A Preferred Stock 8-K 1/22/21 3.1
3.1(g) Certificate of Designation for Series B Convertible Preferred Stock 8-K 3/15/17 3.1
3.1(h) Certificate of Correction to Series B Convertible Preferred Stock 8-K 3/30/17 3.1
3.1(i) Certificate of Withdrawal of Certificate of Designation for Series B Convertible Preferred Stock 8-K 1/22/21 3.2
3.1(j) Certificate of Designation for Series C-1 Convertible Preferred Stock 8-K 10/10/17 3.1
3.1(k) Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series C-1 Convertible Preferred Stock 8-K 12/7/17 3.2
3.1(l) Certificate of Amendment to the Series C-1 Certificate of Designation 8-K 12/3/19 4.1
3.1(m) Certificate of Withdrawal of Certificate of Designation for Series C-1 Preferred Stock 8-K 3/31/21 3.1
3.1(n) Certificate of Designation for Series C-2 Convertible Preferred Stock 8-K 1/4/21 4.1
3.1(o) Certificate of Correction to Series C-2 Convertible Preferred Stock 8-K 1/22/21 3.3
3.1(p) Certificate of Change – Reverse Split
8-K

8/17/21

3.1

3.1(q) Certificate of Withdrawal of Certificate of Designation with respect to the Company’s Series C-2 Preferred Stock.
8-K

10/26/21

3.1

3.2 Bylaws S-1 5/29/08 3.2
4.1 Convertible Note dated as of January 15, 2021 8-K 1/22/21 4.1
4.2 2021 Equity Incentive Plan 10-Q 5/13/21 4.2
10.1 Form of Subscription Agreement – Series C-2 Convertible Preferred Stock 8-K 1/4/21 10.1
10.2 Series D Warrant dated January 15, 2021 8-K 1/22/21 10.1
10.3 Form of Securities Purchase Agreement, dated March 2, 2021, by and between the Company, the Purchasers and the Placement Agent+ 8-K 3/4/21 10.1
10.4 Placement Agent Agreement dated March 2, 2021 by and between the Company and A.G.P./Alliance Global Partners 8-K 3/4/21 10.2
10.5 Common Stock Purchase Warrant dated March 2, 2021, by and between the Company and the Purchasers 8-K 3/4/21 10.3
10.6 Employment Agreement - CFO 10-Q 8/6/21 10.6
31.1 Certification of Principal Executive Officer (302) Filed
32.1 Certification of Principal Executive and Principal Financial Officer (906) Furnished**
101.INS Inline XBRL Instance Document Filed
101.SCH Inline XBRL Taxonomy Extension Schema Document Filed
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed
104 Cover Page Interactive Data File (embedded within the Inline XBRL document) Filed

** This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

+ Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission staff upon request.

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to BTCS Inc., 9466 Georgia Avenue #124, Silver Spring, MD 20910, Attention: Corporate Secretary.

2731


	Series C-1 Convertible				Series C-2 Convertible										Additional						Total Stockholders’
	Preferred Stock				Preferred Stock						Common Stock				Paid-in			Accumulated			Equity
	Shares		Amount		Shares			Amount			Shares		Amount		Capital			Deficit			(Deficit)
Balance June 30, 2021		-	$	-		1,100,000		$	6,203,101			5,712,215	$	5,712	$	137,959,473		$	(131,164,135	)	$	13,004,151
Common stock issued including equity commitment fee, net		-		-		-			-			32,963		33		199,839			-			199,872
Conversion of convertible notes
Conversion of convertible notes, shares
Beneficial conversion features associated with convertible notes payable
Issuance of common stock, net of offering cost / At-the-market offering		-		-		-			-			41,290		41		219,705			-			219,746
Issuance of common stock and warrants for cash, net
Issuance of common stock and warrants for cash, net, shares
Warrant liabilities value related to Issuance of common stock						-			-			-		-		(5,771,250	)		-			(5,771,250	)
Issuance of Series C-2 convertible preferred stock
Issuance of Series C-2 convertible preferred stock, shares
Conversion of Series C-2 Convertible Preferred stock						(1,100,000	)		(6,216,289	)		4,011,766		4,012		6,212,277			-			-
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock		-		-		-			13,188			-		-		(13,188	)		-			-
Conversion of Series C-1 Convertible Preferred stock
Conversion of Series C-1 Convertible Preferred stock, shares
Beneficial conversion features associated with convertible notes payable
Beneficial conversion feature of Series C-2 convertible preferred stock
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock
Fractional shares adjusted for reverse split									-			14,477		15		(15	)		-			-
Warrant exercise
Warrant exercise, shares
Stock-based compensation		-		-		-			-			290,000		290		4,665,892			-			4,666,182
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock
Net loss		-		-		-			-			-		-		-			(3,842,337	)		(3,842,337	)
Balance September 30, 2021		-	$	-		-		$	-			10,102,711	$	10,103	$	143,472,733		$	(135,006,472	)	$	8,476,364

