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 ~~September 30,~~March 31, ~~2022~~2023

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

For the transition period from _______________ to _______________.

Commission file number: 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 (202) 430-6576

Securities registered pursuant to Section 12(b) of the Act:

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)

~~Securities registered under Section 12(g) of the Exchange Act: None~~

~~Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒~~

~~Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒~~

Indicate by check mark whether the registrant (1) 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 Act). Yes ☐ No ☒

As of ~~November 8, 2022,~~May 9, 2023, there were ~~13,077,390~~13,830,303 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 ~~September 30, 2022~~March 31, 2023 (unaudited) and December 31, ~~2021~~2022	4

	Condensed Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	5

	Condensed Statements of Changes in Stockholders’ Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	6

	Condensed Statements of Cash Flows for the ~~Nine Months~~Three months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	7

	Notes to the Unaudited Condensed Financial Statements	8~~-19~~8-21

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2022

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	28

ITEM 4	Controls and Procedures	28

PART II - OTHER INFORMATION

ITEM 1	Legal Proceedings	29

ITEM 1A	Risk Factors	29

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	29

ITEM 3	Defaults Upon Senior Securities	29

ITEM 4	Mine Safety Disclosures	29

ITEM 5	Other Information	29

ITEM 6	Exhibits	29

	Signature	30

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 report contains forward-looking statements, including our liquidity, our belief that our revenues will increase, our blockchain infrastructure efforts will form the core growth for our Digital Asset Platform, our plans and development of our Digital Asset Platform and the integration of Staking-as-a-Service, our Digital Asset treasury strategy, our belief regarding blockchain, plans to expand the proof-of-stake (“PoS”) operations and other future business plans. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “may,” “potential,” “continues,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. 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. The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the rewards and costs associated with staking or validating transactions on blockchains, regulatory issues related to our business model, a drop in the price of our Digital Assets, significant decrease in the value of our digital assets and rewards, loss or theft of the private withdrawal keys resulting in the complete loss of digital assets and reward, and others which are contained in our filings with the SEC, including our Form 10-K for the year ended December 31, 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.

Balance Sheets

	September 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
	(Unaudited)						(Unaudited)
Assets:
Current assets:
Cash	$	2,888,998		$	1,400,867			1,443,058		$	2,146,783
Digital assets/currencies		36,561			3,117,360
Staked digital assets/currencies		2,586,575			623,754
Crypto assets/currencies								1,066			982
Investments, at value (Cost $100,000)								100,000			100,000
Staked crypto assets/currencies								7,854,755			1,826,307
Prepaid expense		207,078			324,551			93,449			123,727
Total current assets		5,719,212			5,466,532			9,492,328			4,197,799

Other assets:
Property and equipment, net		12,330			9,783			9,999			11,152
Staked digital assets/currencies - long term		5,600,122			8,625,678
Staked crypto assets/currencies - long term								-			5,708,624
Total other assets		5,612,452			8,635,461			9,999			5,719,776

Total Assets	$	11,331,664		$	14,101,993		$	9,502,327		$	9,917,575

Liabilities and Stockholders’ Equity:
Accounts payable and accrued expense	$	104,631		$	138,716		$	41,954		$	76,727
Accrued compensation		212,571			7,334			3,429			295,935
Warrant liabilities		712,500			1,852,500			498,750			213,750
Total current liabilities		1,029,702			1,998,550			544,133			586,412

Stockholders’ equity:
Common stock, 97,500,000 shares authorized at $0.001 par value, 13,053,712 and 10,528,212 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		13,055			10,529
Common stock, 97,500,000 shares authorized at $0.001 par value, 13,799,745 and 13,107,149 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively								13,800			13,108
Additional paid in capital		160,374,041			147,682,384			161,839,971			160,800,263
Accumulated deficit		(150,085,134	)		(135,589,470	)		(152,895,577	)		(151,482,208	)
Total stockholders’ equity		10,301,962			12,103,443			8,958,194			9,331,163

Total Liabilities and Stockholders’ Equity	$	11,331,664		$	14,101,993		$	9,502,327		$	9,917,575

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

BTCS Inc.

Statements of Operations

(Unaudited)

	2022			2021			2022			2021			2023			2022
	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended
	September 30,						September 30,						March 31,
	2022			2021			2022			2021			2023			2022

Revenues
Validator revenue (net of fees)	$	344,196		$	323,376		$	1,421,560		$	776,399		$	311,508		$	563,015
Total revenues		344,196			323,376			1,421,560			776,399			311,508			563,015

Cost of revenues
Validator expense		82,203			71,690			313,972			145,935			82,014			137,869
Gross profit		261,993			251,686			1,107,588			630,464			229,494			425,146

Operating expenses:
General and administrative	$	432,956		$	282,558		$	1,595,296		$	1,149,506		$	609,829		$	650,289
Research and development		126,857			273,909			448,579			602,178			201,625			136,718
Compensation and related expenses		669,792			4,747,106			2,731,713			13,788,556			462,090			1,423,896
Marketing		8,765			7,559			74,249			10,345			6,243			41,793
Impairment loss on digital assets/currencies		145,247			208,647			12,347,472			3,777,785
Realized gains on digital asset/currency transactions		(20,126	)		-			(489,682	)		(3,054,418	)
Impairment loss on crypto assets/currencies														94,907			3,307,428
Realized gains on crypto asset/currency transactions														(16,831	)		(71,110	)
Total operating expenses		1,363,491			5,519,779			16,707,627			16,273,952			1,357,863			5,489,014

Other income (expenses):
Interest expense		-			(58,521	)		-			(172,603	)
Amortization on debt discount		-			(581,973	)		-			(1,716,744	)
Change in fair value of warrant liabilities		71,250			2,066,250			1,140,000			2,066,250			(285,000	)		(641,250	)
Distributions to warrant holders		-			-			(35,625	)		-			-			(35,625	)
Total other income (expenses)		71,250			1,425,756			1,104,375			176,903			(285,000	)		(676,875	)

Net loss	$	(1,030,248	)	$	(3,842,337	)	$	(14,495,664	)	$	(15,466,585	)	$	(1,413,369	)	$	(5,740,743	)
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock		-			(13,188	)		-			(45,541	)
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock		-			-			-			(5,020,883	)
Net loss attributable to common stockholders	$	(1,030,248	)	$	(3,855,525	)	$	(14,495,664	)	$	(20,533,009	)


Net loss per share attributable to common stockholders, basic and diluted	$	(0.08	)	$	(0.59	)	$	(1.15	)	$	(3.63	)	$	(0.10	)	$	(0.47	)

Weighted average number of common shares outstanding, basic and diluted		12,952,645			6,518,645			12,616,805			5,660,966			13,673,126			12,245,278

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

BTCS Inc.

Statements of Changes in Stockholders’ Equity

(Unaudited)

For the ~~Nine Months~~Three months Ended ~~September 30, 2022~~March 31, 2023

Additional Total
Common Stock Paid-in Accumulated Stockholders’
Shares Amount Capital Deficit Equity
Balance December 31, 2021 - - 10,528,212 $ 10,529 $ 147,682,384 $ (135,589,470 ) $ 12,103,443
Issuance of common stock, net of offering cost / At-the-market offering 2,148,658 2,149 11,092,983 - 11,095,132
Stock-based compensation 376,842 377 2,233,231 - 2,233,608
Dividend distributions - - (634,557 ) - (634,557 )
Net loss - - - - - (14,495,664 ) (14,495,664 )
Balance September 30, 2022 - - 13,053,712 $ 13,055 $ 160,374,041 $ (150,085,134 ) $ 10,301,962
~~For the Nine Months Ended September 30, 2021~~
Shares Amount Shares Amount Shares Amount Capital Deficit Equity
Series C-1 Convertible Series C-2 Convertible Additional
Preferred Stock Preferred Stock Common Stock Paid-in Accumulated Total Stockholders’
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
Additional Total
Common Stock Paid-in Accumulated Stockholders’
Shares Amount Capital Deficit Equity
Balance December 31, 2022 13,107,149 $ 13,108 $ 160,800,263 $ (151,482,208 ) $        9,331,163
Issuance of common stock, net of offering cost / At-the-market offering 301,154 301 508,482 - 508,783
Stock-based compensation 391,442 391 531,226 - 531,617
Dividend distributions - - - - -
Net loss - - - (1,413,369 ) (1,413,369 )
Balance March 31, 2023 13,799,745 $ 13,800 $ 161,839,971 $ (152,895,577 ) $ 8,958,194

For the Three ~~Months~~months Ended ~~September 30,~~March 31, 2022

Additional Total
Common Stock Paid-in Accumulated Stockholders’
Shares Amount Capital Deficit Equity
Balance June 30, 2022 - - 12,703,794 $ 12,705 $ 159,432,894 $ (149,054,886 ) $ 10,390,713
Issuance of common stock, net of offering cost / At-the-market offering 318,070 318 490,374 - 490,692
Stock-based compensation 31,848 32 450,773 - 450,805
Dividend distributions - - - - -
Net loss - - - - - (1,030,248 ) (1,030,248 )
Balance September 30, 2022 - - 13,053,712 $ 13,055 $ 160,374,041 $ (150,085,134 ) $ 10,301,962
~~For the Three Months Ended September 30, 2021~~
Shares Amount Shares Amount Shares Amount Capital Deficit Equity (Deficit)
Series C-1 Convertible Series C-2 Convertible Additional Total
Preferred Stock Preferred Stock Common Stock Paid-in Accumulated Stockholders’
Shares Amount Shares Amount Shares Amount Capital Deficit Equity
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
Issuance of common stock, net of offering cost / At-the-market offering - - - - 41,290 41 219,705 - 219,746
Warrant liabilities value related to Issuance of common stock - - - - (5,771,250 ) - (5,771,250 )
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 ) - -
Fractional shares adjusted for reverse split - 14,477 15 (15 ) - -
Stock-based compensation - - - - 290,000 290 4,665,892 - 4,666,182
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
Additional Total
Common Stock
Additional
Paid-in
Accumulated Stockholders’
(Deficit)
Shares Amount Capital Deficit Equity
Balance December 31, 2021 10,528,212 $ 10,529 $ 147,682,384 $ (135,589,470 ) $     12,103,443
Balance 10,528,212 $ 10,529 $ 147,682,384 $ (135,589,470 ) $     12,103,443
Issuance of common stock, net of offering cost / At-the-market offering 1,790,576 1,791 10,511,976 - 10,513,767
Stock-based compensation 297,222 297 1,288,977 - 1,289,274
Dividend distributions - - (634,557 ) - (634,557 )
Net loss - - - (5,740,743 ) (5,740,743 )
Balance March 31, 2022 12,616,010 $ 12,617 $ 158,848,780 $ (141,330,213 ) $ 17,531,184
Balance 12,616,010 $ 12,617 $ 158,848,780 $ (141,330,213 ) $ 17,531,184

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

6

BTCS Inc.
Statements of Cash Flows
(Unaudited)
The accompanying notes are an integral part of these unaudited condensed financial statements.

