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Stockholders’ Equity
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
Stockholders’ Equity

Note 7 – 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.

 

As a result of the SEC’s baby shelf requirements, the Company is currently limited in its sales of Common Stock under the ATM Agreement to one-third of its public float during the 12 calendar months immediately prior to the sale. As of the filing date of this Form 10-Q, the Company would be limited in its sales under the ATM Agreement to approximately $2,618,000 of shares.

 

During the nine months ended September 30, 2024, the Company sold a total of 443,727 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $682,000 at an average selling price of $1.54 per share, resulting in net proceeds of approximately $653,000 after deducting commissions and other transaction costs.

 

Share Based Payments

 

Effective January 19, 2023, the Board approved the annual 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, 2024, 72,315 shares of common stock approximating $98,000 were issued to independent directors related to the quarterly approved issuances.

 

On September 12, 2024, the Board approved a resolution to allow all employees, officers, and directors of the Company to elect to receive up to three months of their cash compensation in advance in the form of restricted common stock. This decision aimed to prevent disruptions in operations that could arise from the need to unstake and sell cryptocurrency to meet upcoming cash requirements. On September 13, 2024, in a collective effort to support the Company’s operations and strategy, all employees, directors, and officers (collectively 9 individuals) accepted part of their compensation as equity. This resulted in the issuance of 380,399 restricted common stock shares approximating $430,000. Of the shares issued, 32,429 were returned to net settle the issuance and pay related taxes, resulting in a net share issuance of 347,970 shares.

 

For the nine months ended September 30, 2024, 414,148 shares of common stock were issued to officers related to payment of 2023 accrued bonus compensation totaling approximately $675,000. Of the shares issued, 43,220 were returned to net settle the issuance and pay related taxes, resulting in a net share issuance of 370,928 shares.

 

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.

 

On September 6, 2024, at the 2024 Annual Meeting the Company’s stockholders voted to approve an amendment to the Certificate of Designation of the Series V to provide the Board the discretion to convert each share of the Series V into one share of Common Stock. The Board has not filed an amendment to the Series V Certificate of Designation nor chosen to convert the Series V.

 

The fair value of the Series V 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.

 

For the year ended December 31, 2023, an additional 25,026 shares of Series V were issued related to the vesting of eligible employee RSUs.

 

 

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

 

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, 2024 and 2023 for the Black-Scholes formula:

Schedule of Weighted-Average Assumptions Used to Estimate Fair Value 

   Nine Months Ended
September 30,		 
   2024   2023 
Exercise price  $1.55   $0.63 
Term (years)   5.00    5.00 
Expected stock price volatility   144.57%   152.84%
Risk-free rate of interest   4.31%   3.99%

 

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, 2024 is presented below:

 

   Number of
Shares		   Weighted
Average
Exercise
Price		   Total
Intrinsic
Value		   Weighted
Average
Remaining
Contractual
Life (in years)		 
Outstanding as of December 31, 2023   1,200,000   $2.12   $8,700    2.4 
Employee options granted   120,000    1.52    -    4.6 
Employee options expired   (17,500)   10.30    -    - 
Outstanding as of September 30, 2024   1,302,500   $1.96   $1,650    1.9 
Options vested and exercisable as of September 30, 2024   1,127,500   $2.03   $-    1.5 

 

RSUs

 

On December 29, 2023, upon recommendation of the Compensation Committee, the Board of BTCS Inc. approved the grant of 50,000 RSUs to each of its executive officers (Mr. Allen, Mr. Handerhan, Mr. Prevoznik and Mr. Paranjape), effective January 1, 2024. The RSUs granted vest annually over a 5-year period (10,000 per year) with the first vesting date of December 31, 2024 and each subsequent vesting on the one-year anniversary of the first vesting date, subject to continued employment on each applicable vesting date.

 

On January 12, 2024, Messrs. Allen and Handerhan both informed the Compensation Committee, that for personal reasons, they each do not accept, and forfeit, the 50,000 restricted stock units granted to them each by the Company effective January 1, 2024. Subsequently, effective January 12, 2024, the Compensation Committee approved the grant of 50,000 additional RSUs to Mr. Prevoznik and Mr. Paranjape, each, which vest annually over a 5-year period (10,000 per year) with the first vesting date of December 31, 2024 and each subsequent vesting on the one-year anniversary of the first vesting 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, 2024 are as follows:

 

   Number of
Restricted
Stock Units		   Weighted
Average Grant
Date Fair Value		 
Nonvested at December 31, 2023   1,606,373   $     3.25 
Granted   300,000    1.71 
Forfeited   (100,000)   1.63 
Nonvested at September 30, 2024   1,806,373   $3.09 

 

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, 2024 and 2023 was as follows:

 

   2024   2023   2024   2023 
   For the Three Months Ended
September 30,		   For the Nine Months Ended
September 30,		 
   2024   2023   2024   2023 
Employee stock option awards  $34,601   $441   $66,594   $(4,871)
Employee restricted stock unit awards   244,409    230,118    725,307    726,409 
Employee share-based salary payments   75,468    -    75,468    - 
Non-employee restricted stock awards   66,929    21,536    127,509    45,777 
Stock-based compensation  $421,407   $252,095   $994,878   $767,315