	Series C-1 Shares		Series C-1 Amount		Series C-2 Shares		Series C-2 Amount		Common Stock Shares		Common Stock Amount		Capital			Deficit			(Deficit)
	Series C-1 Convertible				Series C-2 Convertible								Additional						Total Stockholders’
	Preferred Stock				Preferred Stock				Common Stock				Paid-in			Accumulated			Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			(Deficit)
Balance March 31, 2021		-	$	-		1,100,000	$	5,988,261		55,891,645	$	55,890	$	135,637,119		$	(126,322,062	)	$	15,359,208
Common stock issued including equity commitment fee, net		-		-		-		-		1,169,632		1,170	$	798,830.00			-			800,000
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock		-		-		-		16,177		-		-		(16,177	)		-			-
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock		-		-		-		198,663		-		-		(198,663	)		-			-
Stock-based compensation		-		-		-				62,181		62		1,686,954			-			1,687,016
Conversion of convertible notes
Conversion of convertible notes, Shares
Beneficial conversion features associated with convertible notes payable
Issuance of common stock and warrants for cash, net
Issuance of common stock and warrants for cash, net, shares
Issuance of Series C-2 convertible preferred stock
Issuance of Series C-2 convertible preferred stock, Shares
Conversion of Series C-1 Convertible Preferred stock
Conversion of Series C-1 Convertible Preferred stock, Shares
Beneficial conversion feature of Series C-2 convertible preferred stock
Beneficial conversion feature of Series C-2 convertible preferred stock, Shares
Warrant exercise
Warrant exercise, Shares
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock, Shares
Net loss		-		-		-		-		-		-		-			(4,842,073	)		(4,842,073	)
Balance June 30, 2021		-	$	-		1,100,000	$	6,203,101		57,123,458	$	57,122	$	137,908,063		$	(131,164,135	)	$	13,004,151

	Series C-1 Convertible				Series C-2 Convertible										Additional					Total Stockholders’
	Preferred Stock				Preferred Stock						Common Stock				Paid-in		Accumulated			Equity			Series C-1 Convertible									Additional					Total
	Shares		Amount		Shares			Amount			Shares		Amount		Capital		Deficit			(Deficit)			Preferred Stock					Common Stock				Paid-in		Accumulated			Stockholders’
Balance March 31, 2020		29,414	$	29	-	-	-		-	- -		26,018,154	$	26,017	$	117,186,998	$	(117,354,064	)	$	(141,020	)
																							Shares		Amount			Shares		Amount		Capital		Deficit			Deficit
Balance December 31, 2019																								29,414	$	29	-		1,983,047	$	1,983	$	116,798,021	$	(116,983,793	)	$	(183,760	)
Balance																								29,414	$	29	-		1,983,047	$	1,983	$	116,798,021	$	(116,983,793	)	$	(183,760	)
Common stock issued including equity commitment fee, net		-		-	-							769,369		769		142,433		-			143,202			-		-			1,180,989		1,181		1,384,313		-			1,385,494
Conversion of convertible notes		-		-								1,403,854		1,403		210,054		-			211,457			-		-			140,384		140		211,317		-			211,457
Beneficial conversion features associated with convertible notes payable												-		-		269,231					269,231			-		-			-		-		269,231		-			269,231
Net loss		-		-								-		-		-		(420,302	)		(420,302	)		-		-	-		-		-		-		(1,795,897	)		(1,795,897	)
Balance June 30, 2020		29,414	$	29	-	-	-	-	-			28,191,377	$	28,189	$	117,808,716	$	(117,774,366	)	$	62,568
Balance September 30, 2020																								29,414	$	29	-		3,304,420	$	3,304	$	118,662,882	$	(118,779,690	)	$	(113,475	)
Balance																								29,414	$	29	-		3,304,420	$	3,304	$	118,662,882	$	(118,779,690	)	$	(113,475	)

	As of June 30,				As of September 30,
	2021		2020		2021		2020
Warrants to purchase common stock		9,627,915		502,915		962,823		50,323
Series C-1 Convertible Preferred stock		-		196,093		-		19,609
Series C-2 Convertible Preferred stock		40,117,648		-
Convertible notes		2,392,631		4,048,583		285,429		466,201
Total		52,138,194		4,747,591		1,248,252		536,133

	Fair value measured at September 30, 2021
	Total at September 30,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Liabilities
Warrant Liabilities	$	3,705,000	$	-	$	-	$	3,705,000

