0001493152-18-014414.txt : 20181012 0001493152-18-014414.hdr.sgml : 20181012 20181012143654 ACCESSION NUMBER: 0001493152-18-014414 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 36 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20181012 DATE AS OF CHANGE: 20181012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BTCS Inc. CENTRAL INDEX KEY: 0001436229 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 262477977 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-55141 FILM NUMBER: 181120055 BUSINESS ADDRESS: STREET 1: 9466 GEORGIA AVENUE #124 CITY: SILVER SPRING STATE: MD ZIP: 20901 BUSINESS PHONE: 202-430-6576 MAIL ADDRESS: STREET 1: 9466 GEORGIA AVENUE #124 CITY: SILVER SPRING STATE: MD ZIP: 20901 FORMER COMPANY: FORMER CONFORMED NAME: Bitcoin Shop, Inc. DATE OF NAME CHANGE: 20150422 FORMER COMPANY: FORMER CONFORMED NAME: BITCOIN SHOP INC. DATE OF NAME CHANGE: 20140204 FORMER COMPANY: FORMER CONFORMED NAME: TouchIT Technologies, Inc. DATE OF NAME CHANGE: 20100524 10-Q/A 1 form10-qa.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q/A

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2018

 

[  ] 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   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

9466 Georgia Avenue #124

Silver Spring, MD

  20901
(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.)

 

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 [  ] (Do not check if a company) 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]

 

Applicable only to corporate issuers:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of October 11, 2018, there were 372,605,986 shares of common stock, par value $0.001, issued and outstanding.

 

 

 

 
 

 

EXPLANATORY NOTE

 

This is Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) to the Quarterly Report on Form 10-Q for the three months ended March 31, 2018, as originally filed with the Securities and Exchange Commission (the “SEC”) on May 14, 2018 (the “Original Filing”) by BTCS Inc. (the “Company”, “we”, “us”, or “our”). The purpose of this amendment is to correct errors in the Company’s previously issued financial statements for the period ended March 31, 2018 in connection with the accounting for digital currencies as intangible assets with indefinite lives and record such digital currencies at cost less impairment. Other than the updated accounting treatment and disclosure that is as of March 31, 2018, the remaining disclosure in the Original Filing has been updated as necessary.

 

 
 

 

BTCS INC.

TABLE OF CONTENTS

 

    Page
     
PART I - FINANCIAL INFORMATION  
     
ITEM 1 Financial Statements 4
     
  Condensed Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017 4
     
  Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2018 and 2017 (unaudited) 5
     
  Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017 (unaudited) 6
     
  Notes to the Unaudited Condensed Consolidated Financial Statements 7-12
     
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
     
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 16
     
ITEM 4 Controls and Procedures 16
     
PART II - OTHER INFORMATION  
     
ITEM 1 Legal Proceedings 17
     
ITEM 1A Risk Factors 17
     
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 17
     
ITEM 3 Defaults Upon Senior Securities 17
     
ITEM 4 Mine Safety Disclosures 17
     
ITEM 5 Other Information 17
     
ITEM 6 Exhibits 17
     
  Signature 18

 

2
 

 

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 including our Form 10-K/A filed on October 12, 2018.

 

3
 

 

ITEM 1 Financial Statements

 

BTCS Inc. and Subsidiary

Condensed Consolidated Balance Sheets

 

   March 31, 2018   December 31, 2017 
   (Unaudited)     
   (RESTATED)   (RESTATED) 
Assets:          
Current assets:          
Cash  $167,037   $303,334 
Digital currencies   136,893    217,119 
Prepaid expense   73,844    67,736 
Total current assets   377,774    588,189 
           
Other assets:          
Property and equipment, net   1,113    1,235 
Total other assets   1,113    1,235 
           
Total Assets  $378,887   $589,424 
           
Liabilities and Stockholders’ Equity:          
Accounts payable and accrued expense  $30,395   $75,997 
Total current liabilities   30,395    75,997 
           
Stockholders’ equity:          
Preferred stock; 20,000,000 shares authorized at 0.001 par value:          
Series B Convertible Preferred stock: 0 and 25,877 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively; Liquidation preference 0.001 per share   -    25 
Series C-1 Convertible Preferred stock: 50,004 shares issued and outstanding at at March 31, 2018 and December 31, 2017; Liquidation preference 0.001 per share   50    50 
Common stock, 975,000,000 shares authorized at 0.001 par value, 368,219,169 and 363,043,769 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively   368,219    363,044 
Additional paid in capital   114,661,930    114,667,080 
Accumulated deficit   (114,681,707)   (114,516,772)
Total stockholders’ equity   348,492    513,427 
           
