BTCS - BTCS Reports Q2 2022 Results
Revenue for the first six months of 2022 rose to $1.1 million
Silver Spring, MD, Aug. 12, 2022 (GLOBE NEWSWIRE) -- BTCS Inc. (Nasdaq: BTCS) (“BTCS” or the “Company”), a blockchain technology-focused company, announced results for the second quarter ending June 30, 2022.
Second Quarter 2022 Financial Highlights
Revenue increased 35% to $0.5 million from the prior-year quarter and decreased by 9% from the first quarter of 2022. The slight revenue decline from the first quarter of 2022 resulted from a decrease in Digital Asset prices throughout the quarter, partially offset by an increase in Digital Asset production as a result of our expanded blockchain infrastructure. Revenue for the first six months of 2022 rose to $1.1 million compared to $0.5 million for the same period in 2021, nearly reaching 2021 full-year revenue of $1.2 million.
Gross margins improved during the quarter to 82% compared to 76% in the first quarter of 2022, with gross margins of 79% for the first half of 2022. This was a direct result of an increase in Digital Asset production efficiencies and offset by the sharp decline in Digital Asset prices.
Despite increased production from the Company’s blockchain infrastructure validation operations, U.S. GAAP (“GAAP”) net loss for the quarter totaled $7.7 million ($0.61 per share) and $13.5 million ($1.08 per share) for the three and six months ended June 30, 2022, compared to $4.8 million and $11.6 million GAAP net loss for respective periods ended June 30, 2021. The net loss is primarily driven by non-cash charges related to the impairment of Digital Assets, as GAAP requires us to impair our Digital Assets to their lowest price since acquisition. Under GAAP, there is no ability to mark Digital Assets up if prices rebound (e.g., Ethereum, BTCS’ largest holding, is up 77% subsequent to the end of Q2). Digital Asset impairment charges during the period amounted to $8.9 million and $12.2 million for the three and six months ended June 30, 2022, respectively, resulting from crypto market volatility, compared to impairment on Digital Assets of $2.3 million and $3.6 million during the respective periods in 2021.
As of June 30, 2022, the Company had $3.2 million in cash.
Business Highlights
Throughout the market downturn, we have taken the necessary steps to reduce our cash operating costs by decreasing vendor spending and increasing operational efficiencies to best position the Company to weather this economic cycle and ultimately benefit our shareholders. Additionally, we are keenly focused on the continued development of our Digital Asset Platform, specifically the integration of our planned proprietary staking-as-a-service platform to allow users to stake and delegate supported cryptocurrencies through a non-custodial platform to BTCS-operated validator nodes.
Management Commentary
“In spite of macroeconomic factors and increased crypto market volatility, we ended the quarter with solid revenue, gross margin expansion, a strong cash balance, and no debt. Looking forward, we are steadfast in our business model value proposition and are confident in our ability to navigate uncertain times,” stated Charles Allen, Chief Executive Officer of BTCS. Mr. Allen continued, “we continue to remain extremely bullish on next-generation blockchains, including Ethereum our largest holding which recently reached $1,894 up 111% from its Q2 low of $896, and are optimistic that its planned transition to a Proof-of-Stake consensus mechanism will generate additional interest.”
“We view the current market conditions as an opportunity to build our platform and create value for our shareholders and remain optimistic about the growing utility and presence of blockchain technology,” stated Michael Prevoznik, BTCS’ Chief Financial Officer.
About BTCS:
BTCS is an early mover in the blockchain and digital currency ecosystem, and the first “Pure Play” U.S. publicly traded company focused on blockchain infrastructure and technology. Through its blockchain infrastructure operations, the Company secures Proof-of-Stake blockchains by actively processing and validating blockchain transactions and is rewarded with native digital tokens. The Company is developing a proprietary Staking-as-a-Service platform to allow users to stake and delegate supported cryptocurrencies through a non-custodial platform, which it plans to integrate with its Digital Asset Dashboard, now in beta release. BTCS’ proprietary Digital Asset Platform currently supports six exchanges and over 800 digital assets, and the Company plans to further broaden its suite of performance-tracking tools, add additional centralized and decentralized exchanges, as well as wallets, and validator monitoring. 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 our optimism of the Ethereum transition, the Ethereum transition generating additional interest in the Company, opportunity to build value for our shareholders. 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, the rewards and costs associated with validating transactions on proof-of-stake blockchains, a significant decrease in the value in the crypto that we currently own, loss or theft of the private withdrawal keys resulting in the complete loss of digital assets and reward, regulatory issues, unexpected issues with our Digital Asset Platform, reluctance of users to 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, 2021 and the Prospectus Supplement dated September 14, 2021. 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:
Adele Carey
VP, Investor Relations
ir@btcs.com
Public Relations:
Mercy Chikowore
m.chikowore@btcs.com
GAAP Financials
The tables below are derived from the Company’s financial statements included in its Form 10-Q filed on August 11, 2022 with the Securities and Exchange Commission. Please refer to the Form 10-Q for complete financial statements and further information regarding the Company’s results of operations and financial condition relating to the fiscal quarter ended June 30, 2022 and 2021. Please also refer to the Company’s Form 10-K for a discussion of risk factors applicable to the Company and its business.
