BTCS BTCS Inc

BTCS Inc. (Nasdaq: BTCS) (“BTCS” or the “Company”), a blockchain technology-focused company, announced its results for the fiscal year ended December 31, 2023 (“2023”).

2023 Financial Highlights & 2024 Preliminary Insights

• Revenue: $1.3 million in 2023 revenue, down 20% from $1.7 million in 2022. The decrease was primarily driven by lower crypto prices in early 2022. Revenue for the fourth quarter of 2023 increased 20% year-over-year, benefiting from a surge in crypto market prices in December 2023.
• Gross Margin: 73% gross margins in 2023, down slightly from 75% in 2022.
• Net Income: $7.8 million or $0.55 per share in 2023, in stark contrast to a net loss of $15.9 million or -$1.25 per share in 2022. This significant improvement is attributed to financial reporting changes resulting from the adoption of new accounting standards as described herein.
• 2023 Cash & Crypto Value: $26.7 million as of December 31, 2023, marking a 82% year-over-year increase.
• Current Cash & Crypto Value: $36.5 million or approximately $2.33 as of March 19, 2024. The ongoing rally in crypto prices through early 2024 has further elevated the value of our crypto assets.

Management Commentary

In 2023, our strategic initiatives delivered strong results, culminating in significant momentum as we moved into 2024. The fair market value of our cryptocurrency assets saw a remarkable doubling over the past year, with an additional increase of 42% to $35.7 million by March 19, 2024. This growth not only demonstrates our adeptness at navigating the volatile cryptocurrency market but also sets the stage for enhanced revenue prospects in 2024, bolstering our financial strength and future growth.

StakeSeeker: In January 2023 we launched StakeSeeker (beta), our crypto analytics and non-custodial staking-as-a-service platform. Our strategy aims to increase our fee-based revenue from rewards earned on assets delegated to our nodes. Moreover, we’re exploring the introduction of Ethereum non-custodial staking to StakeSeeker in 2024, aiming to diversify and scale our revenue streams further.

Builder+: In February 2024, we introduced “Builder+”, our innovative Ethereum block builder. Utilizing sophisticated algorithms, Builder+ optimizes block construction for on-chain validation, designed to enhance validator earnings and compete in a market for transaction gas fees. Builder+ represents an extension of our core Ethereum blockchain infrastructure operations, aimed at driving scalable revenue growth.

ChainQ: Recognizing the demand for accessible on-chain data, we announced the development of “ChainQ”, an AI-enhanced blockchain data and analytics platform which we plan to launch in 2024. Through comprehensive indexing of public blockchain data from our Blockchain Infrastructure operations, ChainQ is intended to provide an intuitive and easy-to-use platform for accessing on-chain information. We continue to dedicate efforts towards the research and development of ChainQ.

Blockchain Infrastructure: Efficiency enhancement in our blockchain infrastructure operations was a key focus in 2023. By bringing the full monitoring and maintenance of our validator nodes in-house, we’ve reduced our dependency on external service providers, thereby cutting costs and paving the way for new value-added initiatives such as Builder+ and ChainQ.

At BTCS, we firmly believe in the transformative potential of blockchain technologies, and we’re dedicated to being at the forefront of its advancement. Our belief in blockchain's revolutionary impact is steadfast, and we are advocates for its expanded adoption in both the public and private spheres. We are filled with optimism for what the future holds and are eager to spearhead innovations that bolster the value we deliver to our shareholders.

Industry Highlights

Bitcoin and potentially Ethereum ETFs Impact on Market DynamicsIn 2023, the crypto industry experienced a pivotal moment with the SEC’s long-awaited approval of Bitcoin (BTC) Exchange-Traded Funds (ETFs), marking a significant step towards blending digital currencies with mainstream financial mechanisms. This development, alongside the anticipation for Ethereum (ETH) ETFs in 2024, has ignited a bullish momentum across the cryptocurrency markets, showcasing a robust wave of optimism among investors. These ETFs serve as crucial bridges, connecting the traditional financial world with the crypto ecosystem, thereby facilitating a smoother entry for conventional investors into crypto assets.

The positive nature of Bitcoin ETF approvals have uplifted the broader crypto market and spurred a wave of innovation and investment in alternative Layer 1 and Layer 2 protocols. This domino effect is catalyzing growth throughout the blockchain space, as the influx of traditional investment encourages the development of new technologies and solutions. The crypto ecosystem stands at the brink of accelerated expansion, promising an era of heightened accessibility, innovation, and opportunity, driven by the symbiotic relationship between cryptocurrencies and traditional financial markets.