2022 2021 2023 2022
For the Nine Months Ended For the Three Months Ended
September 30, March 31,
2022 2021 2023 2022

Net Cash flows used from operating activities:
Net loss $ (14,495,664 ) $ (15,466,585 ) $ (1,413,369 ) $ (5,740,743 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense 2,862 443 1,153 797
Amortization on debt discount - 1,716,744
Stock-based compensation 2,233,608 13,892,884 531,617 1,289,274
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock - 179,277
Validator revenue (1,421,560 ) (776,399 ) (311,508 ) (563,015 )
Blockchain network fees (non-cash) 1,321 - - 1,321
Change in fair value of warrant liabilities (1,140,000 ) (2,066,250 ) 285,000 641,250
Purchase of non-productive digital assets/currencies - (5,761,550 )
Sale of non-productive digital assets/currencies 2,547,322 4,274,491
Realized gain on digital assets/currencies transactions (489,682 ) (3,054,418 )
Impairment loss on digital assets/currencies 12,347,472 3,777,785
Realized gain on crypto assets/currencies transactions (16,831 ) (71,110 )
Impairment loss on crypto assets/currencies 94,907 3,307,428
Changes in operating assets and liabilities: -
Prepaid expenses and other current assets 117,473 (440,514 ) 30,278 9,382
Accounts payable and accrued expenses (37,842 ) 168,546 (34,773 ) (36,329 )
Accrued compensation 205,237 (348,875 ) (292,506 ) (4,125 )
Capital shares payable - 75,002
Dividends payable - distributions to warrant holders - 35,625
Net cash used in operating activities (129,453 ) (3,904,421 ) (1,126,032 ) (1,055,243 )

Net cash used in investing activities:
Purchase of productive digital assets/currencies for validating (9,274,055 ) (9,462,279 )
Sale of productive digital assets/currencies 432,716 -
Purchase of productive crypto assets/currencies for validating (134,019 ) (8,521,726 )
Sale of productive crypto assets/currencies 47,543 310,149
Purchase of investments - -
Purchase of property and equipment (5,408 ) (4,543 ) - (2,558 )
Net cash used in investing activities (8,846,747 ) (9,466,822 ) (86,476 ) (8,214,135 )

Net cash provided by financing activities:
Dividend distributions (630,801 ) - - (400,194 )
Proceeds from exercise of warrants - 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
Net proceeds from issuance of common stock and warrants for cash - 8,865,000
Net proceeds from issuance of common stock - 3,014,005
Net proceeds from issuance common stock/ At-the-market offering 11,095,132 219,746 508,783 10,513,767
Payment to convertible notes principle - (1,092,712 )
Net cash provided by financing activities 10,464,331 13,506,039 508,783 10,113,573

Net increase in cash 1,488,131 134,796 (703,725 ) 844,195
Cash, beginning of period 1,400,867 524,135 2,146,783 1,400,867
Cash, end of period $ 2,888,998 $ 658,931 $ 1,443,058 $ 2,245,062

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 $ - $ 45,541
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock $ - $ 5,020,883
Conversion of Series C-1 Preferred Stock $ - $ 20
Conversion of Series C-2 Preferred Stock $ - $ 6,216,289
Beneficial conversion feature of Series C-2 convertible preferred stock $ - $ 129,412
Beneficial conversion features associated with convertible notes payable $ - $ 1,000,000
Dividends payable $ - $ 230,606

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~~(“BTCS” or the “Company”) was incorporated in ~~2008. In February 2014,~~2008 and is an early entrant in the ~~Company entered the business of hosting an online e-commerce marketplace where consumers could purchase merchandise using Digital Assets, including Bitcoin.~~crypto asset (also referred to “cryptocurrencies”, “crypto”, or “tokens”) market with a primary focus on blockchain infrastructure and staking. The Company operates validator nodes on various proof-of-stake (“PoS”) and delegated proof-of-stake (“DPoS”) based blockchain networks and stakes the native crypto assets on those blockchains to earn rewards. The Company’s Staking-as-a-Service (“StaaS”) business allows crypto asset holders to earn rewards by participating in network consensus mechanisms through staking and delegating their crypto assets to Company-operated validator nodes (or “nodes”). The Company believes that StaaS provides a more accessible and cost-effective way for crypto asset holders to participate in blockchain networks’ consensus mechanisms, thereby promoting the growth and adoption of blockchain technology. The Company’s recently launched StakeSeeker platform (the “Digital Asset Platform”), currently in beta, is ~~currently focused on blockchain~~a comprehensive crypto dashboard 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 dueeducation center designed to ~~capital constraints. In January 2015, the Company began a rebranding campaign using its BTCS.com domain~~empower users to better ~~reflect its broadened strategy. The Company released~~understand and grow their crypto holdings with innovative portfolio analytics and a ~~new website which included broader information on its strategy.~~non-custodial process to earn staking rewards through direct participation in blockchain consensus algorithms.

The Company’s business is subject to various risks and uncertainties, including risks associated with the evolving regulatory landscape for crypto assets, risks associated with the volatility of crypto asset prices, and risks associated with the development and adoption of blockchain technology. The Company’s future success is dependent on various factors, including the growth of the crypto asset market, the adoption of blockchain technology, and the Company’s ability to effectively operate and grow its blockchain infrastructure operations ~~focuses on securing next-generation blockchains~~ and operating validator nodes on various proof of stake-based blockchain networks, earning rewards of additional Digital Assets by authenticating and validating transactions on the networks. The Company is in the late stages of developing a Digital Asset Platform that would enable users to aggregate their Digital Asset portfolio holdings from multiple exchanges and wallets into a single platform to view and analyze performance, risk metrics, and potential tax implications. The internally developed platform utilizes Digital Asset exchange APIs to read user data and does not allow for the trading of assets. We also are developing an integrated proprietary Staking-as-a-Service feature on the Digital Asset Platform that would enable users to participate in asset leveraging through securing blockchain protocols and to stake and delegating supported cryptocurrencies to BTCS operated validator nodes through a non-custodial platform.StaaS business.

The ~~market is rapidly evolving~~Company plans to expand its PoS operations to secure other disruptive blockchain protocols that also allow for delegating and ~~there can be no assurances that we will be competitive with industry participants that have or may have greater resources than us.~~asset leveraging. The growth of both StakeSeeker’s user base as well as the number and size of staked cryptocurrencies by delegators to Company-run validator nodes are critical to the Company’s strategy and success.

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 and notes to the financial statements have been retroactively restated to reflect the Reverse Split.

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 for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of results for the full year ended December 31, ~~2022.~~2023. The unaudited condensed financial statements and notes should be read in conjunction with the financial statements and notes for the year ended December 31, ~~2021.~~2022.

8

Note 3 - Summary of Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the ~~2021~~2022 Annual Report.

Basis of presentation

The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”).

Reclassifications

Certain prior period amounts have been reclassified in order to conform with the current period presentation. These reclassifications have no impact on the Company’s previously reported net income (loss).

Concentration of Cash

The Company maintains cash balances at ~~two~~four financial institutions in checking accounts and money market accounts. The Company considers all highly liquid investments with original maturities of ~~nine~~six months or less when purchased to be cash and cash equivalents. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had approximately $~~2.9~~1.4 million and $~~1.4~~2.1 million in cash. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had approximately $~~2.5~~ 0.7million and $~~0.9~~1.7 million in excess of the FDIC insured limit, respectively.

Revenue Recognition

The Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the ~~company~~Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

● Step 1: Identify the contract with the customer
● Step 2: Identify the performance obligations in the contract
● Step 3: Determine the transaction price
● Step 4: Allocate the transaction price to the performance obligations in the contract
● Step 5: Recognize revenue when the Company satisfies a performance obligation

Revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company generates revenue through staking rewards.

The Company has entered into network-based smart contracts by running its own ~~Digital Asset validating~~crypto asset validator nodes as well as by staking ~~Digital Assets with staking pools~~crypto assets on nodes run by third-party operators (either directly or through crypto exchanges). Through these contracts, the Company provides cryptocurrency to stake on a node for the purpose of validating transactions and adding blocks to a respective blockchain network. The term of a smart contract can vary based on the rules of the respective blockchain and typically last a few weeks to months after it is canceled by the operator and requires that the cryptocurrency staked remain locked up during the duration of the smart contract. In exchange for staking the cryptocurrency and validating transactions on blockchain networks, the Company is entitled to all of the fixed cryptocurrency award for running the Company’s own node and is entitled to a fractional share of the fixed cryptocurrency award a third-party ~~staking pool~~node operator receives (less ~~digital~~crypto asset transaction fees payable to the ~~pool~~node operator or exchanges, which are immaterial and are recorded as a deduction from revenue), for successfully validating or adding a block to the blockchain. The Company’s fractional share of awards received byfrom delegating to a third-party ~~staking pool~~validator node is based on the proportion of cryptocurrency the Company staked to the ~~staking pool~~ node to the total cryptocurrency staked by ~~all pool participants validating blockchain transactions.~~delegators to the node.

9

The provision of 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 cryptocurrency ~~awards~~award - 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 aton the ~~time~~date of receipt. The satisfaction of the performance obligation for ~~transaction verification services~~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 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 software maintenance and operations of its nodes.

~~Digital~~Crypto Assets Translations and Remeasurements

The Company accounts for its ~~Digital Assets~~crypto assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles ~~–Goodwill~~– Goodwill and Other. 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.

~~Digital Assets~~Crypto assets held are included in the balance sheets as either current assets or other assets if they are staked and locked up for over one year. The Company’s ~~Digital Assets~~crypto assets are initially recorded at fair value upon receipt (or “carrying value”). The fair value of ~~Digital Assets~~crypto assets is determined using the ~~average~~ U.S. dollar spot price of the related ~~Digital Asset.~~crypto asset. On a quarterly basis, ~~Digital Assets~~crypto assets are measured at carrying value, net of any impairment losses incurred since receipt. The Company will record impairment losses as the fair value falls below the carrying value of the ~~Digital Assets~~crypto assets at any time during the period, as determined using the lowest U.S. dollar spot price of the related ~~Digital Asset~~crypto asset subsequent to its acquisition. The ~~Digital Assets~~crypto assets can only be marked down when impaired and not marked up when their value increases.

Such impairment in the value of ~~Digital Assets are~~crypto assets is recorded as a component of costs and expenses in our ~~statements~~Statements of ~~operations.~~Operations. The Company recorded impairment losses related to ~~Digital Assets~~crypto assets of approximately $~~12.3~~95,000 ~~million~~ and $~~3.8~~3.3 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2023, and 2022, ~~and 2021, respectively~~respectively.

Impairment losses cannot be recovered for any subsequent increase in fair value until the sale or disposal of the asset. Realized gain (loss) on sale of ~~Digital Assets~~crypto assets are included in other income (expense) in the ~~statements~~Statements of ~~operations.~~Operations. The Company recorded realized gains (losses) on ~~Digital Assets~~crypto assets of approximately $~~490,000~~17,000 and $~~3.1~~71,000 ~~million~~ during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

The presentation of purchases and sales of ~~Digital Assets~~crypto assets on the Statement of Cash Flows is determined by the nature of the ~~Digital Assets,~~crypto assets, which can be characterized as productive (i.e. purchased for purposes of staking) or non-productive. The purchase of non-productive ~~Digital Assets~~crypto assets and currencies are included as an operating activity, whereas the purchase of productive ~~Digital Assets~~crypto assets and currencies are included as investing activities in accordance with ASC 230-10-20 Investing activities. Productive ~~Digital Assets~~crypto assets that are staked with a lock-up period of less than 12 months are presented on the Balance Sheet as current assets. Staked ~~Digital Assets~~crypto assets with remaining lock-up periods of greater than 12 months are presented as long-term other assets on the Balance Sheet.

