UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2020
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the transition period from _______________ to
_______________.
Commission
file number: 000-55141
BTCS
Inc.
(Exact
name of registrant as specified in its charter)
|
Nevada |
|
90-1096644 |
|
(State
or other jurisdiction of incorporation or organization) |
|
(I.R.S.
Employer Identification No.) |
|
9466
Georgia Avenue #124
Silver
Spring, MD
|
|
20910 |
|
(Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code (202) 430-6576
(Former
name, former address and former fiscal year, if changed since last
report.)
Securities
registered pursuant to Section 12(b) of the Act: None
|
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
|
|
|
|
|
|
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files). [X] Yes [ ]
No.
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer [ ] |
Accelerated
filer [ ] |
|
Non-accelerated
filer [X] |
Smaller
reporting company [X] |
|
Emerging
growth company [ ] |
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No
[X]
Indicate
the number of shares outstanding of each of the issuer’s classes of
common stock, as of the latest practicable date. As of August 4,
2020, there were 30,136,535 shares of common stock, par value
$0.001, issued and outstanding.
BTCS
INC.
TABLE
OF CONTENTS
PART
I - FINANCIAL INFORMATION
This
Quarterly Report includes forward-looking statements within the
meaning of the Securities Exchange Act of 1934 (the “Exchange
Act”). These statements are based on management’s beliefs and
assumptions, and on information currently available to management.
Forward-looking statements include the information concerning our
possible or assumed future results of operations set forth under
the heading “Management’s Discussion and Analysis of Financial
Condition and Plan of Operation.” Forward-looking statements also
include statements in which words such as “expect,” “anticipate,”
“intend,” “plan,” “believe,” “estimate,” “consider” or similar
expressions are used.
Forward-looking
statements are not guarantees of future performance. They involve
risks, uncertainties and assumptions. Our future results and
shareholder values may differ materially from those expressed in
these forward-looking statements. Readers are cautioned not to put
undue reliance on any forward-looking statements. Readers should
review our risk factors in our filings with the Securities and
Exchange Commission (“SEC”) including our 2019 Annual Report on
Form 10-K filed with the SEC on March 23, 2020.
ITEM
1 Financial Statements
BTCS
Inc.
Condensed
Balance Sheets
| |
|
June 30,
2020 |
|
|
December
31, 2019 |
|
| |
|
(Unaudited) |
|
|
|
|
| Assets: |
|
|
|
|
|
|
|
|
| Current
assets: |
|
|
|
|
|
|
|
|
| Cash |
|
$ |
83,788 |
|
|
$ |
143,098 |
|
| Digital
currencies |
|
|
728,305 |
|
|
|
252,903 |
|
| Prepaid
expense |
|
|
49,949 |
|
|
|
24,008 |
|
| Total current
assets |
|
|
862,042 |
|
|
|
420,009 |
|
| |
|
|
|
|
|
|
|
|
| Other
assets: |
|
|
|
|
|
|
|
|
| Property and
equipment, net |
|
|
667 |
|
|
|
1,344 |
|
| Total other
assets |
|
|
667 |
|
|
|
1,344 |
|
| |
|
|
|
|
|
|
|
|
|
Total
Assets |
|
$ |
862,709 |
|
|
$ |
421,353 |
|
| |
|
|
|
|
|
|
|
|
| Liabilities and
Stockholders’ Equity (Deficit): |
|
|
|
|
|
|
|
|
| Accounts payable and
accrued expense |
|
$ |
20,533 |
|
|
$ |
28,324 |
|
| Accrued
compensation |
|
|
483,731 |
|
|
|
416,935 |
|
| Convertible notes
payable, net |
|
|
295,877 |
|
|
|
159,854 |
|
| Total current
liabilities |
|
|
800,141 |
|
|
|
605,113 |
|
| |
|
|
|
|
|
|
|
|
| Stockholders’ equity
(deficit): |
|
|
|
|
|
|
|
|
| Preferred stock;
20,000,000 shares authorized at $0.001 par value: |
|
|
|
|
|
|
|
|
| Series B Convertible
Preferred stock: 0 shares issued and outstanding at June 30, 2020
and December 31, 2019; Liquidation preference $0.001 per
share |
|
|
- |
|
|
|
- |
|
| Series C-1 Convertible
Preferred stock: 29,414 shares issued and outstanding at June 30,
2020 and December 31, 2019; Liquidation preference $0.001 per
share |
|
|
29 |
|
|
|
29 |
|
| Common stock,
975,000,000 shares authorized at $0.001 par value, 28,191,377 and
19,831,521 shares issued and outstanding at June 30, 2020 and
December 31, 2019, respectively |
|
|
28,189 |
|
|
|
19,830 |
|
| Additional paid in
capital |
|
|
117,808,716 |
|
|
|
116,780,174 |
|
| Accumulated
deficit |
|
|
(117,774,366 |
) |
|
|
(116,983,793 |
) |
| Total stockholders’
equity (deficit) |
|
|
62,568 |
|
|
|
(183,760 |
) |
| |
|
|
|
|
|
|
|
|
|
Total
Liabilities and stockholders’ equity (deficit) |
|
$ |
862,709 |
|
|
$ |
421,353 |
|
The
accompanying notes are an integral part of these unaudited
condensed financial statements.
BTCS Inc.
Condensed
Statements of Operations
(Unaudited)
| |
|
For
the three months ended |
|
|
For
the six months ended |
|
| |
|
June
30, |
|
|
June
30, |
|
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative |
|
$ |
255,936 |
|
|
$ |
299,672 |
|
|
$ |
526,464 |
|
|
$ |
551,636 |
|
|
Marketing |
|
|
1,365 |
|
|
|
60 |
|
|
|
4,055 |
|
|
|
595 |
|
|
Total
operating expenses |
|
|
257,301 |
|
|
|
299,732 |
|
|
|
530,519 |
|
|
|
552,231 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
|
(102,792 |
) |
|
|
(6,000 |
) |
|
|
(125,420 |
) |
|
|
(12,000 |
) |
|
Impairment
loss on digital currencies |
|
|
(58,527 |
) |
|
|
- |
|
|
|
(132,952 |
) |
|
|
- |
|
|
Realized
loss on digital currencies transactions |
|
|
(1,682 |
) |
|
|
- |
|
|
|
(1,682 |
) |
|
|
- |
|
|
Total
other expenses |
|
|
(163,001 |
) |
|
|
(6,000 |
) |
|
|
(260,054 |
) |
|
|
(12,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(420,302 |
) |
|
$ |
(305,732 |
) |
|
$ |
(790,573 |
) |
|
$ |
(564,231 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed
dividend related to reduction of warrant strike price |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(95,708 |
) |
|
Net
loss attributable to common stockholders |
|
$ |
(420,302 |
) |
|
$ |
(305,732 |
) |
|
$ |
(790,573 |
) |
|
$ |
(659,939 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share attributable to common stockholders, basic and
diluted |
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.05 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding, basic and
diluted |
|
|
27,151,776 |
|
|
|
13,457,386 |
|
|
|
25,078,068 |
|
|
|
13,246,384 |
|
The
accompanying notes are an integral part of these unaudited
condensed financial statements.
