BTCS Inc.: Form 10-Q for the period ended Mar 31, 2025

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, 2024. When we refer to the “2025 Quarter” and the “2024 Quarter” we are referring to the three months ended March 31, 2025 and March 31, 2024, respectively.

Company Overview

BTCS Inc. is a Nasdaq-listed U.S.-based blockchain technology company focused on blockchain infrastructure, with its primary operations currently centered on the Ethereum network. Our core focus is on driving scalable growth through a diverse range of blockchain-focused technological solutions, emphasizing Ethereum infrastructure, including block-building and validator node operations.

Blockchain Infrastructure

BTCS’s blockchain infrastructure centers on supporting the validation of transactions and securing proof-of-stake (“PoS”) and delegated proof-of-stake (“dPoS”) blockchain networks. The Company manages a network of cloud-based validator nodes that perform essential network functions, including transaction validation (“attestation”) activities and proposing new blocks. Through these activities, BTCS earns native token rewards by staking its own crypto assets on validator nodes operated by BTCS and third parties.

Our evaluation of blockchain networks involves comprehensive due diligence procedures, including assessments of blockchain quality, reward potential, and the technical challenges associated with running validator nodes. Criteria for assessing blockchain quality encompass factors such as i) market and on-chain statistics, ii) liquidity, iii) potential blockchain utility, iv) history and milestones, v) growth and development roadmap, vi) use cases, vii) community interest, viii) quality of documentation, ix) decentralization, and x) any other publicly available information. This process ensures BTCS focuses on high-potential blockchain networks while mitigating technical and operational risks.

Block Building – Builder+

A central focus of BTCS’s current operations is its Ethereum block-building initiatives under Builder+, which commenced operations in 2024. Through Builder+ we purchase block space and leverage advanced algorithmic processes to construct blocks for on-chain validation. The goal of Builder+ is to maximize revenue by optimizing the contents and structure of each block. The Company aims to maximize the value of tokens earned by increasing the number of blocks we purchase while minimizing the payments to validators required for purchasing block space.

Builder+ has rapidly become a key driver of BTCS’s revenue growth, leveraging its scalable and efficient technology to expand its operational footprint within the Ethereum ecosystem. While Builder+ operated exclusively on Ethereum prior to April 1, 2025, we have since expanded into block-building on Binance Smart Chain. Builder+’s flexible design enables potential adaptation to other blockchain networks, aligning with BTCS’s vision to diversify its infrastructure operations over time.

Staking-as-a-Service – NodeOps

BTCS operates a non-custodial Staking-as-a-Service (“StaaS”) business model that enables crypto asset holders to participate in network consensus mechanisms by staking and delegating to BTCS-operated validator nodes. As a non-custodial validator operator, the Company receives a percentage of a crypto asset 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’s StaaS strategy provides a more accessible and cost-effective alternative for crypto asset holders to participate in blockchain networks’ consensus mechanisms, promoting the growth and adoption of blockchain technology.

A StaaS provider maintains a ministerial role in validating transactions on a given dPoS network on behalf of its Delegators by (1) using open-source software to stake the relevant crypto assets; (2) monitoring and maintaining the nodes it is operating to ensure the computers remain online to validate transactions; and (3) verifying transactions on the network when required.

As a non-custodial StaaS provider, we do not hold or take possession of any Delegator funds, crypto assets, or crypto asset rewards at any point during the staking or delegation process. Delegation does not involve the transfer of crypto asset ownership to a Validator. All Delegator assets remain under the sole control of the Delegator. During the process of staking, delegated crypto assets remain in the Delegator’s digital wallets. The blockchain network calculates rewards earned, which are then distributed directly to the Delegator’s wallet. The blockchain network does not distribute any of the Delegator’s earned crypto rewards to BTCS. At no point does the Validator gain access, control, or custody of the original staked crypto assets or the earned crypto rewards through staking to its node. Therefore, the Company does not have any exposure to the custodial risks that a crypto exchange would have related to excessive redemptions or withdrawals of crypto assets, suspension of redemptions, or withdrawals. Further, we do not issue or hold crypto assets on behalf of third parties and have no exposure to the risks an exchange would have with respect to loans, rehypothecation, or margin.

The following table details the blockchain networks on which BTCS operates nodes that support third-party delegations as part of our staking-as-a-service operations, including the amount of third-party crypto assets delegated to our non-custodial validator nodes, as of March 31, 2025:

During the three months ended March 31, 2025, BTCS ceased operating validator nodes on Avalanche (AVAX). In April 2025, BTCS also ceased operating validator nodes on Akash (AKT) and Kava (KAVA) networks.

