BTCS Inc. — FY2023 Form 10-K
Reporting period: Year ended December 31, 2023; filed March 21, 2024. This is an annual report, not a standalone Q4 report. BTCS operates proof-of-stake blockchain infrastructure, earns staking rewards, and offers non-custodial staking services. StakeSeeker was free and generated no revenue in 2023.
Financial results
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $1.340 million | $1.692 million |
| Gross profit | $0.980 million | $1.266 million |
| Gross margin | 73.1% | 74.8% |
| Operating expenses | $5.297 million | $18.762 million |
| Net income (loss) | $7.819 million | $(15.893) million |
| Net cash used in operating activities | $3.562 million | $0.777 million |
| Cash at year-end | $1.458 million | $2.147 million |
| Total assets | $27.147 million | $9.918 million |
| Total current liabilities | $0.981 million | $0.586 million |
At December 31, 2023, crypto assets had a reported fair value of $25.203 million, including $24.900 million of current staked crypto assets. The company reported working capital of approximately $26.055 million and no outstanding debt. As of March 19, 2024, it reported $0.870 million cash, liquid crypto assets with fair value of approximately $35.665 million, and about $5.5 million of potential ATM capacity under applicable shelf limits.
Changes and significant accounting items
- Revenue declined 21%, primarily because staking rewards were valued at lower average crypto prices than in 2022. Validator expenses fell 16%, but gross profit declined 23%.
- Net income turned positive largely because BTCS early-adopted ASU 2023-08, measuring qualifying crypto assets at fair value and recording changes in net income. FY2023 included $12.136 million of unrealized crypto appreciation; FY2022 included $13.349 million of crypto impairment charges, which the new method eliminates. The adoption also increased opening retained earnings by approximately $4.986 million.
- FY2023 included $0.604 million of realized losses on crypto transactions, versus $0.507 million of realized gains in 2022. Management attributed sales of approximately 968 ETH to reallocating assets after Ethereum’s Shanghai upgrade.
- Cash used in operations increased to $3.562 million. Investing activities provided $0.186 million, compared with $8.973 million used in 2022; financing provided $2.688 million, primarily from ATM share sales.
Outlook, risks, and other notable matters
- Management expects to take the StaaS platform out of beta before year-end 2024, is exploring Ethereum non-custodial staking on StakeSeeker, and targeted a 2024 launch for subscription-based ChainQ. Builder+, an Ethereum block builder, launched in February 2024; it had no material effect on FY2023 results. These are plans, not assurances of results.
- Management says cash and liquid crypto assets, together with potential ATM proceeds, are sufficient for at least the next 12 months. However, it also reports recurring operating cash outflows, expects to need additional capital over coming years, and notes that financing availability and terms are uncertain. Staked assets may be locked for hours to six months, limiting liquidity.
- Principal risks include crypto-price volatility, uncertain securities and investment-company regulation, possible restrictions on staking, slashing or loss of assets, cybersecurity and private-key risks, dependence on Amazon Web Services, competition, and execution risks for new products. The company has no insurance for crypto-asset losses; 97% of its crypto assets were in cold storage at year-end.
- The 2023 Series V preferred-stock distribution comprised 14.543 million shares; the shares are non-convertible and non-voting and have a 20% liquidation preference over common stock. Upstream stopped allowing U.S. individuals to trade there in November 2023, and U.S.-owned shares were returned to the transfer agent.
- The auditor issued an unqualified opinion and identified existence and control of digital assets as a critical audit matter. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not express an opinion on internal control.
Investor verification priorities
- Assess the composition, fair-value pricing, custody, and liquidity of the $25.203 million year-end crypto portfolio, including any post-year-end changes and staking lockups.
- Separate operating performance from the $12.136 million non-cash unrealized crypto gain when evaluating FY2023 profitability and cash needs.
- Verify revenue trends, staking rewards, third-party delegations, and progress toward monetizing StakeSeeker, Builder+, and ChainQ.
- Review the potential impact of crypto-asset classification, staking regulation, and the Investment Company Act 40% test on operations and holdings.
- Evaluate future financing and dilution: FY2023 ATM sales generated $2.688 million net, and the company reported substantial outstanding options, warrants, restricted stock units, and Series V preferred stock.