BTCS Inc.
Statements
of Changes in Stockholders’ (Deficit) Equity
(Unaudited)
For
the Three Months Ended June 30, 2020
| |
|
Series C-1 Convertible |
|
|
|
|
|
Additional |
|
|
|
|
|
Total
Stockholders’ |
|
| |
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
(Deficit) |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
| Balance March 31, 2020 |
|
|
29,414 |
|
|
$ |
29 |
|
|
|
26,018,154 |
|
|
$ |
26,017 |
|
|
$ |
117,186,998 |
|
|
$ |
(117,354,064 |
) |
|
$ |
(141,020 |
) |
| Common
stock issued including equity commitment fee, net |
|
|
- |
|
|
|
- |
|
|
|
769,369 |
|
|
|
769 |
|
|
|
142,433 |
|
|
|
- |
|
|
|
143,202 |
|
| Conversion of convertible notes |
|
|
- |
|
|
|
- |
|
|
|
1,403,854 |
|
|
|
1,403 |
|
|
|
210,054 |
|
|
|
- |
|
|
|
211,457 |
|
| Beneficial conversion features associated with
convertible notes payable |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
269,231 |
|
|
|
|
|
|
|
269,231 |
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(420,302 |
) |
|
|
(420,302 |
) |
| Balance June 30, 2020 |
|
|
29,414 |
|
|
$ |
29 |
|
|
|
28,191,377 |
|
|
$ |
28,189 |
|
|
$ |
117,808,716 |
|
|
$ |
(117,774,366 |
) |
|
$ |
62,568 |
|
For
the Three Months Ended June 30, 2019
| |
|
Series C-1 Convertible |
|
|
|
|
|
Additional |
|
|
|
|
|
Total
Stockholders’ |
|
| |
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
(Deficit) |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
| Balance March 31, 2019 |
|
|
29,414 |
|
|
$ |
29 |
|
|
|
13,240,765 |
|
|
$ |
13,240 |
|
|
$ |
115,302,300 |
|
|
$ |
(115,601,691 |
) |
|
$ |
(286,122 |
) |
| Common
stock issued including equity commitment fee, net |
|
|
- |
|
|
|
- |
|
|
|
2,464,795 |
|
|
|
2,465 |
|
|
|
682,541 |
|
|
|
- |
|
|
|
685,006 |
|
| Fractional shares adjusted for reverse
split |
|
|
- |
|
|
|
- |
|
|
|
16,860 |
|
|
|
17 |
|
|
|
(17 |
) |
|
|
- |
|
|
|
- |
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(305,732 |
) |
|
|
(305,732 |
) |
| Balance June 30, 2019 |
|
|
29,414 |
|
|
$ |
29 |
|
|
|
15,722,420 |
|
|
$ |
15,722 |
|
|
$ |
115,984,824 |
|
|
$ |
(115,907,423 |
) |
|
$ |
93,152 |
|
The
accompanying notes are an integral part of these unaudited
condensed financial statements.
BTCS
Inc.
Statements
of Changes in Stockholders’ (Deficit) Equity
(Unaudited)
For
the Six Months Ended June 30, 2020
| |
|
Series C-1 Convertible |
|
|
|
|
|
Additional |
|
|
|
|
|
Total
Stockholders’
|
|
| |
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
(Deficit) |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
| Balance December 31, 2019 |
|
|
29,414 |
|
|
$ |
29 |
|
|
|
19,831,521 |
|
|
$ |
19,830 |
|
|
$ |
116,780,174 |
|
|
$ |
(116,983,793 |
) |
|
$ |
(183,760 |
) |
| Common
stock issued including equity commitment fee, net |
|
|
- |
|
|
|
- |
|
|
|
6,956,002 |
|
|
|
6,956 |
|
|
|
549,257 |
|
|
|
- |
|
|
|
556,213 |
|
| Conversion of convertible notes |
|
|
- |
|
|
|
- |
|
|
|
1,403,854 |
|
|
|
1,403 |
|
|
|
210,054 |
|
|
|
- |
|
|
|
211,457 |
|
| Beneficial conversion features associated with
convertible notes payable |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
269,231 |
|
|
|
- |
|
|
|
269,231 |
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(790,573 |
) |
|
|
(790,573 |
) |
| Balance June 30, 2020 |
|
|
29,414 |
|
|
$ |
29 |
|
|
|
28,191,377 |
|
|
$ |
28,189 |
|
|
$ |
117,808,716 |
|
|
$ |
(117,774,366 |
) |
|
$ |
62,568 |
|
For
the Six Months Ended June 30, 2019
| |
|
Series C-1 Convertible |
|
|
|
|
|
Additional |
|
|
|
|
|
Total
Stockholders’ |
|
| |
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
(Deficit) |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
| Balance December 31, 2018 |
|
|
29,414 |
|
|
$ |
29 |
|
|
|
12,515,201 |
|
|
$ |
12,515 |
|
|
$ |
115,074,655 |
|
|
$ |
(115,343,192 |
) |
|
$ |
(255,993 |
) |
| Common
stock issued including equity commitment fee, net |
|
|
- |
|
|
|
- |
|
|
|
2,464,795 |
|
|
|
2,465 |
|
|
|
682,541 |
|
|
|
- |
|
|
|
685,006 |
|
| Fractional shares adjusted for reverse
split |
|
|
- |
|
|
|
- |
|
|
|
16,860 |
|
|
|
17 |
|
|
|
(17 |
) |
|
|
- |
|
|
|
- |
|
| Warrant exercise |
|
|
- |
|
|
|
- |
|
|
|
725,564 |
|
|
|
725 |
|
|
|
227,645 |
|
|
|
- |
|
|
|
228,370 |
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(564,231 |
) |
|
|
(564,231 |
) |
| Balance June 30, 2019 |
|
|
29,414 |
|
|
$ |
29 |
|
|
|
15,722,420 |
|
|
$ |
15,722 |
|
|
$ |
115,984,824 |
|
|
$ |
(115,907,423 |
) |
|
$ |
93,152 |
|
The
accompanying notes are an integral part of these unaudited
condensed financial statements.
BTCS
Inc.