Supporting Platforms: ChainQ

To complement our core blockchain infrastructure, BTCS has developed “ChainQ,” an AI-powered blockchain data and analytics platform designed to increase accessibility and transparency within the blockchain ecosystem. Currently in beta testing phase, ChainQ simplifies on-chain data access and analysis for cryptocurrency holders, delivering deeper insights into blockchain activity while adhering to data privacy standards. By indexing public data from our blockchain infrastructure operations, ChainQ provides an intuitive platform for exploring on-chain data.

Strategic Outlook

Looking forward, BTCS remains committed to enhancing its blockchain infrastructure capabilities, with a strong emphasis on its Ethereum block-building operations. The Company is poised to leverage its expertise in validator node management and block-building optimization as it seeks scalable opportunities within the rapidly evolving blockchain ecosystem.

BTCS is dedicated to remaining at the forefront of blockchain innovation and staying adaptable to opportunities across the broader blockchain ecosystem. This strategic agility positions BTCS to navigate the evolving blockchain landscape while maximizing its impact.

Crypto Assets

The tables below detail BTCS’s quarterly crypto asset holdings for each quarter from Q1 2024 through Q1 2025.

Crypto Assets Held at the End of the Following Calendar Quarters:

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Fair Market Value of Crypto Assets at the End of the Following Calendar Quarters:

Prices of Crypto Assets at the End of the Following Calendar Quarters:*

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

Crypto Asset Rewards

The tables below detail BTCS’s quarterly crypto assets earned during each of the following quarters:

Crypto assets earned from blockchain infrastructure staking activities through NodeOps

* Revenue includes amounts earned from staking to third-party validator nodes.

Crypto assets earned from block-building through Builder+

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Fair Market Value of Crypto Asset Rewards Earned Recognized as Revenue

The following table summarizes the revenues earned from the Company’s operations by revenue segment during the following calendar quarters:

Revenue by Segment

The tables below detail the fair market value of BTCS’s quarterly crypto assets earned as revenue in each respective segment during the following calendar quarters:

Revenue from blockchain infrastructure staking activities through NodeOps

* All or a portion of revenue earned from staking to third-party validator nodes

Revenue from block building through Builder+

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Results of Operations for the Three Months Ended March 31, 2025 and 2024

The following tables reflect our operating results for the three months ended March 31, 2025 and 2024:

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Revenues

Revenue for the 2025 Quarter increased to approximately $1,689,000 compared to approximately $451,000 in the 2024 Quarter. The increase was primarily attributable to the expansion of our Builder+ operations, which focus on Ethereum block-building activities.

During the 2025 Quarter, Builder+ operations contributed approximately $1,350,000 of total revenue, while our NodeOps business contributed approximately $339,000. The significant year-over-year increase in revenue reflects the continued scaling of our Builder+ operations, which resulted in a substantial increase in block rewards earned during the period.

While we anticipate continued growth in both the number of block rewards and staking rewards earned, the fair value of such rewards may fluctuate due to the inherent volatility of crypto asset markets. As a result, the amount of revenue recognized in future periods may be materially impacted by market price movements of the underlying crypto assets at the time of reward receipt or recognition.

Cost of Revenues

Cost of revenues increased during the 2025 Quarter, primarily due to higher Validator Payments made to external parties to secure block space for purchasing block space as part of our block-building activities under Builder+. Validator Payments totaled approximately $1,480,000 during the 2025 Quarter. These additional costs are partially offset by the efficiencies realized in our blockchain infrastructure validating operating costs, including streamlining of web service hosting fees and reduction of services provided by vendors.

As we continue to expand block-building operations and increase block production, we expect cost of revenues to rise correspondingly. However, costs may grow at a greater rate than revenue, likely reducing gross margins.

Operating Expenses

General and Administrative Expenses

General and administrative expenses increased during the 2025 Quarter compared to the 2024 Quarter. The increase was primarily attributable to higher payments for order flow associated with supporting Ethereum block-building activities, expanded investor relations services, and higher accounting fees, including increases in audit fees.

The growth in general and administrative expenses reflects the Company’s ongoing investment in operational infrastructure to support Builder+ activities and broader public company compliance efforts. We expect general and administrative expenses to fluctuate based on business needs, with potential increases in audit fees as well as order flow costs as operations continue to scale.

Research and Development Expenses

Research and development expenses increased during the 2025 Quarter compared to the 2024 Quarter, primarily due to continued investment in Builder+ strategies and development. The Company also continued the development of ChainQ during the period, although the primary focus of research and development activities remained centered on enhancing Builder+ operations. We expect research and development costs to remain consistent or moderately increase in future periods, with an emphasis on disciplined cost management, particularly for third-party development services.