	Fair value measured at December 31, 2020
	Total at December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Liabilities
Warrant Liabilities	$	-	$	-	$	-	$	-

	September 14, 2021			September 30, 2021
Risk-free rate of interest		0.79	%		0.98	%
Expected volatility		192.2	%		169.4	%
Expected life (in years)		4.47			4.43
Expected dividend yield		-			-

	Fair Value of Level 3 financial liabilities
	September 30,			September 30,
	2021			2010
Beginning balance	$	-		$	-
Warrant liabilities classification		5,771,250			-
Fair value adjustment of warrant liabilities		(2,066,250	)		-
Ending balance	$	3,705,000		$	-

	For the nine months ended September 30,
	2021			2020
Exercise price	$	2.1			-
Term (years)		2.25-3.05			-
Expected stock price volatility		185.9	%		-
Risk-free rate of interest		0.34	%		-

	For the six months ended June 30,
	2021			2020
Exercise price	$	0.21			-
Term (years)		2.50-3.30			-
Expected stock price volatility		185.9	%		-
Risk-free rate of interest		0.34	%		-

	Number of Shares		Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)		Number of Shares		Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2020		-	$	-	$	-		-		-	$	-	$	-		-
Employee options granted		12,350,000		0.21		5,436,000		4.8		1,235,000		2.14		4,188,000		4.5
Outstanding as of June 30, 2021		12,350,000	$	0.21	$	5,436,000		4.8
Outstanding as of September 30, 2021										1,235,000	$	2.14	$	4,188,000		4.5
Options vested and exercisable		7,200,000	$	0.19	$	3,261,600		4.8		720,000	$	1.90	$	2,512,800		4.5

	Number of Restricted Stock Units		Weighted Average Grant Day Fair Value
Non-vested at December 31, 2020		-	$	-
Granted		3,407,813		0.97
Non-vested at June 30, 2021		3,407,813	$	0.97

	Number of Restricted Stock Units			Weighted Average Grant Day Fair Value
Nonvested at December 31, 2020		-		$	-
Granted		340,781			9.72
Vested		(290,000	)		10.29
Nonvested at September 30, 2021		50,781		$	6.42

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Employee stock option awards	$	1,638,516	$	-	$	10,298,844	$	-
Employee restricted stock units awards		3,027,665		-		3,029,040		-
Non-employee restricted stock awards		75,000		-		237,806		-
Series C-2 allocation		-		-		179,277		-
	$	4,741,181	$	-	$	13,744,967	$	-

Digital Assets
Asset	2019Q3		2019Q4		2020Q1		2020Q2		2020Q3		2020Q4		2021Q1		2021Q2		2021Q3
Bitcoin (BTC)		14.9		20.6		20.6		54.3		63.6		66.9		90.0		90.0		90.0
Ethereum (ETH)		584.7		985.0		985.0		2,304.6		2,554.7		2,674.2		7,732.5		7,878.6		7,992.4
Cardano (ADA)																257,757.4		257,757.4
Kusama (KSM)																123.4		374.2
Tezos (XTZ)																14,965.6		24,171.9
Solana (SOL)																		4,787.5
Polkadot (DOT)																		8,032.1
Terra (Luna)																		3,584.2
Cosmos (Atom)																		3,072.4
Polygon (Matic)																		67,114.1
Avalanche (Avax)																		2,024.7
Algorand (Algo)																		50,583.9

Fair Market Value of Digital Assets
Asset	2019Q3		2019Q4			2020Q1			2020Q2			2020Q3			2020Q4			2021Q1			2021Q2			2021Q3
Bitcoin (BTC)	$	123,733	$	148,406		$	132,831		$	496,027		$	686,580		$	1,962,572		$	5,302,695		$	3,153,675		$	3,941,180
Ethereum (ETH)*	$	105,175	$	127,662		$	131,582		$	521,552		$	919,748		$	1,976,126		$	14,833,709		$	17,920,148		$	23,990,541
Cardano (ADA)																					$	356,600		$	545,028
Kusama (KSM)																					$	26,501		$	123,957
Tezos (XTZ)																					$	45,495		$	146,914
Solana (SOL)																								$	675,373
Polkadot (DOT)																								$	229,558
Terra (Luna)																								$	138,351
Cosmos (Atom)																				��				$	111,252
Polygon (Matic)																								$	75,644
Avalanche (Avax)																								$	135,191
Algorand (Algo)																								$	82,381
Total	$	228,908	$	276,068		$	264,413		$	1,017,579		$	1,606,328		$	3,938,698		$	20,136,404		$	21,502,420		$	30,195,370
QoQ Change				21	%		-4	%		285	%		58	%		145	%		411	%		7	%		40	%
YoY Change																1,327	%		7,516	%		2,013	%		1,780	%

