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Stockholders’ Equity | 9 Months Ended
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Sep. 30, 2023
Equity [Abstract] |
Stockholders’ Equity | Note 5 – Stockholders’ Equity Common Stock The Company received shareholder approval on July 11, 2023 to amend our Articles of Incorporation to increase the number of authorized shares of common stock from 97,500,000 shares to 975,000,000. On July 12, 2023, the Company filed a Certificate of Amendment to the Articles of Incorporation to effectuate the increase of our authorized shares of common stock to 975,000,000. At-The-Market Offering Agreement On September 14, 2021, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as agent (“H.C. Wainwright”), pursuant to which the Company may offer and sell, from time-to-time through H.C. Wainwright, shares of the Company’s Common Stock having an aggregate offering price of up to $98,767,500 (the “Shares”). The Company will pay H.C. Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares. During the nine months ended September 30, 2023, the Company sold a total of 803,054 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $1,161,000 at an average selling price of $1.45 per share, resulting in net proceeds of approximately $1,114,000 after deducting commissions and other transaction costs. Share Based Payments Effective January 19, 2023, The Board of Directors of the Company approved the issuance of $50,000 of common stock to each independent director. The shares will be issued in four equal installments ($12,500) at the end of each calendar quarter beginning March 31st, subject to continued service on each applicable issuance date. The number of shares issuable will be based on the closing price of the Company’s common stock on the last trading day prior to the end of the applicable calendar quarter. For the nine months ended September 30, 2023, 99,117 shares of common stock were issued to independent directors. For the nine months ended September 30, 2023, 410,317 shares of common stock were issued to officers related to payment of 2022 accrued bonus compensation. Preferred Stock Series V Effective January 27, 2023, the Board approved the issuance of a newly designated Series V Preferred Stock (“Series V”) on a one-for-one basis to the Company’s shareholders (including restricted stock unit holders and warrant holders). The distribution of Series V shares was approved and completed on June 2, 2023 to shareholders as of the record date of May 12, 2023. The Series V: (i) is non-convertible, (ii) has a 20% liquidation preference over the shares of common stock, (iii) is non-voting and (iv) has certain rights to dividends and distributions (at the discretion of the Board of Directors). A total of 14,542,803 shares of Series V Preferred Stock were distributed to shareholders on June 2, 2023. The Series V is listed to trade on Upstream, the trading app for digital securities and NFTs powered by Horizon Fintex and MERJ Exchange Limited, under the ticker symbol BTCSP. The fair value of the Preferred stock as of the record date, May 12, 2023, amounted to approximately $2,560,000. The Company used a probability valuation model to determine the fair value of the preferred stock. 2021 Equity Incentive Plan The Company’s 2021 Equity Incentive Plan (the “2021 Plan”) was effective on January 1, 2021 and approved by shareholders on March 31, 2021 and amended on June 13, 2022. The Company received shareholder approval on July 11, 2023 to increase the authorized amount under the 2021 Plan from 7,000,000 shares to 12,000,000 shares. Options During the nine months ended September 30, 2023, the Company granted 35,000 stock options with a weighted average exercise price of $0.81 to non-executive employees. The following weighted-average assumptions were used to estimate the fair value of options granted on the deemed grant date during the nine months ended September 30, 2023 and 2022 for both the Black-Scholes formula: Schedule of Weighted-Average Assumptions Used to Estimate Fair Value
|  | Nine Months Ended September 30, |
|  | 2023 |  |  | 2022 |
Exercise price |  | $ | 0.81 |  |  | $ | 1.51 |
Term (years) |  |  | 5.00 |  |  |  | 5.00 |
Expected stock price volatility |  |  | 151.6 | % |  |  | 165.8 | %
Risk-free rate of interest |  |  | 4.15 | % |  |  | 2.77 | %