Ethereum’s Evolution: Network Upgrades Fuelling Future AdoptionThe Ethereum network successfully completed major and transformative upgrade on March 13 with the “Dencun Hardfork”. The upgrade should improve network functionality and bolster the efficiency of Layer-2 blockchain infrastructures, particularly by enhancing data storage capabilities. Such improvements are expected to facilitate a more streamlined and cost-effective environment for handling layer-2 transaction fees, signifying a leap forward in Ethereum’s technological evolution.

Moreover, Ethereum’s ecosystem is demonstrating remarkable growth and security through its staking mechanism, with a current staking ratio of 26%. This translates into 31.4 million ETH staked out of all eligible tokens, underscoring a robust validator market. The active participation of the community in staking not only underscores their commitment to the network's security and decentralization but also highlights the thriving nature of Ethereum's validator market. This engagement is pivotal in bolstering the network's security and fostering a more decentralized ecosystem.

Additionally, Ethereum is experiencing a noteworthy phase of deflation, further testament to its evolving economic model and its implications for value creation within the network. This deflationary trend is indicative of a maturing ecosystem that is not only attracting investment and participation but is also setting a precedent for sustainable growth and adoption in the broader blockchain community. These developments collectively signal Ethereum's continued expansion and its role in driving innovation, adoption, and value creation in the digital asset space.

Adoption of Accounting Standards Update (ASU) No. 2023-08 Impact:

The early adoption of ASU No. 2023-08 brought about a fundamental shift in how we account for our crypto assets on our financial statements, allowing us to now recognize them at their fair market value compared to previously recording them at their lowest post-acquisition price. This change enables the inclusion of unrealized gains or losses on crypto assets directly in our financial results, offering a more accurate representation of our operational health.

We believe that the specified changes in financial reporting stemming from the new accounting guidance better reflect the economic realities of the Company’s business model and the value of the crypto assets held, enhancing the transparency and accuracy of the financial statements.

About BTCS:BTCS Inc. is a Nasdaq listed company operating in the blockchain technology sector since 2014 and is one of the only U.S. publicly traded companies with a primary focus on proof-of-stake blockchain infrastructure. Our core focus is on driving scalable growth through a diverse range of business streams leveraging and built on top of our core and proven blockchain infrastructure operations. BTCS secures and operates validator nodes on cutting-edge blockchain networks that power Web 3, earning native token rewards by staking our proof-of-stake crypto assets, with an emphasis on Ethereum. Our innovative “StakeSeeker” platform empowers crypto holders with an analytics-focused cryptocurrency dashboard. It also offers a non-custodial Staking-as-a-Service solution, enabling users to earn staking rewards, while BTCS earns a percentage of token holders’ rewards, creating the potential for scalable revenue with limited additional costs. We’ve also introduced “Builder+”, an Ethereum block builder. This technology leverages advanced algorithms to maximize profit through optimized block construction. Builder+ creates opportunities for new scalable revenue streams by being utilized by third-party nodes. 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 enhanced revenue prospects in 2024, bolstering our financial strength and future growth, aiming to diversify and sale our revenue streams further and driving scalable revenue growth, optimism for driving shareholder value, expectations for the technological evolution of Ethereum and its value creation. 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 assumptions and are subject to various risks and uncertainties, including without limitation regulatory issues, unexpected issues with Builder+, unexpected issues with our product offering, and the reluctance of validators to try or utilize our Builder+ 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, 2023 which was filed on March 21 , 2024. 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-K filed on March 21, 2024, with the Securities and Exchange Commission. Please refer to the Form 10-K for complete financial statements and further information regarding the Company’s results of operations and financial condition relating to the fiscal quarter and fiscal year ended December 31, 2023 and 2022. The Company’s Form 10-K also includes a discussion of risk factors applicable to the Company and its business.