Total Liabilities and stockholders’ equity  $378,887   $589,424 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4
 

 

BTCS Inc. and Subsidiary

Condensed Consolidated Statements of Operations

(Unaudited)

 

   (RESTATED)     
  

For the three

months ended

  

For the three

months ended

 
   March 31,   March 31, 
   2018   2017 
Revenues          
E-commerce  $-   $3,181 
Total revenues   -    3,181 
           
Operating expenses:          
General and administrative   255,663    179,386 
Marketing   1,485    60 
Total operating expenses   257,148    179,446 
           
Net loss from operations   (257,148)   (176,265)
           
Other (expenses) income:          
Fair value adjustments for warrant liabilities   -    (33,172,886)
Fair value adjustments for convertible notes   -    (16,849,071)
Realized gain on sale of digital currencies   92,213    - 
Gain on extinguishment of debt   -    15,873,067 
Loss from lease termination   -    (177,389)
Liquidated damages   -    (693,000)
Total other income (expenses)   92,213    (35,019,279)
           
Net loss  $(164,935)  $(35,195,544)
           
Net loss per share, basic and diluted          
Basic and Diluted  $(0.00)  $(1.78)
           
Weighted average number of shares outstanding, basic and diluted          
Basic and Diluted   368,219,169    19,730,929 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5
 

 

BTCS Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   (RESTATED)     
   For the three
months ended
   For the three months ended 
   March 31, 2018   March 31, 2017 
Net Cash flows used from operating activities:          
Net loss  $(164,935)  $(35,195,544)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization expenses   122    919 
Fair value adjustments for warrant liabilities   -    33,172,886 
Fair value adjustments for convertible notes   -    16,849,071 
Realized gain on sale of digital currencies   (92,213)   - 
Proceeds from sale of digital currencies   172,439    - 
Gain on extinguishment of debt   -    (15,873,067)
Loss from lease termination   -    177,389 
Liquidated damages   -    693,000 
Changes in operating assets and liabilities:          
Prepaid expenses and other current assets   (6,108)   - 
Accounts payable   (45,602)   84,619 
Net cash used in operating activities   (136,297)   (90,727)
           
Net decrease in cash   (136,297)   (90,727)
Cash, beginning of period   303,334    95,068 
Cash, end of period  $167,037   $4,341 
           
Supplemental disclosure of non-cash financing and investing activities:          
Conversion of Series B Convertible Preferred Stock to common stock  $5,175   $6,340 
Issuance of common stock due to Anti-Dilution provision  $-   $14,517 
Cashless warrant exercise  $-   $4,534 
Management redemption from escrow account  $-   $400 
Preferred issued for conversion of notes  $-   $1,160 
Fractional shares adjusted for reverse split  $-   $4 
Issuance of common stock for settlement of debt  $-   $90,168,290 
Preferred converted to Common Stock  $-   $(32)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6
 

 

BTCS Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated 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 currencies, 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.

 

The Company is 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 blockchain technologies. Subject to additional financing, the Company plans to create a portfolio of Digital Assets including bitcoin and other “protocol tokens” to provide investors a diversified pure-play exposure to the bitcoin and blockchain industries. The Company intends to acquire Digital Assets through open market purchases. 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. 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. Additionally, the Company may acquire Digital Assets by resuming its transaction verification services business through outsourced data centers and earning rewards in Digital Assets by securing their respective blockchains. The Company will carefully review its purchases of Digital Securities to avoid violating the Investment Company Act of 1940 (the “1940 Act”) and seek to reduce potential liabilities under the federal securities laws.

 

Note 2 - Restatement of the Consolidated Financial Statements

 

The purpose of restatement is to correct errors in the Company’s previously issued financial statements for the period ended March 31, 2018 in connection with the accounting for digital currencies as intangible assets with indefinite lives and record such digital currencies at cost less impairment, if any. Management determined that the Company’s digital currencies for the three months ended March 31, 2018 were accounted for in error and were overstated by approximately $63,000.