Condensed
Statements of Cash Flows
(Unaudited)
| |
|
For
the six months ended |
|
| |
|
June 30, |
|
| |
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
| Net Cash flows used
from operating activities: |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(790,573 |
) |
|
$ |
(564,231 |
) |
| Adjustments to reconcile net loss to
net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation
expenses |
|
|
678 |
|
|
|
674 |
|
| Amortization on
debt discount |
|
|
105,254 |
|
|
|
- |
|
| Purchase of
digital currencies |
|
|
(608,355 |
) |
|
|
- |
|
| Impairment loss on
digital currencies |
|
|
132,952 |
|
|
|
- |
|
| Changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
| Prepaid expenses
and other current assets |
|
|
(25,941 |
) |
|
|
(41,981 |
) |
| Accounts payable
and accrued expenses |
|
|
3,666 |
|
|
|
90,515 |
|
|
Accrued compensation |
|
|
66,796 |
|
|
|
109,962 |
|
| Net cash used
in operating activities |
|
|
(1,115,523 |
) |
|
|
(405,061 |
) |
| |
|
|
|
|
|
|
|
|
| Net cash provided
by financing activities: |
|
|
|
|
|
|
|
|
| Proceeds from exercise of
warrants |
|
|
- |
|
|
|
228,370 |
|
| Proceeds from
short term loan |
|
|
500,000 |
|
|
|
- |
|
| Net
proceeds from issuance of common stock |
|
|
556,213 |
|
|
|
685,006 |
|
| Net cash
provided by financing activities |
|
|
1,056,213 |
|
|
|
913,376 |
|
| |
|
|
|
|
|
|
|
|
| Net (decrease) increase in cash |
|
|
(59,310 |
) |
|
|
508,315 |
|
| Cash, beginning of period |
|
|
143,098 |
|
|
|
52,117 |
|
| Cash, end of period |
|
$ |
83,788 |
|
|
$ |
560,432 |
|
| |
|
|
|
|
|
|
|
|
| Supplemental
disclosure of non-cash financing and investing activities: |
|
|
|
|
|
|
|
|
| Conversion of
convertible note to common stock |
|
$ |
211,457 |
|
|
$ |
- |
|
| Fractional shares
adjusted for reverse split |
|
$ |
- |
|
|
$ |
17 |
|
| Deemed
dividend |
|
$ |
- |
|
|
$ |
95,708 |
|
| Beneficial
conversion features associated with convertible notes payable |
|
$ |
269,231 |
|
|
$ |
- |
|
The
accompanying notes are an integral part of these unaudited
condensed financial statements.
BTCS Inc.
Notes
to Unaudited Condensed Financial Statements
Note
1 - Business Organization and Nature of Operations
BTCS
Inc. (formerly Bitcoin Shop, Inc.), a Nevada corporation (the
“Company”) was incorporated in 2008. In February 2014, the Company
entered the business of hosting an online ecommerce marketplace
where consumers can purchase merchandise using Digital Assets,
including bitcoin and is currently focused on blockchain and
digital currency ecosystems. In January 2015, the Company began a
rebranding campaign using its BTCS.COM domain (shorthand for
Blockchain Technology Consumer Solutions) to better reflect its
broadened strategy. The Company released its new website which
included broader information on its strategy. In late 2014 we
shifted our focus towards our transaction verification service
business, also known as bitcoin mining, though in mid-2016 we
ceased our transaction verification services operation at our North
Carolina facility due to capital constraints.
Subject
to additional financing, the Company plans to acquire additional
Digital Assets to provide investors with indirect ownership of
Digital Assets that are not securities, such as bitcoin and ether.
The Company intends to acquire Digital Assets through open market
purchases. We are not limiting our assets to a single type of
Digital Asset and may purchase a variety of Digital Assets that
appear to benefit our investors, subject to the certain limitations
regarding Digital Securities. The Company is also seeking to
acquire controlling interests in businesses in the blockchain
industry.
The
Company has not participated in any initial coin offerings as it
believes most of the offerings entail the offering of Digital
Securities and require registration under the Securities Act and
under state securities laws or can only be sold to accredited
investors in the United States. Since about July 2017, initial coin
offerings using Digital Securities have been (or should be) limited
to accredited investors. Because we cannot qualify as an accredited
investor, we do not intend to acquire coins in initial coin
offerings or from purchasers in such offerings. Further, the
Company does not intend to participate in registered or
unregistered initial coin offerings. The Company will carefully
review its purchases of Digital Securities to avoid violating the
1940 Act and seek to reduce potential liabilities under the federal
securities laws.
Digital
asset blockchains are typically maintained by a network of
participants which run servers which secure their
blockchain.
The
Company is also internally developing a digital asset data
analytics platform to provide information to users, such as
tracking of multiple exchanges and wallets to aggregate portfolio
holdings into a single platform to view and analyze performance,
risk metrics, and potential tax implications.
The
market is rapidly evolving and there can be no assurances that we
will be competitive with industry participants that have or may
have greater resources than us.
Note
2 - Basis of Presentation
The
accompanying unaudited condensed financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States (“GAAP”) for interim financial
information, the instructions to Form 10-Q and the rules and
regulations of the SEC. Accordingly, since they are interim
statements, the accompanying unaudited condensed financial
statements do not include all of the information and notes required
by GAAP for annual financial statements, but in the opinion of the
Company’s management, reflect all adjustments consisting of normal,
recurring adjustments, that are necessary for a fair presentation
of the financial position, results of operations and cash flows for
the interim periods presented. Interim results are not necessarily
indicative of results for a full year. The unaudited condensed
financial statements and notes should be read in conjunction with
the financial statements and notes for the year ended December 31,
2019.
Note
3 - Liquidity, Financial Condition and Management’s
Plans
The
Company has commenced its planned operations but has limited
operating activities to date. The Company has financed its
operations since inception using proceeds received from capital
contributions made by its officers and proceeds in financing
transactions.
Notwithstanding,
the Company has limited revenues, limited capital resources and is
subject to all of the risks and uncertainties that are typical of
an early stage enterprise. Significant uncertainties include, among
others, whether the Company will be able to raise the capital it
needs to finance its longer-term operations and whether such
operations, if launched, will enable the Company to sustain
operations as a profitable enterprise.
BTCS
Inc.
Notes
to Unaudited Condensed Financial Statements
Our
working capital needs are influenced by our level of operations,
and generally decrease with higher levels of revenue. The Company
used approximately $1,115,000 of cash in its operating activities
for the six months ended June 30, 2020. The Company incurred
approximately $790,000 net loss for the six months ended June 30,
2020. The Company had cash of approximately $84,000 and working
capital of approximately $62,000 at June 30, 2020. The Company
expects to incur losses into the foreseeable future as it
undertakes its efforts to execute its business plans.
