Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 11, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | BTCS Inc. | |
Entity Central Index Key | 0001436229 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Reporting Status Current | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 57,123,458 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash | $ 3,367,249 | $ 524,135 |
Digital assets/currencies | 4,567,385 | 995,652 |
Prepaid expense | 453,259 | 31,875 |
Total current assets | 8,387,893 | 1,551,662 |
Other assets: | ||
Property and equipment, net | 18 | 230 |
Staked digital assets/currencies | 7,735,390 | |
Total other assets | 7,735,408 | 230 |
Total Assets | 16,123,301 | 1,551,892 |
Liabilities and Stockholders' Equity: | ||
Accounts payable and accrued expense | 68,555 | 26,288 |
Accrued compensation | 1,501 | 350,376 |
Convertible notes payable, net | 694,037 | 131,941 |
Total current liabilities | 764,093 | 508,605 |
Stockholders' equity: | ||
Common stock, 975,000,000 shares authorized at $0.001 par value, 55,891,645 and 42,011,617 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 55,890 | 42,010 |
Additional paid in capital | 135,637,119 | 120,541,135 |
Accumulated deficit | (126,322,062) | (119,539,887) |
Total stockholders' equity | 15,359,208 | 1,043,287 |
Total Liabilities and stockholders' equity | 16,123,301 | 1,551,892 |
Series B Convertible Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred stock, value | ||
Series C-1 Convertible Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred stock, value | 29 | |
Total stockholders' equity | 29 | |
Series C-2 Convertible Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred stock, value | $ 5,988,261 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2021 | Dec. 31, 2020 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 975,000,000 | 975,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares issued | 55,891,645 | 42,011,617 |
Common stock, shares outstanding | 55,891,645 | 42,011,617 |
Series B Convertible Preferred Stock [Member] | ||
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Preferred stock, liquidation preference per share | $ 0.001 | $ 0.001 |
Series C-1 Convertible Preferred Stock [Member] | ||
Preferred stock, shares issued | 0 | 29,414 |
Preferred stock, shares outstanding | 0 | 29,414 |
Preferred stock, liquidation preference per share | $ 0.001 | $ 0.001 |
Series C-2 Convertible Preferred Stock [Member] | ||
Preferred stock, shares issued | 1,100,000 | 0 |
Preferred stock, shares outstanding | 1,100,000 | 0 |
Preferred stock, liquidation preference per share | $ 0.001 | $ 0.001 |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenues | ||
Total revenues | $ 72,524 | |
Cost of revenues | ||
Staking expenses | 14,996 | |
Gross profit | 57,528 | |
Operating expenses: | ||
General and administrative | 553,981 | 124,228 |
Research and development | 82,933 | |
Compensation and related expenses | 7,337,679 | 146,300 |
Marketing | 1,421 | 2,690 |
Total operating expenses | 7,976,014 | 273,218 |
Other (expenses) income: | ||
Interest expense | (54,247) | (6,022) |
Amortization on debt discount | (562,096) | (16,606) |
Impairment loss on digital assets/currencies | (1,301,764) | (74,425) |
Realized gains on digital asset/currency transactions | 3,054,418 | |
Total other income (expenses) | 1,136,311 | (97,053) |
Net loss | (6,782,175) | (370,271) |
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock | (16,176) | |
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock | (4,822,220) | |
Net loss attributable to common stockholders | $ (11,620,571) | $ (370,271) |
Net loss per share attributable to common stockholders, basic and diluted | $ (0.24) | $ (0.02) |
Weighted average number of common shares outstanding, basic and diluted | 47,780,223 | 23,004,360 |
Staking Revenue [Member] | ||
Revenues | ||
Total revenues | $ 72,524 |
Statements of Changes in Stockh
Statements of Changes in Stockholders' (Deficit) Equity (Unaudited) - USD ($) | Series C-1 Convertible Preferred Stock [Member] | Series C-2 Convertible Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2019 | $ 29 | $ 19,830 | $ 116,780,174 | $ (116,983,793) | $ (183,760) | |
Balance, Shares at Dec. 31, 2019 | 29,414 | 19,831,521 | ||||
Common stock issued including equity commitment fee, net | $ 6,187 | 406,824 | 413,011 | |||
Common stock issued including equity commitment fee, net, shares | 6,186,633 | |||||
Net loss | (370,271) | (370,271) | ||||
Balance at Mar. 31, 2020 | $ 29 | $ 26,017 | 117,186,998 | (117,354,064) | (141,020) | |
Balance, Shares at Mar. 31, 2020 | 29,414 | 26,018,154 | ||||
Balance at Dec. 31, 2020 | $ 29 | $ 42,010 | 120,541,135 | (119,539,887) | 1,043,287 | |
Balance, Shares at Dec. 31, 2020 | 29,414 | 42,011,617 | ||||
Common stock issued including equity commitment fee, net | $ 1,718 | 2,012,541 | 2,014,259 | |||
Common stock issued including equity commitment fee, net, shares | 1,718,144 | |||||
Issuance of common stock and warrants for cash, net | $ 9,500 | 8,855,500 | 8,865,000 | |||
Issuance of common stock and warrants for cash, net, shares | 9,500,000 | |||||
Issuance of Series C-2 convertible preferred stock | $ 1,100,000 | 1,100,000 | ||||
Issuance of Series C-2 convertible preferred stock, shares | 1,100,000 | |||||
Conversion of Series C-1 Convertible Preferred stock | $ (29) | $ 196 | (167) | |||
Conversion of Series C-1 Convertible Preferred stock, shares | (29,414) | 196,094 | ||||
Beneficial conversion features associated with convertible notes payable | 1,000,000 | 1,000,000 | ||||
Beneficial conversion feature of Series C-2 convertible preferred stock | $ (129,412) | (129,412) | ||||
Beneficial conversion feature of Series C-2 convertible preferred stock, shares | ||||||
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock | $ 16,176 | (16,176) | ||||
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock, shares | ||||||
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock | $ 4,822,220 | (4,822,220) | ||||
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock, shares | ||||||
Warrant exercise | $ 2,000 | 398,000 | 400,000 | |||
Warrant exercise, shares | 2,000,000 | |||||
Stock-based compensation | $ 466 | 7,539,094 | 7,539,560 | |||
Stock-based compensation, shares | 465,790 | |||||
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock | $ 179,277 | 179,277 | ||||
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock, shares | ||||||
Net loss | (6,782,175) | (6,782,175) | ||||
Balance at Mar. 31, 2021 | $ 5,988,261 | $ 55,890 | $ 135,637,119 | $ (126,322,062) | $ 15,359,208 | |
Balance, Shares at Mar. 31, 2021 | 1,100,000 | 55,891,645 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Net Cash flows used from operating activities: | ||
Net loss | $ (6,782,175) | $ (370,271) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation expense | 212 | 339 |
Amortization on debt discount | 562,096 | 16,606 |
Stock-based compensation | 7,539,560 | |
