BTCS(BTCS) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed financial statements and management's analysis for BTCS Inc ITEM 1 Financial Statements This section presents BTCS Inc.'s unaudited condensed financial statements, including balance sheets, statements of operations, equity changes, and cash flows, with detailed accounting notes Condensed Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Balance Sheets | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $670,594 | $1,458,327 | | Stablecoins | $14,797 | $21,044 | | Crypto assets | $721,659 | $302,783 | | Staked crypto assets | $37,999,116 | $24,900,146 | | Total current assets | $39,437,786 | $27,036,201 | | Total Assets | $39,546,781 | $27,146,691 | | Accounts payable and accrued expenses | $26,193 | $55,058 | | Accrued compensation | $6,419 | $712,092 | | Warrant liabilities | $213,750 | $213,750 | | Total current liabilities | $246,362 | $980,900 | | Total stockholders' equity | $39,300,419 | $26,165,791 | | Accumulated deficit | $(126,420,517) | $(138,677,103) | Condensed Statements of Operations This section details the company's revenues, expenses, and net income over specific reporting periods Condensed Statements of Operations | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :---------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenues | $385,773 | $311,508 | | Blockchain infrastructure costs | $95,012 | $82,014 | | Gross profit | $290,761 | $229,494 | | General and administrative | $487,599 | $609,829 | | Research and development | $146,549 | $201,625 | | Compensation and related expenses | $455,779 | $462,090 | | Marketing | $57,602 | $6,243 | | Realized (gains) losses on crypto asset transactions | $(10,687) | $(7,554) | | Total operating expenses | $1,136,842 | $1,272,233 | | Change in unrealized appreciation (depreciation) on crypto assets | $13,102,667 | $6,293,207 | | Change in fair value of warrant liabilities | $- | $(285,000) | | Net income | $12,256,586 | $4,965,468 | | Basic net income (loss) per share | $0.78 | $0.36 | | Diluted net income (loss) per share | $0.63 | $0.29 | Condensed Statements of Changes in Stockholders' Equity This section outlines the changes in the company's equity accounts, including stock-based compensation and net income Condensed Statements of Changes in Stockholders' Equity | Metric | Balance December 31, 2023 | Stock-based compensation | Net income | Balance March 31, 2024 | | :-------------------- | :------------------------ | :----------------------- | :--------- | :--------------------- | | Preferred Shares | 14,567,829 | - | - | 14,567,829 | | Preferred Stock Amount | $2,563,938 | - | - | $2,563,938 | | Common Shares | 15,320,281 | 385,134 | - | 15,705,415 | | Common Stock Amount | $15,322 | $385 | - | $15,707 | | Paid-in Capital | $162,263,634 | $877,657 | - | $163,141,291 | | Accumulated Deficit | $(138,677,103) | - | $12,256,586 | $(126,420,517) | | Total Stockholders' Equity | $26,165,791 | $878,042 | $12,256,586 | $39,300,419 | - The opening balance as of December 31, 2022, was adjusted by $4,986,377 due to a change in accounting principle[202] Condensed Statements of Cash Flows This section reports the cash generated and used by the company across operating, investing, and financing activities Condensed Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(769,014) | $(1,126,032) | | Net cash provided by (used in) investing activities | $(18,719) | $(86,476) | | Net cash provided by financing activities | $- | $508,783 | | Net (decrease)/increase in cash | $(787,733) | $(703,725) | | Cash, end of period | $670,594 | $1,443,058 | Notes to Unaudited Condensed Financial Statements This section provides detailed explanations of the accounting policies, principles, and