The
Company will require significant additional capital to sustain its
short-term operations and make the investments it needs to execute
its longer-term business plan. The Company’s existing liquidity is
not sufficient to fund its operations and anticipated capital
expenditures for the foreseeable future. The Company is currently
seeking to obtain additional equity financing, primarily through
the Equity Line Purchase Agreement with Cavalry and seeking to
obtain additional equity linked debt financing, however there are
currently no other commitments of debt or equity in place for
further financing nor is there any assurance that such financing
will be available to the Company on favorable terms, if at
all.
Because
of recurring operating losses, net operating cash flow deficits,
and an accumulated deficit, there is substantial doubt about the
Company’s ability to continue as a going concern for one year from
the issuance of the financial statements. The financial statements
have been prepared assuming the Company will continue as a going
concern. The Company has not made adjustments to the accompanying
financial statements to reflect the potential effects on the
recoverability and classification of assets or liabilities should
the Company be unable to continue as a going concern.
The
Company continues to incur ongoing administrative and other
operating expenses, including public company expenses, in excess of
revenues. While the Company continues to implement its business
strategy, it intends to finance its activities by:
|
● |
managing
current cash and cash equivalents on hand from the Company’s past
debt and equity offerings by controlling costs, |
|
|
|
|
● |
seeking
additional financing through sales of additional securities whether
through Cavalry or other investors. |
Note
4 - Summary of Significant Accounting Policies
There
have been no material changes in the Company’s significant
accounting policies to those previously disclosed in the 2019
Annual Report.
Digital
Assets Translations and Remeasurements
Digital
Assets are included in current assets in the balance sheets.
Digital Assets are recorded at cost less impairment.
An
intangible asset with an indefinite useful life is not amortized
but assessed for impairment annually, or more frequently, when
events or changes in circumstances occur indicating that it is more
likely than not that the indefinite-lived asset is impaired.
Impairment exists when the carrying amount exceeds its fair value.
In testing for impairment, the Company has the option to first
perform a qualitative assessment to determine whether it is more
likely than not that an impairment exists. If it is determined that
it is not more likely than not that an impairment exists, a
quantitative impairment test is not necessary. If the Company
concludes otherwise, it is required to perform a quantitative
impairment test. To the extent an impairment loss is recognized,
the loss establishes the new cost basis of the asset. Subsequent
reversal of impairment losses is not permitted.
Realized
gain (loss) on sale of Digital Assets are included in other income
(expense) in the statements of operations.
The
Company assesses impairment of Digital Assets quarterly if the fair
value of digital assets is less than its cost basis. The Company
recognizes impairment losses on Digital Assets caused by decreases
in fair value using the average U.S. dollar spot price of the
related Digital Asset as of each impairment date. Such impairment
in the value of Digital Assets are recorded as a component of costs
and expenses in our statements of operations.
Use
of Estimates
The
accompanying unaudited condensed financial statements have been
prepared in conformity with accounting principles generally
accepted in the United States of America (“US GAAP”). This requires
management to make estimates and assumptions that affect certain
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during
the period. The Company’s significant estimates and assumptions
include the recoverability and useful lives of long-lived assets,
stock-based compensation, the valuation of derivative liabilities,
and the valuation allowance related to the Company’s deferred tax
assets. Certain of the Company’s estimates, including the carrying
amount of the intangible assets, if any, could be affected by
external conditions, including those unique to the Company and
general economic conditions. It is reasonably possible that these
external factors could have an effect on the Company’s estimates
and could cause actual results to differ from those estimates and
assumptions.
BTCS Inc.
Notes to Unaudited Condensed Financial Statements
Net Loss
per Share
Basic loss
per share is computed by dividing the net income or loss applicable
to common shares by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common shares and, if
dilutive, potential common shares outstanding during the period.
Potential common shares consist of the Company’s convertible
preferred stock, convertible notes and warrants. Diluted loss per
share excludes the shares issuable upon the conversion of preferred
stock, notes and warrants from the calculation of net loss per
share if their effect would be anti-dilutive.
The
following financial instruments were not included in the diluted
loss per share calculation as of June 30, 2020 and 2019 because
their effect was anti-dilutive:
| |
|
As of June 30, |
|
| |
|
2020 |
|
|
2019 |
|
| Warrants to purchase
common stock |
|
|
502,915 |
|
|
|
1,229,710 |
|
| Series C-1 Convertible Preferred
stock |
|
|
196,093 |
|
|
|
196,093 |
|
| Convertible
notes |
|
|
4,048,583 |
|
|
|
- |
|
|
Total |
|
|
4,747,591 |
|
|
|
1,425,803 |
|
Recent
Accounting Pronouncements
In December
2019, the Financial Accounting Standards Board (“FASB”) issued
Accounting standards Update (“ASU”) No. 2019-12, “Income Taxes
(Topic 740): Simplifying the Accounting for Income Taxes (“ASU
2019-12”), which is intended to simplify various aspects related to
accounting for income taxes. ASU 2019-12 removes certain exceptions
to the general principles in Topic 740 and also clarifies and
amends existing guidance to improve consistent application. This
guidance is effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2020, with early
adoption permitted. The Company is currently evaluating the impact
of this standard on its financial statements and related
disclosures.
Other recent
accounting pronouncements issued by the FASB, including its
Emerging Issues Task Force, the American Institute of Certified
Public Accountants, and the Securities and Exchange Commission did
not or are not believed by management to have a material impact on
the Company’s present or future financial statements.
Note 5 -
Note Payable
2019
Promissory Note
On November
7, 2019, the Company issued a $200,000 promissory note (the “2019
Promissory Note”). The 2019 Promissory Note is due on August 7,
2020 and is: (i) convertible at a 20% discount to the closing price
of the Company’s common stock on the date before exercise with a
floor price of $0.02 per share, (ii) shall bear interest at 12% per
annum (payable at maturity) and in the event of default bears
interest at a rate of 20%, (iii) convertible at the Company’s
option subject to certain limitations as set forth in the 2019
Promissory Note, and (iv) may be prepaid by the Company. In
addition, the Convertible Note does not contain any embedded
features that require bifurcation pursuant to ASC 815-15. At the
issuance date, the Convertible Note was convertible into 2,173,913
shares of common stock at $0.09 per share, but the Company’s fair
value of underlying common stock was $0.12 per share. As such, the
Company recognized a beneficial conversion feature, resulting in a
discount to the Notes of approximately $50,000 with a corresponding
credit to additional paid-in capital.
On
April 6, 2020, the Company issued a total of 735,294 shares of the
Company’s common stock for the conversion of $50,000 of principal
on the 2019 Promissory Note.
