BTCS BTCS Inc

BTCS Inc. (Nasdaq: BTCS) (“BTCS” or the “Company”), a blockchain technology-focused company, announced its results for the third quarter ending September 30, 2023 (“Q3 2023”).

Third Quarter 2023 Financial HighlightsQ3 2023 revenue decreased 18% from Q2 2023 and 8% from Q3 2022 as a result of depressed crypto asset prices, particularly impacting Ethereum (ETH) and Cosmos (ATOM), our two highest earning staked tokens.

Gross margins improved slightly to 74% for Q3 2023 compared to 71% for Q2 2023, with gross margins of 72% for the first nine months of 2023.

Net loss for Q3 2023 decreased to $0.6 million ($0.04 per share) compared to $1.0 million ($0.07 per share) for Q2 2023 and $1.0 million ($0.08 per share) for Q3 2022.

Net loss for the nine months ended September 30, 2023 (“2023 Period”) decreased 79% to $3.1 million ($0.22 per share) compared to $14.5 million ($1.15 per share) for the nine months ended September 30, 2022 (“2022 Period”). Net losses during the 2022 Period were largely driven by $12.3 million non-cash crypto asset impairment losses, compared to only $1.3 million impairment charges in the 2023 Period.

As of September 30, 2023, the Company had $0.8 million in cash and cash equivalents.

The fair market value of our crypto assets increased 11% YoY to $16.5 million in Q3 2023.

Management Commentary

Business Update

Strengthening Our Staking InfrastructureDuring Q3 2023, one of our primary areas of focus continued to be the enhancement of our staking infrastructure operations. We are pleased to report significant progress in this regard as we took a strategic step in transitioning all node maintenance, including monitoring, upgrades, and support, in-house. This transition marks a pivotal milestone in our journey, as it empowers us to have greater control and agility in managing our staking infrastructure.

Our in-house staking infrastructure operations provide us with increased flexibility to address technical needs, swiftly adapt to evolving blockchain network requirements, and potentially generate additional revenue streams. This transition has solidified our commitment to achieving operational excellence and sustainability in the dynamic blockchain industry. Further, as a result, we have reduced our reliance on third-party partners and associated fees, resulting in cost savings.

Advancements in our Development Efforts:We have continued to dedicate resources to the development and improvement of StakeSeeker, our proprietary crypto asset platform. In response to valuable feedback from our users, we continued to make improvements to StakeSeeker which were geared towards providing users with more accurate and insightful dashboards and reporting, ensuring that our platform remains a trusted resource for stakers seeking comprehensive analytics and support.

In addition to our core staking infrastructure operations and StakeSeeker, we are actively diversifying our development efforts. Leveraging our deep-rooted expertise in blockchain technology, we have begun exploring new opportunities and initiatives aimed at meeting the rapidly expanding technical and information needs within blockchain networks. These new initiatives reflect our commitment to staying at the forefront of blockchain innovation and look to develop and contribute to emerging technologies that align with our core competencies and industry trends.

As we look forward to the remainder of the year and beyond, we are excited about the prospects future developments hold for BTCS. The continued evolution of StakeSeeker, and our diversification efforts underscore our dedication to growth, innovation, and value creation for our stakeholders.

We appreciate your ongoing support and trust in our vision as we navigate the dynamic landscape of the blockchain industry.

Industry Commentary

The recent actions taken by the SEC against Coinbase and Binance have had a significant impact on our industry. While the SEC has classified several alt tokens as securities, it is essential to note that Ethereum and Bitcoin were not included in this list, and it is crucial to remember that the SEC’s classification may not necessarily align with court decisions.

With regard to accounting practices, the upcoming FASB guidelines on fair market value accounting promise to bring greater transparency to our financial statements. This change will offer our shareholders and the investing public a clear understanding of our financial position representative of the economic reality of our business, particularly concerning our crypto assets which are carried on our balance sheet at the lowest market price since acquisition (i.e. impaired cost), regardless of what current market prices are.

Finally, we wish to highlight the current uptrend in the crypto market, with Bitcoin and Ethereum recently reaching 52-week highs. This positive sentiment bodes well for our sector, and we remain optimistic about the potential for this trend to continue, which should beneficially impact our revenue.