 

The originally filed accounting policy regarding digital currencies transactions and remeasurement stated that:

 

“The Company accounts for digital currencies, which it considers to be an operating asset, at their initial cost and subsequently remeasures the carrying amounts of digital currencies it owns at each reporting date based on their current fair value. The changes in the fair value of digital currencies are included as a component of income or loss from operations. The Company currently classifies digital currencies as a current asset. Digital currencies are considered a crypto-currency and the Company receives deposits in various kinds of digital currencies including but not limited to bitcoins, litecoins and dogecoins from customer trade transactions.

 

The Company obtains the equivalency rate of bitcoins to USD from various exchanges including, Bitstamp and Coinbase. The equivalency rate obtained from these sources represents a generally well recognized quoted price in an active market for bitcoins, which market and related database are accessible to the Company on an ongoing basis.”

 

The updated accounting policy regarding digital currencies transactions and remeasurement state that:

 

“Digital currencies are included in current assets in the consolidated balance sheets. Digital currencies are recorded at cost less impairment.

 

7
 

 

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 that is amortized over the remaining useful life of that asset, if any. Subsequent reversal of impairment losses is not permitted.

 

Realized gain (loss) on sale of digital currencies is included in other income (expense) in the consolidated statements of operations.”

 

The effect of the restatement on the Company’s consolidated balance sheet as of March 31, 2018 are as follows:

 

   March 31, 2018 
   As Previously Reported   Restatement Adjustment   As Restated 
Digital currencies  $199,920   $(63,027)  $136,893 
Total current assets   440,801    (63,027)   377,774 
Total Assets   441,914    (63,027)   378,887 
Accumulated deficit   (114,618,680)   (63,027)   (114,681,707)
Total stockholders’ equity   411,519    (63,027)   348,492 
Total Liabilities and stockholders’ equity   441,914    (63,027)   378,887 

 

The effect of the restatement on the Company’s consolidated statement of operations for the three months ended March 31, 2018 are as follows:

 

   For the three months ended March 31, 2018 
   As Previously Reported   Restatement Adjustment   As Restated 
Total operating expenses   257,146    2    257,148 
Net loss from operations   (257,146)   (2)   (257,148)
Revaluation of digital currencies   (180,816)   180,816    - 
Realized gain (loss) on sale of digital currencies   (63,179)   155,392    92,213 
Total other expenses (income)   (243,995)   336,207    92,213 
Net loss   (501,141)   336,206    (164,935)
Basic and Diluted Loss per Share   (0.00)   0.00    (0.00)
Basic and Diluted Shares   368,219,169    -    368,219,169 

 

8
 

 

The effect of the restatement on the Company’s consolidated statement of cash flows for the three months ended March 31, 2018 are as follows:

 

   For the three months ended March 31, 2018 
   As Previously Reported   Restatement Adjustment   As Restated 
Net loss  $(501,141)  $336,206   $(164,935)
Change in fair value of digital currencies   180,816    (180,816)   - 
Realized loss (gain) on sale of digital currencies   63,179    (155,392)   (92,213)
Net cash used in operating activities   (308,734)   172,437    (136,297)
Net cash provided by investing activities   172,437    (172,437)   - 

 

The impact of the restatement has been reflected throughout these financial statements, including the applicable footnotes, as appropriate

 

Note 3 - Basis of Presentation

 

The accompanying unaudited condensed consolidated 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 condensed consolidated 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 condensed consolidated financial statements and notes should be read in conjunction with the financial statements and notes for the year ended December 31, 2017.

 

Note 4 - 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.

 

Our working capital needs are influenced by our level of operations, and generally decrease with higher levels of revenue. The Company used approximately $0.1 million of cash in its operating activities for the three months ended March 31, 2018. The Company incurred $0.2 million net loss for the three months ended March 31, 2018. The Company had cash of approximately $0.17 million, digital currencies of approximately $0.1 million and a working capital of approximately $0.3 million at March 31, 2018. 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 debt or equity financing, however there are currently no commitments 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 condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has not made adjustments to the accompanying condensed consolidated 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.

 

9
 

 

BTCS Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

 

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

 

Note 5 - Summary of Significant Accounting Policies

 

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2017 Annual Report.

 

Basis of Presentation and Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary BTCS Digital Manufacturing. All significant intercompany balances and transactions have been eliminated in consolidation.

 

Concentration of Cash

 

The Company maintains cash balances at two financial institutions in checking accounts and money market accounts. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. As of March 31, 2018, and December 31, 2017, the Company had approximately $167,000 and $303,000 in cash and cash equivalents. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

 

Digital Currencies Translations and Remeasurements

 

Digital currencies are included in current assets in the consolidated balance sheets. Digital currencies 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 that is amortized over the remaining useful life of that asset, if any. Subsequent reversal of impairment losses is not permitted.