specific financial instrument valuations underlying the financial statements Note 1 - Business Organization and Nature of Operations This note describes BTCS Inc.'s operations in the blockchain technology sector, focusing on proof-of-stake infrastructure and proprietary platforms - BTCS Inc. operates in the blockchain technology sector since 2014, primarily focusing on proof-of-stake (PoS) blockchain infrastructure, earning native token rewards by validating transactions on various networks, with an emphasis on Ethereum[205] - The company developed "Builder+", an Ethereum block builder, which utilizes algorithms to optimize block construction for on-chain validation and maximize revenue[206] - The "StakeSeeker" platform is an internally developed personal finance software for crypto asset holders to monitor and analyze their portfolios, offering educational features on delegating crypto assets to non-custodial validator nodes, without facilitating trading, delegation, or custody of crypto assets[232] Note 2 - Basis of Presentation This note clarifies the preparation of unaudited interim financial statements in accordance with GAAP and SEC rules - The unaudited condensed financial statements are prepared in accordance with GAAP for interim financial information and SEC rules, and interim results for the three months ended March 31, 2024, are not necessarily indicative of full-year results[233] - Certain prior period amounts have been reclassified to conform with the current period presentation, with no material impact on financial statements or disclosures[7] Note 3 - Summary of Significant Accounting Policies This note outlines the key accounting principles applied, including those for cash, stablecoins, crypto assets, revenue recognition, and stock-based compensation - The Company considers all highly liquid investments with original maturities of three months or less as cash and cash equivalents, holding approximately $670,000 as of March 31, 2024[208] - Stablecoins are accounted for as indefinite-lived intangible assets (ASC 350) but are considered a liquidity resource for facilitating crypto asset transactions[10][209] - Crypto assets are measured at fair value in accordance with ASC 820, with Kraken designated as the primary exchange and Coinbase as the secondary for pricing data[11][211][237] - Crypto assets are classified as 'productive' (for staking) or 'non-productive'; acquisitions of productive assets are investing activities, while non-productive are operating activities. Staked crypto assets with lock-up periods less than 12 months are current assets[14][213] - Revenue is recognized under ASC 606 from staking rewards (BTCS and third-party nodes) and gas fees from Ethereum block building (Builder+), collectively termed 'Blockchain infrastructure revenues'[270][218] - Cost of revenues primarily includes direct production costs for transaction validation, cloud hosting, employee salaries for node maintenance, and third-party software/node operation fees[51] - Internally developed software costs are expensed until technological feasibility is established, then capitalized as property, equipment, and software[52][221] - Warrants are classified as derivative liabilities and re-measured at fair value each reporting period using a Black-Scholes valuation model, due to the company no longer controlling cash settlement[251][25] - Stock-based compensation is accounted for under ASC 718, measured at fair value on the grant date, with stock options valued using Black-Scholes and market-based RSUs using Monte Carlo simulation[26][253][254] - The Company early adopted ASU No. 2023-08 effective January 1, 2023, which materially changed crypto asset accounting to fair value measurement with changes