Moving forward, we maintain a positive outlook on both the future of the crypto industry and BTCS. We are highly motivated to spearhead innovations that foster the wider adoption and acceptance of blockchain technologies, bringing value to our shareholders. With our unwavering commitment and focused approach, we aspire to uphold our position as industry leaders in this ever-evolving landscape.

About BTCS:BTCS Inc. is a Nasdaq listed company operating in the blockchain technology space since 2014 and is one of the first U.S. publicly traded companies with a primary focus on blockchain infrastructure and staking. BTCS secures and operates validator nodes on disruptive next-generation blockchain networks that power Web 3, earning native token rewards by staking our proof-of-stake crypto assets. “StakeSeeker” is BTCS’ newly introduced proprietary Cryptocurrency Dashboard and Staking-as-a-Service platform, developed to empower users to better understand and grow their crypto holdings with innovative portfolio analytics and a non-custodial process to earn staking rewards on crypto asset holdings. Users can easily link and monitor their cryptocurrency portfolios across exchanges, wallets, validator nodes, and other sources; and have access to a suite of data analytic tools such as performance and reward tracking. StakeSeeker’s Staking Hub allows users to earn rewards by directly participating in network consensus mechanisms by staking and delegating their cryptocurrencies to company-operated validator nodes for a growing number of supported blockchains. As a non-custodial validator operator, BTCS receives a percentage of token holders staking rewards generated as a validator node fee, creating the potential opportunity for a highly scalable business with limited additional costs. For more information visit: www.btcs.com.

Forward-Looking Statements:Certain statements in this press release, constitute “forward-looking statements” within the meaning of the federal securities laws including statements regarding the growth of our StakeSeeker use base, our beliefs regarding the transformational potential of blockchain technologies, the potential and opportunities within the cryptocurrency market, our growth, developing new inns built on our core expertise, leveraging our knowledge and expertise, and the optimism regarding delivering shareholder value. Words such as “may,” “might,” “will,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “predict,” “forecast,” “project,” “plan,” “intend” or similar expressions, or statements regarding intent, belief, or current expectations, are forward-looking statements. While the Company believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to us on the date of this release. These forward-looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including without limitation regulatory issues unexpected issues with our proprietary Digital Asset Analytic and Staking-as-a-Service Platform: StakeSeeker, regulatory issues, unexpected issues with our Staking-as-a-Service Platform and the reluctance of users to try or accept our product, as well as risks set forth in the Company’s filings with the Securities and Exchange Commission including its Form 10-K for the year ended December 31, 2022 which was filed on March 31, 2023. Thus, actual results could be materially different. The Company expressly disclaims any obligation to update or alter statements, whether as a result of new information, future events or otherwise, except as required by law.

Investor Relations:ir@btcs.com

Financials

The tables below are derived from the Company’s financial statements included in its Form 10-Q filed on November 9, 2023 with the Securities and Exchange Commission. Please refer to the Form 10-Q for complete financial statements and further information regarding the Company’s results of operations and financial condition relating to the fiscal quarter ended September 30, 2023 and 2022. Please also refer to the Company’s Form 10-K for a discussion of risk factors applicable to the Company and its business.

BTCS Inc.Balance Sheets

		September 30, 2023				December 31, 2022
		(Unaudited)
Assets:
Current assets:
Cash and cash equivalents		$	753,233			$	2,146,783
Stablecoins			29,794				-
Crypto assets			101,387				982
Staked crypto assets			7,811,809				1,826,307
Investments, at value (Cost $100,000)			100,000				100,000
Prepaid expense			107,429				123,727
Total current assets			8,903,652				4,197,799
Other assets:
Property and equipment, net			12,001				11,152
Staked crypto assets - long term			-				5,708,624
Total other assets			12,001				5,719,776
Total Assets		$	8,915,653			$	9,917,575
Liabilities and Stockholders’ Equity:
Accounts payable and accrued expense		$	92,659			$	76,727
Accrued compensation			321,144				295,935
Warrant liabilities			71,250				213,750
Total current liabilities			485,053				586,412
Stockholders’ equity:
Preferred stock: 20,000,000 shares authorized at $0.001 par value:			-				-
Series V Preferred stock: 14,542,803 and 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			2,559,533				-
Common stock, 97,500,000 shares authorized at $0.001 par value, 14,373,186 and 13,107,149 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			14,374				13,108
Additional paid in capital			160,410,794				160,800,263
Accumulated deficit			(154,554,101	)			(151,482,208	)
Total stockholders’ equity			8,430,600				9,331,163
Total Liabilities and Stockholders’ Equity		$	8,915,653			$	9,917,575