Stock-based compensation in connection with issuance of Series C-2 convertible preferred stock | 179,277 | |
Staking revenue | (72,524) | |
Purchase of non-productive digital assets/currencies | (5,761,549) | |
Sale of non-productive digital assets/currencies | 4,274,491 | |
Realized gain on digital assets/currencies transactions | (3,054,418) | |
Impairment loss on digital assets/currencies | 1,301,764 | 74,425 |
Changes in operating assets and liabilities: | ||
Prepaid expenses and other current assets | (421,384) | 15,740 |
Accounts payable and accrued expenses | 42,267 | (4,973) |
Accrued compensation | (348,875) | (9,409) |
Net cash used in operating activities | (2,541,258) | (277,543) |
Net cash used in investing activities: | ||
Purchase of productive digital assets/currencies for staking | (7,994,887) | |
Net cash used in investing activities | (7,994,887) | |
Net cash provided by financing activities: | ||
Proceeds from exercise of warrants | 400,000 | |
Net proceeds from issuance of convertible notes | 1,000,000 | |
Net proceeds from issuance of common stock and warrants for cash | 8,865,000 | |
Net proceeds from issuance of common stock | 2,014,259 | 413,011 |
Proceeds from issuance of Series C-2 convertible preferred stock | 1,100,000 | |
Net cash provided by financing activities | 13,379,259 | 413,011 |
Net increase in cash | 2,843,114 | 135,468 |
Cash, beginning of period | 524,135 | 143,098 |
Cash, end of period | 3,367,249 | 278,566 |
Supplemental disclosure of non-cash financing and investing activities: | ||
Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock | 16,176 | |
Deemed dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock | 4,822,220 | |
Conversion of Series C-1 Preferred Stock | 196 | |
Beneficial conversion feature of Series C-2 convertible preferred stock | 129,412 | |
Beneficial conversion features associated with convertible notes payable | $ 1,000,000 |
Business Organization and Natur
Business Organization and Nature of Operations | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Organization and Nature of Operations | 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 could purchase merchandise using digital assets, including bitcoin. The Company is currently focused on blockchain and digital currency ecosystems. 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 mining operation at our North Carolina facility due to capital constraints. In January 2015, the Company began a rebranding campaign using its BTCS.com domain to better reflect its broadened strategy. The Company recently released its new website which included broader information on its strategy. In the first quarter of 2021, the Company resumed its blockchain infrastructure operations (previously referred to as transaction verification services) with a focus on securing proof-of-stake blockchains and anticipates this will be a core focus going forward. Blockchain infrastructure operations can broadly be defined as earning a reward for securing a blockchain by processing and validating transactions on that blockchain. The Company is developing a proprietary staking-as-a-service platform that would enable clients to stake and delegate supported cryptocurrencies through a non-custodial platform. The Company is also developing a proprietary digital asset data analytics platform aimed at enabling users to aggregate their portfolio holdings from multiple exchanges and wallets into a single platform to view and analyze performance, risk metrics, and potential tax implications. The internally developed platform utilizes digital asset exchange APIs to read user data and does not allow for the trading of assets. The Company employs a digital asset treasury strategy with a primary focus on disruptive non-security protocol layer assets such as bitcoin and ethereum. The Company receives digital assets from its blockchain infrastructure solutions business and acquires digital assets through open market purchases. The Company is not limiting its assets to a single type of digital asset and may hold a variety of digital assets. 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. |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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, 2020. |
Liquidity, Financial Condition
Liquidity, Financial Condition and Management's Plans | 3 Months Ended |
Mar. 31, 2021 | |
Liquidity Financial Condition And Managements Plans | |
Liquidity, Financial Condition and Management's Plans | 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 investments from third-party investors as well as from officers and directors of the Company. During the first quarter of 2021, the Company received net proceeds of approximately $13.3 million from the issuance of a convertible note, issuances of common stock and warrants, and the issuance of Series C-2 convertible preferred stock. Therefore, the Company has adequate cash to fund its operations for at least the next twelve months. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 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 2020 Annual Report. Staking Revenue The Company runs its own digital asset validating nodes and has entered into network-based smart contracts. Through these contracts, the Company provides cryptocurrency to stake a node for the purpose of processing and validating transactions and adding blocks to a respective blockchain network. The term of a smart contract can vary based on the rules of the respective blockchain and typically last a few weeks to months after it is canceled by the operator and requires that the cryptocurrency staked remain locked up during the duration of the smart contract. In exchange for validating transactions and staking the cryptocurrency, the Company is entitled to all of the fixed cryptocurrency award for running the Company’s own node and successfully processing, validating and/or adding a block to the blockchain. The provision of processing and validating blockchain transactions is an output of the Company’s ordinary activities. Each separate block creation or validation under a smart contract with a network represents a performance obligation. The transaction consideration the Company receives, the fixed cryptocurrency awards, is noncash consideration, which the Company measures at fair value on the date received. The fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency on the date of receipt. The satisfaction of the performance obligation for processing and validating blockchain transactions occurs at a point in time when confirmation is received from the network indicating that the validation is complete and the awards are available for transfer. At that point, revenue is recognized. Cost of revenue The Company’s cost of revenue consists primarily of direct production costs related to the operations of processing and validating transactions on the network, rent and utilities for locations housing server nodes to the extent applicable, hosting costs if cloud-based servers are utilized and fees (including stock based fees) paid to 3rd parties to assist in the software maintenance and operations of its nodes. Digital Assets Translations and Remeasurements Digital assets are included in the balance sheets as either current assets or other assets if they are staked and locked up for over one year. 