BTCS Inc. (Nasdaq: BTCS) (“BTCS” or the “Company”), a blockchain technology-focused company, today announced its results for the first quarter ended March 31, 2022.

Q1 2022 Highlights

  • Expanding blockchain infrastructure operations drove Q1 revenue up 29% over Q4 2021 and up 776% over Q1 2021 to $0.6 million
  • 76% gross margins for the three months ended March 31, 2022 compared to 79% and 72% for Q1 2021 and Q4 2021 respectively
  • $5.8 million GAAP net loss, primarily triggered by non-cash charges compared to $11.6 million GAAP net loss for Q1 2021
  • Stockholders’ equity increased 44% to $17.4 million at March 31, 2022, up $5.3 million from December 31, 2021
  • Fair market value of digital assets increased to approximately $41.3 million as of March 31, 2022, up 13% compared to December 31, 2021, and up 105% versus March 31, 2021
  • Cash and fair market value of digital assets $43.6 million or $3.45 per share as of March 31, 2022
  • Declared a special one-time $0.05 per share dividend payable in Bitcoin at election of shareholders, becoming the first U.S. public company to issue such a dividend
  • Strengthened leadership team with the addition of Chief Technology Officer

Blockchain Infrastructure Update

BTCS continued to expand its blockchain infrastructure operations in the first quarter of 2022, announcing the addition of Algorand, Kusama, Solana, Polkadot, and Terra. Subsequent to the quarter end, the Company announced the addition of Polygon and Kava to its infrastructure operations. A primary driver of revenue growth, the Company’s blockchain infrastructure operations are a high profit margin component of its business model, and margins are expected to improve as operations scale. Research and development related to the technical work needed to run additional validator nodes on new blockchains remains ongoing.

Management Commentary

“We continued to grow our blockchain infrastructure segment in Q1 and anticipate ongoing growth in the quarters ahead as we add new blockchains to our expanding operations,” stated Charles Allen, Chief Executive Officer of BTCS. “As a high-margin component of our business, our blockchain infrastructure operations were a key driver behind the 76% gross margins achieved in Q1. The fact that we were able to grow high-margin revenues despite the backdrop of extreme volatility in the crypto markets is a strong testament to the strength of our strategy, and I believe we are in a great position to build on this success as we continue to capitalize on opportunities to create new value for shareholders.”

“Our ability to effectively execute our strategy during Q1 was integral to our ability to accomplish yet another first for a U.S. public company– the declaration and payment of a ‘Bividend’, a dividend that was paid in Bitcoin to shareholders of record who elected as such,” added Allen. “Innovation is the cornerstone of the blockchain industry and a foundational component of our success.”

“While expansion of our blockchain infrastructure operations is the key focus during Q1 and the coming quarters, our team is advancing the development of our Digital Asset Platform toward full commercial launch during the quarter,” added Michal Handerhan, COO of BTCS. “With the February appointment of our new Chief Technology Officer, Manish Paranjape, who has been involved in the development of our Digital Asset Platform since early 2021, we believe ongoing development will further accelerate, enabling us to complete the current Beta phase and enter the market in the second half of this year.”

“As crypto market participants, we are well aware of its current turmoil. Market cycles are inevitable, however, the way they take shape is always different. The overall cycles repeat with pullbacks every ten years or so, and smaller slumps in markets appear much more frequently – Nasdaq retraced during the Dot Com Era and again during the Great Recession in 2007-2008. Crypto cycles have tended to be more frequent and recover more quickly than stock market cycles. Despite the recent turmoil our cash and crypto positions remain strong, and we believe we’re well positioned to not only weather the storm but thrive in the future” added Allen.

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 stake pool 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 belief regarding expected improvement in margins, anticipated growth in our operations, continuing to capitalize on opportunities to create shareholder value, launching our Digital Asset Platform and the acceleration of such launch during the second half of 2022, our ability to thrive in this market. 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, 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:Dave GentryRedChip Companies, Inc.Phone: (407) 491-4498BTCS@redchip.com

Public Relations: Mercy Chikoworem.chikowore@btcs.com

GAAP Financials

The tables below (preceding the section titled “Non-GAAP – Financial Measure”) are derived from the Company’s financial statements included in its Form 10-Q filed on May 13, 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 March 31, 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

    March 31,     December 31,  
    2022     2021  
      (Unaudited)          
Assets:                
Current assets:                
Cash   $ 2,245,062     $ 1,400,867  
Digital assets/currencies     2,617,730       3,117,360  
Staked digital assets/currencies     6,601,777       623,754  
Prepaid expense     315,169       324,551  
Total current assets     11,779,738       5,466,532  
                 
Other assets:                
Property and equipment, net     11,544       9,783  
Staked digital assets/currencies - long term     8,684,238       8,625,678  
Total other assets     8,695,782       8,635,461  
                 
Total Assets   $ 20,475,520     $ 14,101,993  
                 
Liabilities and Stockholders’ Equity:                
Accounts payable and accrued expense   $ 106,144     $ 138,716  
Accrued compensation     3,209       7,334  
Capital shares payable     75,002       -  
Dividends payable     266,231       -  
Warrant liabilities     2,493,750       1,852,500  
Total current liabilities     2,944,336       1,998,550  
                 
