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, 2022.

2022 Financial Highlights

Revenue for fiscal year 2022 rose 39% to $1.7 million compared to $1.2 million in 2021.

Gross margins were 75% for fiscal year 2022, compared to 78% during 2021.

In 2022, net loss decreased to $15.9 million ($1.25 per share) compared to $21.1 million ($3.09 per share) net loss for 2021. BTCS’s net loss is primarily driven by non-cash charges related to the impairment of crypto assets, because U.S. Generally Accepted Accounting Principles requires BTCS to impair its crypto assets to their lowest price since acquisition, with no ability to mark-to-market if crypto prices rebound. Crypto asset impairment charges during the fourth quarter of 2022 amounted to $1.0 million, compared to $145,000 in the third quarter of 2022 and $12.2 million in the first six months of 2022, highlighting the impact of the crypto market’s decline throughout the year on our financial statements. Crypto asset impairment for fiscal year 2022 totaled $13.3 million compared to $3.8 million in 2021.

The fair value of BTCS’s crypto assets totaled $12.5 million as of December 31, 2022, however, crypto prices have since rebounded and the fair value of our crypto assets was $18.8 million and together with our cash equate to approximately $1.37 per share as of March 28, 2023.

As of December 31, 2022, the Company had $2.1 million in cash.

Management Commentary

“Building on the momentum of staking our own crypto assets over the past several years and through extensive research and development in the necessary technology to create and run validator nodes on a growing number of proof-of-stake blockchains, we successfully completed the beta launch of our innovative StakeSeeker platform in early January 2023,” said Charles Allen, Chief Executive Officer of BTCS. “The launch of this proprietary digital asset analytics and non-custodial staking-as-a-service platform represents a significant step forward for our organization.”

StakeSeeker is a comprehensive crypto dashboard and education center for crypto asset holders to learn how to earn crypto rewards by staking through its non-custodial Stake Hub and evaluate their crypto portfolios across exchanges and wallets in a single analytics platform. StakeSeeker sets itself apart by solving the common problem of central tracking for crypto holdings stored on various crypto exchanges and digital wallets, providing crypto holders with an improved user experience and the ability to easily track and analyze the performance of their entire portfolio. The platform was developed to empower crypto holders, to self-custody their crypto, and to better understand and grow their crypto asset holdings with innovative portfolio analytics and a non-custodial process to earn staking rewards through the direct participation in blockchain consensus algorithms.

“Since launching StakeSeeker, we have continued to expand its features and functionality, with a particular focus on integrating new blockchain networks and improving user experience,” added Michael Prevoznik, Chief Financial Officer of BTCS. “We remain committed to growing StakeSeeker's user base and building a strong delegator base on our validator nodes to provide an attractive non-custodial staking option for crypto asset holders. Our team is passionate about empowering users to keep control of their crypto assets and make informed decisions with respect to their crypto assets. We have developed in-depth educational materials that emphasize the benefits of non-custodial staking and the importance of self-custody of assets.”

“At BTCS, we recognize that blockchain technologies are still emerging, and we remain committed to being at the forefront of the industry’s ongoing evolution,” continued Allen, “As such, we continue to invest time and resources into educating the public on emerging blockchain technologies, the benefits of self-custody of crypto assets, and the importance of secure staking practices. We firmly believe in the transformational potential of blockchain technologies and passionately advocate for its increasing use in both the private and public sectors. We are optimistic about the future and excited to continue driving new innovations that strengthen long-term shareholder value.”

Industry and Business Highlights

The recent failures of Silicon Valley Bank, Silvergate, and Signature Bank have had a significant impact on both the crypto and financial markets, sparking a shift in capital flows as people look for alternative places to store their wealth. BTC and ETH in particular have shone brightly in this market environment, providing signs of optimism in the sector following FTX's recent collapse.

BTCS believes the failure of FTX as well as recent actions taken by the SEC against Kraken and ongoing investigations into crypto's classification as securities underscore the need for greater regulatory clarity and transparency in the crypto market. Importantly, the Company's StakeSeeker platform, a non-custodial staking-as-a-service solution, differs materially from other industry staking programs such as Kraken's custodial model.

In non-custodial staking, users retain control over their crypto assets and directly participate in the network’s consensus mechanism by staking their crypto and earning rewards. In contrast, centralized staking, such as that employed by Kraken and other exchanges, involves entrusting a third-party with your crypto assets. While centralized staking may seem convenient, they often come with significant undisclosed risks, such as hacking, theft, and going bankrupt.

“As the crypto industry continues to grow and mature, it is vital that we maintain a clear understanding of the differences between non-custodial and centralized staking,” continued Allen. “By doing so, we can ensure the general public is informed and make wise decisions about how they participate in consensus mechanisms and earn rewards.”