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. We assign costs to transactions on a first-in, first-out basis. 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 lowest 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. Internally Developed Software Internally developed software consisting of the core technology of the Company’s digital asset data analytics platform which is being designed to allow user to aggregate and analyze data from digital asset exchanges. For internally developed software, the Company uses both its own employees as well as the services of external vendors and independent contractors. The Company accounts for computer software used in the business in accordance with ASC 985-20 and ASC 350. ASC 985-20, Software-Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, ASC 350, Intangibles-Goodwill and Other Use of Estimates The accompanying unaudited condensed financial statements have been prepared in conformity with 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 intangible assets, stock-based compensation, the valuation of derivative liabilities, the valuation of convertible preferred stock 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. Stock-based compensation The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest over a one-year period. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. Expected Term Expected Volatility Risk-Free Interest Rate Expected Dividend Effective January 1, 2017, the Company elected to account for forfeited awards as they occur, as permitted by ASU 2016-09. Ultimately, the actual expenses recognized over the vesting period will be for those shares that vested. Prior to making this election, the Company estimated a forfeiture rate for awards at 0%, as the Company did not have a significant history of forfeitures. Convertible Preferred Stock The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred stock subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ equity. The Company evaluated the classification of its convertible preferred stock and determined that such instruments meet the criteria for equity classification. The Company has also evaluated its convertible preferred stock in accordance with the provisions of ASC 815, Derivatives and Hedging Beneficial Conversion Feature of Convertible Notes Payable The Company accounts for convertible notes payable in accordance with the guidelines established by the FASB Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options. The beneficial conversion feature of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a beneficial conversion feature related to the issuance of a convertible note when issued. The discounted face value is then used to measure the effective conversion price of the note. The effective conversion price and the market price of the Company’s common stock are used to calculate the intrinsic value of the conversion feature. The intrinsic value is recorded in the financial statements as a debt discount from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense. 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 March 31, 2021 and 2020 because their effect was anti-dilutive: As of March 31, 2021 2020 Warrants to purchase common stock 9,627,915 920,424 Series C-1 Convertible Preferred stock - 196,093 Series C-2 Convertible Preferred stock 39,897,668 - Convertible notes 1,493,652 4,032,258 Total 51,019,235 5,148,775 Recent Accounting Pronouncements In December 2019, the FASB issued 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. In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity 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 Payable
Note Payable | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Note Payable | Note 5 - Note Payable 2020 December Promissory Note On December 16, 2020, the Company issued Cavalry Fund I LP (“Cavalry”) a $1,000,000 promissory note (the “2020 December Promissory Note”) in consideration for $1,000,000. The 2020 December Promissory Note is (i) due on October 16, 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 $0.04 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 December Promissory Note. In connection with issuance of the 2020 December Promissory Note, the Company issued a Series C warrant to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $0.20, the Series C warrants were exercised for cash on January 15, 2021, resulting in proceeds of $400,000 to the Company. During the three months ended March 31, 2021, the Company recorded interest expense of approximately $29,589 for the 2020 December Promissory Note. As of March 31, 2021, the principal balance of the 2020 December Promissory Note was $1 million and accrued interest on the note payable amounted to approximately $35,000. During the three months ended March 31, 2021, the Company recorded approximately $315,000 amortization of debt discount related to the 2020 December Promissory Note. 2021 Promissory Note On January 15, 2021, the Company issued Calvary the 2021 Promissory Note in consideration for $1,000,000. The 2021 Promissory Note is (i) due on November 15, 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 $0.75 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 2021 Promissory Note. In connection with issuance of the Note, the Company issued a Series D warrant to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $2.16 per share (the “Warrant”). Detachable warrants issued in a bundled transaction with debt and equity offerings are accounted for on a separate basis. The allocation of the issuance proceeds to the base instrument and to the warrants depends on the accounting classification of the separate warrant as equity or liability. If the warrants are classified as equity, then the allocation is made based upon the relative fair values of the base instrument and the warrants following the guidance in ASC 470-20-25-2. In this case, the Warrant is equity-classified, with the fair value at issuance was approximately $3,580,000. As such, the Company recognized a beneficial conversion feature, resulting in a discount to the 2021 Promissory Note of approximately $782,000 with a corresponding credit to additional paid-in capital. In addition, the 2021 Promissory Note does not contain any embedded features that require bifurcation pursuant to ASC 815-15. At the issuance date, the 2021 Promissory Note was convertible into 705,716 shares of common stock at $1.41 per share, but the Company’s fair value of underlying common stock was $2.18 per share. As such, the Company recognized a beneficial conversion feature, resulting in an additional discount to the 2021 Promissory Note of approximately $218,000 with a corresponding credit to additional paid-in capital. During the three months ended March 31, 2021, the Company recorded interest expense of approximately $24,658 for the 2021 Promissory Note. As of March 31, 2021, the principal balance of the 2021 Promissory Note was $1 million and accrued interest on the note payable amounted to approximately $25,000. During the three months ended March 31, 2021, the Company recorded approximately $247,000 amortization of debt discount related to the 2021 Promissory Note. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Stockholders' Equity | Note 6 - Stockholders’ Equity Preferred Stock The Company is authorized to issue up to 20,000,000 shares of preferred stock. This preferred stock may be issued in one or more series, and shall have such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as shall be determined at the time of issuance by the Company’s board of directors without further action by the Company’s shareholders. On January 1, 2021, members of the Company’s management subscribed for 1,100,000 shares of the Company’s to be designated Series C-2 Convertible Preferred Stock (the “Series C-2”), for a total of $1,100,000 at $1.00 per Share of Series C-2. The Company obtained an independent valuation of the Series C-2 and $179,277 of compensation expense was recognized, representing the difference between the fair value and the proceeds received. The Series C-2 is not mandatorily redeemable and is not unconditionally redeemable. The Series C-2 is callable by the Company. The Certificate of Designation required that the Company, within 180 days of the Initial Issuance Date, call a special meeting of stockholders seeking shareholder ratification of the issuance of the Series C-2. If the ratification of the issuance was not approved prior to the twelve-month anniversary of the Initial Issuance Date (the “Vote Deadline”), the Series C-2 would be redeemed at a price equal to 107% of (i) the Stated Value per share plus (ii) all unpaid dividends thereon. Provided; further, if the Company had filed a proxy with the SEC prior to the Vote Deadline but was unable to conduct a vote prior to the Vote Deadline then the Vote Deadline shall be extended until such time as the vote is conducted. The Series C-2 holders were not entitled to vote on the ratification. The call provision would have been automatically triggered if the ratification of the issuance was not approved in a special meeting of stockholders prior to the twelve-month anniversary of the Initial Issuance Date. The Company held the meeting within the required period and the Series C-2 is no longer redeemable. Based on the guidance in ASC 480-10-S99 (“ASR 268”), a redeemable equity instrument is not to be included in permanent equity. Rather, it should be reported between long-term debt and stockholders’ equity, without a subtotal that might imply it is a part of stockholders’ equity (i.e., “temporary equity” or “mezzanine capital”). ASR 268 specifies that redeemable stock is any type of equity security, including common or preferred stock, when it has any condition for redemption which is not solely within the control of the issuer without regard to probability. The Series C-2 Certificate of Designation required the Company to redeem the Series C-2 if stockholder approval was not received by the Vote Deadline. Stockholder approval was not considered to be “solely within the Company’s control.” Stockholder approval occurred on March 31, 2021, at which time the Series C-2 was no longer callable by the Company. As such, the Series C-2 was initially classified in temporary equity under ASR 268 and was reclassified to permanent equity upon stockholder approval on March 31, 2021. The holders of Series C-2 shall be entitled to receive dividends or distributions on each share of Series C-2 on an “as converted” into Common Stock when and if dividends are declared on the Common Stock by the Board of Directors. Dividends shall be paid in cash or property, as determined by the Board of Directors. At any time or times on or after the two-year anniversary of the Initial Issuance Date, each Holder shall be entitled to convert any portion of the outstanding Series C-2 held by such Holder into validly issued, fully paid and non-assessable shares of Common at the Conversion Rate. The Conversion Amount is subject to adjustment for certain capitalization and Anti-Dilution Events. The Series C-2 will automatically be converted at the earlier of: (i) the four-year anniversary of the Initial Issuance Date, and (ii) simultaneous with the Corporation’s Common Stock being listed on a national securities exchange. The Conversion Rate is based upon the Conversion Price of $.17 which resulted in a beneficial conversion feature at the time of issuance. As such, the Company recognized a beneficial conversion amount of $129,412 as a reduction to the carrying amount of the convertible instrument. This discount will be amortized as a dividend over two years, the earliest conversion date. The Conversion Amount may be adjusted due to certain Anti-Dilution Events. If at any time after the Initial Issuance Date, the Company raises capital equal to or in excess of $5 million by issuing Common Stock or Common Stock Equivalents then the Anti-Dilution Amount per share of Series C-2 shall be the product of: (i) 0.0000004, and (ii) the aggregate amount of all capital raised by the Corporation after the Initial Issuance Date (the “ Capital Raised Common Stock Issuance of Shares Pursuant to Equity Line of Credit Purchase Agreement On January 28, 2021, the Company filed a registration statement on Form S-1 seeking to register 4,000,000 shares (the “Registration Statement”). The Registration Statement was declared effective by the SEC on February 1, 2021. During the three months ended March 31, 2021, the Company issued 1,718,144 shares of common stock (including 117,545 pro-rata commitment shares) under the Registration Statement pursuant to the equity line of credit purchase agreement with Cavalry (the “Equity Line”) resulting in aggregate net proceeds of $2,014,259 (net of $750 of transfer agent fees) and $2,015,008 in gross proceeds at a per share price of $1.173 (inclusive of the pro-rata commitment shares). Issuance of Shares Pursuant to Registered Direct Offering On March 4, 2021, the Company closed on a securities purchase agreement (the “Purchase Agreement”) with institutional investors, pursuant to which the Company sold and issued, in a registered direct offering, 9,500,000 shares of the Company’s common stock, at a purchase price per share of $1.00 and immediately exercisable five-year warrants to purchase 7,125,000 shares of common stock at an exercise price of $1.15 per share (the “Warrants” and together with the common stock, the “Securities”). The gross proceeds from the offering was $9.5 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company, and the net proceeds were $8.9 million. The Purchase Agreement contains representations, warranties, indemnification and other provisions customary for transactions of this nature. Pursuant to the Purchase