BTCS Inc.
Balance Sheets
| June 30, |
| December 31, |
| 2022 |
| 2021 |
| (Unaudited) |
| Assets: |
| Current assets: |
| Cash |
| $ |
| 3,191,418 |
| $ |
| 1,400,867 |
| Digital assets/currencies |
| 19,803 |
| 3,117,360 |
| Staked digital assets/currencies |
| 2,475,868 |
| 623,754 |
| Prepaid expense |
| 261,175 |
| 324,551 |
| Total current assets |
| 5,948,264 |
| 5,466,532 |
| Other assets: |
| Property and equipment, net |
| 10,615 |
| 9,783 |
| Staked digital assets/currencies - long term |
| 5,498,808 |
| 8,625,678 |
| Total other assets |
| 5,509,423 |
| 8,635,461 |
| Total Assets |
| $ |
| 11,457,687 |
| $ |
| 14,101,993 |
| Liabilities and Stockholders' Equity: |
| Accounts payable and accrued expense |
| $ |
| 143,037 |
| $ |
| 138,716 |
| Accrued compensation |
| 140,187 |
| 7,334 |
| Warrant liabilities |
| 783,750 |
| 1,852,500 |
| Total current liabilities |
| 1,066,974 |
| 1,998,550 |
| Stockholders' equity: |
| Common stock, 97,500,000 shares authorized at $0.001 par value, 12,703,794 and 10,528,212 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively |
| 12,705 |
| 10,529 |
| Additional paid in capital |
| 159,432,894 |
| 147,682,384 |
| Accumulated deficit |
| (149,054,886 |
| ) |
| (135,589,470 |
| ) |
| Total stockholders' equity |
| 10,390,713 |
| 12,103,443 |
| Total Liabilities and Stockholders' Equity |
| $ |
| 11,457,687 |
| $ |
| 14,101,993 |
BTCS Inc.
Statements of Operations
(Unaudited)
| For the Three Months Ended |
| For the Six Months Ended |
| June 30, |
| June 30, |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| Revenues |
| Validator revenue (net of fees) |
| $ |
| 514,349 |
| $ |
| 380,499 |
| $ |
| 1,077,364 |
| $ |
| 453,023 |
| Total revenues |
| 514,349 |
| 380,499 |
| 1,077,364 |
| 453,023 |
| Cost of revenues |
| Validator expense |
| 93,900 |
| 59,249 |
| 231,769 |
| 74,245 |
| Gross profit |
| 420,449 |
| 321,250 |
| 845,595 |
| 378,778 |
| Operating expenses: |
| General and administrative |
| $ |
| 512,051 |
| $ |
| 312,967 |
| $ |
| 1,162,340 |
| $ |
| 866,948 |
| Research and development |
| 185,004 |
| 245,336 |
| 321,722 |
| 328,269 |
| Compensation and related expenses |
| 638,025 |
| 1,703,771 |
| 2,061,921 |
| 9,041,450 |
| Marketing |
| 23,691 |
| 1,365 |
| 65,484 |
| 2,786 |
| Impairment loss on digital assets/currencies |
| 8,894,797 |
| 2,267,374 |
| 12,202,225 |
| 3,569,138 |
| Realized gains on digital asset/currency transactions |
| (398,446 |
| ) |
| - |
| (469,556 |
| ) |
| (3,054,418 |
| ) |
| Total operating expenses |
| 9,855,122 |
| 4,530,813 |
| 15,344,136 |
| 10,754,173 |
| Other income (expenses): |
| Interest expense |
| - |
| (59,835 |
| ) |
| - |
| (114,082 |
| ) |
| Amortization on debt discount |
| - |
| (572,675 |
| ) |
| - |
| (1,134,771 |
| ) |
| Change in fair value of warrant liabilities |
| 1,710,000 |
| - |
| 1,068,750 |
| - |
| Distributions to warrant holders |
| - |
| - |
| (35,625 |
| ) |
| - |
| Total other income (expenses) |
| 1,710,000 |
| (632,510 |
| ) |
| 1,033,125 |
| (1,248,853 |
| ) |
| Net loss |
| $ |
| (7,724,673 |
| ) |
| $ |
| (4,842,073 |
| ) |
| $ |
| (13,465,416 |
| ) |
| $ |
| (11,624,248 |
| ) |
| Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock |
| - |
| (16,177 |
| ) |
| - |
| (32,353 |
| ) |
| Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock |
| - |
| (198,663 |
| ) |
| - |
| (5,020,883 |
| ) |
| Net loss attributable to common stockholders |
| $ |
| (7,724,673 |
| ) |
| $ |
| (5,056,913 |
| ) |
| $ |
| (13,465,416 |
| ) |
| $ |
| (16,677,484 |
| ) |
| Net loss per share attributable to common stockholders, basic and diluted |
| $ |
| (0.61 |
| ) |
| $ |
| (0.89 |
| ) |
| $ |
| (1.08 |
| ) |
| $ |
| (3.19 |
| ) |
| Weighted average number of common shares outstanding, basic and diluted |
| 12,644,719 |
| 5,667,229 |
| 12,446,102 |
| 5,225,019 |
BTCS Inc.
Statements of Cash Flows
(Unaudited)
| For the Six Months Ended |
| June 30, |
| 2022 |
| 2021 |
| Net Cash flows used from operating activities: |
| Net loss |
| $ |
| (13,465,416 |
| ) |
| $ |
| (11,624,248 |
| ) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
| Depreciation expense |
| 1,727 |
| 299 |
| Amortization on debt discount |
| - |
| 1,134,771 |
| Stock-based compensation |
| 1,782,802 |
| 9,226,702 |
| Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock |
| - |
| 179,277 |
| Validator revenue |
| (1,077,364 |
| ) |
| (453,023 |
| ) |
| Blockchain network fees (non-cash) |
| 1,321 |
| - |
| Change in fair value of warrant liabilities |
| (1,068,750 |
| ) |
| - |
| Purchase of non-productive digital assets/currencies |
| - |
| (5,761,549 |
| ) |
| Sale of non-productive digital assets/currencies |
| 2,547,322 |
| 4,274,491 |
| Realized gain on digital assets/currencies transactions |
| (469,556 |
| ) |
| (3,054,418 |
| ) |
| Impairment loss on digital assets/currencies |
| 12,202,225 |
| 3,569,138 |
| Changes in operating assets and liabilities: |
| Prepaid expenses and other current assets |
| 63,376 |
| (566,337 |
| ) |
| Accounts payable and accrued expenses |
| 565 |
| 130,541 |
| Accrued compensation |
| 132,853 |
| (346,689 |
| ) |
| Net cash provided by (used in) operating activities |
| 651,105 |
| (3,291,045 |
| ) |
| Net cash used in investing activities: |
| Purchase of productive digital assets/currencies for validating |
| (9,141,785 |
| ) |
| (8,493,136 |
| ) |
| Sale of productive digital assets/currencies |
| 310,149 |
| - |
| Purchase of property and equipment |
| (2,558 |
| ) |
| (3,245 |
| ) |
| Net cash used in investing activities |
| (8,834,194 |
| ) |
| (8,496,381 |
| ) |
| 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 |
| - |
| 2,814,133 |
| Net proceeds from issuance common stock/ At-the-market offering |
| 10,604,441 |
| - |
| Payment to convertible notes principle |
| - |
| - |
| Net cash provided by financing activities |
| 9,973,640 |
| 14,179,133 |
| Net increase in cash |
| 1,790,551 |
| 2,391,707 |
| Cash, beginning of period |
| 1,400,867 |
| 524,135 |
| Cash, end of period |
| $ |
| 3,191,418 |
| $ |
| 2,915,842 |
| 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 |
| $ |
| - |
| $ |
| 32,353 |
| 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 |
| $ |
| - |
| $ |
| 196 |
| Beneficial conversion feature of Series C-2 convertible preferred stock |
| $ |
| - |
| $ |
| 129,412 |
| Beneficial conversion features associated with convertible notes payable |
| $ |
| - |
| $ |
| 1,000,000 |