Compensation and Related Expenses

Compensation and related expenses increased during the 2025 Quarter compared to the 2024 Quarter, primarily due to the addition of employee headcount and larger accruals for estimated performance-based bonuses tied to operational and financial milestones. The Company continues to rely on non-cash equity-based compensation as a core element of its overall compensation strategy, and we expect total compensation costs to increase in future periods as additional personnel are added and as further accruals for performance-based incentives are recognized.

Marketing Expenses

Marketing expenses increased during the 2025 Quarter compared to the 2024 Quarter, primarily due to expanded advertising campaigns and promotional activities aimed at enhancing brand visibility and supporting business development initiatives. The Company expects that marketing spend are expected to remain at current or higher levels in future periods, in line with strategic growth objectives and broader customer engagement efforts.

Realized Losses on Crypto Asset Transactions

Realized losses on crypto asset transactions during the 2025 Quarter were primarily driven by the sale of Kusama (KSM), which the Company had held with a long-standing unrealized loss totaling approximately $1.3 million that was recognized upon sale. This transaction reflects the Company’s strategic exit from its KSM-related operations and holdings. Additional realized gains or losses may be recognized in future periods based on the timing and pricing of crypto asset sales to support operational or liquidity needs.

Other Income (Expenses)

Other income (expense) for the 2025 Quarter was primarily impacted by changes in the fair value of the Company’s crypto assets and warrant liabilities.

The recognition of unrealized depreciation of crypto assets during the 2025 Quarter, compared to unrealized appreciation during the 2024 Quarter, contributed significantly to the year-over-year change. These fluctuations reflect movements in the fair market value of the Company’s crypto asset holdings, which are directly influenced by the volatility of crypto markets. Market volatility remains difficult to predict and can materially affect the value of assets reported on our balance sheet and the related effects on our results of operations.

Additionally, the decrease in the fair value of warrant liabilities during the 2025 Quarter contributed to a reduction in non-cash expense. The valuation of warrant liabilities is primarily influenced by changes in the Company’s stock price as of each reporting period end, which may fluctuate based on market conditions beyond management’s control.

Net income (loss)

The decline in net income for the 2025 Quarter compared to the 2024 Quarter was primarily driven by a sharp reversal in the fair value of crypto assets, resulting in significant unrealized losses during the period. In contrast, the prior-year quarter benefited from substantial unrealized gains. This swing in non-cash fair value adjustments reflects ongoing crypto market volatility, which may continue to materially impact results in future periods.

Operating expenses also increased meaningfully, led by higher compensation costs—including increased performance bonus accruals tied to revenue growth—and a rise in marketing spend to support strategic growth initiatives. Additionally, the Company recognized realized losses on crypto asset transactions during the 2025 Quarter, compared to immaterial realized gains in the prior-year period.

The combined impact of these factors contributed to a substantial year-over-year decrease in net income.

Net income (loss) may continue to fluctuate significantly due to the volatility in the crypto asset markets, impacting changes in the fair value of crypto assets during future reporting periods.

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 (assuming an effective registration statement on Form S-3), 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 September 14, 2021 through May 13, 2025, the Company sold a total of 7,383,868 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $25,839,000 at an average selling price of $3.50 per share, resulting in net proceeds of approximately $24,997,000 after deducting commissions and other transaction costs.

However, due to the SEC’s baby shelf requirements, the Company is currently limited in its sales of Common Stock under the ATM Agreement to no more than one-third of its public float (calculated as the aggregate market value of outstanding Common Stock held by non-affiliates) during any 12-month period, provided that the amount of securities that may be sold under the Form S-3 may fluctuate based on changes in the Company’s public float and stock price. As of May 13, 2025, the Company would be limited in its sale of shares under the ATM Agreement to approximately $12,138,000, subject to ongoing changes in the Company’s public float and stock price.

Liquidity

The Company’s consolidated 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 sufficient funds to support its current and future operations, satisfy its obligations as they come due, and otherwise operate on an ongoing basis. As of March 31, 2025, the Company had approximately $270,000 of cash and working capital of approximately $20,202,000.

As of May 13, 2025, subsequent to the financing described below, the Company had approximately $7,747,000 of cash and cash equivalents, and the fair market value of the Company’s crypto assets was approximately $30,741,000.

As disclosed in Note 11 – Subsequent Events, on May 13, 2025, the Company issued $7,810,526 of 5% Original Issue Discount Senior Secured Convertible Notes for a purchase price of $7,420,000. The notes: (i) are convertible into shares of the Company’s common stock at a conversion price of $5.85 per share, (ii) mature on May 13, 2027, and (iii) accrue interest at a rate of 6% per annum, which may be paid on a quarterly basis in either cash or freely tradable shares of the Company’s common stock. The Company also had approximately $320,000 in debt obligations outstanding under its lending arrangement with AAVE Protocol as of May 13, 2025.