Agreement, subject to limited exceptions, each of the Company and its officers and directors agreed not to, and not to publicly disclose the intention to, sell or otherwise dispose of, any shares of common stock or any securities convertible into, or exchangeable or exercisable for, common stock, for a period ending 60 days after the date of the prospectus supplement for this offering. The Company also entered into a placement agent agreement (the “PA Agreement”) with A.G.P./Alliance Global Partners (“AGP”), pursuant to which AGP agreed to serve as the exclusive placement agent for the Company in connection with that offering. The Company paid AGP a cash placement fee equal to 7.0% of the aggregate gross proceeds raised in the offering (reduced to 3.5% for certain investors), and reimbursed the placement agent for its legal fees and other accountable expenses in the amount of $40,000. Issuance of Shares Pursuant to Cash Exercise of Series C Warrants On January 15, 2021, the Company issued 2,000,000 shares of the Company’s common stock to Cavalry upon the exercise of all their Series C warrants and payment of the exercise price of $400,000. Cavalry and the Company entered into an agreement whereby the Cavalry would exercise early for cash provided that the Company register the underlying shares of common stock within 30 days of exercise. Issuance of Shares Due to Conversion of Series C-1 Preferred Stock On March 30, 2021, the Company issued 196,094 shares of common stock upon the conversion of 29,414 shares of Series C-1 Convertible Preferred stock. After this conversion, there were no Series C-1 shares outstanding and the Company filed a Certificate of Withdrawal with the Secretary of State of the State of Nevada. The Certificate of Withdrawal eliminated from the Articles of Incorporation of the Company all matters set forth in the Series C-1. Issuance of Restricted Stock to Service Providers During the three months ended March 31, 2021, the Company issued to RedChip Companies Inc. and Launchnodes LTD, two service providers of the Company, 400,000 and 65,790 shares of restricted common stock respectively, with a total fair value of $0.5 million. 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. The Company has reserved 20,000,000 shares of common stock for issuance pursuant to the 2021 Plan. Options On January 1, 2021, the Board of Directors of the Company approved the grant of 12 million stock options with an exercise price of $0.19 under the Company’s 2021 Plan to Messrs. David Garrity a director, and Charles Allen and Michal Handerhan, executive officers and directors of the Company. Effective as of January 1, 2021, the Company and each optionee executed Stock Option Agreements evidencing the option grants. While stockholder approval (or ratification) of the grants was not required (under either the Stock Option Agreements or by the resolutions of the Board of Directors approving such grants), the Board of Directors voluntarily caused the Company to seek shareholder ratification of the grants to limit any potential exposure to breach of fiduciary duty claims. As a result, based on the guidance in ASC 718, the date the stockholders ratified the grants (March 31, 2021) is the deemed grant date solely with respect to GAAP for those stock options. Of the stock options: (i) 4.8 million options will vest on January 1, 2022 and (ii) the remaining options vested (prior to March 31, 2021) based upon the Company’s stock price meeting certain milestones. The Company records compensation expense for stock options based on the estimated fair value of the options on the deemed grant date using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options. The following weighted-average assumptions were used to estimate the fair value of options granted during: Three-Months Ended March 31, 2021 2020 Dividend yield 0.0 % 0.0 % Expected volatility 0.0 % 0.0 % Risk-free interest rate 0.0 % 0.0 % Expected term 0.0 years 0.0 years Expected Volatility Risk-Free Interest Rate Expected Term 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. 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. A summary of option activity under the Company’s stock option plan for three months ended March 31, 2021 is presented below: Number of Shares Weighted Average Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of December 31, 2020 - $ - $ - - Employee options issued 12,000,000 0.19 10,080,000 5.0 Outstanding as of March 31, 2021 12,000,000 $ 0.19 $ 10,080,000 5.0 Options vested and exercisable 7,200,000 $ 0.19 $ 6,048,000 5.0 RSUs On January 1, 2021, the Board of Directors of the Company approved 2.75 million restricted stock unit grants under the Company’s 2021 Equity Incentive Plan to Messrs. David Garrity a director, and Charles Allen and Michal Handerhan, executive officers and directors of the Company. Effective as of January 1, 2021, the Company and each recipient executed a Restricted Stock Agreement evidencing the stock grants. While stockholder approval (or ratification) of the grants was not required (under either the Restricted Stock Agreements or by the resolutions of the Board of Directors approving such grants), the Board of Directors voluntarily caused the Company to seek shareholder ratification of the grants to limit any potential exposure to breach of fiduciary duty claims. As a result, based on the guidance in ASC 718, the date the stockholders ratified the grants (March 31, 2021) is the deemed grant date solely with respect to GAAP for those restricted stock grants. The restricted stock units vest when the Company lists its Common Stock on a national securities exchange. As of March 31, 2021, the restricted stock units remained unvested. The cost of stock-based compensation for restricted stock units is measured based on the closing fair market value of the Company’s common stock at the deemed grant date. Because the listing on a national securities exchange is not deemed probable of occurring until the event occurs, compensation cost measured on the deemed grant date will not be recognized until the listing actually occurs. A summary of the Company’s restricted stock units granted under the 2021 Plan during the three months ended March 31, 2021 are as follows: Number of Restricted Weighted Average Grant Day Fair Value Nonvested at December 31, 2020 - $ - Granted 2,750,000 2,832,500 Nonvested at March 31, 2021 2,750,000 $ 2,832,500 Stock Based Compensation Stock-based compensation expense for the three months ended March 31, 2021 was approximately $7.0 million, comprised of $59,000 for the issuance of restricted common stock to service providers not pursuant to the 2021 Plan and approximately $7.0 million in connection with options issued pursuant to the 2021 Plan. Unrecognized compensation expense for the Company’s was $5.2 million at March 31, 2021. $4.7 million of the unrecognized compensation expense is expected to be recognized on January 1, 2022, $0.3 million expected to be amortized through September 2022 and $0.1 million through February 2024. Share-based compensation expense is recorded as a part of selling, general and administrative expenses, compensation expenses and cost of revenues. |