10

Internally Developed Software

Internally developed software consists of the core technology of the Company’s Digital Asset Platform, which is being designed to allow users to track, monitor and analyze their aggregate cryptocurrency portfolio holdings by connecting their ~~Digital Asset~~crypto exchanges and digital wallets as well as providing a non-custodial delegation process to earn staking rewards on ~~Digital Asset~~crypto asset holdings. 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.

Property and Equipment

Property and equipment consists of computer, equipment and office furniture and fixtures, all of which are recorded at cost. Depreciation and amortization isare recorded using the straight-line method over the respective useful lives of the assets ranging from three to five years ~~years.~~. Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable.

Use of Estimates

The accompanying financial statements have been prepared in conformity with U.S. 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 indefinite life intangible assets, stock-based compensation, and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates, including the carrying amount of the indefinite life intangible assets, 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.

Income Taxes

The Company recognizes income taxes on an accrual basis based on tax positions taken or expected to be taken in its tax returns. A tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not (i.e., likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold are measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon ~~settlement~~settlement.. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized. Should they occur, the Company’s policy is to classify interest and penalties related to tax positions as income tax expense. Since the Company’s inception, no such interest or penalties have been incurred.

11

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 4).

Stock-based compensation

The Company accounts for stock-based compensation in accordance with ASC 718 Compensation -– Stock Compensation (“ASC 718”). ASC 718 addresses all forms of share-based payment ~~(“SBP”)~~ awards including shares issued under employee stock purchase plans and stock incentive shares. Under ASC 718 awards result in a cost that is measured at fair value on the awards’ grant date, based on the estimated number of awards that are expected to vest and will result in a charge to operations.

Share-based payment awards exchanged for services are accounted for at the fair value of the award on the estimated grant date.

Options

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 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.

12

Restricted Stock Units (RSUs)

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. Stock-based compensation expense for the market-based restricted stock units with explicit service conditions is recognized on a straight-line basis over the longer of the derived service period or the explicit service period, regardless of whether the market condition is satisfied. However, in the event that the explicit service period is not met, previously recognized compensation cost would be reversed. Market-based restricted stock units subject to market-based performance targets require achievement of the performance target as well as a service condition in order for these RSUs to vest.

The Company estimates the fair value of market-based RSUs as of the grant date and expected derived term using a Monte Carlo simulation that incorporates pricing inputs covering the period from the grant date through the end of the derived service period.

Dividends

On January 5, 2022, the ~~board~~Board of ~~directors~~Directors (the “Board”) of the Company declared a non-recurring special dividend of ~~$0.05~~$0.05 for each outstanding share of Common Stock of the Company, payable to holders of record as of the close of business on March 17, 2022. The dividend distributions are considered a return of capital as the distributions are in excess of the Company’s current and accumulated earnings and profits. The return of capital distribution reduces the Company’s additional paid in capital balance. The Company will evaluate the appropriateness of potential future dividends as the Company continues to grow its operations. Dividend distributions amounted to $~~635,000~~0 and $0635,000 during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Advertising Expense

Advertisement costs are expensed as incurred and included in marketing expenses. Advertising and marketing expenses amounted to approximately $~~74,000~~6,000 and $~~10,000~~42,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

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, restricted stock units, options 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.

The following financial instruments were not included in the diluted loss per share calculation as of ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ because their effect was anti-dilutive:
Schedule of Earnings Per Share Anti-diluted
2023 2022
As of March 31,
2023 2022
Warrants to purchase common stock 712,500 962,794
Options 1,170,000 1,235,000
Non-vested restricted stock awards units 1,631,399 1,668,084
Total 3,513,899 3,865,878

2022 2021
As of September 30,
2022 2021
Warrants to purchase common stock 945,837 962,823
Convertible notes - 285,429
Options 1,285,000 -
Non-vested restricted stock awards units 1,612,350 -
Total 3,843,187 1,248,252
13

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, ~~“Income~~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 adopted ASU No. 2019-12 effective January 1, 2021, and the adoption did not have a material impact 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 U.S. 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 adopted ASU No. ~~2019-12~~2020-06 effective January 1, ~~2021,~~2022, and the adoption did not have a material impact 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 4 - – Fair Value of Financial Assets and Liabilities
The Company measures certain assets and liabilities at fair value. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
14

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 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~~tables present the Company’s assets and liabilities that are measured at fair value ~~at September 30, 2022~~on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of March 31, 2023 and December 31, ~~2021:~~2022:
Schedule of Fair Value of Assets and Liabilities Valued on Recurring Basis
Fair value measured at September 30, 2022 Fair Value Measured at March 31, 2023
Total at
September 30, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs
Total at
March 31,

Quoted prices in
active markets

Significant other
observable inputs

Significant
unobservable
inputs

2022 (Level 1) (Level 2) (Level 3) 2023 (Level 1) (Level 2) (Level 3)
Assets
Investments $ 100,000 $         - $         - $ 100,000
Liabilities
Warrant Liabilities $ 712,500 $  - $  - $ 712,500 $ 498,750 $ - $ - $ 498,750

Fair value measured at December 31, 2021
Total at December 31, Quoted prices in active markets Significant other
observable inputs Significant unobservable inputs
2021 (Level 1) (Level 2) (Level 3)
Liabilities
Warrant Liabilities $ 1,852,500 $   - $   - $  1,852,500

Fair Value Measured at December 31, 2022

Total at
December 31,

Quoted prices in
active markets

Significant other
observable inputs

Significant
unobservable
inputs

2022 (Level 1) (Level 2) (Level 3)
Assets
Investments $ 100,000 $          - $          - $ 100,000
Liabilities
Warrant Liabilities $ 213,750 $ - $ - $ 213,750
The Company did not make any transfers between the levels of the fair value hierarchy during the three months ended March 31, 2023 and 2022.
1415

Level 3 Valuation Techniques
Level 3 financial assets consist of private equity investments for which there is no current public market for these securities such that the determination of fair value requires significant judgment or estimation. As of March 31,2023 and December 31, 2022, the Company’s Level 3 investments were carried at original cost of the investments, with a value of $100,000. The Company has elected to apply the measurement alternative under ASC 321, Investments—Equity Securities, for these investments.

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~~$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 December 31, ~~2021,~~2022, 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 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~~risk-free rates, as well as volatility.

The Warrants require the issuance of 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, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, is as follows:
Summary of Valuation Methodology and Significant Unobservable Inputs Warrant Liabilities

September 30,
2022

December 31,
2021

March 31,
2023

December 31,
2022

Risk-free rate of interest 4.06 % 1.26 % 3.60 % 3.99 %
Expected volatility 157.1 % 162.5 % 144.8 % 152.8 %
Expected life (in years) 3.43 4.18 2.93 3.18
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 recurring 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 assets and liabilities for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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 Assets
March 31, March 31,
2023 2022
Beginning balance $ 100,000 $       -
Purchases - -
Unrealized appreciation (depreciation) - -
Ending balance $ 100,000 $ -

Fair Value of Level 3 financial liabilities Fair Value of Level 3 Financial Liabilities
September 30, September 30, March 31, March 31,
2022 2021 2023 2022
Beginning balance $ 1,852,500 $ - $ 213,750 $ 1,852,500
Warrant liabilities classification - - - -
Fair value adjustment of warrant liabilities (1,140,000 ) - 285,000 641,250
Ending balance $ 712,500 $ - $ 498,750 $ 2,493,750

1516

Note 5 -– Stockholders’ Equity

Common Stock
~~Reverse Stock Split~~
~~On August 25, 2021, the Company issued approximately~~ ~~14,500~~ ~~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. The financial statements have been retroactively restated to reflect the reverse stock split.~~

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%~~3.0% of the aggregate gross proceeds from each sale of Shares.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company sold a total of ~~2,148,658~~301,154 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $~~11,454,000~~529,000 at an average selling price of $~~5.33~~1.76 per share, resulting in net proceeds of approximately $~~11,095,000~~509,000 after deducting commissions and other transaction costs.
Share Based Payments
Effective January 19, 2023, The Board of Directors of the Company approved the issuance of $50,000 of common stock to each independent director. The shares will be issued in four equal installments ($12,500) at the end of each calendar quarter beginning March 31^st, subject to continued service on each applicable issuance date. The number of shares issuable will be based on the closing price of the Company’s common stock on the last trading day prior to the end of the applicable calendar quarter. For the three months ended March 31, 2023, 27,576 shares of common stock were issued to independent directors.
Preferred Stock
Effective January 27, 2023, the Company’s Board of Directors approved the issuance of a newly designated Series V Preferred Stock (“Series V”) on a one-for-one basis to the Company’s shareholders (including restricted stock unit holders). The record date has been set for May 12, 2023 and the payment date is June 2, 2023. The Series V: (i) is non-convertible, (ii) has a 20% liquidation preference over the shares of common stock, (iii) is non-voting and (iv) has certain rights to dividends and distributions (at the discretion of the Board of Directors).

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 and amended on June 13, 2022. The Company has reserved 7,000,000 shares of Common Stock for issuance pursuant to the 2021 Plan.

Options

During the three months ended ~~September 30, 2022,~~March 31, 2023, the Company granted ~~50,000~~20,000 stock options with a weighted average exercise price of $~~1.51~~0.63 to non-executive employees.
The following weighted-average assumptions were used to estimate the fair value of options granted on the deemed grant date during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ for both the Black-Scholes ~~formula and the Monte-Carlo simulation formula, applicable to 2021 options granted:~~formula:
~~Summary~~
Schedule of ~~Weighted-average~~Weighted-Average Assumptions Used to Estimate Fair Value

For the nine months ended September 30,

For the Three Months
Ended March 31,

2022 2021 2023 2022
Exercise price $ 1.51 $ 0.21 $ 0.63 $     -
Term (years) 5.00 2.25-3.05 5.00 -
Expected stock price volatility 165.8 % 185.9 % 152.8 % - %
Risk-free rate of interest 2.77 % 0.34 % 3.99 % - %

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 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.

1617

A summary of option activity under the Company’s stock option plan for ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 is presented below:
Summary of Option Activity
Number of Shares
Weighted Average
Exercise Price
Total Intrinsic Value
Weighted Average Remaining Contractual Life
(in years)

Outstanding as of December 31, 2022 1,150,000 $ 2.15 $ - 3.3
Employee options granted 20,000 0.63 14,600 4.8
Outstanding as of March 31, 2023 1,170,000 $ 2.12 $ 14,600 3.0
Options vested and exercisable as of March 31, 2023 1,135,000 $ 2.16 $ - 3.0
Number of Shares
Weighted Average
Exercise Price
Total Intrinsic Value Weighted Average Remaining Contractual Life
(in years)
Outstanding as of December 31, 2021 1,235,000 $ 2.14 $ 1,488,000 4.3
Employee options granted 50,000 1.51 - 4.8
Outstanding as of September 30, 2022 1,285,000 $ 2.11 $ - 3.6
Options vested and exercisable as of September 30, 2022 1,229,750 $ 2.10 $ - 3.5
RSUs

Effective January 2, 2022, the Board of Directors of the Company ratified the following arrangements approved by its Compensation Committee:
~~The Board of Directors of the Company ratified grants of RSUs to each independent director. David Garrity, Carol Van Cleef and Charles Lee were each granted~~ ~~31,848~~ ~~restricted stock units (the “Board Grants”). The Board Grants vest in four equal installments at the end of each calendar quarter in 2022.~~

The Company’s executive officers were granted RSUs as part of a long-term incentive plan (“LTI”), with vesting terms set for when the Company’s market capitalization reaches and sustains a market capitalization for 30 consecutive days above four defined market capitalization thresholds of $100million, $150 million, $200 million and $400 million.