 

Realized gain (loss) on sale of digital currencies is included in other income (expense) in the consolidated statements of operations.

 

Use of Estimates

 

The accompanying condensed consolidated 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, 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.

 

Fair Value of Financial Instruments

 

Financial instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

 

10
 

 

BTCS Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

 

The Company uses three levels of inputs that may be used to measure fair value:

 

Level 1 - quoted prices in active markets for identical assets or liabilities

 

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

 

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 and warrants. Diluted loss per share excludes the shares issuable upon the conversion of preferred stock 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, 2018 and 2017 because their effect was anti-dilutive:

 

   As of March 31, 
   2018   2017 
Warrants to purchase common stock   62,064,634    105,610,725 
Series B Convertible Preferred stock   -    225,848,200 
Series C-1 Convertible Preferred stock   10,000,800    - 
Total   72,065,434    331,458,925 

 

Adoption of Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-09) as modified by ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” and ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” The revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, new and enhanced disclosures will be required. Companies may adopt the new standard either using the full retrospective approach, a modified retrospective approach with practical expedients, or a cumulative effect upon adoption approach. The Company adopted ASU 2014-09 on January 1, 2018, using the modified retrospective approach. The adoption of ASU 2014-09 did not have a material impact on the Company’s condensed consolidated financial position, results of operations, equity or cash flows.

 

11
 

 

BTCS Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 6 - Stockholders’ Equity

 

On January 1, 2018, the Company issued 5,175,400 shares of Common Stock upon the conversion of 25,877 shares of Series B Convertible Preferred stock.

 

Note 7 - Subsequent Events

 

On April 4, 2018, the Company approved the sale and transfer of all 100 issued and outstanding shares of the Company’s super voting Series A Preferred Stock (the “Series A”). Charles Allen, the Company’s Chief Executive Officer, sold all 100 shares of the Series A to David Garrity, one of the Company’s directors.

 

During April 2018 the Company issued 4,118,000 shares of Common Stock upon the conversion of 20,590 shares of Series C-1 Convertible Preferred stock.

 

12
 

 

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 Form 10-K/A filed with the Securities and Exchange Commission (“SEC”) on October [  ], 2018.

 

Overview

 

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. Additionally, the Company may acquire Digital Assets by resuming its transaction verification services business through outsourced data centers and earning rewards in Digital Assets by securing their respective blockchains. 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 and/or blockchain, subject to the limitations contained within this report regarding Digital Securities. The Company is also seeking to acquire controlling interests in businesses in the blockchain industry as further described in this report. We do not intend to operate outside of the Digital Asset and blockchain industries.

 

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 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.

 

Blockchain Technology and Digital Asset Initiatives

 

We are also focused on Digital Assets and blockchain technologies. Subject to additional financing, 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 fallen substantially 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 and cover public company expenses. The requirement that a potential target have sufficient capital is a result of our inability to have our registration statement initially filed with the SEC on August 10, 2017 declared effective which has severely limited our ability to raise non-toxic 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.

 

Transaction Verification Service Business (Digital Asset mining e.g. bitcoin, Suspended)

 

We believe that with additional funding we may be able to resume our transaction verification services business (Digital Asset mining e.g. bitcoin) and believe this may provide revenue growth. If we are successful in resuming our transaction verification services business, we anticipate utilizing outsourced data centers and may diversify operations by securing other blockchains in addition to bitcoins. If we resume our mining operations, we do not intend to actively trade the Digital Assets but rather hold them for our own account and sell them for U.S. dollars or other currencies including virtual currencies.

 

Transaction verification entails running ASIC (application-specific integrated circuit) servers or other specialized servers which solve a set of prescribed complex mathematical calculations in order to add a block to a blockchain and thereby confirm Digital Asset transactions. A party which is successful in adding a block to the blockchain, is awarded a fixed number of Digital Assets for our effort.

 

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, 2017 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 financial support. 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.

 

13
 

 

We continue to incur ongoing administrative and other expenses, including public company expenses, in excess of revenue and 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 recent equity offerings, and
   
seeking additional funds raised through the sale of additional securities in the future.