BTCS Inc.Statements of Operations(Unaudited)

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2023				2022				2023				2022
Revenues
Validator revenue (net of fees)		$	316,242			$	344,196			$	1,013,503			$	1,421,560
Total revenues			316,242				344,196				1,013,503				1,421,560
Cost of revenues
Validator expenses			83,100				82,203				278,726				313,972
Gross profit			233,142				261,993				734,777				1,107,588
Operating expenses:
General and administrative		$	283,239			$	432,956			$	1,510,637			$	1,595,296
Research and development			148,525				126,857				531,053				448,579
Compensation and related expenses			409,960				669,792				1,450,546				2,731,713
Marketing			2,155				8,765				11,121				74,249
Impairment loss on crypto assets			372,441				145,247				1,251,950				12,347,472
Realized gains on crypto asset transactions			(58,107	)			(20,126	)			(806,137	)			(489,682	)
Total operating expenses			1,158,213				1,363,491				3,949,170				16,707,627
Other income (expenses):
Change in fair value of warrant liabilities			285,000				71,250				142,500				1,140,000
Distributions to warrant holders			-				-				-				(35,625	)
Total other income (expenses)			285,000				71,250				142,500				1,104,375
Net loss		$	(640,071	)		$	(1,030,248	)		$	(3,071,893	)		$	(14,495,664	)
Net loss per share attributable to common stockholders, basic and diluted		$	(0.04	)		$	(0.08	)		$	(0.22	)		$	(1.15	)
Weighted average number of common shares outstanding, basic and diluted			14,317,750				12,952,645				13,957,097				12,616,805

BTCS Inc.Statements of Cash Flows(Unaudited)

		For the Nine Months Ended
		September 30,
		2023				2022
Net Cash flows used from operating activities:
Net loss		$	(3,071,893	)		$	(14,495,664	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			3,521				2,862
Stock-based compensation			1,057,512				2,233,608
Validator revenue			(1,013,503	)			(1,421,560	)
Blockchain network fees (non-cash)			-				1,321
Change in fair value of warrant liabilities			(142,500	)			(1,140,000	)
Sale of non-productive crypto assets			-				2,547,322
Realized gain on crypto assets transactions			(806,137	)			(489,682	)
Impairment loss on crypto assets			1,251,950				12,347,472
Changes in operating assets and liabilities:
Stablecoins			(29,794	)			-
Prepaid expenses and other current assets			16,298				117,473
Accounts payable and accrued expenses			15,932				(37,842	)
Accrued compensation			25,209				205,237
Net cash used in operating activities			(2,693,405	)			(129,453	)
Cash flows from investing activities:
Purchase of productive crypto assets for validating			(1,804,482	)			(9,274,055	)
Sale of productive crypto assets			1,994,890				432,716
Purchase of property and equipment			(5,276	)			(5,408	)
Sale of property and equipment			905				-
Net cash provided by (used in) investing activities			186,037				(8,846,747	)
Cash flows from financing activities:
Dividend distributions			-				(630,801	)
Net proceeds from issuance common stock/ At-the-market offering			1,113,818				11,095,132
Net cash provided by financing activities			1,113,818				10,464,331
Net (decrease)/increase in cash			(1,393,550	)			1,488,131
Cash, beginning of period			2,146,783				1,400,867
Cash, end of period		$	753,233			$	2,888,998
Supplemental disclosure of non-cash financing and investing activities:
Series V Preferred Stock Distribution		$	2,559,533			$	-