Expected Volatility: The Company uses historical volatility as it provides a reasonable estimate of the expected volatility. Historical volatility is based on the most recent volatility of the stock price over a period of time equivalent to the expected term of the option. Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. treasury zero-coupon yield curve in effect at the time of grant for the expected term of the option. Expected Term: The Company’s expected term represents the weighted-average period that the Company’s stock options are expected to be outstanding. The expected term is based on the expected time to post-vesting exercise of options by employees. The Company uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise patterns. For awards vesting upon the achievement of the market conditions which were met at the date of grant, compensation cost measured on the date of grant was immediately recognized. For awards vesting upon the achievement of the market conditions which were not met at the date of grant, compensation cost measured on the grant date will be recognized on a straight-line basis over the vesting period based on estimation using a Monte-Carlo simulation. A summary of option activity under the Company’s stock option plan for nine months ended September 30, 2023 is presented below: Summary of Option Activity
|  | Number of Shares |  |  | Weighted Average Exercise Price |  |  | Total Intrinsic Value |  |  | Weighted Average Remaining Contractual Life (in years) |
Outstanding as of December 31, 2022 |  |  | 1,150,000 |  |  | $ | 2.15 |  |  | $ | - |  |  |  | 3.3 |
Employee options granted |  |  | 35,000 |  |  |  | 0.81 |  |  |  | - |  |  |  | 4.9 |
Employee options forfeited |  |  | (35,000 | ) |  |  | 1.02 |  |  |  | 11,100 |  |  |  | - |
Outstanding as of September 30, 2023 |  |  | 1,150,000 |  |  | $ | 2.14 |  |  | $ | - |  |  |  | 2.5 |
Options vested and exercisable as of September 30, 2023 |  |  | 1,135,000 |  |  | $ | 2.16 |  |  | $ | - |  |  |  | 2.5 |
RSUs Effective January 2, 2022, the Board of Directors of the Company ratified the following arrangements approved by its Compensation Committee: The Company’s executive officers were granted RSUs as part of a long-term incentive plan (“LTI”), with vesting terms set for when the Company’s market capitalization reaches and sustains a market capitalization for 30 consecutive days above four defined market capitalization thresholds of $100 million, $150 million, $200 million and $400 million. Effective February 22, 2022, upon appointment of Manish Paranjape as Chief Technology Officer of the Company, Mr. Paranjape was also granted RSUs as part of the LTI plan, with consistent vesting terms set for when the Company’s market capitalization above the same four defined market capitalization thresholds. Effective January 1, 2023 (the “LTI RSU Amendment Date”), upon recommendation of the Compensation Committee of the Board of Directors approved an amendment to the LTI plan, whereby the market capitalization threshold targets were lowered to $50 million, $100 million, $150 million, and $300 million. The RSUs granted to each executive employee are as follows: Schedule of Restricted Stock Units
|  |  |  |  |  | Total |  |  | Market Cap Vesting Thresholds |
Officer Name |  | Title |  | Grant Date |  | RSUs Granted |  |  | $ 50 million |  |  | $ 100 million |  |  | $ 150 million |  |  | $ 300 million |
Charles Allen |  | Chief Executive Officer |  | 1/2/2022 |  |  | 694,444 |  |  |  | 173,611 |  |  |  | 173,611 |  |  |  | 173,611 |  |  |  | 173,611 |
Michal Handerhan |  | Chief Operations Officer |  | 1/2/2022 |  |  | 444,444 |  |  |  | 111,111 |  |  |  | 111,111 |  |  |  | 111,111 |  |  |  | 111,111 |
Michael Prevoznik |  | Chief Financial Officer |  | 1/2/2022 |  |  | 222,224 |  |  |  | 55,556 |  |  |  | 55,556 |  |  |  | 55,556 |  |  |  | 55,556 |
Manish Paranjape |  | Chief Technology Officer |  | 2/22/2022 |  |  | 160,184 |  |  |  | 40,046 |  |  |  | 40,046 |  |  |  | 40,046 |  |  |  | 40,046 |
|  |  |  |  |  |  | 1,521,296 |  |  |  | 380,324 |  |  |  | 380,324 |  |  |  | 380,324 |  |  |  | 380,324 |
To the extent any market capitalization targets set forth above for Mr. Prevoznik and Mr. Paranjape are achieved, the RSUs will also be subject to the following five-year vesting schedule: 20% of the LTI RSUs which have met a market capitalization criteria will vest on the one-year anniversary of the grant date, and the remaining 80% of the LTI RSUs which have met a market capitalization criteria will vest annually on each subsequent calendar year-end date over the four years following the one year anniversary of the grant date. For awards vesting upon the achievement of a service condition, compensation cost measured on the grant date will be recognized on a straight-line basis over the vesting period. Stock-based compensation expense for the market-based restricted stock units with explicit service conditions is recognized on a straight-line basis over the longer of the derived service period or the explicit service period, regardless of whether the market condition is satisfied. However, in