 

Results of Operations for the Three Months Ended March 31, 2018 and 2017

 

The following table reflects our operating results for the three months ended March 31, 2018 and 2017:

 

   (RESTATED)     
  

For the three

months ended

  

For the three

months ended

 
   March 31,   March 31, 
   2018   2017 
Revenues          
E-commerce  $-   $3,181 
Total revenues   -    3,181 
           
Operating expenses:          
General and administrative   255,663    179,386 
Marketing   1,485    60 
Total operating expenses   257,148    179,446 
           
Net loss from operations   (257,148)   (176,265)
           
Other (expenses) income:          
Fair value adjustments for warrant liabilities   -    (33,172,886)
Fair value adjustments for convertible notes   -    (16,849,071)
Realized gain on sale of digital currencies   92,213    - 
Gain on extinguishment of debt   -    15,873,067 
Loss from lease termination   -    (177,389)
Liquidated damages   -    (693,000)
Total other income (expenses)   92,213    (35,019,279)
           
Net loss  $(164,935)  $(35,195,544)

 

Revenues

 

Revenues for the three months ended March 31, 2018 and 2017 were approximately $0 and $3,000, respectively. Revenues represent net revenue earned from the processing of customer transactions through our ecommerce website, through fees earned from our transaction verification service business, and fees charged for hosting services.

 

Operating Expenses

 

Operating expenses for the three months ended March 31, 2018 and 2017 were approximately $257,000 and $179,000, respectively. The increase in operating expenses over the prior year mostly relates to increases in general and administrative expenses.

 

Other Income (Expenses)

 

Other income (expense) for the three months ended March 31, 2018 and 2017 was approximately $92,000 and $(35.0) million, respectively. The decrease in other expenses over the prior year primarily relates to increases in fair value adjustments for warrant liabilities of $33.2 million, fair value adjustments for convertible notes of $16.8 million and is partially offset by gain on extinguishment of debt of $15.9 million, all of which are non-cash expenses.

 

Net Loss

 

Net loss for the three months ended March 31, 2018 was approximately $0.2 million, net loss for the three months ended March 31, 2017 was approximately $35.2 million, respectively. The decrease in net loss for the three months ended March 31, 2018 resulted primarily from fair value adjustments for warrant liabilities of $33.2 million, fair value adjustments for convertible notes of $16.8 million, partially offset by gain on extinguishment of debt of $15.9 million.

 

14
 

 

Liquidity and Capital Resources

 

Net Cash from Operating Activities

 

Net cash used in operating activities was approximately $0.1 million for the three months ended March 31, 2018. Net cash used in operating activities for the three months ended March 31, 2018 was primarily driven by a $0.2 million net loss, $92,000 realized gain on sale of digital currencies, and partially offset by proceeds from sale of digital currencies of $0.2 million.

 

Net cash used in operating activities was approximately $91,000 for the three months ended March 31, 2017. Net cash used in operating activities for the three months ended March 31, 2017 was primarily driven by a $35.2 million net loss and gain on extinguishment of debt of $15.9 million, offset by $33.2 million of fair value adjustment for warrant liabilities and $16.8 million of fair value adjustment for convertible notes.

 

Net Cash from Investing Activities

 

Net cash provided by investing activities was $0 for the three months ended March 31, 2018 and 2017.

 

Net Cash from Financing Activities

 

Net cash provided by financing activities was $0 for the three months ended March 31, 2018 and 2017.

 

Liquidity

 

On March 31, 2018, we had current assets of approximately $0.4 million and current liabilities of approximately $30,000, rendering a working capital of approximately $0.3 million.

 

Our working capital needs are influenced by our level of operations, and generally decrease with higher levels of revenue. The Company used approximately $0.1 million of cash in its operating activities for the three months ended March 31, 2018. The Company incurred a $0.2 million net loss for the three months ended March 31, 2018. The Company had cash of approximately $0.2 million and working capital of approximately $0.3 million at March 31, 2018. The Company expects to incur losses into the foreseeable future as it undertakes its efforts to execute its business plans.

 

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 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 condensed consolidated financial statements have been prepared assuming we will continue as a going concern. We have not made adjustments to the accompanying condensed consolidated 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 the business strategy, we intend to finance our activities through:

 

managing current cash and cash equivalents on hand from the Company’s past equity offerings, and
   
seeking additional funds raised through the sale of additional securities in the future.

 

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.