Effective February 22, 2022, upon appointment of Manish Paranjape as Chief Technology Officer of the Company, Mr. Paranjape was also granted RSUs as part of the LTI plan, with consistent vesting terms set for when the Company’s market capitalization above the same four defined market capitalization thresholds.

Effective January 1, 2023 (the “LTI RSU Amendment Date”), upon recommendation of the Compensation Committee of the Board of Directors approved an amendment to the LTI plan, whereby the market capitalization threshold targets were lowered to $50 million, $100 million, $150 million, and $300 million.
The RSUs granted to each executive employee are as follows:
Schedule of Restricted Stock Units
Total Market Cap Vesting Thresholds Total Market Cap Vesting Thresholds
Officer Name Title Grant Date RSUs Granted $ 100 million $ 150 million $ 200 million $ 400 million Title Grant Date RSUs Granted $ 50 million $ 100 million $ 150 million $ 300 million
Charles Allen Chief Executive Officer 1/2/2022 694,444 173,611 173,611 173,611 173,611 Chief Executive Officer 1/2/2022 694,444 173,611 173,611 173,611 173,611
Michal Handerhan Chief Operations Officer 1/2/2022 444,444 111,111 111,111 111,111 111,111 Chief Operations Officer 1/2/2022 444,444 111,111 111,111 111,111 111,111
Michael Prevoznik Chief Financial Officer 1/2/2022 222,224 55,556 55,556 55,556 55,556 Chief Financial Officer 1/2/2022 222,224 55,556 55,556 55,556 55,556
Manish Paranjape Chief Technology Officer 2/22/2022 160,184 40,046 40,046 40,046 40,046 Chief Technology Officer 2/22/2022 160,184 40,046 40,046 40,046 40,046
1,521,296 380,324 380,324 380,324 380,324 1,521,296 380,324 380,324 380,324 380,324

To the extent any market capitalization targets set forth above for Mr. Prevoznik and Mr. Paranjape are achieved, the RSUs will also be subject to the following five-year vesting schedule: ~~20%~~20% of the LTI RSUs which have met a market capitalization criteria will vest on the one-year anniversary of the grant date, and the remaining ~~80%~~80% of the LTI RSUs which have met a market capitalization criteria will vest ~~monthly~~annually on each subsequent calendar year-end date over the four years following the one year anniversary of the grant date.
18

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. Stock-based compensation expense for the market-based restricted stock units with explicit service conditions is recognized on a straight-line basis over the longer of the derived service period or the explicit service period, regardless of whether the market condition is satisfied. However, in the event that the explicit service period is not met, previously recognized compensation cost would be reversed. Market-based restricted stock units subject to market-based performance targets require achievement of the performance target as well as a service condition in order for these RSUs to vest.

The Company estimates the fair value of market-based RSUs as of the grant date and expected derived term using a Monte Carlo simulation that incorporates pricing inputs covering the period from the grant date through the end of the derived service period.
17
As of the LTI RSU Amendment Date, the Company determined the pre-modification and post-modification estimated fair value of the LTI RSUs accounting for the amended market cap criteria. The increase in fair value of the LTI RSUs attributable to the modification was added to the related unrecognized compensation expense in accordance with ASC 718 – Share-Based Compensation, whereby any previously recognized compensation cost that has not vested as of the modification date should be adjusted to reflect the new fair value of the equity awards on the date of the modification.

The following weighted-average assumptions were used to estimate the fair value of options granted during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ for the Monte-Carlo simulation:
Schedule of Weighted-Average Assumptions Used to Estimate Fair Value

Nine Months Ended
September 30,

Three Months Ended
March 31,

2022 2021
2023
(Post-Modification)

2022
(Original Grants)

Vesting Hurdle Price $ 19.39 - $ 3.81 - $30.52 $ 8.07 - $36.99
Term (years) 5.00 - 4.00 5.00
Expected stock price volatility 103.7 % - 97.30 % 103.72 %
Risk-free rate of interest 1.32 % - 4.10 % 1.32 %

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 RSUs.

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 RSUs.

Expected Term: The Company’s expected term represents the weighted-average period that the Company’s RSUs are expected to be outstanding. The expected term is based on the stipulated ~~5 year~~five-year period from the grant date until the ~~market based~~market-based criteria are achieved. If the market-based criteria are not achieved within the five ~~year~~-year period from the grant date, the RSUs will not vest and shall expire.

Vesting Hurdle Price: The vesting hurdle ~~prices are~~price is determined ~~by taking~~as the average of the vesting Market Cap criteria divided by the shares outstanding as of the valuation dates.

~~Effective September 30,~~
19
On December 9, 2022, ~~Mr. David Garrity resigned as a director~~upon recommendation of ~~BTCS, Inc. The~~the Compensation Committee, the Board of Directors approved the grant of 25,000 RSUs to Mr. Prevoznik and Mr. Paranjape each, effective January 1, 2023, which vest annually over a five-year period with the first vesting date being on the one-year anniversary of the ~~Company agreed~~execution date of the effective grant date, subject to ~~fully vest Mr. Garrity’s remaining unvested restricted stock units (7,962~~ ~~shares) and pay Mr. Garrity approximately $5,600, which represents the remaining 2022 director fees.~~continued employment on each applicable vesting date.

A summary of the Company’s restricted stock units granted under the 2021 Plan during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 are as follows:
Summary of Restricted Stock
Number of Restricted Stock Units Weighted Average Grant Day Fair Value
Nonvested at December 31, 2021 29,363 $ 5.96
Granted 1,662,607 3.29
Vested (79,620 ) 3.14
Forfeited - -
Nonvested at September 30, 2022 1,612,350 $ 3.35
Number of Restricted Stock Units Weighted Average Grant Day Fair Value
Nonvested at December 31, 2022 1,590,552 $ 3.34
Granted 50,000 0.63
Vested (9,153 ) 4.37
Nonvested at March 31, 2023 1,631,399 $ 3.25

Stock Based Compensation

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,~~March 31, 2023 and 2022 ~~and 2021~~ was as follows:
Schedule of Stock-based Compensation Expense
2023 2022

For the Three Months Ended
March 31,

2023 2022
Employee bonus stock awards $ - $ 894,027
Employee stock option awards 3,307 69,634
Employee restricted stock unit awards 267,338 341,990
Non-employee restricted stock awards 15,908 82,081
Stock-based compensation $ 286,553 $ 1,387,732

2022 2021 2022 2021

For the Three Months Ended
September 30,

For the Nine Months Ended
September 30,

2022 2021 2022 2021
Employee bonus stock awards $ - $ - $ 894,027 $ -
Employee stock option awards 16,455 1,638,516 98,901 10,298,844
Employee restricted stock unit awards 434,349 3,027,665 1,182,053 3,029,040
Non-employee restricted stock awards 30,480 75,000 202,218 237,806
Series C-2 Allocation - - - 179,277
Stock-based compensation $ 481,284 $ 4,741,181 $ 2,377,199 $ 13,744,967
1820

Note 6 – Accrued Expenses

Accrued expenses consist of the following:
Schedule of Accrued Expenses
September 30, 2022
December 31,
2021
March 31, 2023 December 31, 2022
Compensation and related expenses $ 212,571 $ 7,334 $ 3,429 $ 295,935
Accounts Payable 100,875 138,372 41,954 76,727
Other 3,757 343
Accrued Expenses $ 317,203 $ 146,050 $ 45,383 $ 372,662

Accrued compensation and related expenses include approximately $~~209,000~~0 and $284,000 related to performance bonus accruals as of ~~September 30, 2022.~~March 31, 2023 and December 31, 2022, respectively.

Note 7 -– 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. For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, the Company made contributions to the 401(k) Plan of $95,000 and $45,000., respectively.

Note 8 – Liquidity

The Company follows “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the financial statements, the Company has historically incurred a net loss and has an accumulated deficit at ~~September 30, 2022,~~March 31, 2023, a net loss and net cash used in operating activities for the reporting period then ended. The Company is implementing its business plan and generating revenue; however, the Company’s cash position and liquid ~~Digital Assets~~crypto assets are sufficient to support its daily operations over the next twelve months.

Note 9 -– Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements other than disclosed.

During the period from ~~October~~April 1, ~~2022~~2023 to ~~November 8, 2022,~~May 9, 2023, the Company sold a total of ~~23,678~~30,558 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $~~33,000~~46,000 at an average selling price of $~~1.38~~1.52 per share, resulting in net proceeds of approximately $~~31,000~~44,000 after deducting commissions and other transaction costs.

On ~~October 1, 2022,~~May 11, 2023, the Compensation Committee of the Board of Directors of ~~BTCS Inc. appointed Melanie Pump as~~the Company approved a ~~new independent director~~performance based Annual Cash Incentive Plan for the Company’s executives for fiscal year 2023. If an executive meets their performance milestones, the executive will receive a bonus, payable in cash and/or equity at the discretion of the ~~Board. Ms. Pump was also appointed as the Chairperson~~Compensation Committee, in an amount up to 54% to 104% of the ~~Audit and Compensation Committees. As compensation for her service~~applicable executive’s base salary, as ~~a director and Chairperson of the Committees, Ms. Pump will receive: (i) annual cash compensation of $25,000~~ ~~and $5,000~~ ~~for each Committee ($10,000~~ ~~in total), and (ii)~~ ~~7,962~~ ~~restricted stock units which will vest on December 31, 2022.~~detailed below:

● Charles Allen, the Company’s Chief Executive Officer is eligible to receive up to 104% of his base salary. Mr. Allen’s current base salary is $411,419;
● Michal Handerhan, the Company’s Chief Operating Officer is eligible to receive up to 68% of his base salary. Mr. Handerhan’s base salary is $287,375;
● Michael Prevoznik, the Company’s Chief Financial Officer is eligible to receive up to 54% of his base salary. Mr. Prevoznik’s base salary is $235,125;
● Manish Paranjape, the Company’s Chief Technology Officer is eligible to receive up to 54% of his base salary. Mr. Paranjape’s base salary is $235,125.
1921

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

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our historical financial statements and the notes to those statements that appear elsewhere in this report. Certain statements in the discussion contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those discussed in the Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. When we refer to the ~~“2022~~“2023 Quarter” and the ~~“2021~~“2022 Quarter” we are referring to the three months ended ~~September 30, 2022~~March 31, 2023 and September 30, 2021 quarters, respectively. Further, when we refer to the “2022 Period” and the “2021 Period” we are referring to the nine months ended September 30, 2022 and September 30, 2021 periods, respectively. Additionally, the twelve months ending DecemberMarch 31, 2022 ~~is referred to as “Fiscal 2022.”~~quarters, respectively.