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 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, 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

Public Relations: Mercy Chikoworem.chikowore@btcs.com

Financials

The tables below are derived from the Company’s financial statements included in its Form 10-K filed on March 31, 2023, 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, 2022 and 2021. 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,
		2022				2021
Assets:
Current assets:
Cash		$	2,146,783			$	1,400,867
Crypto assets			982				3,117,360
Investments, at value (Cost $100,000)			100,000				-
Staked crypto assets			1,826,307				623,754
Prepaid expense			123,727				324,551
Total current assets			4,197,799				5,466,532
Other assets:
Property and equipment, net			11,152				9,783
Staked crypto assets			5,708,624				8,625,678
Total other assets			5,719,776				8,635,461
Total Assets		$	9,917,575			$	14,101,993
Liabilities and Stockholders' Equity:
Accounts payable and accrued expense		$	76,727			$	138,716
Accrued compensation			295,935				7,334
Warrant liabilities			213,750				1,852,500
Total current liabilities			586,412				1,998,550
Stockholders' equity:
Common stock, 97,500,000 shares authorized at $0.001 par value, 13,107,149 and 10,528,212 shares issued and outstanding at December 31, 2022 and 2021, respectively			13,108				10,529
Additional paid in capital			160,800,263				147,682,384
Accumulated deficit			(151,482,208	)			(135,589,470	)
Total stockholders' equity			9,331,163				12,103,443
Total Liabilities and Stockholders' Equity		$	9,917,575			$	14,101,993

BTCS Inc.Statements of Operations

		For the Year Ended
		December 31,
		2022				2021
Revenues
Validator revenue (net of fees)		$	1,692,454			$	1,213,284
Total revenues			1,692,454				1,213,284
Cost of revenues
Validator expense			426,440			$	268,346
Gross profit			1,266,014				944,938
Operating expenses:
General and administrative		$	1,916,193			$	1,590,707
Research and development			611,758				712,736
Compensation and related expenses			3,313,638				15,583,258
Marketing			78,171				180,290
Impairment loss on crypto assets			13,348,874				3,845,899
Realized gains on crypto asset transactions			(506,757	)			(3,054,418	)
Total operating expenses			18,761,877				18,858,472
Other income (expenses):
Interest expense			-				(186,740	)
Amortization on debt discount			-				(1,868,059	)
Change in fair value of warrant liabilities			1,638,750				3,918,750
Distributions to warrant holders			(35,625	)			-
Total other income (expenses)			1,603,125				1,863,951
Net loss		$	(15,892,738	)		$	(16,049,583	)
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	)
Net loss attributable to common stockholders		$	(15,892,738	)		$	(21,116,007	)
Net loss per share attributable to common stockholders, basic and diluted		$	(1.25	)		$	(3.09	)
Weighted average number of common shares outstanding, basic and diluted			12,732,914				6,840,665

BTCS Inc.Statements of Cash Flows

		For the Year Ended
		December 31,
		2022				2021
Net Cash flows used from operating activities:
Net loss		$	(15,892,738	)		$	(16,049,583	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			4,039				939
Amortization on debt discount			-				1,868,059
Stock-based compensation			2,625,270				15,490,555
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock			-				179,277
Validator revenue			(1,692,454	)			(1,213,284	)
Blockchain network fees (non-cash)			1,321				-
Change in fair value of warrant liabilities			(1,638,750	)			(3,918,750	)
Purchase of non-productive crypto assets			-				(5,761,550	)
Sale of non-productive crypto assets			2,547,325				4,274,491
Realized gain on crypto asset transactions			(506,757	)			(3,054,418	)
Impairment loss on crypto assets			13,348,874				3,845,899
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			200,824				(292,676	)
Accounts payable and accrued expenses			(62,332	)			112,428
Accrued compensation			288,601				(343,042	)
Net cash used in operating activities			(776,777	)			(4,861,655	)
Net cash used in investing activities:
Purchase of productive crypto assets for validating			(9,453,024	)			(9,462,279	)
Sale of productive crypto assets			585,595				-
Purchase of investments			(100,000	)			-
Purchase of property and equipment			(5,408	)			(10,491	)
Net cash used in investing activities			(8,972,837	)			(9,472,770	)
Net cash provided by financing activities:
Dividend distributions			(630,801	)			-
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			11,126,331				2,832,152
Payment to convertible notes principle			-				(2,000,000	)
Net cash provided by financing activities			10,495,530				15,211,157
Net increase in cash			745,916				876,732
Cash, beginning of period			1,400,867				524,135
Cash, end of period		$	2,146,783			$	1,400,867
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		$	-			$	-