 

15
 

 

Principal Accounting Estimates

 

In response to the SEC’s financial reporting release, FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, the Company has selected its most subjective accounting estimation processes for purposes of explaining the methodology used in calculating the estimate, in addition to the inherent uncertainties pertaining to the estimate and the possible effects on the Company’s financial condition. These estimates involve certain assumptions that if incorrect could create a material adverse impact on the Company’s results of operations and financial condition.

 

There were no material changes to our principal accounting estimates during the period covered by this report.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

For information on recent accounting pronouncements, see Note 4 to the Unaudited Condensed Consolidated Financial Statements.

 

Cautionary Note Regarding Forward-Looking Statements

 

This report contains forward-looking statements including our liquidity. 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 include our ability to raise capital on favorable terms.

 

Further information on our risk factors is contained in our filings with the SEC, including our Form 10-K/A filed on October 12, 2018, as it may be amended. 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 Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2018 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 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 March 31, 2018, 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 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 three months ended March 31, 2018 as well as two other periods.

 

16
 

 

Remediation Plan

 

When we have sufficient capital resources we intend to hire additional accounting staff, and operations and administrative executives and remediate each of the weaknesses in our disclosure controls and internal control over financial reporting.

 

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

 

On January 1, 2018, the Company issued 5,175,400 shares of Common Stock upon the conversion of 25,877 shares of Series B Convertible Preferred stock.

 

On April 20, 2018, the Company issued 392,200 shares of Common Stock upon the conversion of 1,961 shares of Series C-1 Convertible Preferred stock.

 

On April 23, 2018, the Company issued 1,176,600 shares of Common Stock upon the conversion of 5,883 shares of Series C-1 Convertible Preferred stock.

 

On April 24, 2018, the Company issued 2,549,200 shares of Common Stock upon the conversion of 12,746 shares of Series C-1 Convertible Preferred stock.

 

On July 23, 2018, the Company issued 268,817 shares of Common Stock for the cashless exercise of 555,556 warrants.

 

On October 11, 2018 the Company issued four investors each 13,750,000 Series C Warrants or 55,000,000 warrants in aggregate. The Series C Warrants are exercisable at $1.0 per share, over a four-year period, are exercisable for cash only, and are callable by the Company at any time for nominal consideration.

 

The Company did not receive any proceeds from the aforementioned conversion of preferred stock or cashless warrant exercises.

 

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 “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-Q/A.

 

17
 

 

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.
October 12, 2018    
  By: /s/ Charles Allen
    Charles Allen
    Chief Executive Officer, Chief Financial Officer and Director
    (Principal Executive Officer and Principal Financial and Accounting Officer)

 

18
 

 

EXHIBIT INDEX

 

        Incorporated by Reference   Filed or Furnished
Exhibit #   Exhibit Description   Form   Date   Number   Herewith
3.1   Articles of Incorporation, as amended   10-K   3/31/11   3.1    
3.1(a)   Amendment No. 1 to Articles of Incorporation   8-K   3/25/13   3.1    
3.1(b)   Amendment No. 2 to Articles of Incorporation   8-K   2/5/14   3.1    
3.1(c)   Certificate of Amendment filed February 13, 2017   8-K   2/16/17   3.1    
3.1(d)   Certificate of Designation-Series C   8-K   5/26/17   10.1    
3.1(e)   Certificate of Designation-Series C-1   8-K   10/10/17   3.1    
3.2   Bylaws   S-1   5/29/08   3.2    
10.1   Form of Series A Warrant   8-K   5/26/17   10.2    
10.2   Form of Additional Warrant   8-K   5/26/17   10.3    
10.3   Form of Bonus Warrant   8-K   5/26/17   10.4    
10.4   Form of Registration Rights Agreement dated May 23, 2017   8-K   5/26/17   10.5    
10.5   Form of Securities Purchase Agreement dated May 23, 2017   8-K   5/26/17   10.6    
10.6   Employment Agreement - Charles Allen*   10-K   6/23/17   10.8    
10.7   Employment Agreement - Michael Handerhan*   10-K   6/23/17   10.9    
10.8   Form of Series B Warrant   8-K   10/10/17   10.1    
10.9   Form of Series C-1 Securities Purchase Agreement   8-K   10/10/17   10.2    
10.10   Form of Side Letter   8-K   10/10/17   10.3    
10.11   Form of Series C Warrant   10-K/A   10/12/18   10.31     
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.

 

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 20901, Attention: Corporate Secretary.