Employee Benefit Plans
Employee Benefit Plans | 3 Months Ended |
Mar. 31, 2021 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | Note 7 - Employee Benefit Plans The Company maintains defined contribution benefit plans under Section 401(k) of the Internal Revenue Code covering substantially all qualified employees of the Company (the “401(k) Plan”). Under the 401(k) Plan, the Company may make discretionary contributions of up to 100% of employee contributions. During the three months ended March 31, 2021, the Company made contributions to the 401(k) Plan of $39,000. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 8 - Subsequent Events On April 1, 2021, the Company issued its legal counsel 48,544 fully-vested shares of the Company’s common stock for a $50,000 pre-payment of legal fees. On April 1, 2021, the Company issued Kilwar LLC 13,637 fully-vested shares of the Company’s common stock in connection with an Information Technology Services Agreement related to the development of its data analytics platform. On May 6, 2021, the Company issued 1,169,632 shares of common stock (including 46,667 pro-rata commitment shares) pursuant to the Equity Line with Cavalry resulting in aggregate proceeds of $800,000. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Staking Revenue | Staking Revenue The Company runs its own digital asset validating nodes and has entered into network-based smart contracts. Through these contracts, the Company provides cryptocurrency to stake a node for the purpose of processing and validating transactions and adding blocks to a respective blockchain network. The term of a smart contract can vary based on the rules of the respective blockchain and typically last a few weeks to months after it is canceled by the operator and requires that the cryptocurrency staked remain locked up during the duration of the smart contract. In exchange for validating transactions and staking the cryptocurrency, the Company is entitled to all of the fixed cryptocurrency award for running the Company’s own node and successfully processing, validating and/or adding a block to the blockchain. The provision of processing and validating blockchain transactions is an output of the Company’s ordinary activities. Each separate block creation or validation under a smart contract with a network represents a performance obligation. The transaction consideration the Company receives, the fixed cryptocurrency awards, is noncash consideration, which the Company measures at fair value on the date received. The fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency on the date of receipt. The satisfaction of the performance obligation for processing and validating blockchain transactions occurs at a point in time when confirmation is received from the network indicating that the validation is complete and the awards are available for transfer. At that point, revenue is recognized. |
Cost of Revenue | Cost of revenue The Company’s cost of revenue consists primarily of direct production costs related to the operations of processing and validating transactions on the network, rent and utilities for locations housing server nodes to the extent applicable, hosting costs if cloud-based servers are utilized and fees (including stock based fees) paid to 3rd parties to assist in the software maintenance and operations of its nodes. |
Digital Assets Translations and Remeasurements | Digital Assets Translations and Remeasurements Digital assets are included in the balance sheets as either current assets or other assets if they are staked and locked up for over one year. 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. We assign costs to transactions on a first-in, first-out basis. 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 lowest 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. |
Internally Developed Software | Internally Developed Software Internally developed software consisting of the core technology of the Company’s digital asset data analytics platform which is being designed to allow user to aggregate and analyze data from digital asset exchanges. For internally developed software, the Company uses both its own employees as well as the services of external vendors and independent contractors. The Company accounts for computer software used in the business in accordance with ASC 985-20 and ASC 350. ASC 985-20, Software-Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, ASC 350, Intangibles-Goodwill and Other |
Use of Estimates | Use of Estimates The accompanying unaudited condensed financial statements have been prepared in conformity with 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 intangible assets, stock-based compensation, the valuation of derivative liabilities, the valuation of convertible preferred stock 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. |
Stock-based Compensation | Stock-based compensation The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest over a one-year period. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. Expected Term Expected Volatility Risk-Free Interest Rate Expected Dividend Effective January 1, 2017, the Company elected to account for forfeited awards as they occur, as permitted by ASU 2016-09. Ultimately, the actual expenses recognized over the vesting period will be for those shares that vested. Prior to making this election, the Company estimated a forfeiture rate for awards at 0%, as the Company did not have a significant history of forfeitures. |
Convertible Preferred Stock | Convertible Preferred Stock The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred stock subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ equity. The Company evaluated the classification of its convertible preferred stock and determined that such instruments meet the criteria for equity classification. The Company has also evaluated its convertible preferred stock in accordance with the provisions of ASC 815, Derivatives and Hedging |
Beneficial Conversion Feature of Convertible Notes Payable | Beneficial Conversion Feature of Convertible Notes Payable The Company accounts for convertible notes payable in accordance with the guidelines established by the FASB Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options. The beneficial conversion feature of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a beneficial conversion feature related to the issuance of a convertible note when issued. The discounted face value is then used to measure the effective conversion price of the note. The effective conversion price and the market price of the Company’s common stock are used to calculate the intrinsic value of the conversion feature. The intrinsic value is recorded in the financial statements as a debt discount from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense. |