the event that the explicit service period is not met, previously recognized compensation cost would be reversed. Market-based restricted stock units subject to market-based performance targets require achievement of the performance target as well as a service condition in order for these RSUs to vest. The Company estimates the fair value of market-based RSUs as of the grant date and expected derived term using a Monte Carlo simulation that incorporates pricing inputs covering the period from the grant date through the end of the derived service period. As of the LTI RSU Amendment Date, the Company determined the pre-modification and post-modification estimated fair value of the LTI RSUs accounting for the amended market cap criteria. The increase in fair value of the LTI RSUs attributable to the modification was added to the related unrecognized compensation expense in accordance with ASC 718 – Share-Based Compensation, whereby any previously recognized compensation cost that has not vested as of the modification date should be adjusted to reflect the new fair value of the equity awards on the date of the modification. The following weighted-average assumptions were used to estimate the fair value of options granted during the nine months ended September 30, 2023 and 2022 for the Monte-Carlo simulation: Schedule of Weighted-Average Assumptions Used to Estimate Fair Value
|  | Valuation Dates |
|  | January 1, 2023 (Modification) |  |  | January 2, 2022 (Original Issuance) |
Vesting Hurdle Price |  | $ | 3.81 - $30.52 |  |  | $ | 8.07 - $36.99 |
Term (years) |  |  | 4.00 |  |  |  | 5.00 |
Expected stock price volatility |  |  | 97.30 | % |  |  | 103.72 | %
Risk-free rate of interest |  |  | 4.10 | % |  |  | 1.32 | %
Expected Volatility: The Company uses historical volatility as it provides a reasonable estimate of the expected volatility. Historical volatility is based on the most recent volatility of the stock price over a period of time equivalent to the expected term of the RSUs. Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. treasury zero-coupon yield curve in effect at the time of grant for the expected term of the RSUs. Expected Term: The Company’s expected term represents the weighted-average period that the Company’s RSUs are expected to be outstanding. The expected term is based on the stipulated five-year period from the grant date until the market-based criteria are achieved. If the market-based criteria are not achieved within the five-year period from the grant date, the RSUs will not vest and shall expire. Vesting Hurdle Price: The vesting hurdle price is determined as the average of the vesting Market Cap criteria divided by the shares outstanding as of the valuation dates. On December 9, 2022, upon recommendation of the Compensation Committee, the Board of Directors approved the grant of 25,000 RSUs to Mr. Prevoznik and Mr. Paranjape each, effective January 1, 2023, which vest annually over a five-year period with the first vesting date being on the one-year anniversary of the execution date of the effective grant date, subject to continued employment on each applicable vesting date. A summary of the Company’s restricted stock units granted under the 2021 Plan during the nine months ended September 30, 2023 are as follows: Summary of Restricted Stock
|  | Number of Restricted Stock Units |  |  | Weighted Average Grant Day Fair Value |
Nonvested at December 31, 2022 |  |  | 1,590,552 |  |  | $ | 3.34 |
Granted |  |  | 50,000 |  |  |  | 0.63 |
Vested |  |  | (9,153 | ) |  |  | 4.37 |
Forfeited |  |  | - |  |  |  | - |
Nonvested at September 30, 2023 |  |  | 1,631,399 |  |  | $ | 3.25 |
Stock Based Compensation Stock-based compensation expense is recorded as a part of selling, general and administrative expenses, compensation expenses and cost of revenues. Stock-based compensation expense for the three and nine months ended September 30, 2023 and 2022 was as follows: Schedule of Stock-based Compensation Expense
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | For the Three Months Ended September 30, |  |  | For the Nine Months Ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Employee bonus stock awards |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 894,027 |
Employee stock option awards |  |  | 441 |  |  |  | 16,455 |  |  |  | (4,871 | ) |  |  | 98,901 |
Employee restricted stock unit awards |  |  | 230,118 |  |  |  | 434,349 |  |  |  | 726,409 |  |  |  | 1,182,053 |
Non-employee restricted stock awards |  |  | 21,536 |  |  |  | 30,480 |  |  |  | 45,777 |  |  |  | 202,218 |
Stock-based compensation |  | $ | 252,095 |  |  | $ | 481,284 |  |  | $ | 767,315 |  |  | $ | 2,377,199 |

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