BTCS Inc. (Nasdaq: BTCS) (“BTCS” or the “Company”), a blockchain
technology-focused company, announced results for the third quarter
ending September 30, 2022.
Third Quarter 2022
Financial HighlightsRevenue for the first
nine months of 2022 rose 83% to $1.4 million compared to $0.8
million for the same period in 2021. However, revenue decreased by
33% from the second quarter of 2022 to $0.3 million for the third
quarter of 2022. The revenue decline is a result of Digital Asset
prices remaining depressed throughout the quarter after crypto
markets hit a 2022 low in mid-June.
Despite a 12% reduction in validator expenses
quarter over quarter through the implementation of streamlined
operations, gross margins for Q3 2022 decreased slightly to 76%,
down from Q2 2022’s 82% gross margin. This was a result of a
decline in Digital Asset prices. Gross margins were 78% for the
first nine months of 2022 down from 81% during the same period in
2021.
U.S. GAAP (“GAAP”) net loss for the quarter
decreased to $1.0 million ($0.08 per share) compared to $7.7
million in Q2 2022 and $3.9 million for Q3 2021. GAAP net loss for
the nine months ended September 30, 2022, decreased to $14.5
million ($1.15 per share) compared to $20.5 million GAAP net loss
for the respective period ended September 30, 2021. BTCS’s 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. Digital Asset
impairment charges during Q3 2022 quarter amounted to $145,000
compared to $8.9 million in Q2 2022 and $3.3 million in Q1 2022,
highlighting the impact of the crypto market’s decline throughout
the year on our financial statements. Digital Asset impairment for
the nine months ended September 2022 totaled $12.4 million compared
to $3.7 million in the respective period ended September 30,
2021.
The fair value of BTCS’s Digital Assets
rebounded 24% from June 30, 2022, to $14.8 million as of September
30, 2022. As of September 30, 2022, the Company had $2.9 million in
cash.
Management Commentary“BTCS’
management team saw early potential in next-generation blockchains
resulting in a strategic shift from Bitcoin to these networks
starting with Ethereum. Our focus is on next-gen blockchains that
leverage proof-of-stake consensus mechanisms. We seek to capitalize
on the multi-billion dollar staking market opportunity and upward
trend, which our SaaS platform is being developed to capture. We
are optimistic about the operational progress of our integrated
analytics and staking-as-a-service platform”, said Michael
Prevoznik, Chief Financial Officer of BTCS.
“BTCS has been resilient despite macroeconomic
headwinds to both traditional and crypto markets during the third
quarter. Our management team is centered on effectively executing
our strategic initiatives with a low-cost philosophy while ensuring
we maintain a strong balance sheet and drive long-term value for
our shareholders”, stated Charles Allen, Chief Executive Officer of
BTCS. “The economic environment may be contributing to our stock
being traded at a discount to the fair market value of our crypto
holdings and cash balances as of November 10th, 2022. With no debt
or significant liabilities, we believe BTCS is a value play for
investors looking for diversified exposure to cryptocurrency in the
midst of a crypto winter”, added Allen.
“In light of recent news surrounding FTX, we
would like to confirm that BTCS has no exposure to FTX and only 1%
of our Digital Assets are held on exchanges, which limits our
counterparty risk. Our priority continues to be focused on
non-custodial staking where users control and maintain their own
private keys while safeguarding their assets”, stated Michael
Prevoznik, Chief Financial Officer of BTCS.
Industry and
Business HighlightsDuring the
third quarter, the Fed took aggressive measures to control
inflation by raising interest rates again. Market volatility
continues to impact the economy negatively. With an economic
recession looming, we have focused on cost-cutting measures while
continuing to allocate funds to R&D for our integrated
analytics and Staking-as-a-Service business. With interest rates
rising and equity markets underperforming digital assets have
become an increasingly attractive way for investors seeking
alternative solutions to hedge against inflation and further
diversify their portfolios.
Following a challenging first half of 2022, the
cryptocurrency markets saw a rebound during the third quarter, with
Ethereum’s price increasing by 27% compared to only 3% for Bitcoin
with both outperforming the S&P 500, which was down about 5%.
However, crypto prices remain well below early 2022 levels,
indicating we are still in the middle of a “crypto winter.” Despite
current stock and crypto market conditions, there are several signs
of optimism in the crypto segment. Blockchain and Web 3 application
development and the number of users has seen exponential growth
during 2022. Additionally, traditional institutions have
demonstrated an increasingly rapid embrace of crypto, as headlined
by Nasdaq’s announcement of its new digital assets custody
business, as well as several other recent announcements.
In September 2022, the success of the Ethereum
merge was a catalyst in the industry for other blockchain network
upgrades. The transition from proof-of-work to proof-of-stake was
smooth and, according to Bitwise Asset Management, resulted in a
significant drop in Ethereum’s carbon footprint by more than 99%,
cutting global energy consumption by 0.2% post-merge. The Merge
also brought industry awareness, highlighted segment growth
opportunities, and emphasized the benefits of proof-of-stake
consensus mechanisms for blockchain protocols. The Ethereum Merge
and continued growth in crypto adoption are positive indicators for
the value of our Digital Assets, especially Ethereum, which
continues to be our largest holding and source of staking recurring
revenue.