On
May 7, 2020, the Company issued a total of 632,736 shares of the
Company’s common stock for the conversion of the remaining $150,000
of principal and $2,000 of interest on the 2019 Promissory
Note.
BTCS Inc.
Notes to Unaudited Condensed Financial Statements
On
May 11, 2020, the Company issued a total of 35,824 shares of the
Company’s common stock for the conversion of the remaining accrued
interest of $9,458 on the 2019 Promissory Note.
During the
six months ended June 30, 2020, the Company recorded approximately
$40,000 in interest expense related to amortization on debt
discount related to the 2019 Promissory Note.
During the
six months ended June 30, 2020, the Company recorded interest
expense of approximately $7,900. As of June 30, 2020, the principal
balance of the 2019 Promissory Note was $0.
2020
Promissory Note
On
April 17, 2020, the Company issued Cavalry Fund I LP (the “Fund”) a
$500,000 promissory note (the “2020 Promissory Note”) in
consideration for $500,000. The Promissory Note is (i) due on
February 17, 2021, (ii) convertible at a 35% discount to the
closing price of the Company’s common stock on the date before
exercise with a floor price of $0.01 per share and (iii) shall bear
interest at 12% per annum (payable at maturity). Subject to certain
limitations, the Company may force conversion of the 2020
Promissory Note. In addition, the Convertible Note does not contain
any embedded features that require bifurcation pursuant to ASC
815-15. At the issuance date, the Convertible Note was convertible
into 7,770,008 shares of common stock at $0.064 per share, but the
Company’s fair value of underlying common stock was $0.099 per
share. As such, the Company recognized a beneficial conversion
feature, resulting in a discount to the Notes of approximately
$269,000 with a corresponding credit to additional paid-in
capital.
During
the six months ended June 30, 2020, the Company recorded
approximately $65,000 in interest expense related to amortization
on debt discount related to the 2020 Promissory Note. As of June
30, 2020, the remaining unamortized debt discount related to the
2020 Promissory Note was approximately $204,000.
During
the six months ended June 30, 2020, the Company recorded interest
expense of approximately $12,000. As of June 30, 2020, the
principal balance of the 2020 Promissory Note was
$500,000.
Note 6 -
Stockholders’ Equity
Issuance
of Shares Pursuant to Equity Line of Credit Purchase
Agreement
On September
5, 2019, the Company filed a second Registration Statement on Form
S-1 seeking to register 6,454,000 shares. The second Registration
Statement was declared effective by the SEC on December 20,
2019.
During the six months ended June 30, 2020, the Company issued
6,186,633 shares of common stock (including 24,219 pro-rata
commitment shares) under the second Registration Statement pursuant
to the Purchase Agreement with Cavalry resulting in aggregate
proceeds of approximately $415,000.
On June 22, 2020, the Company filed a third Registration Statement
on Form S-1 seeking to register 9,045,000 shares. The third
Registration Statement was declared effective by the SEC on June
26, 2020.
During the six months ended June 30, 2020, Company issued 769,369
shares of common stock (including 8,369 pro-rata commitment shares)
under the third Registration Statement pursuant to the Purchase
Agreement with Cavalry resulting in aggregate proceeds of
approximately $143,000.
Issuance
of Shares Due to Conversion of 2019 Promissory Note
On
April 6, 2020, the Company issued a total of 735,294 shares of the
Company’s common stock for the conversion of $50,000 of principal
on the 2019 Promissory Note.
On
May 7, 2020, the Company issued a total of 632,736 shares of the
Company’s common stock for the conversion of the remaining $150,000
of principal and $2,000 of interest on the 2019 Promissory
Note.
On
May 11, 2020, the Company issued a total of 35,824 shares of the
Company’s common stock for the conversion of the remaining accrued
interest of $9,458 on the 2019 Promissory Note.
Note 7 -
Subsequent Events
From
July 15, 2020 to July 21, 2020, the Company issued 1,945,158 shares
of common stock (including 17,658 pro-rata commitment shares) under
the third Registration Statement pursuant to the Purchase Agreement
with Cavalry resulting in aggregate proceeds of approximately
$302,000.
ITEM 2
Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
Certain
statements in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” are forward-looking statements
that involve risks and uncertainties. Words such as may, will,
should, would, anticipates, expects, intends, plans, believes,
seeks, estimates and similar expressions identify such
forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect
management’s analysis only as of the date hereof. We assume no
obligation to update these forward-looking statements to reflect
actual results or changes in factors or assumptions affecting
forward-looking statements. Factors that could cause or contribute
to these differences include those discussed in the Risk Factors
contained in our Annual Report on Form 10-K filed with the SEC on
March 23, 2020 and our Prospectus dated June 26, 2020.
Overview
We are an
early entrant in the Digital Asset market and one of the first U.S.
publicly traded companies to be involved with Digital Assets and
block chain technologies. To our knowledge, we are one of a few
public companies intending to acquire both Digital Assets and a
controlling interest in one or more businesses in the Digital Asset
and blockchain industries.
Digital
Asset Initiatives
Subject
to additional financing, the Company plans to acquire additional
Digital Assets to provide investors with indirect ownership of
Digital Assets that are not securities, such as bitcoin and ether.
The Company intends to acquire Digital Assets through open market
purchases. We are not limiting our assets to a single type of
Digital Asset and may purchase a variety of Digital Assets that
appear to benefit our investors, subject to the limitations
contained within this report regarding Digital
Securities.
The following table reflects the fair market value of our Digital
Assets as of June 30, 2020:
|
Digital Asset |
|
Units Held |
|
|
Fair Market
Value |
|
| Bitcoin (BTC) |
|
|
54.28 |
|
|
$ |
496,027 |
|
| Ethereum
(ETH) |
|
|
2,304.58 |
|
|
$ |
521,552 |
|
| Total |
|
|
|
|
|
$ |
1,017,579 |
|
The
following table reflects the fair market value of our Digital
Assets as of August 4, 2020.
|
Digital Asset |
|
Units Held |
|
|
Fair Market
Value |
|
| Bitcoin (BTC) |
|
|
54.28 |
|
|
$ |
602,868 |
|
| Ethereum
(ETH) |
|
|
2,304.58 |
|
|
$ |
884,271 |
|
| Total |
|
|
|
|
|
$ |
1,487,139 |
|
The Company
has not participated in any initial coin offerings as it believes
most of the offerings entail the offering of Digital Securities and
require registration under the Securities Act and under state
securities laws or can only be sold to accredited investors in the
United States. Since about July 2017, initial coin offerings using
Digital Securities have been (or should be) limited to accredited
investors. Because we cannot qualify as an accredited investor, we
do not intend to acquire coins in initial coin offerings or from
purchasers in such offerings. Further, the Company does not intend
to participate in registered or unregistered initial coin
offerings. The Company will carefully review its purchases of
Digital Securities to avoid violating the 1940 Act and seek to
reduce potential liabilities under the federal securities
laws.