 

19
 

 

EX-31 2 ex31.htm

 

EXHIBIT 31

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND

PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Charles Allen, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q/A of BTCS Inc. for the fiscal quarter ended March 31, 2018.
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this interim report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
     
  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the registrant’s board of directors:

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Dated: October 12, 2018 By: /s/ Charles Allen
    Charles Allen
    Chief Executive Officer, Chief Financial Officer and Director
    (Principal Executive Officer and Principal Financial and
    Accounting Officer)

 

 
 

EX-32 3 ex32.htm

 

EXHIBIT 32

 

CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of BTCS Inc. (the “Company”) on Form 10-Q/A for the quarter ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Charles Allen, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The quarterly report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) Information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: October 12, 2018 By: /s/ Charles Allen
    Charles Allen
    Chief Executive Officer, Chief Financial Officer and Director
    (Principal Executive Officer and Principal Financial and
    Accounting Officer)

 

A signed original of this written statement required by Section 906 has been provided to BTCS Inc. and will be retained by BTCS Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

 
 

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3 Months Ended
Mar. 31, 2018
Oct. 11, 2018
Document And Entity Information    
Entity Registrant Name BTCS Inc.  
Entity Central Index Key 0001436229  
Document Type 10-Q/A  
Document Period End Date Mar. 31, 2018  
Amendment Flag true  
Amendment Description This is Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) to the Quarterly Report on Form 10-Q for the three months ended March 31, 2018, as originally filed with the Securities and Exchange Commission (the “SEC”) on May 14, 2018 (the “Original Filing”) by BTCS Inc. (the “Company”, “we”, “us”, or “our”). The purpose of this amendment is to correct errors in the Company’s previously issued financial statements for the period ended March 31, 2018 in connection with the accounting for digital currencies as intangible assets with indefinite lives and record such digital currencies at cost less impairment. Other than the updated accounting treatment and disclosure that is as of March 31, 2018, the remaining disclosure in the Original Filing has been updated as necessary.  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Entity Small Business Flag true  
Entity Emerging Growth Company false  
Entity Ex Transition Period false  
Entity Common Stock, Shares Outstanding   372,605,986
Trading Symbol BTCS  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2018  
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Condensed Consolidated Balance Sheets - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Current assets:    
Cash $ 167,037 $ 303,334
Digital currencies 136,893 217,119
Prepaid expense 73,844 67,736
Total current assets 377,774 588,189
Other assets:    
Property and equipment, net 1,113 1,235
Total other assets 1,113 1,235
Total Assets 378,887 589,424
Liabilities and Stockholders' Equity:    
Accounts payable and accrued expense 30,395 75,997
Total current liabilities 30,395 75,997
Stockholders' equity:    
Common stock, 975,000,000 shares authorized at 0.001 par value, 368,219,169 and 363,043,769 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively 368,219 363,044
Additional paid in capital 114,661,930 114,667,080
Accumulated deficit (114,681,707) (114,516,772)
Total stockholders' equity 348,492 513,427
Total Liabilities and stockholders' equity 378,887 589,424
Series B Convertible Preferred Stock [Member]    
Stockholders' equity:    
Preferred stock; 20,000,000 shares authorized at 0.001 par value: 25
Series C-1 Convertible Preferred Stock [Member]    
Stockholders' equity:    
Preferred stock; 20,000,000 shares authorized at 0.001 par value: $ 50 $ 50
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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
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Dec. 31, 2017
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
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Common stock, shares outstanding 368,219,169 363,043,769
Series B Convertible Preferred Stock [Member]    
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Preferred stock, shares outstanding 0 25,877
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Series C-1 Convertible Preferred Stock [Member]    
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Preferred stock, shares outstanding 50,004 50,004
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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Revenues    
E-commerce $ 3,181
Total revenues 3,181
Operating expenses:    
General and administrative 255,663 179,386
Marketing 1,485 60
Total operating expenses 257,148 179,446
Net loss from operations (257,148) (176,265)
Other (expenses) income:    
Fair value adjustments for warrant liabilities (33,172,886)
Fair value adjustments for convertible notes (16,849,071)
Realized gain on sale of digital currencies 92,213
Gain on extinguishment of debt 15,873,067
Loss from lease termination (177,389)
Liquidated damages (693,000)
Total other income (expenses) 92,213 (35,019,279)
Net loss $ (164,935) $ (35,195,544)
Net loss per share, basic and diluted    
Basic and Diluted $ (0.00) $ (1.78)
Weighted average number of shares outstanding, basic and diluted    
Basic and Diluted 368,219,169 19,730,929
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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Net Cash flows used from operating activities:    
Net loss $ (164,935) $ (35,195,544)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization expenses 122 919
Fair value adjustments for warrant liabilities 33,172,886
Fair value adjustments for convertible notes 16,849,071
Realized gain on sale of digital currencies (92,213)
Proceeds from sale of digital currencies 172,439
Gain on extinguishment of debt (15,873,067)
Loss from lease termination 177,389
Liquidated damages 693,000
Changes in operating assets and liabilities:    
Prepaid expenses and other current assets (6,108)
Accounts payable (45,602) 84,619
Net cash used in operating activities (136,297) (90,727)
Net decrease in cash (136,297) (90,727)
Cash, beginning of period 303,334 95,068
Cash, end of period 167,037 4,341
Supplemental disclosure of non-cash financing and investing activities:    
Conversion of Series B Convertible Preferred Stock to common stock 5,175 6,340
Issuance of common stock due to Anti-Dilution provision 14,517
Cashless warrant exercise 4,534
Management redemption from escrow account 400
Preferred issued for conversion of notes 1,160
Fractional shares adjusted for reverse split 4
Issuance of common stock for settlement of debt 90,168,290
Preferred converted to Common Stock $ (32)
XML 15 R6.htm IDEA: XBRL DOCUMENT v3.10.0.1
Business Organization and Nature of Operations
3 Months Ended
Mar. 31, 2018
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 can purchase merchandise using digital currencies, 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.