Company Overview

BTCS Inc. is an early entrant in the ~~Digital Asset~~cryptocurrency market and ~~one of the first~~a publicly-traded U.S. ~~publicly-traded companies to focus~~company focused on ~~Digital Assets~~blockchain infrastructure and ~~blockchain technologies. Through our blockchain-infrastructure operations, we secure disruptive next-generation blockchains and operate~~staking. The Company specializes in operating validator nodes on various Delegated proof-of-stake (“DPoS”) and proof-of-stake (“PoS”) based blockchain networks ~~earning rewards of additional Digital Assets by authenticating~~ and ~~validating transactions~~stakes the native crypto assets on the networks. The Company is in the late stages of developing a Digital Asset Platform that would enable users to aggregate their Digital Asset portfolio holdings from multiple exchanges and wallets into a single platform to view and analyze performance, risk metrics, and potential tax implications. The internally developed platform utilizes Digital Asset exchange APIs to read user data and does not allow for the trading of assets. We also are developing an integrated proprietary Staking-as-a-Service feature on the Digital Asset Platform that would enable users to participate in asset leveraging through securing blockchain protocols and to stake and delegating supported cryptocurrencies to BTCS operated validator nodes ~~through a non-custodial platform.~~
~~Blockchain Infrastructure~~
Blockchain infrastructure operations can broadly be defined as earning a reward for securing a blockchain by validating transactions on that blockchain. There are currently two main consensus mechanisms usedit operates to ~~secure blockchains: i) proof-of-work (“PoW”),~~earn rewards 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 impossible 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 computers and is rewarded for this “work” with Digital Assets. The miner, typically through pools running nodes, 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 PoW and is by far the largest and most secure PoW blockchain.
PoS miners, often referred to as validators in PoS systems, operate nodes and validate transactions. Validators are required to stake holdings of a digital currency to participate in the consensus algorithm and are rewarded in tokens for aligning behavior with the rules of the algorithm. Bad behavior can be penalized by “slashing” the validator’s holdings and/or rewards. Validators can also be removed from the network for breaking the rules. Ill-intentioned behavior among validators is discouraged, allowing for the blockchain to be properly maintained and secured. Compared to PoW, PoS blockchains require less energy.
Depending on the PoS blockchain protocol, native token holders have the opportunity to leverage their asset holdings by either running their own validator (“Validating”) or delegating their rights to a validator (“Delegating” or “Staking”). With Delegating or Staking, token holders participate in blockchain networks by maintaining control of their private keys and delegating their tokens to an existing validator. Therefore, Delegating is more akin to assigning voting rights of stock to another person or entity via a power of attorney. With Validating, a node operator and token holder combine tokens in order to improve the node’s collective odds of earning token rewards for successfully validating new transactions and blocks on the network. With both Delegating and Validating, the validator operators earn a fee for providing the technical administerial capabilities of running a node 24/7 that requires regular, maintenance and industry expertise.
~~BTCS uses its blockchain infrastructure to operate validator nodes on various proof of stake-based blockchain networks. In~~ connection with the validation of transactions occurring on those blockchain ~~networks,~~networks. BTCS will stake the Digital Assets native to those blockchains on the validator nodes it operates in order to earn staking rewards. BTCS may also use its blockchain infrastructure to validate and authenticate transactions on behalf of customers that delegate their validation and voting rights to BTCS-operated validator nodes (referred to as “Staking-as-a-Service” or “SaaS”).
A SaaS provider maintains an administerial role in validating transactions on a given PoS network on behalf of its delegators by maintaining the validator nodes we operate to ensure they remain online and ready to validate transactions.
20
All of the Company’s Digital Asset holdings are in tokens secured by PoS or similar consensus mechanisms. The Company is currently actively operating validator nodes on Ethereum, Cosmos, Kava, Tezos, Avalanche, Kusama, Polygon, Mina, Akash and Cardano. The Company has also staked the following tokens Polkadot, Algorand, Axie Infinity, Oasis and Solana. Building on that base, the Company plans to expand its PoS operations to secure other disruptive blockchain protocols that ~~also~~ allow for ~~Delegating and asset leveraging.~~delegating, which presents a significant growth opportunity for the company.

BTCS’s business model is focused on Staking-as-a-Service (StaaS), allowing crypto asset holders to earn rewards by participating in network consensus mechanisms through staking and delegating their crypto assets to Company operated validator nodes. As a non-custodial validator operator, the company receives a percentage of token holders’ staking rewards generated as a validator node fee, for our ministerial role in hosting the validator node. This creates an opportunity for scalable revenue and business growth with limited additional costs. The ~~Company believes its~~company’s StaaS strategy provides a more accessible and cost-effective way for crypto asset holders to participate in blockchain ~~infrastructure efforts will form~~networks’ consensus mechanisms, promoting the ~~core~~ growth ~~for its Digital Asset Platform.~~and adoption of blockchain technology. The ~~Company utilizes cloud infrastructure~~company’s internally-developed dashboard, StakeSeeker, is a non-custodial platform that allows users to ~~operate~~learn how to earn staking rewards through direct participation in blockchain consensus algorithms and ~~run its validator nodes~~analyze their crypto portfolios across exchanges and ~~does not maintain its own physical assets, but may add this infrastructure in the future.~~wallets through a comprehensive crypto dashboard and education center.
22

The table below describes ~~our Digital Asset~~BTCS’s quarterly crypto asset holdings as of the ~~end of~~2022 Quarter through the ~~third quarter of 2021 until the end of the 2022 Period.~~2023 Quarter.

~~Digital~~Crypto Assets Held at Period End

Asset 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1
Bitcoin (BTC) 90 90 90 - - 90 - - - -
Ethereum (ETH) 7,992 8,098 8,196 8,283 8,380 8,196 8,283 8,380 8,454 8,524
Cardano (ADA) 257,757 257,757 257,757 260,555 262,860 257,757 260,555 262,860 262,860 262,860
Kusama (KSM) 374 374 5,278 5,550 6,297 5,278 5,550 6,297 6,493 6,767
Tezos (XTZ) 24,172 24,504 70,453 71,369 72,578 70,453 71,369 72,578 73,486 74,765
Solana (SOL) 4,788 4,779 7,043 7,136 7,238 7,043 7,136 7,238 7,371 7,493
Polkadot (DOT) 8,032 8,032 38,816 39,986 23,905 38,816 39,986 23,905 7,280 7,526
Terra (LUNA) 3,584 3,584 3,621 - - 3,621 - - - -
Cosmos (ATOM) 3,072 3,072 80,474 86,613 91,181 80,474 86,613 91,181 96,318 102,298
Polygon (MATIC) 67,114 67,114 454,486 466,022 474,207 454,486 466,022 474,207 480,825 486,806
Avalanche (AVAX) 2,025 2,073 14,273 14,594 14,888 14,273 14,594 14,888 17,178 17,178
Algorand (ALGO) 50,584 51,103 51,197 51,201 51,201 51,197 51,201 51,201 - -
Axie Infinity (AXS) 22,322 31,763 37,402 22,322 31,763 37,402 42,030 46,482
Kava (KAVA) 183,966 264,917 280,293 183,966 264,917 280,293 290,909 304,968
Band Protocol (BAND) 992 992 992 992
Mina (MINA) 71,297 71,297 74,177 79,937
Oasis Network (ROSE) 349,661 349,661 359,607 2,569,991
Akash (AKT) 103,730 103,730 107,405 110,213
NEAR Protocol (NEAR) 74,702 75,724
Fair Value of Crypto Assets at Period End
Asset 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1
Bitcoin (BTC) $ 4,098,481 $ - $ - $ - $ -
Ethereum (ETH)* 26,894,723 8,840,595 11,128,675 10,117,237 15,530,133
Cardano (ADA) 294,320 119,555 114,190 64,786 104,861
Kusama (KSM) 992,851 267,583 265,505 149,981 236,070
Tezos (XTZ) 262,023 101,102 103,210 52,720 83,614
Solana (SOL) 863,854 239,700 240,377 73,426 158,625
Polkadot (DOT) 826,875 281,496 150,964 31,410 47,720
Terra (LUNA) 373,005 - - - -
Cosmos (ATOM) 2,325,374 651,909 1,186,824 900,440 1,144,459
Polygon (MATIC) 735,034 222,466 368,671 364,714 544,815
Avalanche (AVAX) 1,383,403 247,059 256,021 187,286 304,341
Algorand (ALGO) 47,492 16,115 18,044 - -
Axie Infinity (AXS) 1,416,264 461,649 470,116 253,943 389,893
Kava (KAVA) 828,742 468,634 423,326 166,752 270,486
Band Protocol (BAND) 1,215 1,396 1,857
Mina (MINA) 42,085 32,187 62,101
Oasis Network (ROSE) 21,330 12,291 156,698
Akash (AKT) 26,881 19,938 34,510
NEAR Protocol (NEAR) 93,785 150,854
Total 41,342,441 11,917,864 14,817,434 12,522,292 19,221,037
QoQ Change 13 % -71 % 24 % -15 % 53 %
YoY Change 105 % -45 % -51 % -66 % -54 %

2123

~~Fair Market Value~~Prices of ~~Digital~~Crypto Assets at Period End

Asset 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3
Bitcoin (BTC) 3,941,180 4,167,579 4,098,481 - -
Ethereum (ETH)* 23,990,541 29,820,477 26,894,723 8,840,595 11,128,675
Cardano (ADA) 545,028 337,716 294,320 119,555 114,190
Kusama (KSM) 123,957 103,866 992,851 267,583 265,505
Tezos (XTZ) 146,914 106,679 262,023 101,102 103,210
Solana (SOL) 675,373 813,791 863,854 239,700 240,377
Polkadot (DOT) 229,558 214,616 826,875 281,496 150,964
Terra (LUNA) 138,351 306,353 373,005 - -
Cosmos (ATOM) 111,252 99,761 2,325,374 651,909 1,186,824
Polygon (MATIC) 75,644 169,604 735,034 222,466 368,671
Avalanche (AVAX) 135,191 226,499 1,383,403 247,059 256,021
Algorand (ALGO) 82,381 84,830 47,492 16,115 18,044
Axie Infinity (AXS) 1,416,264 461,649 470,116
Kava (KAVA) 828,742 468,634 423,326
Band Protocol (BAND) 1,215
Mina (MINA) 42,085
Oasis Network (ROSE) 21,330
Akash (AKT) 26,881
Total 30,195,370 36,451,772 41,342,441 11,917,864 14,817,434
QoQ Change 40 % 21 % 13 % -71 % 24 %
YoY Change 1780 % 825 % 105 % -45 % -51 %
* Approximately 9 ETH is not staked.
22
~~Prices of Digital Assets at Period End~~
Asset 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1
Bitcoin (BTC) $ 43,791 $ 46,306 $ 45,539 $ 19,785 $ 19,432 $ 45,539 $ 19,785 $ 19,432 $ 16,547 $ 28,478
Ethereum (ETH) $ 3,002 $ 3,683 $ 3,282 $ 1,067 $ 1,328 3,282 1,067 1,328 1,197 1,822
Cardano (ADA) $ 2.11 $ 1.31 $ 1.14 $ 0.46 $ 0.43 1.14 0.46 0.43 0.25 0.40
Kusama (KSM) $ 331 $ 278 $ 188 $ 48 $ 42 188 48.21 42.16 23.10 34.89
Tezos (XTZ) $ 6.08 $ 4.35 �� $ 3.72 $ 1.42 $ 1.42 3.72 1.42 1.42 0.72 1.12
Solana (SOL) $ 141 $ 170 $ 123 $ 34 $ 33 123 33.59 33.21 9.96 21.17
Polkadot (DOT) $ 28.58 $ 26.72 $ 21.30 $ 7.04 $ 6.32 21.30 7.04 6.32 4.31 6.34
Terra (LUNA) $ 38.60 $ 85.47 $ 103 $ - $ - 103 - - - -
Cosmos (ATOM) $ 36.21 $ 32.47 $ 28.90 $ 7.53 $ 13.02 28.90 7.53 13.02 9.35 11.19
Polygon (MATIC) $ 1.13 $ 2.53 $ 1.62 $ 0.48 $ 0.78 1.62 0.48 0.78 0.76 1.12
Avalanche (AVAX) $ 66.77 $ 109 $ 96.92 $ 16.93 $ 17.20 96.92 16.93 17.20 10.90 17.72
Algorand (ALGO) $ 1.63 $ 1.66 $ 0.93 $ 0.31 $ 0.35 0.93 0.31 0.35 0.17 0.23
Axie Infinity (AXS) $ 63.45 $ 14.53 $ 12.57 63.45 14.53 12.57 6.04 8.39
Kava (KAVA) $ 4.50 $ 1.77 $ 1.51 4.50 1.77 1.51 0.57 0.89
Band Protocol (BAND) $ 1.22 1.22 1.41 1.87
Mina (MINA) $ 0.59 0.59 0.43 0.78
Oasis Network (ROSE) $ 0.06 0.06 0.03 0.06
Akash (AKT) $ 0.26 0.26 0.19 0.31
NEAR Protocol (NEAR) 1.26 1.99