BTCS Inc.Balance Sheets

		December 31,				December 31,
		2023				2022
Assets:
Current assets:
Cash and cash equivalents		$	1,458,327			$	2,146,783
Stablecoins			21,044				-
Crypto assets			302,783				982
Staked crypto assets			24,900,146				1,826,307
Prepaid expenses			62,461				123,727
Receivable for capital shares sold			291,440				-
Total current assets			27,036,201				4,097,799
Other assets:
Investments, at value (Cost $100,000)			100,000				100,000
Property and equipment, net			10,490				11,152
Staked crypto assets - long term			-				5,708,624
Total other assets			110,490				5,819,776
Total Assets		$	27,146,691			$	9,917,575
Liabilities and Stockholders' Equity:
Accounts payable and accrued expenses		$	55,058			$	76,727
Accrued compensation			712,092				295,935
Warrant liabilities			213,750				213,750
Total current liabilities			980,900				586,412
Stockholders' equity:
Preferred stock: 20,000,000 shares authorized at $0.001 par value:			-				-
Series V preferred stock: 14,567,829 and 0 shares issued and outstanding at December 31, 2023 and 2022, respectively			2,563,938				-
Common stock, 975,000,000 shares authorized at $0.001 par value, 15,320,281 and 13,107,149 shares issued and outstanding at December 31, 2023 and 2022, respectively			15,322				13,108
Additional paid in capital			162,263,634				160,800,263
Accumulated deficit			(138,677,103	)			(151,482,208	)
Total stockholders' equity			26,165,791				9,331,163
Total Liabilities and Stockholders' Equity		$	27,146,691			$	9,917,575

BTCS Inc.Statements of Operations

		For the Year Ended
		December 31,
		2023				2022
Revenues
Validator revenue (net of fees)		$	1,339,628			$	1,692,454
Total revenues			1,339,628				1,692,454
Cost of revenues
Validator expenses			359,778				426,440
Gross profit			979,850				1,266,014
Operating expenses:
General and administrative		$	1,863,916			$	1,916,193
Research and development			687,288				611,758
Compensation and related expenses			2,129,144				3,313,638
Marketing			12,153				78,171
Impairment loss on crypto assets			-				13,348,874
Realized (gains) losses on crypto asset transactions			604,269				(506,757	)
Total operating expenses			5,296,770				18,761,877
Other income (expenses):
Change in unrealized appreciation (depreciation) on crypto assets			12,135,648				-
Change in fair value of warrant liabilities			-				1,638,750
Distributions to warrant holders			-				(35,625	)
Total other income (expenses)			12,135,648				1,603,125
Net income (loss)		$	7,818,728			$	(15,892,738	)
Net income (loss) per share attributable to common stockholders, basic and diluted		$	0.55			$	(1.25	)
Weighted average number of common shares outstanding, basic and diluted			14,092,233				12,732,914

BTCS Inc.Statements of Cash Flows

		For the Year Ended
		December 31,
		2023				2022
Net Cash flows used from operating activities:
Net income (loss)		$	7,818,728			$	(15,892,738	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			5,033				4,039
Stock-based compensation			1,341,729				2,625,270
Validator revenue			(1,339,628	)			(1,692,454	)
Blockchain network fees (non-cash)			-				1,321
Change in fair value of warrant liabilities			-				(1,638,750	)
Sale of non-productive crypto assets			-				2,547,325
Realized gain on crypto assets transactions			604,269				(506,757	)
Change in unrealized (appreciation) depreciation on crypto assets			(12,135,648	)			-
Impairment loss on crypto assets			-				13,348,874
Changes in operating assets and liabilities:
Stablecoins			(21,044	)			-
Prepaid expenses and other current assets			61,266				200,824
Receivable for capital shares sold			(291,440	)			-
Accounts payable and accrued expenses			(21,669	)			(62,332	)
Accrued compensation			416,157				288,601
Net cash used in operating activities			(3,562,247	)			(776,777	)
Cash flows from investing activities:
Purchase of productive crypto assets for validating			(1,804,482	)			(9,453,024	)
Sale of productive crypto assets			1,994,851				585,595
Purchase of investments			-				(100,000	)
Purchase of property and equipment			(5,276	)			(5,408	)
Sale of property and equipment			904				-
Net cash provided by (used in) investing activities			185,997				(8,972,837	)
Cash flow from financing activities:
Dividend distributions			-				(630,801	)
Net proceeds from issuance common stock/ At-the-market offering			2,687,794				11,126,331
Net cash provided by financing activities			2,687,794				10,495,530
Net (decrease)/increase in cash			(688,456	)			745,916
Cash, beginning of period			2,146,783				1,400,867
Cash, end of period		$	1,458,327			$	2,146,783
Supplemental disclosure of non-cash financing and investing activities:
Series V Preferred Stock Distribution		$	2,559,533			$	-