BTCS has long believed in the innovative and
disruptive power of next generation blockchains and continues to
focus on expanding our blockchain infrastructure and staking
operations to secure and support the various protocols we’ve
invested in thus far.
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 in late-stage development of 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. The Company
plans to further broaden its suite of performance-tracking tools,
add additional centralized and decentralized exchanges, 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 opportunity
to build value for our shareholders and the large opportunity from
staking. 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 which
cause us to revise our business model, 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 CareyVP, Investor
Relationsir@btcs.com
Public Relations: Mercy Chikoworem.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
|
|
|
|
|
|
|
|
|
September
30, |
|
|
December
31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
2,888,998 |
|
|
$ |
1,400,867 |
|
Digital
assets/currencies |
|
|
36,561 |
|
|
|
3,117,360 |
|
Staked
digital assets/currencies |
|
|
2,586,575 |
|
|
|
623,754 |
|
Prepaid
expense |
|
|
207,078 |
|
|
|
324,551 |
|
Total
current assets |
|
|
5,719,212 |
|
|
|
5,466,532 |
|
|
|
|
|
|
|
|
|
|
Other
assets: |
|
|
|
|
|
|
|
|
Property and
equipment, net |
|
|
12,330 |
|
|
|
9,783 |
|
Staked
digital assets/currencies - long term |
|
|
5,600,122 |
|
|
|
8,625,678 |
|
Total other
assets |
|
|
5,612,452 |
|
|
|
8,635,461 |
|
|
|
|
|
|
|
|
|
|
Total
Assets |
|
$ |
11,331,664 |
|
|
$ |
14,101,993 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity: |
|
|
|
|
|
|
|
|
Accounts
payable and accrued expense |
|
$ |
104,631 |
|
|
$ |
138,716 |
|
Accrued
compensation |
|
|
212,571 |
|
|
|
7,334 |
|
Warrant
liabilities |
|
|
712,500 |
|
|
|
1,852,500 |
|
Total
current liabilities |
|
|
1,029,702 |
|
|
|
1,998,550 |
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common
stock, 97,500,000 shares authorized at $0.001 par value, 13,053,712
and 10,528,212 shares issued and outstanding at September 30, 2022
and December 31, 2021, respectively |
|
|
13,055 |
|
|
|
10,529 |
|
Additional
paid in capital |
|
|
160,374,041 |
|
|
|
147,682,384 |
|
Accumulated
deficit |
|
|
(150,085,134 |
) |
|
|
(135,589,470 |
) |
Total
stockholders' equity |
|
|
10,301,962 |
|
|
|
12,103,443 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity |
|
$ |
11,331,664 |
|
|
$ |
14,101,993 |
|
BTCS Inc.Statements of
Operations(Unaudited)
|
|
For the Three
Months Ended |
|
|
For the Nine
Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Validator revenue (net of fees) |
|
$ |
344,196 |
|
|
$ |
323,376 |
|
|
$ |
1,421,560 |
|
|
$ |
776,399 |
|
Total revenues |
|
|
344,196 |
|
|
|
323,376 |
|
|
|
1,421,560 |
|
|
|
776,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Validator expense |
|
|
82,203 |
|
|
|
71,690 |
|
|
|
313,972 |
|
|
|
145,935 |
|
Gross profit |
|
|
261,993 |
|
|
|
251,686 |
|
|
|
1,107,588 |
|
|
|
630,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
$ |
432,956 |
|
|
$ |
282,558 |
|
|
$ |
1,595,296 |
|
|
$ |
1,149,506 |
|
Research and development |
|
|
126,857 |
|
|
|
273,909 |
|
|
|
448,579 |
|
|
|
602,178 |
|
Compensation and related expenses |
|
|
669,792 |
|
|
|
4,747,106 |
|
|
|
2,731,713 |
|
|
|
13,788,556 |
|
Marketing |
|
|
8,765 |
|
|
|
7,559 |
|
|
|
74,249 |
|
|
|
10,345 |
|
Impairment loss on digital assets/currencies |
|
|
145,247 |
|
|
|
208,647 |
|
|
|
12,347,472 |
|
|
|
3,777,785 |
|
Realized gains on digital asset/currency transactions |
|
|
(20,126 |
) |
|
|
- |
|
|
|
(489,682 |
) |
|
|
(3,054,418 |
) |
Total operating expenses |
|
|
1,363,491 |
|
|
|
5,519,779 |
|
|
|
16,707,627 |
|
|
|
16,273,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
- |
|
|
|
(58,521 |
) |
|
|
- |
|
|
|
(172,603 |
) |
Amortization on debt discount |
|
|
- |
|
|
|
(581,973 |
) |
|
|
- |
|
|
|
(1,716,744 |
) |
Change in fair value of warrant liabilities |
|
|
71,250 |
|
|
|
2,066,250 |
|
|
|
1,140,000 |
|
|
|
2,066,250 |
|
Distributions to warrant holders |