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

The following table presents the Fair ~~Market~~ Value of ~~Digital~~Crypto Assets held compared to the GAAP Book Value reported on the Company’s balance sheet.

September 30, 2022 December 31, 2021 March 31, 2023 December 31, 2022
Book Value Fair Value Book Value Fair Value Book Value Fair Value Book Value Fair Value
Bitcoin (BTC) $ - $ - $ 2,600,426 $ 4,167,579
Ethereum (ETH) 5,633,111 11,128,675 8,642,983 29,820,477 $ 5,817,449 $ 15,530,133 $ 5,708,624 $ 10,117,237
Cardano (ADA) 106,883 114,190 258,527 337,716 63,178 104,861 63,178 64,786
Kusama (KSM) 237,906 265,505 81,296 103,866 148,883 236,070 142,242 149,981
Tezos (XTZ) 87,412 103,210 62,651 106,679 52,853 83,614 51,651 52,720
Solana (SOL) 189,103 240,377 248,698 813,791 62,006 158,625 60,012 73,426
Polkadot (DOT) 143,413 150,964 182,570 214,616 32,168 47,720 30,859 31,410
Terra (LUNA) - - 80,968 306,353 - - - -
Cosmos (ATOM) 532,006 1,186,824 46,174 99,761 630,782 1,144,459 568,359 900,440
Polygon (MATIC) 156,353 368,671 68,362 169,604 167,117 544,815 161,293 364,714
Avalanche (AVAX) 206,808 256,021 50,190 226,499 182,964 304,341 182,964 187,286
Algorand (ALGO) 14,157 18,044 43,948 84,830 - - - -
Axie Infinity (AXS) 437,876 470,116 - - 277,651 389,893 245,443 253,943
Kava (KAVA) 394,140 423,326 - - 161,459 270,486 165,426 166,752
Band Protocol (BAND) 1,076 1,215 - - 982 1,857 982 1,396
Mina (MINA) 40,180 42,085 - - 34,267 62,101 32,002 32,187
Oasis Network (ROSE) 16,322 21,330 - - 110,927 156,698 12,045 12,291
Akash (AKT) 26,513 26,881 - - 18,765 34,510 17,993 19,938
NEAR Protocol (NEAR) 94,370 150,854 92,840 93,785
Total $ 8,223,259 $ 14,817,434 $ 12,366,792 $ 36,451,772 $ 7,855,821 $ 19,221,037 $ 7,535,913 $ 12,522,292
2324

~~Digital Asset Platform~~
The Company is in the late stages of developing a proprietary Digital Asset Platform aimed at allowing users to evaluate their crypto portfolio holdings across multiple exchanges and wallets on a single platform. The internally-developed dashboard utilizes APIs to read user data and does not allow for the trading of assets. In addition to portfolio monitoring, we are also working to integrate a full suite of additional analytical, tracking and reporting features. We believe that increasing the number of features we offer may create a sticky user experience across multiple, interrelated products.
The Company is also currently developing and plans to integrate into the Digital Asset Platform a proprietary Staking-as-a-Service feature aimed at allowing users to delegate supported cryptocurrencies to BTCS operated validator nodes through a non-custodial platform. Delegation (or “staking”) involves committing (or locking) Digital Assets on a blockchain network to support and secure the network and allows delegators to earn native token rewards on their staked assets during the duration of their stake. Validator node operators charge a fee on delegated staked asset rewards earned in addition to earning rewards on their own staked assets. In turn, the highly scalable nature of both staking Digital Assets as well as allowing users to stake Digital Assets to earn token rewards is the premise behind BTCS’ Staking-as-a-Service platform.
Results of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

The following tables reflect our operating results for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

For the Three Months Ended For the Three Months Ended
September 30, $ Change % Change March 31, $ Change % Change
2022 2021 2022 2022 2023 2022 2023 2023

Revenues
Validator revenue $ 344,196 $ 323,376 $ 20,820 6 % $ 311,508 $ 563,015 $ (251,507 ) (45 )%
Total revenues 344,196 323,376 20,820 6 311,508 563,015 (251,507 ) (45 )%

Cost of revenues
Validator expense 82,203 71,690 10,513 15 82,014 137,869 (55,855 ) (41 )%
Gross profit 261,993 251,686 10,307 4 229,494 425,146 (195,652 ) (46 )%

Operating expenses:
General and administrative $ 432,956 $ 282,558 $ 150,398 53 % $ 609,829 $ 650,289 $ (40,460 ) (6 )%
Research and development 126,857 273,909 (147,052 ) (54 ) 201,625 136,718 64,907 47 %
Compensation and related expenses 669,792 4,747,106 (4,077,314 ) (86 ) 462,090 1,423,896 (961,806 ) (68 )%
Marketing 8,765 7,559 1,206 16 6,243 41,793 (35,550 ) (85 )%
Impairment loss on digital assets/currencies 145,247 208,647 (63,400 ) (30 )
Realized gains on digital asset/currency transactions (20,126 ) - (20,126 ) N/A
Impairment loss on crypto assets/currencies 94,907 3,307,428 (3,212,521 ) (97 )%
Realized gains on crypto asset/currency transactions (16,831 ) (71,110 ) 54,279 76 %
Total operating expenses 1,363,491 5,519,779 (4,156,288 ) (75 ) 1,357,863 5,489,014 (4,131,151 ) (75 )%

Other income (expenses):
Interest expense - (58,521 ) 58,521 (100 )
Amortization on debt discount - (581,973 ) 581,973 (100 )
Change in fair value of warrant liabilities 71,250 2,066,250 (1,995,000 ) (97 ) (285,000 ) (641,250 ) 356,250 (56 )%
Distributions to warrant holders - - - N/A - (35,625 ) 35,625 N/A %
Total other income (expenses) 71,250 1,425,756 (1,354,506 ) 95 (285,000 ) (676,875 ) 391,875 58 %

Net loss $ (1,030,248 ) $ (3,842,337 ) 2,812,089 (73 ) $ (1,413,369 ) $ (5,740,743 ) $ 4,327,374 (75 )%

24
For the Nine Months Ended
September 30, $ Change % Change
2022 2021 2022 2022

Revenues
Validator revenue $ 1,421,560 $ 776,399 $ 645,161 83 %
Total revenues 1,421,560 776,399 645,161 83
��
Cost of revenues
Validator expense 313,972 145,935 168,037 115
Gross profit 1,107,588 630,464 477,124 76

Operating expenses:
General and administrative $ 1,595,296 $ 1,149,506 $ 445,790 39 %
Research and development 448,579 602,178 (153,599 ) (26 )
Compensation and related expenses 2,731,713 13,788,556 (11,056,843 ) (80 )
Marketing 74,249 10,345 63,904 618
Impairment loss on digital assets/currencies 12,347,472 3,777,785 8,569,687 227
Realized gains on digital asset/currency transactions (489,682 ) (3,054,418 ) 2,564,736 84
Total operating expenses 16,707,627 16,273,952 433,675 3

Other income (expenses):
Interest expense - (172,603 ) 172,603 (100 )
Amortization on debt discount - (1,716,744 ) 1,716,744 (100 )
Change in fair value of warrant liabilities 1,140,000 2,066,250 (926,250 ) (45 )
Distributions to warrant holders (35,625 ) - (35,625 ) N/A
Total other income (expenses) 1,104,375 176,903 927,472 (524 )

Net loss $ (14,495,664 ) $ (15,466,585 ) 970,921 (6 )
25

Validator Revenue

The ~~increase~~decrease in revenue during the ~~2022~~2023 Quarter ~~and 2022 Period~~ as compared to the ~~2021~~2022 Quarter is primarily due to a drop in the fair value of our crypto assets earned as rewards for staking since the market’s highs in Q1 of 2022. Although we believe the number of tokens we earn from staking and ~~2021 Period is from the expansion of~~revenue recognized will increase as we continue to expand our blockchain infrastructure ~~validating revenue. We believe revenues~~efforts, we recognize that volatility in the cryptocurrency markets may ~~increase for~~impact the ~~period ending December 31, 2022 as a result of an improvement in~~ market prices of the ~~Digital Assets~~crypto assets we ~~have earned and/or purchased, rebounding~~earn from ~~2022 market low prices in June 2022.~~staking.

Cost of Revenues

The ~~increase~~decrease in cost of revenues is due to efficiencies realized in our blockchain infrastructure validating operating costs, including streamlining of web service hosting fees and ~~cash and stock-based compensation related to~~reduction of services provided by vendors. We believe our cost of revenues will increase as we continue to ramp up our business. However, we believe gross margin will improve as we add scale to our blockchain infrastructure operations and reduce costs as a result of increased operational efficiencies, leading to improved gross profits.

Operating Expenses

The decrease in operating expenses in the ~~2022~~2023 Quarter is primarily due to the ~~$4.7~~$3.3 million impairment loss on crypto assets (which we refer to as a “Crypto Asset Impairment”) during the 2022 Quarter, compared to only a $95,000 Crypto Asset Impairment during the 2023 Quarter. In addition, the decrease is also due to the non-cash $1.3 million equity-based contingent bonuses granted to employees and our non-employee directors during the ~~2021~~2022 Quarter for the achievement of performance ~~milestones.~~
~~The increase in operating expenses in the 2022 Period is primarily due to the $12.3 million impairment loss on Digital Assets (“Digital Asset Impairment”) in the 2022 Period,~~milestones compared to only ~~$3.8 million Digital Asset Impairment in the 2021 Period. This is partially offset by the $13.3 million non-cash contingent bonuses granted to employees and our non-employee directors~~$271,000 equity-based compensation during the ~~2021 Period for the achievement of performance milestones.~~2023 Quarter.