Net Loss Per Share | 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 March 31, 2021 and 2020 because their effect was anti-dilutive: As of March 31, 2021 2020 Warrants to purchase common stock 9,627,915 920,424 Series C-1 Convertible Preferred stock - 196,093 Series C-2 Convertible Preferred stock 39,897,668 - Convertible notes 1,493,652 4,032,258 Total 51,019,235 5,148,775 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In December 2019, the FASB issued 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. In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity 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. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Schedule of Earnings Per Share Anti-diluted | The following financial instruments were not included in the diluted loss per share calculation as of March 31, 2021 and 2020 because their effect was anti-dilutive: As of March 31, 2021 2020 Warrants to purchase common stock 9,627,915 920,424 Series C-1 Convertible Preferred stock - 196,093 Series C-2 Convertible Preferred stock 39,897,668 - Convertible notes 1,493,652 4,032,258 Total 51,019,235 5,148,775 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Summary of Weighted-average Assumptions Used to Estimate Fair Value | The following weighted-average assumptions were used to estimate the fair value of options granted during: Three-Months Ended March 31, 2021 2020 Dividend yield 0.0 % 0.0 % Expected volatility 0.0 % 0.0 % Risk-free interest rate 0.0 % 0.0 % Expected term 0.0 years 0.0 years |
Summary of Option Activity | A summary of option activity under the Company’s stock option plan for three months ended March 31, 2021 is presented below: Number of Shares Weighted Average Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of December 31, 2020 - $ - $ - - Employee options issued 12,000,000 0.19 10,080,000 5.0 Outstanding as of March 31, 2021 12,000,000 $ 0.19 $ 10,080,000 5.0 Options vested and exercisable 7,200,000 $ 0.19 $ 6,048,000 5.0 |
Summary of Restricted Stock | A summary of the Company’s restricted stock units granted under the 2021 Plan during the three months ended March 31, 2021 are as follows: Number of Restricted Weighted Average Grant Day Fair Value Nonvested at December 31, 2020 - $ - Granted 2,750,000 2,832,500 Nonvested at March 31, 2021 2,750,000 $ 2,832,500 |
Liquidity, Financial Conditio_2
Liquidity, Financial Condition and Management's Plans (Details Narrative) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Liquidity Financial Condition And Managements Plans | |
Proceeds from issuance of shares, debt and warrant | $ 13,300,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) | Jan. 01, 2017 |
Accounting Policies [Abstract] | |
Estimated forfeiture rate | 0 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Earnings Per Share Anti-diluted (Details) - shares | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Total | 51,019,235 | 5,148,775 |
Warrants to Purchase Common Stock [Member] | ||
Total | 9,627,915 | 920,424 |
Series C-1 Convertible Preferred Stock [Member] | ||
Total | 196,093 | |
Series C-2 Convertible Preferred Stock [Member] | ||
Total | 39,897,668 | |
Convertible Notes [Member] | ||
Total | 1,493,652 | 4,032,258 |
Note Payable (Details Narrative
Note Payable (Details Narrative) - USD ($) | Jan. 15, 2021 | Dec. 16, 2020 | Mar. 31, 2021 |
2020 December Promissory Note [Member] | |||
Promissory notes | $ 1,000,000 | ||
Interest expense | 29,589 | ||
Accrued interest | 35,000 | ||
Amortization on debt discount | 315,000 | ||
2021 Promissory Note [Member] | |||
Interest expense | 24,658 | ||
Accrued interest | 25,000 | ||
Amortization on debt discount | $ 247,000 | ||
Cavalry Fund I LP [Member] | 2020 December Promissory Note [Member] | |||
Promissory notes | $ 1,000,000 | ||
Proceeds from issuance of promissory note | $ 1,000,000 | ||
Debt maturity date | Oct. 16, 2021 | ||
Debt instrument discount rate | 35.00% | ||
Debt conversion price per share | $ 0.04 | ||
Debt interest rate | 12.00% | ||
Warrants to purchase of common stock shares | 20,000,000 | ||
Warrants exercise price | $ 0.20 | ||
Proceeds from issuance of debt | $ 400,000 | ||
Cavalry Fund I LP [Member] | 2021 Promissory Note [Member] | |||
Promissory notes | $ 1,000,000 | ||
Proceeds from issuance of promissory note | $ 1,000,000 | ||
Debt maturity date | Nov. 15, 2021 | ||
Debt instrument discount rate | 35.00% | ||
Debt conversion price per share | $ 0.75 | ||
Debt interest rate | 12.00% | ||
Debt conversion of beneficial conversion feature | $ 218,000 | ||
Debt conversion common stock issued | 705,716 | ||
Shares issued, price per share | $ 1.41 | ||
Fair value of underlying common stock | $ 2.18 | ||
Cavalry Fund I LP [Member] | 2021 Promissory Note [Member] | Series D Warrants [Member] | |||
Warrants to purchase of common stock shares | 2,000,000 | ||
Warrants exercise price | $ 2.16 | ||
Fair value of warrant | $ 3,580,000 | ||
Debt conversion of beneficial conversion feature | $ 782,000 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | Mar. 30, 2021 | Mar. 04, 2021 | Jan. 28, 2021 | Jan. 15, 2021 | Jan. 02, 2021 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 |
Number of shares issued | $ 2,014,259 | $ 413,011 | ||||||
Stock-based compensation expense | $ 7,539,560 | |||||||
Preferred stock, shares authorized | 20,000,000 | 20,000,000 | ||||||
Conversion of common stock shares | 196,094 | |||||||
Proceeds from common stock | $ 2,014,259 | $ 413,011 | ||||||
Exercise price | $ 0.19 | |||||||
Number of vesting shares | 4,800,000 | |||||||
Vesting period | Jan. 1, 2022 | |||||||
Unrecognized compensation expense | $ 5,200,000 | |||||||
January 1, 2022 [Member] | ||||||||
Unrecognized compensation expense | 4,700,000 | |||||||
Expected to Amortized, September 2022 [Member] | ||||||||
Unrecognized compensation expense | 300,000 | |||||||
Expected to Amortized, February 2024 [Member] | ||||||||
Unrecognized compensation expense | 100,000 | |||||||
2021 Equity Incentive Plan [Member] | ||||||||
Stock-based compensation expense | $ 7,000,000 | |||||||
Number of common stock reserved | 20,000,000 | |||||||
Number of stock options granted | 12,000,000 | |||||||
Exercise price | $ 0.19 | |||||||
Option issued | $ 7,000,000 | |||||||
2021 Equity Incentive Plan [Member] | Restricted Stock [Member] | ||||||||
Proceeds from common stock | $ 59,000 | |||||||
RedChip Companies Inc. [Member] | ||||||||
Number of restricted stock | 400,000 | |||||||
Fair value of restricted stock | $ 500,000 | |||||||
Launchnodes LTD [Member] | ||||||||
Number of restricted stock | 65,790 | |||||||
Fair value of restricted stock | $ 500,000 | |||||||
Board of Directors [Member] | 2021 Equity Incentive Plan [Member] | ||||||||
Number of restricted stock | 2,750,000 | |||||||
Equity Line of Credit Purchase Agreement [Member] | ||||||||
Number of shares issued | $ 2,014,259 | |||||||
Number of shares issued, shares | 4,000,000 | 1,718,144 | ||||||
Transfer agent fees | $ 750 | |||||||
Proceeds from common stock | $ 2,015,008 | |||||||
