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Stockholders’ Equity (Deficit)
 12 Months Ended
Dec. 31, 2023
Equity [Abstract]  
Stockholders’ Equity (Deficit)

Note 6 - Stockholders’ Equity (Deficit)

 

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 year ended December 31, 2023, the Company sold a total of 1,707,621 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $2,790,000 at an average selling price of $1.63 per share, resulting in net proceeds of approximately $2,688,000 after deducting commissions and other transaction costs.

 

During the year ended December 31, 2022, the Company sold a total of 2,172,336 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $11,487,000 at an average selling price of $5.29 per share, resulting in net proceeds of approximately $11,126,000 after deducting commissions and other transaction costs.

 

Share Based Payments

 

Effective January 19, 2023, The Board approved the issuance of $50,000 of common stock to each independent director. The shares will be issued in four equal installments ($12,500 each) 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 year ended December 31, 2023, 122,124 shares of common stock were issued to independent directors.

 

For the years ended December 31, 2023 and 2022, 354,713 and 284,722 shares of common stock were issued to officers related to payment of accrued bonus compensation, respectively.

 

Issuance of Restricted Stock to Service Providers

 

During the year ended December 31, 2022, the Company issued to one service provider a total of approximately 12,500 shares of restricted Common Stock, representing a total fair value of $59,000.

 

 

BTCS Inc.

NOTES TO FINANCIAL STATEMENTS

 

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). 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 year ended December 31, 2023, the Company granted 85,000 stock options with a weighted average exercise price of $1.29 to non-executive employees.

 

During the year ended December 31, 2022, the Company granted 50,000 stock options with a weighted average exercise price of $1.51 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 years ended December 31, 2023 and 2022 for the Black-Scholes formula:

 

  

Year Ended

December 31,

 
   2023   2022 
Exercise price  $1.29   $1.51 
Term (years)   5.00    5.00 
Expected stock price volatility   151.32%   165.79%
Risk-free rate of interest   3.97%   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.

 

A summary of options activity under the Company’s stock option plan for the years ended December 31, 2023 and 2022 are presented below:

 

   Number of Shares   Weighted Average Exercise Price   Total Intrinsic Value   Weighted Average Remaining Contractual Life (in years) 
Outstanding as of December 31, 2021   1,235,000   $2.14   $1,488,000    4.0 
Employee options granted   50,000    1.51    -    1.4 
Employee options expired   (100,000)   1.90    -    - 
Employee options forfeited   (35,000)   1.50    -    - 
Outstanding as of December 31, 2022   1,150,000   $2.15   $-    3.3 
Options vested and exercisable as of December 31, 2022   1,135,000   $2.16   $-    3.3 

 

   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   85,000    1.29    -    5.0 
Employee options forfeited   (35,000)   1.02    11,100    - 
Outstanding as of December 31, 2023   1,200,000   $2.12   $8,700    2.4 
Options vested and exercisable as of December 31, 2023   1,145,000   $2.15   $-    2.3 

 

 

BTCS Inc.

NOTES TO FINANCIAL STATEMENTS

 

RSUs

 

On February 22, 2022, the Company granted 45,767 restricted stock units to the Company’s Chief Technology Officer. The restricted stock units are to vest over a five-year period as follows: 20% of the 45,767 restricted stock units vested on January 1, 2023, and the remaining 80% are to vest annually over the following four years with vesting occurring on December 31st of each respective year. The grant date fair value of restricted stock units was approximately $200,000.

 

Effective January 2, 2022, the Board ratified grants of RSUs to each independent director. David Garrity, Carol Van Cleef and Charles Lee were each granted 95,544 restricted stock units (the “2022 Board Grants”). The 2022 Board Grants vest in four equal installments at the end of each calendar quarter in 2022. As of December 31, 2022, all 95,544 of the restricted stock units vested with a total fair value of approximately $300,000.

 

Effective January 2, 2022, the Board, as approved by its Compensation Committee, ratified grants of RSUs to the Company’s executive officers as part of a long-term incentive (“LTI”) plan, 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 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:

 

         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.

 

 

BTCS Inc.

NOTES TO FINANCIAL STATEMENTS

 

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 valued to be approximately $83,000 and 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 years ended December 31, 2023 and 2022 for the Monte-Carlo simulation:

 

   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 5-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 prices are determined by taking the vesting Market Cap criteria divided by the shares outstanding as of the valuation dates.

 

Effective September 30, 2022, Mr. David Garrity resigned as a director of BTCS, Inc. The Board agreed to fully vest Mr. Garrity’s remaining unvested restricted stock units (7,962 shares) and pay Mr. Garrity approximately $5,600, which represents the remaining unpaid 2022 director fees as of the date of resignation.

 

On October 1, 2022, the Company granted a total of 7,962 restricted stock units to Melanie Pump, a non-employee director of the Company, which vested on December 31, 2023 with a total fair value of approximately $12,000.

 

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. The fair value of the RSUs on the grant date was approximately $16,000, each.

 

A summary of the Company’s restricted stock units granted under the 2021 Plan during the years ended December 31, 2023 and 2022 are as follows:

 

   Number of Restricted Stock Units   Weighted Average Grant Date Fair Value 
Nonvested at December 31, 2022   29,363   $5.96 
Granted   1,670,569    3.28 
Vested   (109,379)   2.29 
Nonvested at December 31, 2022   1,590,553   $3.34 
Granted   50,000    0.63 
Vested   (34,180)   3.55 
Nonvested at December 31, 2023   1,606,373   $3.25 

 

 

BTCS Inc.

NOTES TO FINANCIAL STATEMENTS

 

Stock-based Compensation

 

Stock-based compensation expenses are recorded as a part of selling, general and administrative expenses, compensation expenses and cost of revenues. Stock-based compensation expenses for the years ended December 31, 2023 and 2022 were as follows:

 

   2023   2022 
   For the Year Ended December 31, 
   2023   2022 
Employee bonus stock awards  $675,061   $1,152,525 
Employee stock option awards   11,726    97,142 
Employee restricted stock unit awards   956,526    1,575,475 
Non-employee restricted stock awards   195,784    225,207 
Stock-based compensation  $1,839,097   $3,050,349 

 

Stock Purchase Warrants

 

The following is a summary of warrant activity for the years ended December 31, 2023 and 2022:

 

   Number of Warrants 
Outstanding as of December 31, 2021   962,794 
Expiration of warrants   (50,294)
Outstanding as of December 31, 2022   912,500 
Expiration of warrants   (200,000)
Outstanding as of December 31, 2023   712,500 

 

 

BTCS Inc.

NOTES TO FINANCIAL STATEMENTS