recognized in net income[59][32][259] Note 4 - Changes in Accounting Principle This note details the early adoption of ASU No. 2023-08, which significantly changed crypto asset accounting to fair value measurement - Effective January 1, 2023, the Company early adopted ASU No. 2023-08, resulting in a material change in accounting principles for crypto assets, now measured at fair value with changes recognized in net income[32][59][259] - The adoption required an adjustment to the opening Retained Earnings balance as of January 1, 2023, of approximately $4,986,000, reflecting the difference between the December 31, 2022 book value and fair market value of crypto assets[33] Note 5 – Crypto Assets This note provides a detailed breakdown of the company's crypto asset holdings, including their cost and fair market value Crypto Assets Held as of March 31, 2024 | Asset | Tokens | Cost | Fair Market Value | | :----------------------- | :------- | :--------- | :---------------- | | Ethereum (ETH) | 7,868 | $9,028,622 | $28,700,380 | | Cosmos (Atom) | 281,264 | $4,964,305 | $3,455,299 | | Solana (SOL) | 7,964 | $548,745 | $1,613,543 | | Avalanche (Avax) | 17,842 | $1,129,281 | $964,888 | | Axie Infinity (AXS) | 65,932 | $1,962,310 | $726,572 | | Polygon (Matic) | 512,241 | $854,336 | $514,187 | | Oasis Network (ROSE) | 2,663,766 | $159,759 | $366,108 | | Kusama (KSM) | 7,796 | $1,427,557 | $377,395 | | Kava (KAVA) | 351,685 | $1,094,552 | $374,932 | | NEAR Protocol (NEAR) | 80,981 | $167,201 | $591,162 | | Akash (AKT) | 123,646 | $64,902 | $592,956 | | Cardano (ADA) | 266,543 | $402,745 | $173,350 | | Mina (MINA) | 92,897 | $67,185 | $115,192 | | Polkadot (DOT) | 9,010 | $142,668 | $86,858 | | Evmos (EVMOS) | 357,203 | $98,344 | $28,612 | | Tezos (XTZ) | 26,492 | $73,686 | $37,118 | | Band Protocol (BAND) | 992 | $1,500 | $2,223 | | Total | | $22,187,698 | $38,720,775 | Note 6 – Fair Value of Financial Assets and Liabilities This note explains the fair value measurement hierarchy and presents the valuation of crypto assets, investments, and warrant liabilities - Fair value is estimated using a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs reflecting management's estimates)[35][36][63][261] Fair Value Measured at March 31, 2024 | Assets/Liabilities | Total at March 31, 2024 | Level 1 | Level 2 | Level 3 | | :------------------ | :---------------------- | :------ | :------ | :------ | | Crypto Assets | $38,720,775 | $38,720,775 | $- | $- | | Investments | $100,000 | $- | $- | $100,000 | | Total Assets | $38,820,775 | $38,720,775 | $- | $100,000 | | Warrant Liabilities | $213,750 | $- | $- | $213,750 | Fair Value Measured at December 31, 2023 | Assets/Liabilities | Total at December 31, 2023 | Level 1 | Level 2 | Level 3 | | :------------------ | :------------------------- | :------ | :------ | :------ | | Crypto Assets | $25,202,929 | $25,202,929 | $- | $- | | Investments | $100,000 | $- | $- | $100,000 | | Total Assets | $25,302,929 | $25,202,929 | $- | $100,000 | | Warrant Liabilities | $213,750 | $- | $- | $213,750 | - Warrant liabilities are classified as derivative liabilities and valued using the Black-Scholes model, incorporating stock price, contractual terms, maturity, risk-free rates, and volatility, due to the company no longer controlling cash settlement[68][69][265] Note 7 – Stockholders' Equity This note details changes in common and preferred stock, stock-based compensation, and equity incentive plans - The number of authorized common stock shares was increased from 97,500,000 to 975,000,000 on July 11, 2023[91] - For the three months ended March 31, 2024, 414,148 shares of common stock were issued to officers for 2023 accrued bonus compensation ($675,000), and 14,206 shares were issued to