We believe operating expenses will ~~remain consistent~~increase as the Company continues to utilize equity-based ~~bonus~~compensation incentives as a core part of our compensation strategy. ~~However,~~Additionally, volatility in the ~~Digital Asset~~cryptocurrency markets will subject the Company to the possibility of additional impairment charges on its ~~Digital Asset~~crypto asset holdings.
The Company is evaluating additional opportunities to reduce costs. As part of our cost cutting measures, in June 2022, the Board of Directors reduced all director fees for 2022 from $50,000 to $25,000 and reduced the Audit, Compensation and Nominating and Corporate Governance committee chair fees for 2022 to $5,000. Additionally, Charles Allen and Michal Handerhan, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, agreed to forfeit $25,000 of their annual base salaries for 2022. Collectively, these cost-cutting measures will result in cost savings of approximately $141,000 for 2022.

Other Income (Expenses)

The changes in other income for the ~~periods~~years reported was primarily due to the ~~decrease~~increase in the fair value of warrant liabilities. This non-cash expense is driven by the value of our stock price at the end of each quarter, which we cannot predict.

Net loss

The decrease in our net loss for the ~~periods reported~~2023 Quarter was primarily due to the decrease in operating expenses and changes in other income ~~(expense)~~(expenses) as discussed above. We believe that our net loss ~~will~~may increase as the Company incurs increased costs related to the development of its Digital Asset Platform and incurs additional ~~Digital~~Crypto Asset Impairment losses due to volatility in the ~~Digital Asset~~cryptocurrency markets.

26

Liquidity and Capital Resources

ATM Financing

On September 14, 2021, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as agent (“H.C. Wainwright”), pursuant to which the Company may offer and sell, from time-to-time through H.C. Wainwright, shares of the Company’s Common Stock having an aggregate offering price of up to $98,767,500. From the period September 14, 2021 through ~~November 8, 2022,~~May 10, 2023, the Company sold a total of ~~2,639,127~~2,970,839 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately ~~$14,465,000~~$15,040,000 at an average selling price of ~~$5.48~~$5.06 per share, resulting in net proceeds of approximately ~~$14,008,000~~$14,562,000 after deducting commissions and other transaction costs.

Liquidity

The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. ~~At September 30, 2022,~~As of March 31, 2023, the Company had ~~$2.9~~approximately $1.4 million of cash.

We view our ~~Digital Assets~~crypto assets as long-term holdings and we do not plan to engage in regular trading of ~~Digital Assets.~~crypto assets. Further certain of our staked crypto assets may be locked up depending on the specific blockchain protocol and we may be unable to unstake them in a timely manner in order to liquidate to the extended desired. During times of instability in the market of ~~Digital Assets,~~crypto assets, we may not be able to sell our ~~Digital Assets~~crypto assets at reasonable prices or at all. As a result, our ~~Digital Assets~~crypto assets may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

As of ~~November 8, 2022,~~May 10, 2023, the Company had approximately ~~$2.6~~$1.1 million of cash and the fair ~~market~~ value of the Company’s liquid ~~Digital Assets~~crypto assets was approximately ~~$3.3~~$18.9 million, which ~~excludes $11.1~~includes $14.6 million of staked ~~Ethereum.~~Ethereum considered to be liquid after the successful Shanghai upgrade on Ethereum’s network in April 2023. The Company has no outstanding debt. As of ~~November 8, 2022,~~May 10, 2023, the Company also has approximately ~~$17.6~~$6.4 million available under the AtATM Agreement over the ~~Market Offering Agreement~~next twelve months under the Form S-3 baby shelf rules, although, the amount that we may raise under the Form S-3 may increase or decrease based upon our stock price. The Company believes that the existing cash and liquid ~~Digital Assets~~crypto assets held by us, in addition to the funds available to the Company from the issuance of additional stock through the ATM Agreement, provide sufficient liquidity to meet working capital requirements, anticipated capital expenditures and contractual obligations for at least the next twelve months.

Cash Flows

Cash used in operating activities was approximately ~~$130,000~~$1.1 million during the ~~2022 Period~~2023 Quarter compared to ~~$3.9~~$1.1 million for the ~~2021 Period.~~2022 Quarter.

Cash used in investing activities was ~~$8.8 million~~$86,000 during the ~~2022 Period~~2023 Quarter compared to ~~$9.5~~$8.2 million for the ~~2021 Period.~~2022 Quarter. Net cash outflow for investing activities was used primarily for the purchase of ~~Digital Assets~~crypto assets for our blockchain infrastructure operations.

Cash provided by financing activities was ~~$10.5 million~~$509,000 during the ~~2022Period~~2023 Quarter compared to ~~$13.5~~$10.1 million for the ~~2021 Period.~~2022 Quarter. The cash inflows from financing activities were ~~primarily~~entirely from proceeds from the Common Stock sold pursuant to the ATM ~~Agreement ($11.1 million). This was partially offset by a one-time return of capital distribution of $635,000 made to record holders as of March 17, 2022.~~Agreement. The Company has plans to continue to raise proceeds from the sale of Common Stock to fund operations as needed.

27

Off Balance Sheet Transactions

As of ~~September 30, 2022,~~March 31, 2023, there were no off-balance sheet arrangements and we were 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 3 to the Unaudited Condensed Financial Statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, including our liquidity, our belief that our blockchain infrastructure efforts will form the core growth for our Digital Asset Platform, our plans and development of our Digital Asset Platform and the integration of Staking-as-a-Service, our belief regarding blockchain, expected increase in our revenues and gross margins and future business plans. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “may,” “potential,” “continues,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods.
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. The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the rewards and costs associated with staking or validating transactions on blockchains, regulatory issues related to our business model, a drop in the price of our crypto assets, significant decrease in the value of our crypto assets and rewards, loss or theft of the private withdrawal keys resulting in the complete loss of crypto assets and reward, and others which are contained in our filings with the SEC, including our Form 10-K for the year ended December 31, 2022. 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.
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~September 30, 2022.~~March 31, 2023. Our disclosure controls and procedures are designed to provide reasonable assurance 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 rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of ~~September 30, 2022.~~March 31, 2023.

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 that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

28

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

None.

ITEM 3 Defaults Upon Senior Securities

None.

ITEM 4 Mine Safety Disclosures

Not applicable.

ITEM 5 Other Information

~~None.~~On May 11, 2023, the Compensation Committee of the Board of Directors of the Company approved a performance based Annual Cash Incentive Plan for the Company’s executives for fiscal year 2023. If an executive meets their performance milestones, the executive will receive a bonus, payable in cash and equity at the discretion of the Compensation Committee, in an amount up to 54% to 104% of the applicable executive’s base salary, as detailed below:
● Charles Allen, the Company’s Chief Executive Officer is eligible to receive up to 104% of his base salary. Mr. Allen’s current base salary is $411,419;
● Michal Handerhan, the Company’s Chief Operating Officer is eligible to receive up to 68% of his base salary. Mr. Handerhan’s base salary is $287,375;
● Michael Prevoznik, the Company’s Chief Financial Officer is eligible to receive up to 54% of his base salary. Mr. Prevoznik’s base salary is $235,125;
● Manish Paranjape, the Company’s Chief Technology Officer is eligible to receive up to 54% of his base salary. Mr. Paranjape’s base salary is $235,125.
ITEM 6 Exhibits

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

29

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.

~~November 10, 2022~~May 12, 2023
By: /s/ Charles Allen
Charles W. Allen
Chief Executive Officer
(Principal Executive Officer)

30

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 Change – Reverse Split 8-K 8/17/21 3.1
3.2 Bylaws S-1 5/29/08 3.2
3.2(a) Amendment No. 1 to the Bylaws 8-K 4/12/22 3.1
4.1 2021 Equity Incentive Plan DEF 14A 4/26/22 Annex A
31.1 Certification of Principal Executive and Financial 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 Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
Incorporated by Reference Filed or Furnished
Exhibit # Exhibit Description Form Date Number Herewith
2.1 Articles of Merger 8-K/A 7/31/15 3.1
2.2 Agreement and Plan of Merger 8-K/A 7/31/15 3.2
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 Change – Reverse Stock Split 8-K 8/17/21 3.1
3.1(f) Certificate of Designation – Series V 8-K 1/31/23 3.1
3.1(g) Certificate of Amendment to the Series V Certificate of Designation 8-K 4/19/23 3.1
3.2 Bylaws S-1 5/29/08 3.2
3.2(a) Amendment No. 1 to the Bylaws 8-K 4/12/22 3.1
31.1 Certification of Principal Executive and Financial 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 Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

** 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.

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.

31

							Additional						Total
			Common Stock				Paid-in			Accumulated			Stockholders’
			Shares		Amount		Capital			Deficit			Equity
Balance December 31, 2021	-	-		10,528,212	$	10,529	$	147,682,384		$	(135,589,470	)	$	12,103,443
Issuance of common stock, net of offering cost / At-the-market offering				2,148,658		2,149		11,092,983			-			11,095,132
Stock-based compensation				376,842		377		2,233,231			-			2,233,608
Dividend distributions				-		-		(634,557	)		-			(634,557	)
Net loss	-	-		-		-		-			(14,495,664	)		(14,495,664	)
Balance September 30, 2022	-	-		13,053,712	$	13,055	$	160,374,041		$	(150,085,134	)	$	10,301,962

	●	Step 1: Identify the contract with the customer
	●	Step 2: Identify the performance obligations in the contract
	●	Step 3: Determine the transaction price
	●	Step 4: Allocate the transaction price to the performance obligations in the contract
	●	Step 5: Recognize revenue when the Company satisfies a performance obligation

	2023		2022
	As of March 31,
	2023		2022
Warrants to purchase common stock		712,500		962,794
Options		1,170,000		1,235,000
Non-vested restricted stock awards units		1,631,399		1,668,084
Total		3,513,899		3,865,878

	2022		2021
	As of September 30,
	2022		2021
Warrants to purchase common stock		945,837		962,823
Convertible notes		-		285,429
Options		1,285,000		-
Non-vested restricted stock awards units		1,612,350		-
Total		3,843,187		1,248,252

	Fair value measured at September 30, 2022								Fair Value Measured at March 31, 2023
	Total at September 30,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs		Total at March 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2022		(Level 1)		(Level 2)		(Level 3)		2023		(Level 1)		(Level 2)		(Level 3)
Assets
Investments									$	100,000	$	-	$	-	$	100,000
Liabilities
Warrant Liabilities	$	712,500	$	-	$	-	$	712,500	$	498,750	$	-	$	-	$	498,750

	Fair value measured at December 31, 2021
	Total at December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Liabilities
Warrant Liabilities	$	1,852,500	$	-	$	-	$	1,852,500

	Fair Value Measured at December 31, 2022
	Total at December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2022		(Level 1)		(Level 2)		(Level 3)
Assets
Investments	$	100,000	$	-	$	-	$	100,000
Liabilities
Warrant Liabilities	$	213,750	$	-	$	-	$	213,750

	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Risk-free rate of interest		4.06	%		1.26	%		3.60	%		3.99	%
Expected volatility		157.1	%		162.5	%		144.8	%		152.8	%
Expected life (in years)		3.43			4.18			2.93			3.18
Expected dividend yield		-			-			-			-