The market
is rapidly evolving and there can be no assurances that we will be
competitive with industry participants that have or may have
greater resources than us.
Digital
Asset Data Analytics Platform
We are also
focused on Digital Assets and blockchain technologies. We are
currently internally developing a digital asset data analytics
platform aimed at aggregating users’ information, such as tracking
of multiple exchanges and wallets to aggregate portfolio holdings
into a single platform to view and analyze performance, risk
metrics, and potential tax implications. The platform utilizes
digital asset exchange APIs to read user data and does not allow
for the trading of assets.
Acquisition
Initiatives
The Company
is also seeking to acquire controlling interests in businesses in
the blockchain industry as further described in this report. We
plan to continue to evaluate other strategic opportunities
including acquiring controlling interests in business in this
rapidly evolving sector in an effort to enhance shareholder
value.
Even though
the prices of Digital Assets have been subject to substantial
volatility and there remains some regulatory uncertainty, we
believe that businesses using blockchain technology and those
involved with Digital Assets such as bitcoin and ether, offer
upside opportunity and are the types of opportunities that we may
pursue.
Our current
framework or criteria is to seek and evaluate acquisition targets
in the blockchain and Digital Asset sector which (i) align with our
business model of acquiring Digital Assets or acquiring a
controlling interest in one or more blockchain technology related
business ventures, and (ii) have sufficient capital to provide
working capital. As disclosed in this report we have limited cash,
and accordingly as a critical framework element are seeking
acquisition targets with sufficient capital which may help us
sustain our operations without having us rely on toxic funding
structures. Our acquisition activities are spearheaded by Charles
Allen, our Chief Executive Officer who regularly communicates with
Mr. David Garrity, one of our independent directors who is also
seeking acquisition targets on behalf of the Company.
We also
monitor blockchain networks and may consider re-entering the
digital asset mining business if and when we believe a positive
return on investment is achievable. However, given the current
network difficulties and price levels to mine both bitcoin and
ethereum we do not believe mining offers a positive return on
investment at present and have no immediate plans to resume
mining.
Going
Concern
Because of
recurring operating losses, net operating cash flow deficits, and
an accumulated deficit, our independent auditors have indicated in
their report on our December 31, 2019 financial statements that
there is substantial doubt about our ability to continue as a going
concern.
The
continuation of our business is dependent upon us raising
additional funds. The issuance of additional equity or convertible
debt securities by us could result in a significant dilution in the
equity interests of our current stockholders. Obtaining commercial
loans, assuming those loans would be available, will increase our
liabilities and future cash commitments.
We continue
to incur ongoing administrative and other expenses, including
public company expenses, in excess of capital raises. While we
continue to implement our business strategy, we intend to finance
our activities through:
|
● |
managing
current cash and cash equivalents on hand from the Company’s past
debt and equity offerings by controlling costs, and |
| |
|
| ● |
seeking
additional financing through sales of additional securities whether
through Cavalry or other investors. |
Results of
Operations for the Three Months Ended June 30, 2020 and
2019
The
following table reflects our operating results for the three months
ended June 30, 2020 and 2019:
| |
|
For
the three months ended |
|
| |
|
June 30, |
|
| |
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
General and administrative |
|
$ |
255,936 |
|
|
$ |
299,672 |
|
|
Marketing |
|
|
1,365 |
|
|
|
60 |
|
| Total
operating expenses |
|
|
257,301 |
|
|
|
299,732 |
|
| |
|
|
|
|
|
|
|
|
| Other expense: |
|
|
|
|
|
|
|
|
| Interest
expense |
|
|
(102,792 |
) |
|
|
(6,000 |
) |
| Impairment loss on
digital currencies |
|
|
(58,527 |
) |
|
|
- |
|
|
Realized loss on digital currencies transactions |
|
|
(1,682 |
) |
|
|
- |
|
| Total
other expenses |
|
|
(163,001 |
) |
|
|
(6,000 |
) |
| |
|
|
|
|
|
|
|
|
| Net
loss |
|
$ |
(420,302 |
) |
|
$ |
(305,732 |
) |
Operating
Expenses
Operating expenses for the three months ended June 30, 2020 and
2019 were $257,301 and $299,732, respectively.
Other
Expense
Other
expense for the three months ended June 30, 2020 and 2019 was
$163,001 and $6,000, respectively.
Results of
Operations for the Six Months Ended June 30, 2020 and
2019
The
following table reflects our operating results for the six months
ended June 30, 2020 and 2019:
| |
|
For
the six months ended |
|
| |
|
June 30, |
|
| |
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
General and administrative |
|
$ |
526,464 |
|
|
$ |
551,636 |
|
|
Marketing |
|
|
4,055 |
|
|
|
595 |
|
| Total
operating expenses |
|
|
530,519 |
|
|
|
552,231 |
|
| |
|
|
|
|
|
|
|
|
| Other expense: |
|
|
|
|
|
|
|
|
| Interest
expense |
|
|
(125,420 |
) |
|
|
(12,000 |
) |
| Impairment loss on
digital currencies |
|
|
(132,952 |
) |
|
|
- |
|
|
Realized loss on digital currencies transactions |
|
|
(1,682 |
) |
|
|
- |
|
| Total
other expenses |
|
|
(260,054 |
) |
|
|
(12,000 |
) |
| |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(790,573 |
) |
|
$ |
(564,231 |
) |
| |
|
|
|
|
|
|
|
|
| Deemed dividend
related to reduction of warrant strike price |
|
|
- |
|
|
|
(95,708 |
) |
| Net
loss attributable to common stockholders |
|
$ |
(790,573 |
) |
|
$ |
(659,939 |
) |
Operating
Expenses
Operating
expenses for the six months ended June 30, 2020 and 2019 were
$530,519 and $552,231, respectively.
Other
Expense
Other
expense for the six months ended June 30, 2020 and 2019 was
$260,054 and $12,000, respectively.
Net
loss attributable to common stockholders
We incurred
$0 and $95,708 of deemed dividend related to reduction of warrant
strike price during the six months ended June 30, 2020 and 2019,
respectively.
Liquidity
and Capital Resources
Net Cash
from Operating Activities
Net cash
used in operating activities was approximately $1,115,000 for the
six months ended June 30, 2020. Net cash used in operating
activities for the six months ended June 30, 2020 was primarily
driven by a $790,573 net loss and $608,000 purchase of digital
currencies, and partially offset by impairment loss on digital
currencies of $132,952.