independent directors[44][71] - The Series V Preferred Stock, approved January 27, 2023, is non-convertible, has a 20% liquidation preference, is non-voting, and has discretionary dividend rights. A total of 14,542,803 shares were distributed on June 2, 2023[45][255] - The 2021 Equity Incentive Plan's authorized amount was increased from 7,000,000 to 12,000,000 shares on July 11, 2023[269] Stock Option Activity (Three Months Ended March 31, 2024) | Metric | Number of Shares | Weighted Average Exercise Price | Total Intrinsic Value | Weighted Average Remaining Contractual Life (in years) | | :------------------------------------ | :--------------- | :------------------------------ | :-------------------- | :----------------------------------------------------- | | Outstanding as of December 31, 2023 | 1,200,000 | $2.12 | $8,700 | 2.4 | | Outstanding as of March 31, 2024 | 1,200,000 | $2.12 | $17,150 | 2.1 | | Options vested and exercisable as of March 31, 2024 | 1,145,000 | $2.15 | $1,300 | 2.0 | Restricted Stock Units Activity (Three Months Ended March 31, 2024) | Metric | Number of Stock Restricted Units | Weighted Average Grant Fair Value | | :-------------------------- | :------------------------------- | :-------------------------------- | | Nonvested at December 31, 2023 | 1,606,373 | $3.25 | | Granted | 300,000 | $1.71 | | Forfeited | (100,000) | $1.63 | | Nonvested at March 31, 2024 | 1,806,373 | $3.09 | Stock-Based Compensation Expense | Category | For the Three Months Ended March 31, 2024 | For the Three Months Ended March 31, 2023 | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Employee stock option awards | $9,280 | $3,307 | | Employee restricted stock unit awards | $239,146 | $267,338 | | Non-employee restricted stock awards | $- | $15,908 | | Total | $248,426 | $286,553 | Note 8 – Accrued Expenses This note provides a breakdown of accrued expenses, highlighting the significant decrease in accrued compensation Accrued Expenses | Category | March 31, 2024 | December 31, 2023 | | :---------------------------- | :------------- | :---------------- | | Accrued compensation | $6,419 | $712,092 | | Accounts payable and accrued expenses | $26,193 | $55,058 | | Total | $32,612 | $767,150 | - Accrued compensation decreased significantly due to the payment of approximately $710,000 in performance bonus accruals[99] Note 9 – Employee Benefit Plans This note outlines the company's 401(k) Plan and contributions made for employee benefits - The Company maintains a 401(k) Plan for qualified employees, with contributions of $109,000 for Q1 2024, up from $95,000 for Q1 2023[100] Note 10 – Liquidity This note assesses the company's ability to meet its short-term obligations, considering its accumulated deficit and cash flow - As of March 31, 2024, the Company had an accumulated deficit of approximately $126,421,000 and net cash used in operating activities of approximately $769,000[79] - Despite historical net losses, the Company's cash position and liquid crypto assets are deemed sufficient to support daily operations for the next twelve months[79] Note 11 – Subsequent Events This note discloses significant events occurring after the balance sheet date, including a new executive incentive plan - On April 11, 2024, the Board approved a performance-based Annual Cash Incentive Plan for executives for fiscal year 2024, with potential bonuses ranging from 163% to 195% of base salary, payable in cash and/or equity[102] - No other recognized or non-recognized subsequent events requiring adjustment or disclosure were identified after the balance sheet date but before the financial statements were issued[80] ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses BTCS Inc.'s financial performance, crypto