Stockholders’ equity:                
Common stock, 97,500,000 shares authorized at $0.001 par value, 12,616,010 and 10,528,212 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively     12,617       10,529  
Additional paid in capital     158,848,780       147,682,384  
Accumulated deficit     (141,330,213 )     (135,589,470 )
Total stockholders’ equity     17,531,184       12,103,443  
                 
Total Liabilities and Stockholders’ Equity   $ 20,475,520     $ 14,101,993  

BTCS Inc.Statements of Operations(Unaudited)

    For the Three Months Ended  
    March 31,  
    2022     2021  
             
Revenues                
Validator revenue (net of fees)   $ 563,015     $ 72,524  
Total revenues     563,015       72,524  
                 
Cost of revenues                
Validator expense     137,869       14,996  
Gross profit     425,146       57,528  
                 
Operating expenses:                
General and administrative   $ 650,289     $ 553,981  
Research and development     136,718       82,933  
Compensation and related expenses     1,423,896       7,337,679  
Marketing     41,793       1,421  
Total operating expenses     2,252,696       7,976,014  
                 
Other income (expenses):                
Interest expense     -       (54,247 )
Amortization on debt discount     -       (562,096 )
Change in fair value of warrant liabilities     (641,250 )     -  
Distributions to warrant holders     (35,625 )     -  
Impairment loss on digital assets/currencies     (3,307,428 )     (1,301,764 )
Realized gains (loss) on digital asset/currency transactions     71,110       3,054,418  
Total other income (expenses)     (3,913,193 )     1,136,311  
                 
Net loss   $ (5,740,743 )   $ (6,782,175 )
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock     -       (16,176 )
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock     -       (4,822,220 )
Net loss attributable to common stockholders   $ (5,740,743 )   $ (11,620,571 )
                 
Net loss per share attributable to common stockholders, basic and diluted   $ (0.47 )   $ (2.43 )
                 
Weighted average number of common shares outstanding, basic and diluted     12,245,278       4,777,894  

BTCS Inc.Statements of Cash Flows(Unaudited)

    For the Three Months Ended  
    March 31,  
    2022     2021  
             
Net Cash flows used from operating activities:                
Net loss   $ (5,740,743 )   $ (6,782,175 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation expense     797       212  
Amortization on debt discount     -       562,096  
Stock-based compensation     1,289,274       7,539,560  
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock     -       179,277  
Validator revenue     (563,015 )     (72,524 )
Blockchain network fees (non-cash)     1,321          
Change in fair value of warrant liabilities     641,250       -  
Purchase of non-productive digital assets/currencies     -       (5,761,549 )
Sale of non-productive digital assets/currencies     -       4,274,491  
Realized gain on digital assets/currencies transactions     (71,110 )     (3,054,418 )
Impairment loss on digital assets/currencies     3,307,428       1,301,764  
Changes in operating assets and liabilities:                
Prepaid expenses and other current assets     9,382       (421,384 )
Accounts payable and accrued expenses     (36,329 )     42,267  
Accrued compensation     (4,125 )     (348,875 )
Capital shares payable     75,002       -  
Dividends payable - distributions to warrant holders     35,625       -  
Net cash used in operating activities     (1,055,243 )     (2,541,258 )
                 
Net cash used in investing activities:                
Purchase of productive digital assets/currencies for validating     (8,521,726 )     (7,994,887 )
Sale of productive digital assets/currencies     310,149       -  
Purchase of property and equipment     (2,558 )     -  
Net cash used in investing activities     (8,214,135 )     (7,994,887 )
                 
Net cash provided by financing activities:                
Dividend distributions     (400,194 )     -  
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     -       2,014,259  
Net proceeds from issuance common stock/ At-the-market offering     10,513,767       -  
Payment to convertible notes principle     -       -  
Net cash provided by financing activities     10,113,573       13,379,259  
                 
Net increase in cash     844,195       2,843,114  
Cash, beginning of period     1,400,867       524,135  
Cash, end of period   $ 2,245,062     $ 3,367,249  
                 
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   $ -     $ 16,176  
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock   $ -     $ 4,822,220  
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  
Dividends payable   $ 230,606     $ -  

Non-GAAP – Financial Measure

In addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance. We believe that Adjusted EBITDA may be helpful to investors because it provides consistency and comparability with past financial performance and the economic realities of our business. However, Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Among other non-cash and non-recurring items, Adjusted EBITDA excludes stock-based compensation expense (including stock-based compensation issued to service providers), which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

We calculate Adjusted EBITDA as net income (loss), adjusted to exclude, depreciation and amortization, interest expense, change in fair value of warrant liabilities, and stock-based compensation expense (including stock-based compensation issued to service providers). Adjusted EBITDA presented does not include adjustments for impairment of intangible digital assets. Note: In previous disclosures of Adjusted EBTIDA impairment of intangible assets had been included as an adjustment added back.

The table below presents our Adjusted EBITDA reconciled to our net loss, the closest GAAP measure, for the period indicated:

    Three Months Ended March 31,  
    2022     2021  
             
Net income (loss)   $ (5,740,743 )   $ (6,782,175 )
Adjusted to exclude the following:                
Depreciation and amortization     797       562,096  
Interest expense     -       54,247  
Change in fair value of warrant liabilities     641,250       -  
Stock-based compensation     1,364,276       7,281,477  
Adjusted EBITDA     (3,734,420 )     1,115,645  
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