Net cash
used in operating activities was approximately $405,000 for the six
months ended June 30, 2019. Net cash used in operating activities
for the six months ended June 30, 2019 was primarily driven by a
$564,231 net loss and partially offset by changes in operating
assets and liabilities of approximately $158,000.
Net Cash
from Financing Activities
Net
cash provided by financing activities was approximately $1,056,000
for the six months ended June 30, 2020. During the six months ended
June 30, 2020, Company issued 6,956,002 shares of common stock
(including 32,588 pro-rata commitment shares) under the Purchase
Agreement with Cavalry resulting in aggregate proceeds of
approximately $556,000. In addition, the Company entered into a
$500,000 short term convertible note payable in April 2020. The
convertible note bears interest at 12%.
Net
cash provided by financing activities was approximately $913,000
for the six months ended June 30, 2019, including approximately
$228,000 from exercise of warrants and approximately $685,000 from
selling a total of 2,464,795 shares of common stock under the
Purchase Agreement.
Liquidity
As of
August 4, 2020, the Company had approximately $199,906 of
cash.
On June 30,
2020, we had current assets of approximately $862,000 and current
liabilities of approximately $800,000, rendering working capital of
approximately $62,000.
Our working
capital needs are influenced by our level of operations, and
generally decrease with higher levels of revenue. The Company used
approximately $1,115,000 of cash in its operating activities for
the six months ended June 30, 2020. The Company incurred
approximately a $790,000 net loss for the six months ended June 30,
2020. The Company had cash of approximately $84,000 and working
capital of approximately $62,000 at June 30, 2020. The Company
expects to incur losses into the foreseeable future as it
undertakes its efforts to execute its business plans.
On April 17, 2020, we issued an institutional investor a $500,000
promissory note (the “Promissory Note”) in consideration for
$500,000. The Promissory Note is (i) due on February 17, 2021, (ii)
convertible at a 35% discount to the closing price of the Company’s
common stock on the date before exercise with a floor price of
$0.01 per share and (iii) shall bear interest at 12% per annum
(payable at maturity). Subject to certain limitations, the Company
may force conversion of the Promissory Note.
As of August 4, 2020, the Company had sold 13,209,934 shares of
common stock (and issued 118,778 commitment shares) under the $10
million Purchase Agreement and received $2,035,730 in connection
with the sales. We cannot provide any assurance that we will be
able to continue selling under the $10 million Purchase Agreement
or that we will be able to do so at prices that we believe are
beneficial to the Company and its shareholders.
We will
require significant additional capital to sustain short-term
operations and make the investments needed to execute our
longer-term business plan. Our existing liquidity is not sufficient
to fund operations and anticipated capital expenditures for the
foreseeable future, and we do not have sufficient cash resources to
support our current operations for the next 12 months, and will
need additional funding, whether through our $10 million Purchase
Agreement or other sources, to resume revenue generating
activities. If we attempt to obtain additional debt or equity
financing, we cannot provide assurance that such financing will be
available to us on favorable terms, if at all.
Because of
recurring operating losses, net operating cash flow deficits, and
an accumulated deficit, there is substantial doubt about our
ability to continue as a going concern. The unaudited financial
statements have been prepared assuming we will continue as a going
concern. We have not made adjustments to the accompanying unaudited
financial statements to reflect the potential effects on the
recoverability and classification of assets or liabilities should
we be unable to continue as a going concern.
We continue
to incur ongoing administrative and other expenses, including
public company expenses, primarily accounting and legal fees, in
excess of corresponding (non-financing related) revenue. While we
continue to implement its business strategy, it intends to finance
its activities through:
|
● |
managing
current cash and cash equivalents on hand from the Company’s past
debt and equity offerings by controlling costs, and |
| |
|
| ● |
seeking
additional financing through sales of additional securities whether
through Cavalry or other investors. |
Off
Balance Sheet Transactions
We are not a
party to any off-balance sheet transactions. We have no guarantees
or obligations other than those which arise out of normal business
operations.
RECENT
ACCOUNTING PRONOUNCEMENTS
For
information on recent accounting pronouncements, see Note 4 to the
Unaudited Condensed Financial Statements.
Cautionary Note
Regarding Forward-Looking Statements
This report
contains forward-looking statements including our liquidity and
future business plans. Forward-looking statements can be identified
by words such as “anticipates,” “intends,” “plans,” “seeks,”
“believes,” “estimates,” “expects” and similar references to future
periods.
Forward-looking statements are based on our current expectations
and assumptions regarding our business, the economy and other
future conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict. Our actual
results may differ materially from those contemplated by the
forward-looking statements. We caution you therefore against
relying on any of these forward-looking statements. They are
neither statements of historical fact nor guarantees or assurances
of future performance. Important factors that could cause actual
results to differ materially from those in the forward-looking
statements are contained in our filings with the SEC, including our
Prospectus dated June 26, 2020. Any forward-looking statement made
by us speaks only as of the date on which it is made. Factors or
events that could cause our actual results to differ may emerge
from time to time, and it is not possible for us to predict all of
them. We undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as may be required by
law.
ITEM 3
Quantitative and Qualitative Disclosures About Market
Risk
Not
applicable.
ITEM 4 Controls
and Procedures
Evaluation of
Disclosure Controls and Procedures
We
conducted an evaluation, with the participation of our Chief
Executive Officer, who is also our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act, as of June 30, 2020 to ensure
that information required to be disclosed by us in the reports
filed or submitted by us under the Exchange Act is recorded,
processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission’s rules and
forms, including to ensure that information required to be
disclosed by us in the reports filed or submitted by us under the
Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. Based on that
evaluation, our Chief Executive Officer concluded that as of June
30, 2020, our disclosure controls and procedures were not effective
at the reasonable assurance level due to the following material
weaknesses in our internal control over financial
reporting:
|
● |
Due to our
small number of employees and limited resources, we have limited
segregation of duties, as a result of which there is insufficient
independent review of duties performed. |
| |
|
| ● |
As a result
of the limited number of accounting personnel, we rely on outside
consultants for the preparation of our financial reports, including
financial statements and management’s discussion and analysis,
which could lead to overlooking items requiring
disclosure. |
| |
|
| ● |
Difficulty
applying complex accounting principles. |
On September 17, 2018, the Board of Directors of the Company
concluded that due to ineffective controls we failed to follow GAAP
in accounting for our digital assets. This failure arose from a
material weakness which required us to restate our financial
statements for the nine months ended September 30, 2018 as well as
two other periods. Further, in April 2020, the Company received an
oral comment from the Staff of the SEC regarding the classification
of Digital Asset transactions as an Investing Activity in its Cash
Flow Statement within the Company’s Form 10-K for the year ended
December 31, 2019 (“Form 10-K). Prior to the filing of the Form
10-K, in response to a prior SEC comment, the Company agreed to
include Digital Assets transactions in its future filings as an
Operating Activity but failed to do so in the Form 10-K. The
Company filed a 10-K/A which addressed this future filing
request.