asset holdings, revenue streams, and liquidity for the three months ended March 31, 2024 Company Overview This section provides an overview of BTCS Inc.'s business model, focusing on proof-of-stake blockchain infrastructure and new platform developments - BTCS Inc. is a Nasdaq-listed company operating in the blockchain technology sector since 2014, primarily focused on proof-of-stake blockchain infrastructure, earning native token rewards by validating transactions[116][83] - The company's Staking-as-a-Service (StaaS) business model is non-custodial, allowing crypto asset holders to earn token rewards by delegating to BTCS-operated validator nodes, creating scalable revenue with limited additional costs[84][106][119] - BTCS introduced "Builder+" in January 2024, an Ethereum block builder that uses algorithms to construct optimized blocks for on-chain validation, aiming for scalable revenue[86][108] - ChainQ, an AI-powered blockchain data and analytics platform, is currently under development with a target beta release in 2024, designed to provide real-time and historical on-chain data[87][121] Crypto Assets This section presents a detailed quarterly breakdown of the fair market value and token quantities of the company's crypto asset holdings Fair Market Value of Crypto Assets at Period End | Asset | 2023 Q1 | 2023 Q2 | 2023 Q3 | 2023 Q4 | 2024 Q1 | | :----------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Ethereum (ETH) | $15,530,133 | $15,141,859 | $12,948,491 | $17,829,264 | $28,700,380 | | Cardano (ADA) | $104,861 | $75,553 | $67,259 | $157,615 | $173,350 | | Kusama (KSM) | $236,070 | $175,352 | $138,166 | $329,353 | $377,395 | | Tezos (XTZ) | $83,614 | $20,452 | $17,569 | $26,379 | $37,118 | | Solana (SOL) | $158,625 | $144,010 | $165,849 | $796,327 | $1,613,543 | | Polkadot (DOT) | $47,720 | $40,763 | $34,009 | $70,879 | $86,858 | | Cosmos (ATOM) | $1,144,459 | $2,261,411 | $1,859,407 | $2,860,870 | $3,455,299 | | Polygon (MATIC) | $544,815 | $325,857 | $266,400 | $491,138 | $514,187 | | Avalanche (AVAX) | $304,341 | $231,941 | $164,759 | $687,713 | $964,888 | | Axie Infinity (AXS) | $389,893 | $302,966 | $254,967 | $535,546 | $726,572 | | Kava (KAVA) | $270,486 | $305,501 | $207,289 | $301,429 | $374,932 | | Band Protocol (BAND) | $1,857 | $1,260 | $1,121 | $2,174 | $2,223 | | Mina (MINA) | $62,101 | $39,579 | $32,095 | $122,007 | $115,192 | | Oasis Network (ROSE) | $156,698 | $128,686 | $109,516 | $363,571 | $366,108 | | Akash (AKT) | $34,510 | $63,311 | $94,686 | $291,574 | $592,956 | | NEAR Protocol (NEAR) | $150,854 | $107,088 | $89,660 | $293,204 | $591,162 | | Evmos (EVMOS) | $- | $26,069 | $24,089 | $43,886 | $28,612 | | Total | $19,221,037 | $19,391,658 | $16,475,332 | $25,202,929 | $38,720,775 | | QoQ Change | 53% | 1% | -15% | 53% | 54% | | YoY Change | -54% | 63% | 11% | 101% | 101% | Crypto Assets Held at Period End (Tokens) | Asset | 2023 Q1 | 2023 Q2 | 2023 Q3 | 2023 Q4 | 2024 Q1 | | :----------------------- | :------ | :------ | :------ | :------ | :------ | | Ethereum (ETH) | 8,524 | 7,833 | 7,748 | 7,815 | 7,868 | | Cardano (ADA) | 262,860 | 263,293 | 264,751 | 265,254 | 266,543 | | Kusama (KSM) | 6,767 | 6,946 | 7,246 | 7,313 | 7,796 | | Tezos (XTZ) | 74,765 | 25,375 | 25,760 | 26,174 | 26,492 | | Solana (SOL) | 7,493 | 7,621 | 7,752 | 7,845 | 7,964 | | Polkadot (DOT) | 7,526 | 7,882 | 8,284 | 8,650 | 9,010 | | Cosmos (ATOM) | 102,298 | 243,472 | 256,784 | 270,098 | 281,264 | | Polygon (MATIC) | 486,806 | 492,965 | 499,548 | 506,010 | 512,241 | | Avalanche (AVAX) | 17,178 | 17,824 | 17,824 | 17,842 | 17,842 | | Axie Infinity (AXS) | 46,482 | 50,955 | 55,584 | 60,552 | 65,932 | | Kava (KAVA) | 304,968 | 315,362 | 327,862 | 345,394 | 351,685 | | Band Protocol (BAND) | 