|
|
- |
|
|
|
- |
|
|
|
(35,625 |
) |
|
|
- |
|
Total other income (expenses) |
|
|
71,250 |
|
|
|
1,425,756 |
|
|
|
1,104,375 |
|
|
|
176,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(1,030,248 |
) |
|
$ |
(3,842,337 |
) |
|
$ |
(14,495,664 |
) |
|
$ |
(15,466,585 |
) |
Deemed
dividends related to amortization of beneficial conversion feature
of Series C-2 convertible preferred stock |
|
|
- |
|
|
|
(13,188 |
) |
|
|
- |
|
|
|
(45,541 |
) |
Deemed
dividends related to recognition of downround adjustment to
conversion amount for Series C-2 convertible preferred stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5,020,883 |
) |
Net loss
attributable to common stockholders |
|
$ |
(1,030,248 |
) |
|
$ |
(3,855,525 |
) |
|
$ |
(14,495,664 |
) |
|
$ |
(20,533,009 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
per share attributable to common stockholders, basic and
diluted |
|
$ |
(0.08 |
) |
|
$ |
(0.59 |
) |
|
$ |
(1.15 |
) |
|
$ |
(3.63 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding, basic and
diluted |
|
|
12,952,645 |
|
|
|
6,518,645 |
|
|
|
12,616,805 |
|
|
|
5,660,966 |
|
BTCS Inc. Statements of Cash
Flows(Unaudited)
|
|
For the Nine
Months Ended |
|
|
|
September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
Net Cash
flows used from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(14,495,664 |
) |
|
$ |
(15,466,585 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
Depreciation expense |
|
|
2,862 |
|
|
|
443 |
|
Amortization on debt discount |
|
|
- |
|
|
|
1,716,744 |
|
Stock-based compensation |
|
|
2,233,608 |
|
|
|
13,892,884 |
|
Stock-based compensation in connection with issuance of Series C-2
convertible preferred stock |
|
|
- |
|
|
|
179,277 |
|
Validator revenue |
|
|
(1,421,560 |
) |
|
|
(776,399 |
) |
Blockchain network fees (non-cash) |
|
|
1,321 |
|
|
|
- |
|
Change in fair value of warrant liabilities |
|
|
(1,140,000 |
) |
|
|
(2,066,250 |
) |
Purchase of non-productive digital assets/currencies |
|
|
- |
|
|
|
(5,761,550 |
) |
Sale of non-productive digital assets/currencies |
|
|
2,547,322 |
|
|
|
4,274,491 |
|
Realized gain on digital assets/currencies transactions |
|
|
(489,682 |
) |
|
|
(3,054,418 |
) |
Impairment loss on digital assets/currencies |
|
|
12,347,472 |
|
|
|
3,777,785 |
|
Changes in
operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
117,473 |
|
|
|
(440,514 |
) |
Accounts payable and accrued expenses |
|
|
(37,842 |
) |
|
|
168,546 |
|
Accrued compensation |
|
|
205,237 |
|
|
|
(348,875 |
) |
Net cash
used in operating activities |
|
|
(129,453 |
) |
|
|
(3,904,421 |
) |
|
|
|
|
|
|
|
|
|
Net cash
used in investing activities: |
|
|
|
|
|
|
|
|
Purchase of productive digital assets/currencies for
validating |
|
|
(9,274,055 |
) |
|
|
(9,462,279 |
) |
Sale of productive digital assets/currencies |
|
|
432,716 |
|
|
|
- |
|
Purchase of property and equipment |
|
|
(5,408 |
) |
|
|
(4,543 |
) |
Net cash
used in investing activities |
|
|
(8,846,747 |
) |
|
|
(9,466,822 |
) |
|
|
|
|
|
|
|
|
|
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 |
|
|
- |
|
|
|
3,014,005 |
|
Net proceeds from issuance common stock/ At-the-market
offering |
|
|
11,095,132 |
|
|
|
219,746 |
|
Payment to convertible notes principle |
|
|
- |
|
|
|
(1,092,712 |
) |
Net cash
provided by financing activities |
|
|
10,464,331 |
|
|
|
13,506,039 |
|
|
|
|
|
|
|
|
|
|
Net increase
in cash |
|
|
1,488,131 |
|
|
|
134,796 |
|
Cash, beginning of period |
|
|
1,400,867 |
|
|
|
524,135 |
|
Cash, end of period |
|
$ |
2,888,998 |
|
|
$ |
658,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
- |
|
|
$ |
45,541 |
|
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 |
|
$ |
- |
|
|
$ |
20 |
|
Conversion of Series C-2 Preferred Stock |
|
$ |
- |
|
|
$ |
6,216,289 |
|
Beneficial conversion feature of Series C-2 convertible preferred
stock |
|
$ |
- |
|
|
$ |
129,412 |
|
Beneficial conversion features associated with convertible notes
payable |
|
$ |
- |
|
|
$ |
1,000,000 |
|
BTCS (NASDAQ:BTCS)
Historical Stock Chart
From Apr 2024 to May 2024
BTCS (NASDAQ:BTCS)
Historical Stock Chart
From May 2023 to May 2024