Item
1.01
|
Entry
into a Material Definitive Agreement
|
On
May 13, 2019, BTCS Inc. (the “Company”) entered into an equity line purchase agreement with Cavalry Fund I LP (“Cavalry”)
(the “Purchase Agreement”) pursuant to which Cavalry has agreed to purchase from the Company, at the direction
of the Company and in its sole discretion, up to $10,000,000 of common stock (subject to certain limitations)
from time to time over a 36-month period. In consideration for entering into the $10 million Purchase Agreement, the Company
issued to Cavalry 333,334 shares of common stock as a commitment fee and will issue up to 583,334 shares of common stock pro rata
as Cavalry purchases additional shares.
Concurrently
with the execution of the Purchase Agreement on May 13, 2019, the Company and Cavalry also entered into a registration rights
agreement (the “Registration Rights Agreement”), pursuant to which the Company agreed, among other things, to file
a registration statement (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”),
no later than May 23, 2019 to register for resale by Cavalry under the Securities Act of 1933 (the “Act”), the shares
of common stock that the Company may elect to issue and sell to Cavalry from time to time under the Purchase Agreement. Registration
Rights Agreement provides that in the event the Company is unable to register sufficient shares under the Registration Statement,
the Company will be required to file additional registration statements such that sufficient registered shares are available for
issuance and sale to Cavalry under the Purchase Agreement.
The
Company does not have the right to commence any sales to Cavalry under the Purchase Agreement until each of the conditions set
forth in the Purchase Agreement are satisfied, including the Registration Statement being declared effective by the SEC. Thereafter,
the Company may, from time to time and at its sole discretion, direct Cavalry to purchase shares of the Company’s common
stock during trading hours (“Intraday Puts”) and after trading hours until 7 p.m. New York time (“Aftermarket
Puts”) (either an Intraday Put or an Aftermarket Put may be referred to as a “Put”). The Company may make
multiple Puts each day subject to delivery of the shares associated with prior Puts.
The
number of shares that may be sold under an Intraday Put shall be equal to the total daily trading dollar volume (“Daily
Trading Dollar Volume”) for the trading day prior to the applicable Put date, divided by the Intraday Purchase Price (such
shares being the “Intraday Put Share Limit”). The “Intraday Purchase Price” means the lower of: (i) 94%
of the lowest sale price on the trading day prior to the applicable Put date, and (ii) 94% of the arithmetic average of the three
lowest closing prices for the Company’s common stock during the 12 consecutive trading days ending on the Trading Day immediately
preceding such Put date.
The
number of shares that may be sold under an Aftermarket Put shall be equal to the Daily Trading Dollar Volume, divided by the Aftermarket
Put Price (such shares being the “Aftermarket Put Share Limit”). The “Aftermarket Put Price” means: the
lower of: (i) the lowest Sale Price on the applicable Put date, and (ii) the arithmetic average of the three lowest closing prices
for the Company’s common stock during the 12 consecutive trading days ending on the trading day immediately preceding such
Put date.
Upon mutual agreement
of Cavalry and the Company and subject to written confirmation by Cavalry that such agreement will not result in violation of
the 4.99% beneficial ownership limitation, the Company may increase the Intraday Put Share Limit or the Aftermarket Put Share
Limit, as applicable, for any Put to include an amount equal to $2,000,000 in Put shares at the applicable Purchase Price, in
each case in addition to the applicable Intraday Put Share Limit or Aftermarket Put Share Limit. In all instances, the Company
may not sell shares of its common stock to Cavalry under the Purchase Agreement if it would result in Cavalry beneficially owning
more than 4.99% of the Company’s common stock or if the closing price the trading day immediately preceding the Put date is
below $0.005.
The
net proceeds under the Purchase Agreement to the Company will depend on the frequency and prices at which the Company sells shares
of its stock to Cavalry. The Company expects that any proceeds received by the Company from such sales to Cavalry under the Purchase
Agreement will be used for but not be limited to general corporate purposes, including compensating the Company’s management.
This
Current Report on Form 8-K shall not constitute an offer to sell or a solicitation of an offer to buy any shares of common stock,
nor shall there be any sale of shares of common stock in any state or jurisdiction in which such an offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.
The
foregoing descriptions of the Purchase Agreement and Registration Rights Agreement are qualified in their entirety by reference
to the full text of the Purchase Agreement and the Registration Rights Agreement, copies of which are attached hereto as
Exhibit
10.1
and
10.2
, respectively, and each of which is incorporated herein in its entirety by reference.