992 | 992 | 992 | 992 | 992 | | Mina (MINA) | 79,937 | 81,377 | 84,257 | 90,017 | 92,897 | | Oasis Network (ROSE) | 2,569,991 | 2,600,279 | 2,626,600 | 2,647,629 | 2,663,766 | | Akash (AKT) | 110,213 | 113,063 | 115,735 | 119,071 | 123,646 | | NEAR Protocol (NEAR) | 75,724 | 77,389 | 79,067 | 80,267 | 80,981 | | Evmos (EVMOS) | - | 295,422 | 322,693 | 345,777 | 357,203 | Prices of Crypto Assets at Period End (USD) | Asset | 2023 Q1 | 2023 Q2 | 2023 Q3 | 2023 Q4 | 2024 Q1 | | :----------------------- | :------ | :------ | :------ | :------ | :------ | | Ethereum (ETH) | $1,822 | $1,933 | $1,671 | $2,281 | $3,648 | | Cardano (ADA) | $0.40 | $0.29 | $0.25 | $0.59 | $0.65 | | Kusama (KSM) | $34.89 | $25.24 | $19.07 | $45.04 | $48.41 | | Tezos (XTZ) | $1.12 | $0.81 | $0.68 | $1.01 | $1.40 | | Solana (SOL) | $21.17 | $18.90 | $21.40 | $101.51 | $202.60 | | Polkadot (DOT) | $6.34 | $5.17 | $4.11 | $8.19 | $9.64 | | Cosmos (ATOM) | $11.19 | $9.29 | $7.24 | $10.59 | $12.28 | | Polygon (MATIC) | $1.12 | $0.66 | $0.53 | $0.97 | $1.00 | | Avalanche (AVAX) | $17.72 | $13.01 | $9.24 | $38.54 | $54.08 | | Axie Infinity (AXS) | $8.39 | $5.95 | $4.59 | $8.84 | $11.02 | | Kava (KAVA) | $0.89 | $0.97 | $0.63 | $0.87 | $1.07 | | Band Protocol (BAND) | $1.87 | $1.27 | $1.13 | $2.19 | $2.24 | | Mina (MINA) | $0.78 | $0.49 | $0.38 | $1.36 | $1.24 | | Oasis Network (ROSE) | $0.06 | $0.05 | $0.04 | $0.14 | $0.14 | | Akash (AKT) | $0.31 | $0.56 | $0.82 | $2.45 | $4.80 | | NEAR Protocol (NEAR) | $1.99 | $1.38 | $1.13 | $3.65 | $7.30 | | Evmos (EVMOS) | | $0.09 | $0.07 | $0.13 | $0.08 | Crypto Asset Rewards This section details the crypto assets and associated revenue earned from BTCS's own validator nodes and third-party staking Crypto Assets Earned from BTCS Validator Nodes (Tokens) | Asset | 2023 Q1 | 2023 Q2 | 2023 Q3 | 2023 Q4 | 2024 Q1 | | :----------------------- | :------ | :------ | :------ | :------ | :------ | | Ethereum (ETH) | 98 | 108 | 85 | 67 | 65 | | Cosmos (ATOM) | 5,980 | 10,662 | 13,312 | 13,314 | 11,166 | | Akash (AKT) | 2,807 | 2,851 | 2,671 | 3,337 | 4,575 | | Kava (KAVA) | 13,008 | 10,394 | 12,500 | 17,532 | 6,292 | | NEAR Protocol (NEAR) | 1,022 | 1,665 | 1,606 | 1,200 | 714 | | Mina (MINA) | 5,760 | 1,440 | 2,880 | 5,760 | 2,880 | | Oasis Network (ROSE) | 20,364 | 30,287 | 26,321 | 21,029 | 16,137 | | Kusama (KSM) | 273 | 180 | 300 | 67 | 10 | | Avalanche (AVAX) | - | 646 | - | 18 | - | | Evmos (EVMOS) | - | 32,236 | 27,271 | 30,084 | - | | Tezos (XTZ) | 1,179 | 435 | 385 | 414 | - | Revenue Earned from BTCS Validator Nodes ($USD) | Asset | 2023 Q1 | 2023 Q2 | 2023 Q3 | 2023 Q4 | 2024 Q1 | | :--------------------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Ethereum (ETH) | $154,634 | $201,121 | $151,699 | $131,903 | $188,078 | | Cosmos (ATOM) | $75,469 | $109,787 | $106,982 | $116,726 | $121,074 | | Akash (AKT) | $1,045 | $1,159 | $2,263 | $5,341 | $18,746 | | Kava (KAVA) | $11,735 | $9,351 | $9,523 | $13,033 | $5,252 | | NEAR Protocol (NEAR) | $2,111 | $2,841 | $2,050 | $1,834 | $4,422 | | Mina (MINA) | $3,837 | $1,070 | $1,234 | $4,818 | $3,646 | | Oasis Network (ROSE) | $1,196 | $1,735 | $1,183 | $1,688 | $2,218 | | Kusama (KSM) | $9,412 | $4,960 | $6,416 | $1,193 | $475 | | Avalanche (AVAX) | $- | $8,403 | $- | $714 | $- | | Evmos (EVMOS) | $- | $5,862 | $2,016 | $2,929 | $- | | Tezos (XTZ) | $1,269 | $432 | $288 | $337 | $- | | Total revenue earned from BTCS validator nodes | $260,708 | $346,721 | $283,654 | $280,516 | $343,911 | Revenue Earned from Staking to Third-Party Validator Nodes ($USD) | Asset | 2023 Q1 | 2023 Q2 | 2023 Q3 | 2023 Q4 | 2024 Q1 | | :----------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Axie Infinity (AXS) | $40,028 | $29,313 | $23,755 | $34,595 | $48,322 | | Solana (SOL) | $2,531 | $2,581 | $2,860 | $3,620 | $15,372 | | Polygon (MATIC) | $6,737 | $5,057 | $3,676 | $5,143 | $5,731 | | Polkadot (DOT) | $1,504 | $1,957 | $1,898 | $1,999 | $2,957 | | Evmos (EVMOS) | $- | $- | $- | $- | $940 | | Cardano (ADA) | $- | $124 | $399 | $252 | $753 | | Tezos (XTZ) | $- | $- | $- | $- | $367 | | Total revenue earned from staking to third-party validator nodes | $50,800 | $39,032 | $32,588 | $45,609 | $74,442 | | Total revenue earned | $311,508 | $385,753 | $316,242 | $326,125 | $385,773 | Revenue Earned from Ethereum Block Building through Builder+ ($USD) | Metric | For the Three Months Ending March 31, 2024 | | :--------------------------------------------------------- | :----------------------------------------- | | Gas fees earned from blocks proposed | $33,033 | | Validator payments for block space | $(65,613) | | Revenue earned from Ethereum block building through Builder+ | $(32,580) | Results of Operations for the Three Months Ended March 31, 2024 and 2023 This section analyzes the financial performance, highlighting changes in revenues, costs, operating expenses, and net income between the two periods - Total revenues increased by 24% to $385,773 in Q1 2024, primarily due to the increase in fair value of crypto assets earned as staking rewards, partially offset by negative revenue from Ethereum block building activities[129][130] - Cost of revenues increased by 16% to $95,012 in Q1 2024, mainly due to new costs associated with the launch of Ethereum block building activities (Builder+)[129][131] - Gross profit increased by 27% to $290,761 in Q1 2024[129] - Total operating expenses decreased by 11% to $1,136,842 in Q1 2024, driven by a 20% decrease in general and administrative expenses (due to lower legal costs) and a 27% decrease in research and development expenses[129][132][145] - Marketing costs increased by 823% to $57,602 in Q1 2024, primarily due to expenditures for purchasing transaction traffic to bolster Ethereum block production for Builder+ operations[129][146] - Other income (expenses) increased by 118% to $13,102,667 in Q1 2024, mainly due to a 108% increase in unrealized appreciation on crypto assets resulting from rising fair market values[129][171] - Net income increased by 147% to $12,256,586 in Q1 2024, primarily attributable to larger increases in the fair value of crypto assets[129][172] Liquidity and Capital Resources This section assesses the company's current liquidity, cash flow activities, and ability to meet future financial obligations - As of May 10, 2024, the Company had approximately $431,000 of cash and cash equivalents and $30,301,000 in liquid crypto assets, with no outstanding debt[137] - The Company believes its existing cash and liquid crypto assets provide sufficient liquidity to meet working capital requirements, anticipated capital expenditures, and contractual obligations for at least the next 12 months[137] - Net cash used in operating activities was approximately $769,000 in Q1 2024, a decrease from $1,126,000 in Q1 2023[138] - Net cash used in investing activities was approximately $19,000 in Q1 2024, primarily for the purchase of productive crypto assets, a decrease from $86,000 in Q1 2023[175] - Net cash provided by financing activities was $0 in Q1 2024, compared to $509,000 in Q1 2023, which was entirely from proceeds from common stock sales under the ATM Agreement[152] - From September 14, 2021, through May 10, 2024, the Company sold 4,346,748 shares of Common Stock under the At-The-Market Offering Agreement, generating approximately $17,256,000 in gross proceeds and $16,696,000 in net proceeds[149] - Certain staked crypto assets may have lock-up periods ranging from several hours to six months, which