Equity Line of Credit Purchase Agreement [Member] | Pro-rata Commitment Shares [Member] | ||||||||
Number of shares issued, shares | 117,545 | |||||||
Share price per share | $ 1.173 | |||||||
Securities Purchase Agreement [Member] | ||||||||
Number of shares issued, shares | 9,500,000 | |||||||
Share price per share | $ 1 | |||||||
Proceeds from offering | $ 9,500,000 | |||||||
Proceeds from placement | $ 8,900,000 | |||||||
Percentage of gross proceeds of offerings | 7.00% | |||||||
Legal fees and other accountable expenses | $ 40,000 | |||||||
Minimum [Member] | Securities Purchase Agreement [Member] | Investors [Member] | ||||||||
Percentage of gross proceeds of offerings | 3.50% | |||||||
Preferred Stock [Member] | Maximum [Member] | ||||||||
Preferred stock, shares authorized | 20,000,000 | |||||||
Warrant [Member] | Securities Purchase Agreement [Member] | ||||||||
Warrants term | 5 years | |||||||
Warrants to purchase of common stock shares | 7,125,000 | |||||||
Warrants exercise price | $ 1.15 | |||||||
Series C-2 Convertible Preferred Stock [Member] | ||||||||
Number of shares issued | $ 1,100,000 | |||||||
Number of shares issued, shares | 1,100,000 | |||||||
Share price per share | $ 1 | |||||||
Stock-based compensation expense | $ 179,277 | |||||||
Redeemed price value percentage | 107.00% | |||||||
Conversion price | $ .17 | |||||||
Beneficial conversion feature | $ 129,412 | |||||||
Terms of conversion | If at any time after the Initial Issuance Date, the Company raises capital equal to or in excess of $5 million by issuing Common Stock or Common Stock Equivalents then the Anti-Dilution Amount per share of Series C-2 shall be the product of: (i) 0.0000004, and (ii) the aggregate amount of all capital raised by the Corporation after the Initial Issuance Date (the “Capital Raised”). Provided; further, for the determination of the Anti-Dilution Amount, the amount of Capital Raised shall be limited to $13 million, regardless of how much capital the Corporation raises. In the event capital is raised simultaneous with a listing on a national securities exchange and the automatic conversion of the Series C-2 then such funds shall be included in the Capital Raised for the purpose of determining the Anti-Dilution Amount. As of March 31, 2021, $12,915,008 of Capital Raised triggered an adjustment to the Conversion Amount. The Company recognized the effect of the down-round protection when the capital raises occurred as the difference between: (1) the financial instrument’s fair value (without the down round feature) using the pre-trigger exercise price, and (2) the financial instrument’s fair value (without the down round feature) using the reduced exercise price. The value of the effect of the down round feature of $4,822,220 was treated as a dividend and a reduction to income available to common shareholders in the basic EPS calculation. | |||||||
Conversion of common stock shares | 39,897,669 | |||||||
Preferred stock, shares outstanding | 1,100,000 | 0 | ||||||
Series C Warrants [Member] | Cavalry Fund I LP [Member] | ||||||||
Warrants to purchase of common stock shares | 2,000,000 | |||||||
Payment of exercise price | $ 400,000 | |||||||
Series C-1 Convertible Preferred Stock [Member] | ||||||||
Number of shares issued | ||||||||
Number of shares issued, shares | ||||||||
Conversion of common stock shares | 29,414 | |||||||
Preferred stock, shares outstanding | 0 | 29,414 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Weighted-average Assumptions Used to Estimate Fair Value (Details) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Equity [Abstract] | ||
Dividend yield | 0.00% | 0.00% |
Expected volatility | 0.00% | 0.00% |
Risk-free interest rate | 0.00% | 0.00% |
Expected term | 0 years | 0 years |
Stockholders' Equity - Summar_2
Stockholders' Equity - Summary of Option Activity (Details) | 3 Months Ended |
Mar. 31, 2021USD ($)$ / sharesshares | |
Equity [Abstract] | |
Number of Shares Outstanding, Beginning balance | shares | |
Number of Shares Outstanding, Employee options issued | shares | 12,000,000 |
Number of Shares Outstanding, Ending balance | shares | 12,000,000 |
Number of Shares Outstanding, Options vested and exercisable | shares | 7,200,000 |
Weighted Average Exercise Price, Beginning balance | $ / shares | |
Weighted Average Exercise Price, Employee options issued | $ / shares | 0.19 |
Weighted Average Exercise Price, Ending balance | $ / shares | 0.19 |
Weighted Average Exercise Price, Options vested and exercisable | $ / shares | $ 0.19 |
Total Intrinsic Value, Beginning balance | $ | |
Total Intrinsic Value, Employee options issued | $ | 10,080,000 |
Total Intrinsic Value, Ending balance | $ | 10,080,000 |
Total Intrinsic Value, Options vested and exercisable | $ | $ 6,048,000 |
Weighted Average Remaining Contractual Life (in years), Beginning balance | 0 years |
Weighted Average Remaining Contractual Life (in years), Employee options issued | 5 years |
Weighted Average Remaining Contractual Life (in years), Ending balance | 5 years |
Weighted Average Remaining Contractual Life (in years), Options vested and exercisable | 5 years |
Stockholders' Equity - Summar_3
Stockholders' Equity - Summary of Restricted Stock (Details) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Equity [Abstract] | |
Number of Restricted Stock Units Nonvested, beginning balance | shares | |
Number of Restricted Stock Units, Granted | shares | 2,750,000 |
Number of Restricted Stock Units Nonvested, ending balance | shares | 2,750,000 |
Weighted Average Grant Day Fair Value Nonvested, beginning balance | $ / shares | |
Weighted Average Grant Day Fair Value, Granted | $ / shares | 2,832,500 |
Weighted Average Grant Day Fair Value Nonvested, ending balance | $ / shares | $ 2,832,500 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details Narrative) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Retirement Benefits [Abstract] | |
Employee contribution percentage | 100.00% |
Employee contribution amount | $ 39,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | May 06, 2021 | Apr. 01, 2021 | Mar. 04, 2021 | Mar. 31, 2021 | Mar. 31, 2020 |
Proceeds from common stock | $ 2,014,259 | $ 413,011 | |||
Securities Purchase Agreement [Member] | |||||
Pre-payment of legal fees | $ 40,000 | ||||
Number of shares issued, shares | 9,500,000 | ||||
Subsequent Event [Member] | |||||
Number of fully vested shares issued | 48,544 | ||||
Pre-payment of legal fees | $ 50,000 | ||||
Subsequent Event [Member] | Kilwar LLC [Member] | Information Technology Services Agreement [Member] | |||||
Number of fully vested shares issued | 13,637 | ||||
Subsequent Event [Member] | Cavalry Fund I LP [Member] | Securities Purchase Agreement [Member] | |||||
Number of shares issued, shares | 1,169,632 | ||||
Proceeds from common stock | $ 800,000 | ||||
Subsequent Event [Member] | Cavalry Fund I LP [Member] | Securities Purchase Agreement [Member] | Pro-rata Commitment Shares [Member] | |||||
Number of shares issued, shares | 46,667 |