Name or Class of Investor	Date of Issuance	No. of ~~Securities~~Securities(1)	Reason for Issuance ~~(1)~~(2)
Investor Relations	January 2021	~~400,000 shares of common stock~~40,000	Investor Relation Services

Consultant	February 2021	65,790 ~~shares of common stock~~	Staking Solution Services

Series C-1 Holder	March 2021	~~196,094 shares of common stock~~19,610	Conversion of Series C-1 Preferred Stock

Legal Counsel	April 2021	~~48,544 shares of common stock~~4,855	~~Shares issued in~~In lieu of cash payment for legal services

Digital Analytics Consultant	April 2021	~~13,637 shares of common stock~~1,364	Digital Analytics Services

Series C-2 Holders (Related party)	September 2021	4,011,766	Conversion of Series C-2 Preferred Stock

	BTCS Inc.

~~August 6,~~November 9, 2021
	By:	/s/ Charles Allen
		Charles Allen
		Chief Executive Officer
		~~(Principal Executive Officer)~~

	~~By:~~	~~/s/ Andrew Lee~~
		~~Andrew Lee~~
		and Chief Financial Officer
		(Principal Executive Officer and Principal Financial Officer)

		Incorporated by Reference			Filed or Furnished
Exhibit #	Exhibit Description	Form	Date	Number	Herewith
3.1	Amended and Restated Articles of Incorporation, as of May 2010	10-K	3/31/11	3.1
3.1(a)	Certificate of Amendment to Articles of Incorporation - Increase Authorized Capital	8-K	3/25/13	3.1
3.1(b)	Certificate of Amendment to Articles of Incorporation - Increase Authorized Capital	8-K	2/5/14	3.1
3.1(c)	Certificate of Amendment to Articles of Incorporation - Reverse Stock Split	8-K	2/16/17	3.1
3.1(d)	Certificate of Amendment to Articles of Incorporation - Reverse Stock Split	8-K	4/9/19	3.1
3.1(e)	Certificate of Designation for Series A Preferred Stock	8-K	12/9/16	3.1
3.1(f)	Certificate of Withdrawal of Certificate of Designation for Series A Preferred Stock	8-K	1/22/21	3.1
3.1(g)	Certificate of Designation for Series B Convertible Preferred Stock	8-K	3/15/17	3.1
3.1(h)	Certificate of Correction to Series B Convertible Preferred Stock	8-K	3/30/17	3.1
3.1(i)	Certificate of Withdrawal of Certificate of Designation for Series B Convertible Preferred Stock	8-K	1/22/21	3.2
3.1(j)	Certificate of Designation for Series C-1 Convertible Preferred Stock	8-K	10/10/17	3.1
3.1(k)	Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series C-1 Convertible Preferred Stock	8-K	12/7/17	3.2
3.1(l)	Certificate of Amendment to the Series C-1 Certificate of Designation	8-K	12/3/19	4.1
3.1(m)	Certificate of Withdrawal of Certificate of Designation for Series C-1 Preferred Stock	8-K	3/31/21	3.1
3.1(n)	Certificate of Designation for Series C-2 Convertible Preferred Stock	8-K	1/4/21	4.1
3.1(o)	Certificate of Correction to Series C-2 Convertible Preferred Stock	8-K	1/22/21	3.3
3.2	Bylaws	S-1	5/29/08	3.2
4.1	Convertible Note dated as of January 15, 2021	8-K	1/22/21	4.1
4.2	2021 Equity Incentive Plan	10-Q	5/13/21	4.2
10.1	Form of Subscription Agreement – Series C-2 Convertible Preferred Stock	8-K	1/4/21	10.1
10.2	Series D Warrant dated January 15, 2021	8-K	1/22/21	10.1
10.3	Form of Securities Purchase Agreement, dated March 2, 2021, by and between the Company, the Purchasers and the Placement Agent+	8-K	3/4/21	10.1
10.4	Placement Agent Agreement dated March 2, 2021 by and between the Company and A.G.P./Alliance Global Partners	8-K	3/4/21	10.2
10.5	Common Stock Purchase Warrant dated March 2, 2021, by and between the Company and the Purchasers	8-K	3/4/21	10.3
10.6	Employment Agreement - CFO				Filed
31.1	Certification of Principal Executive Officer (302)				Filed
31.2	Certification of Principal Financial Officer (302)				Filed
32.1	Certification of Principal Executive and Principal Financial Officer (906)				Furnished**
101.INS	XBRL Instance Document				Filed
101.SCH	XBRL Taxonomy Extension Schema Document				Filed
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document				Filed
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				Filed
101.LAB	XBRL Taxonomy Extension Label Linkbase Document				Filed
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document				Filed

**	This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

+	Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission staff upon request.