	Fair Value of Level 3 Financial Assets
	March 31,		March 31,
	2023		2022
Beginning balance	$	100,000	$	-
Purchases		-		-
Unrealized appreciation (depreciation)		-		-
Ending balance	$	100,000	$	-

	Fair Value of Level 3 financial liabilities					Fair Value of Level 3 Financial Liabilities
	September 30,			September 30,		March 31,		March 31,
	2022			2021		2023		2022
Beginning balance	$	1,852,500		$	-	$	213,750	$	1,852,500
Warrant liabilities classification		-			-		-		-
Fair value adjustment of warrant liabilities		(1,140,000	)		-		285,000		641,250
Ending balance	$	712,500		$	-	$	498,750	$	2,493,750

	For the nine months ended September 30,						For the Three Months Ended March 31,
	2022			2021			2023			2022
Exercise price	$	1.51		$	0.21		$	0.63		$	-
Term (years)		5.00			2.25-3.05			5.00			-
Expected stock price volatility		165.8	%		185.9	%		152.8	%		-	%
Risk-free rate of interest		2.77	%		0.34	%		3.99	%		-	%

	Number of Shares		Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2022		1,150,000	$	2.15	$	-		3.3
Employee options granted		20,000		0.63		14,600		4.8
Outstanding as of March 31, 2023		1,170,000	$	2.12	$	14,600		3.0
Options vested and exercisable as of March 31, 2023		1,135,000	$	2.16	$	-		3.0

			Total		Market Cap Vesting Thresholds										Total		Market Cap Vesting Thresholds
Officer Name	Title	Grant Date	RSUs Granted		$ 100 million		$ 150 million		$ 200 million		$ 400 million		Title	Grant Date	RSUs Granted		$ 50 million		$ 100 million		$ 150 million		$ 300 million
Charles Allen	Chief Executive Officer	1/2/2022		694,444		173,611		173,611		173,611		173,611	Chief Executive Officer	1/2/2022		694,444		173,611		173,611		173,611		173,611
Michal Handerhan	Chief Operations Officer	1/2/2022		444,444		111,111		111,111		111,111		111,111	Chief Operations Officer	1/2/2022		444,444		111,111		111,111		111,111		111,111
Michael Prevoznik	Chief Financial Officer	1/2/2022		222,224		55,556		55,556		55,556		55,556	Chief Financial Officer	1/2/2022		222,224		55,556		55,556		55,556		55,556
Manish Paranjape	Chief Technology Officer	2/22/2022		160,184		40,046		40,046		40,046		40,046	Chief Technology Officer	2/22/2022		160,184		40,046		40,046		40,046		40,046
				1,521,296		380,324		380,324		380,324		380,324				1,521,296		380,324		380,324		380,324		380,324

	Nine Months Ended September 30,					Three Months Ended March 31,
	2022			2021		2023 (Post-Modification)			2022 (Original Grants)
Vesting Hurdle Price	$	19.39			-	$	3.81 - $30.52		$	8.07 - $36.99
Term (years)		5.00			-		4.00			5.00
Expected stock price volatility		103.7	%		-		97.30	%		103.72	%
Risk-free rate of interest		1.32	%		-		4.10	%		1.32	%

	Number of Restricted Stock Units			Weighted Average Grant Day Fair Value
Nonvested at December 31, 2021		29,363		$	5.96
Granted		1,662,607			3.29
Vested		(79,620	)		3.14
Forfeited		-			-
Nonvested at September 30, 2022		1,612,350		$	3.35

	Number of Restricted Stock Units			Weighted Average Grant Day Fair Value
Nonvested at December 31, 2022		1,590,552		$	3.34
Granted		50,000			0.63
Vested		(9,153	)		4.37
Nonvested at March 31, 2023		1,631,399		$	3.25

	2023		2022
	For the Three Months Ended March 31,
	2023		2022
Employee bonus stock awards	$	-	$	894,027
Employee stock option awards		3,307		69,634
Employee restricted stock unit awards		267,338		341,990
Non-employee restricted stock awards		15,908		82,081
Stock-based compensation	$	286,553	$	1,387,732

	September 30, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Compensation and related expenses	$	212,571	$	7,334	$	3,429	$	295,935
Accounts Payable		100,875		138,372		41,954		76,727
Other		3,757		343
Accrued Expenses	$	317,203	$	146,050	$	45,383	$	372,662

	●	Charles Allen, the Company’s Chief Executive Officer is eligible to receive up to 104% of his base salary. Mr. Allen’s current base salary is $411,419;
	●	Michal Handerhan, the Company’s Chief Operating Officer is eligible to receive up to 68% of his base salary. Mr. Handerhan’s base salary is $287,375;
	●	Michael Prevoznik, the Company’s Chief Financial Officer is eligible to receive up to 54% of his base salary. Mr. Prevoznik’s base salary is $235,125;
	●	Manish Paranjape, the Company’s Chief Technology Officer is eligible to receive up to 54% of his base salary. Mr. Paranjape’s base salary is $235,125.

Asset	2021 Q3		2021 Q4		2022 Q1		2022 Q2		2022 Q3		2022 Q1		2022 Q2		2022 Q3		2022 Q4		2023 Q1
Bitcoin (BTC)		90		90		90		-		-		90		-		-		-		-
Ethereum (ETH)		7,992		8,098		8,196		8,283		8,380		8,196		8,283		8,380		8,454		8,524
Cardano (ADA)		257,757		257,757		257,757		260,555		262,860		257,757		260,555		262,860		262,860		262,860
Kusama (KSM)		374		374		5,278		5,550		6,297		5,278		5,550		6,297		6,493		6,767
Tezos (XTZ)		24,172		24,504		70,453		71,369		72,578		70,453		71,369		72,578		73,486		74,765
Solana (SOL)		4,788		4,779		7,043		7,136		7,238		7,043		7,136		7,238		7,371		7,493
Polkadot (DOT)		8,032		8,032		38,816		39,986		23,905		38,816		39,986		23,905		7,280		7,526
Terra (LUNA)		3,584		3,584		3,621		-		-		3,621		-		-		-		-
Cosmos (ATOM)		3,072		3,072		80,474		86,613		91,181		80,474		86,613		91,181		96,318		102,298
Polygon (MATIC)		67,114		67,114		454,486		466,022		474,207		454,486		466,022		474,207		480,825		486,806
Avalanche (AVAX)		2,025		2,073		14,273		14,594		14,888		14,273		14,594		14,888		17,178		17,178
Algorand (ALGO)		50,584		51,103		51,197		51,201		51,201		51,197		51,201		51,201		-		-
Axie Infinity (AXS)						22,322		31,763		37,402		22,322		31,763		37,402		42,030		46,482
Kava (KAVA)						183,966		264,917		280,293		183,966		264,917		280,293		290,909		304,968
Band Protocol (BAND)										992						992		992		992
Mina (MINA)										71,297						71,297		74,177		79,937
Oasis Network (ROSE)										349,661						349,661		359,607		2,569,991
Akash (AKT)										103,730						103,730		107,405		110,213
NEAR Protocol (NEAR)																		74,702		75,724

	September 30, 2022				December 31, 2021				March 31, 2023				December 31, 2022
	Book Value		Fair Value		Book Value		Fair Value		Book Value		Fair Value		Book Value		Fair Value
Bitcoin (BTC)	$	-	$	-	$	2,600,426	$	4,167,579
Ethereum (ETH)		5,633,111		11,128,675		8,642,983		29,820,477	$	5,817,449	$	15,530,133	$	5,708,624	$	10,117,237
Cardano (ADA)		106,883		114,190		258,527		337,716		63,178		104,861		63,178		64,786
Kusama (KSM)		237,906		265,505		81,296		103,866		148,883		236,070		142,242		149,981
Tezos (XTZ)		87,412		103,210		62,651		106,679		52,853		83,614		51,651		52,720
Solana (SOL)		189,103		240,377		248,698		813,791		62,006		158,625		60,012		73,426
Polkadot (DOT)		143,413		150,964		182,570		214,616		32,168		47,720		30,859		31,410
Terra (LUNA)		-		-		80,968		306,353		-		-		-		-
Cosmos (ATOM)		532,006		1,186,824		46,174		99,761		630,782		1,144,459		568,359		900,440
Polygon (MATIC)		156,353		368,671		68,362		169,604		167,117		544,815		161,293		364,714
Avalanche (AVAX)		206,808		256,021		50,190		226,499		182,964		304,341		182,964		187,286
Algorand (ALGO)		14,157		18,044		43,948		84,830		-		-		-		-
Axie Infinity (AXS)		437,876		470,116		-		-		277,651		389,893		245,443		253,943
Kava (KAVA)		394,140		423,326		-		-		161,459		270,486		165,426		166,752
Band Protocol (BAND)		1,076		1,215		-		-		982		1,857		982		1,396
Mina (MINA)		40,180		42,085		-		-		34,267		62,101		32,002		32,187
Oasis Network (ROSE)		16,322		21,330		-		-		110,927		156,698		12,045		12,291
Akash (AKT)		26,513		26,881		-		-		18,765		34,510		17,993		19,938
NEAR Protocol (NEAR)										94,370		150,854		92,840		93,785
Total	$	8,223,259	$	14,817,434	$	12,366,792	$	36,451,772	$	7,855,821	$	19,221,037	$	7,535,913	$	12,522,292

	For the Nine Months Ended
	September 30,						$ Change			% Change
	2022			2021			2022			2022

Revenues
Validator revenue	$	1,421,560		$	776,399		$	645,161			83	%
Total revenues		1,421,560			776,399			645,161			83
	��
Cost of revenues
Validator expense		313,972			145,935			168,037			115
Gross profit		1,107,588			630,464			477,124			76

Operating expenses:
General and administrative	$	1,595,296		$	1,149,506		$	445,790			39	%
Research and development		448,579			602,178			(153,599	)		(26	)
Compensation and related expenses		2,731,713			13,788,556			(11,056,843	)		(80	)
Marketing		74,249			10,345			63,904			618
Impairment loss on digital assets/currencies		12,347,472			3,777,785			8,569,687			227
Realized gains on digital asset/currency transactions		(489,682	)		(3,054,418	)		2,564,736			84
Total operating expenses		16,707,627			16,273,952			433,675			3

Other income (expenses):
Interest expense		-			(172,603	)		172,603			(100	)
Amortization on debt discount		-			(1,716,744	)		1,716,744			(100	)
Change in fair value of warrant liabilities		1,140,000			2,066,250			(926,250	)		(45	)
Distributions to warrant holders		(35,625	)		-			(35,625	)		N/A
Total other income (expenses)		1,104,375			176,903			927,472			(524	)

Net loss	$	(14,495,664	)	$	(15,466,585	)		970,921			(6	)

	BTCS Inc.

~~November 10, 2022~~May 12, 2023
	By:	/s/ Charles Allen
		Charles W. Allen
		Chief Executive Officer
		(Principal Executive 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 Change – Reverse Split	8-K	8/17/21	3.1
3.2	Bylaws	S-1	5/29/08	3.2
3.2(a)	Amendment No. 1 to the Bylaws	8-K	4/12/22	3.1
4.1	2021 Equity Incentive Plan	DEF 14A	4/26/22	Annex A
31.1	Certification of Principal Executive and Financial 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	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).