could limit their timely liquidation as a source of liquidity[174] Off-Balance Sheet Transactions This section confirms the absence of any off-balance sheet arrangements or transactions as of the reporting date - As of March 31, 2024, there were no off-balance sheet arrangements or transactions[153] Critical Accounting Policies and Estimates This section states that there have been no material changes to the company's critical accounting policies or estimates - There have been no material changes in critical accounting policies or estimates during the period covered by this report[154] Recent Accounting Pronouncements This section directs readers to Note 3 for details on recent accounting pronouncements relevant to the financial statements - For information on recent accounting pronouncements, refer to Note 3 to the Unaudited Condensed Financial Statements[155] Cautionary Note Regarding Forward-Looking Statements This section advises that the report contains forward-looking statements subject to inherent uncertainties and risks that may cause actual results to differ - The report contains forward-looking statements regarding liquidity, business growth (Builder+, StakeSeeker, ChainQ), PoS operations expansion, revenue/gross margin increases, and future business plans[156] - These statements are subject to inherent uncertainties, risks, and changes in circumstances, and actual results may differ materially from those contemplated[177] ITEM 3 Quantitative and Qualitative Disclosures About Market Risk This section indicates that the item is not applicable to the company - Not applicable[178] ITEM 4 Controls and Procedures This section covers management's evaluation of disclosure controls and procedures and reports on changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2024 - Management, with the participation of the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2024, and concluded they were effective[157] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during the reporting period - No changes in internal control over financial reporting occurred during the period covered by this report that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[158] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits ITEM 1 Legal Proceedings This section confirms that there are no legal proceedings to report - None[160] ITEM 1A Risk Factors This section states that the item is not applicable to smaller reporting companies - Not applicable to smaller reporting companies[161] ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds This section indicates no unregistered sales of equity securities or use of proceeds to report - None[162] ITEM 3 Defaults Upon Senior Securities This section confirms no defaults upon senior securities to report - None[163] ITEM 4 Mine Safety Disclosures This section states that the item is not applicable - Not applicable[164] ITEM 5 Other Information This section reports on Rule 10b5-1 trading arrangements - No officers or directors adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the last fiscal quarter[165] ITEM 6 Exhibits This section lists the exhibits filed or incorporated by reference as part of the Form 10-Q, including corporate documents and certifications - The exhibits listed in the accompanying "Exhibit Index" are filed or incorporated by reference as part of this Form 10-Q[166] - Includes certifications of Principal Executive Officer (302), Principal Financial Officer (302), and Principal Executive and Principal Financial Officer (906), along with Inline XBRL documents[184] SIGNATURES This section contains the formal signatures for the report - The report was signed by Charles Allen, Chief Executive Officer (Principal Executive Officer), on May 14, 2024[183]