The Company believes that its existing cash and crypto assets, together with the proceeds from the May 13 financing and the ability to raise additional funds through its ATM Agreement, provide sufficient liquidity to meet working capital requirements, anticipated capital expenditures, strategic funding needs, and contractual obligations for at least the next twelve months from the filing date of this report. This assessment is based on current market conditions, regulatory environment, and the Company’s operational plans, all of which are subject to change.

Certain of our staked crypto assets may be locked up for varying durations, depending on the specific blockchain protocol, and we may be unable to unstake them in a timely manner to liquidate to the extent desired, which could materially impact our liquidity position. Additionally, technical issues, network congestion, or regulatory changes could further restrict our ability to access or liquidate these assets. Lock-up periods for our staked crypto assets range from several hours to six months. During times of instability in the cryptocurrency markets, the Company may not be able to sell its crypto assets at prices reflecting their perceived value or at all, which could result in substantial losses given the historical volatility of cryptocurrency prices. As a result, our crypto assets may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

Cash Flows

Cash Used in Operating Activities

Cash used in operating activities was approximately $1,902,000 during the 2025 Quarter compared to approximately $769,000 for the 2024 Quarter. Significant non-cash adjustments impacting operating cash flows included:

• Positive Adjustments:
• Approximately $3,598,000 related to stock-based compensation, reflecting the issuance of equity-based awards to employees, including performance-based equity awards.
• Approximately $1,480,000 related to Validator Payments made in native crypto asset tokens as part of our Ethereum block-building operations.
• Approximately $14,531,000 in unrealized depreciation of crypto assets, driven by market value decreases during the 2025 Quarter.
• Negative Adjustments:
• Approximately $1,689,000 in revenue earned in native crypto assets, which does not result in immediate cash inflows.

We anticipate that equity-based compensation will decrease during Fiscal 2025, as the achievement of performance-based awards has become more challenging due to the recent pullback in crypto market values and related revenue impacts. Non-cash adjustments related to revenue earned in native crypto assets and Validator Payments are expected to grow as we continue scaling our Ethereum block-building operations. However, the magnitude of these non-cash adjustments will continue to be influenced by the inherent volatility of crypto markets, which can materially impact both asset valuations and operational outputs.

Cash Used in Investing Activities

Cash used in investing activities was approximately $34,000 during the 2025 Quarter compared to approximately $19,000 for the 2024 Quarter. Net cash inflows from investing activities resulted from the sale and purchase of crypto assets. We anticipate similar levels of crypto assets sales in future quarters to fund operating activities.

Cash Provided by Financing Activities

Cash provided by financing activities was approximately $229,000 during the 2025 Quarter compared to approximately $0 for the 2024 Quarter. The cash inflows from financing activities were entirely from proceeds of Common Stock sold pursuant to the ATM Agreement.

The Company anticipates continuing to raise proceeds through Common Stock sales under the ATM Agreement to fund operational needs. Future financing activities will remain aligned with our strategic priorities, including the scaling of block-building operations and ongoing blockchain infrastructure development.

Off Balance Sheet Transactions

As of March 31, 2025, 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.

Critical Accounting Policies and Estimates

We discussed the material accounting policies that are critical in making the estimates and judgments in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, under the caption “Management’s Discussion and Analysis—Critical Accounting Policies and Estimates”. There has been no material change in critical accounting policies or estimates during the period covered by this report.

RECENT ACCOUNTING PRONOUNCEMENTS

For information on recent accounting pronouncements, see Note 3 - Summary of Significant Accounting Policies to the Unaudited Consolidated Condensed Financial Statements.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements, including statements regarding our liquidity, our belief that our blockchain infrastructure efforts will form the core growth for our business, including but not limited to Builder+, StakeSeeker, and ChainQ, plans to expand our PoS operations, potential growth opportunities for the Company, our views regarding blockchain technology, anticipated increases in our revenues and gross margins and our 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: (i) the rewards and costs associated with staking or validating transactions on blockchains and successfully building blocks on Ethereum’s blockchain; (ii) regulatory issues related to our business model; (iii) fluctuations in the price of our crypto assets; (iv) potential decreases in the value of our crypto assets and rewards; (v) risks related to the loss or theft of private withdrawal keys resulting in the complete loss of crypto assets and rewards; and (vi) other risks and uncertainties described in our filings with the SEC, including our Form 10-K for the year ended December 31, 2024. 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.

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 March 31, 2025. 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 March 31, 2025.

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.