Item
1.01 Entry into a Material Definitive Agreement.
On
May 25, 2017 BTCS, Inc. (the “
Company
”) raised $1 million in cash from four institutional investors in exchange
for the issuance of $1,111,111 of a new class of Series C Convertible Preferred Stock (“
Series C
”) and three
types of warrants as described below. The 79,368 Series C shares are initially convertible into 15,873,600 shares of common stock.
The Series C is convertible at $0.7 per share or approximately $0.063 per share after giving effect to the additional $111,1111,
subject to reduction in the event of future sales of equity securities and common stock equivalents (with customary exemptions)
at a lower price. The Company is subject to a number of customary covenants and a restriction on the incurrence of indebtedness
for one year. Within 120 days, the Company has agreed to file a registration statement covering the common stock issuable upon
exercise of the registrable securities described below. The registration statement will cover 47,302,176 shares of common underlying
the Series A Warrants, Additional Warrants, and Bonus Warrants, which warrants are described below:
15,873,600
Series A Warrants exercisable at $0.085 per share, subject to adjustment, over a five-year period;
15,714,288
Additional Warrants exercisable at $0.085 per share, subject to adjustment, over a period which is the earlier of (i) one-year
after the effective date of a registration statement covering the warrant shares, or (ii) three years from the date of issuance.
The Additional Warrants are callable by the Company for nominal consideration if the common stock trades above $0.17 per share
and the daily volume is more than $50,000 for at least 20 trading days;
15,714,288
Bonus Warrants exercisable at $0.17 per share, over a three-year period. The Bonus Warrants are also callable for nominal consideration
but the threshold price is more than $0.30 per share.
The
Series A Warrants and Additional Warrants have price protection in the event of future lower priced issuances.
The
following table details the Company’s capitalization after giving effect to the this financing.
|
Class of Security
|
|
Shares of Common Stock as Converted
|
|
|
Common Stock Issued and Outstanding
|
|
|
65,954,894
|
|
|
Series B Preferred Stock (1,068,147 shares at a 1:200 conversion ratio)
|
|
|
213,629,400
|
|
|
Series C Preferred Stock (79,368 shares at a 1:200 conversion ratio)
|
|
|
15,873,016
|
|
|
Warrants to Purchase Common Stock
|
|
|
133,231,343
|
|
|
Total Shares Fully Diluted
|
|
|
428,688,653
|
|
The
133,231,343 warrants include: (i) 47,302,176 warrants issued in connection with this financing, (ii) 493,950 warrants with a strike
price of $0.025 and an expiration date of January 21, 2020, and (iii) 85,435,786 warrants with a strike price of $0.032 and an
expiration date of April 16, 2020.
The
Company expects to use the proceeds for working capital including payment of liabilities. Of the liabilities, the Company’s
management will receive approximately $377,000 representing accrued and unpaid salaries for 2016 and 2017. Provided; however,
that the Company’s management will be unable to receive any payments towards accrued and unpaid salaries in excess of $50,000
in total for 2017 for each of its two officers, until such time as the Company has filed its Form 10-K for the year ended December
31, 2016 (the “
10K
”). Additionally, the Company owes $187,330 to investors in the Company’s April 2017
financing pursuant to the amendment to the subscription agreement and as a condition to the Series C financing no payments can
be made until the Company has filed its 10K.
The foregoing description
of the Series C, warrants, and Securities Purchase Agreement does not purport to be complete and is qualified in
its entirety by reference to the provisions of such agreements, the forms of which are filed as Exhibit 10.1, Exhibit 10.2, Exhibit
10.3, Exhibit 10.4 and Exhibit 10.6 respectively, to this Current Report on Form 8-K.