Changes
in Internal Control over Financial Reporting
There were
no changes in our internal control over financial reporting, as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,
during our most recently completed fiscal quarter that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II - OTHER
INFORMATION
ITEM 1 Legal
Proceedings
None.
ITEM 1A Risk
Factors
Not
applicable to smaller reporting companies.
ITEM 2
Unregistered Sales of Equity Securities and Use of
Proceeds
None.
ITEM 3 Defaults
Upon Senior Securities
None.
ITEM 4 Mine Safety
Disclosures
Not
applicable.
ITEM 5 Other
Information
None.
ITEM 6
Exhibits
The exhibits
listed in the accompanying “Exhibit Index” are filed or
incorporated by reference as part of this Form 10-Q.
SIGNATURES
Pursuant to
the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
| |
BTCS
Inc. |
|
|
|
|
| August
5, 2020 |
|
|
| |
|
|
|
|
By: |
/s/
Charles Allen |
| |
|
Charles
Allen |
| |
|
|
| |
|
Chief Executive Officer,
Chief Financial Officer and Director |
| |
|
(Principal Executive
Officer and Principal Financial and Accounting Officer) |
EXHIBIT
INDEX
|
|
|
|
|
Incorporated by
Reference |
|
Filed or
Furnished |
|
Exhibit
# |
|
Exhibit
Description |
|
Form |
|
Date |
|
Number |
|
Herewith |
|
3.1 |
|
Amended and Restated
Articles of Incorporation, as of May 2010 |
|
10-K |
|
3/31/11 |
|
3.1 |
|
|
|
3.1(a) |
|
Certificate of Amendment
to Articles of Incorporation - Increase Authorized
Capital |
|
8-K |
|
3/25/13 |
|
3.1 |
|
|
|
3.1(b) |
|
Certificate of Amendment
to Articles of Incorporation - Increase Authorized
Capital |
|
8-K |
|
2/5/14 |
|
3.1 |
|
|
|
3.1(c) |
|
Certificate of Amendment
to Articles of Incorporation - Reverse Stock Split |
|
8-K |
|
2/16/17 |
|
3.1 |
|
|
|
3.1(d) |
|
Certificate of Amendment
to Articles of Incorporation - Reverse Stock Split |
|
8-K |
|
4/9/19 |
|
3.1 |
|
|
|
3.1(e) |
|
Certificate of
Designation for Series C-1 Convertible Preferred
Stock |
|
8-K |
|
10/10/17 |
|
3.1 |
|
|
|
3.1(f) |
|
Amended and Restated
Certificate of Designation of Preferences, Rights and Limitations
of Series C-1 Convertible Preferred Stock |
|
8-K |
|
12/7/17 |
|
3.2 |
|
|
|
3.1(g) |
|
Certificate of Amendment
to the Series C-1 Certificate of Designation |
|
8-K |
|
12/3/19 |
|
4.1 |
|
|
|
3.2 |
|
Bylaws |
|
S-1 |
|
5/29/08 |
|
3.2 |
|
|
|
10.1 |
|
Equity Line Purchase
Agreement, dated May 13, 2019, by and between BTCS Inc., and
Cavalry Fund I LP |
|
8-K |
|
5/16/19 |
|
10.1 |
|
|
|
10.1(a) |
|
Amendment No 1. To the
Equity Line Purchase Agreement - Cavalry |
|
S-1/A |
|
5/28/19 |
|
10.27(a) |
|
|
|
10.2 |
|
Registration Rights
Agreement, dated May 13, 2019, by and between BTCS Inc., and
Cavalry Fund I LP |
|
8-K |
|
5/16/19 |
|
10.2 |
|
|
|
10.3 |
|
Form of Promissory Note
dated December 18, 2018 |
|
8-K |
|
12/19/18 |
|
10.1 |
|
|
|
10.4 |
|
Convertible Note dated
as of September 18, 2019 |
|
8-K |
|
9/19/19 |
|
4.1 |
|
|
|
10.5 |
|
Convertible Note dated
as of November 7, 2019 |
|
8-K |
|
11/7/19 |
|
4.1 |
|
|
|
10.6 |
|
Convertible Note dated
as of April 17, 2020 |
|
8-K |
|
4/17/20 |
|
4.1 |
|
|
|
10.7 |
|
Note Exchange Agreement
dated as of September 18, 2019 |
|
8-K |
|
9/19/19 |
|
10.1 |
|
|
|
10.8 |
|
Side Letter with Cavalry
Fund I LP dated April 17, 2020 |
|
8-K |
|
4/17/20 |
|
10.1 |
|
|
|
10.9 |
|
Amendment to Employment
Agreement – Charles Allen |
|
10-K |
|
3/23/20 |
|
10.15(a) |
|
|
|
10.10 |
|
Amendment to Employment
Agreement – Michal Handerhan |
|
10-K |
|
3/23/20 |
|
10.16(a) |
|
|
|
31.1 |
|
Certification of
Principal Executive and Financial Officer (302) |
|
|
|
|
|
|
|
Filed |
|
32.1 |
|
Certification of
Principal Executive and Principal Financial Officer
(906) |
|
|
|
|
|
|
|
Furnished** |
|
101.INS |
|
XBRL
Instance Document |
|
|
|
|
|
|
|
Filed |
|
101.SCH |
|
XBRL
Taxonomy Extension Schema Document |
|
|
|
|
|
|
|
Filed |
|
101.CAL |
|
XBRL
Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
|
|
Filed |
|
101.DEF |
|
XBRL
Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
|
|
Filed |
|
101.LAB |
|
XBRL
Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
|
|
Filed |
|
101.PRE |
|
XBRL
Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
|
Filed |
|
* |
Represents
compensatory plan of management. |
| |
|
| ** |
This exhibit
is being furnished rather than filed and shall not be deemed
incorporated by reference into any filing, in accordance with Item
601 of Regulation S-K. |
| |
|
| + |
Certain
schedules, appendices and exhibits to this agreement have been
omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy
of any omitted schedule and/or exhibit will be furnished
supplementally to the Securities and Exchange Commission staff upon
request. |
Copies of
this report (including the financial statements) and any of the
exhibits referred to above will be furnished at no cost to our
shareholders who make a written request to BTCS Inc., 9466 Georgia
Avenue #124, Silver Spring, MD 20910, Attention: Corporate
Secretary.
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