BTCS Reports Q2 2022 Results

Rhea-AI Summary

BTCS reported a 35% increase in revenue for Q2 2022, reaching $0.5 million, while total revenue for the first half of the year rose to $1.1 million. Despite the positive revenue growth, the company faced a net loss of $7.7 million in Q2, primarily due to non-cash impairment charges of $8.9 million related to Digital Assets. Gross margins improved to 82%. The company is focused on enhancing its Digital Asset platform and has maintained a strong cash balance of $3.2 million with no debt, as management expresses optimism about the future of blockchain technology.

Positive

• Revenue for Q2 2022 increased by 35% to $0.5 million from Q2 2021.
• Total revenue for the first half of 2022 rose to $1.1 million, nearing 2021's full-year revenue.
• Gross margins expanded to 82% compared to 76% in Q1 2022.
• The company has a strong cash position of $3.2 million and no debt.

Negative

• Net loss for Q2 totaled $7.7 million, compared to $4.8 million in Q2 2021.
• Non-cash impairment charges on Digital Assets amounted to $8.9 million in Q2.
• Digital Asset prices declined, impacting Q2 revenue growth.

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

FAQ

What were the revenue figures for BTCS in Q2 2022?

BTCS reported revenue of $0.5 million for Q2 2022, a 35% increase from the prior year.

What is the net loss reported by BTCS for Q2 2022?

BTCS reported a net loss of $7.7 million for Q2 2022.

How much cash does BTCS have as of June 30, 2022?

As of June 30, 2022, BTCS had $3.2 million in cash.

What contributed to the increased net loss for BTCS in Q2 2022?

The increased net loss was primarily due to non-cash impairment charges related to Digital Assets.

What is BTCS's outlook on blockchain technology?

Management remains optimistic about the utility and presence of blockchain technology despite current market conditions.