 

The Company is 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 blockchain technologies. Subject to additional financing, the Company plans to create a portfolio of Digital Assets including bitcoin and other “protocol tokens” to provide investors a diversified pure-play exposure to the bitcoin and blockchain industries. The Company intends to acquire Digital Assets through open market purchases. 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. 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. Additionally, the Company may acquire Digital Assets by resuming its transaction verification services business through outsourced data centers and earning rewards in Digital Assets by securing their respective blockchains. The Company will carefully review its purchases of Digital Securities to avoid violating the Investment Company Act of 1940 (the “1940 Act”) and seek to reduce potential liabilities under the federal securities laws.

XML 16 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
Restatement of the Consolidated Financial Statements
3 Months Ended
Mar. 31, 2018
Accounting Changes and Error Corrections [Abstract]  
Restatement of the Consolidated Financial Statements

Note 2 - Restatement of the Consolidated Financial Statements

 

The purpose of restatement is to correct errors in the Company’s previously issued financial statements for the period ended March 31, 2018 in connection with the accounting for digital currencies as intangible assets with indefinite lives and record such digital currencies at cost less impairment, if any. Management determined that the Company’s digital currencies for the three months ended March 31, 2018 were accounted for in error and were overstated by approximately $63,000.

 

The originally filed accounting policy regarding digital currencies transactions and remeasurement stated that:

 

“The Company accounts for digital currencies, which it considers to be an operating asset, at their initial cost and subsequently remeasures the carrying amounts of digital currencies it owns at each reporting date based on their current fair value. The changes in the fair value of digital currencies are included as a component of income or loss from operations. The Company currently classifies digital currencies as a current asset. Digital currencies are considered a crypto-currency and the Company receives deposits in various kinds of digital currencies including but not limited to bitcoins, litecoins and dogecoins from customer trade transactions.

 

The Company obtains the equivalency rate of bitcoins to USD from various exchanges including, Bitstamp and Coinbase. The equivalency rate obtained from these sources represents a generally well recognized quoted price in an active market for bitcoins, which market and related database are accessible to the Company on an ongoing basis.”

 

The updated accounting policy regarding digital currencies transactions and remeasurement state that:

 

“Digital currencies are included in current assets in the consolidated balance sheets. Digital currencies 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 that is amortized over the remaining useful life of that asset, if any. Subsequent reversal of impairment losses is not permitted.

 

Realized gain (loss) on sale of digital currencies is included in other income (expense) in the consolidated statements of operations.”

 

The effect of the restatement on the Company’s consolidated balance sheet as of March 31, 2018 are as follows:

 

    March 31, 2018  
    As Previously Reported     Restatement Adjustment     As Restated  
Digital currencies   $ 199,920     $ (63,027 )   $ 136,893  
Total current assets     440,801       (63,027 )     377,774  
Total Assets     441,914       (63,027 )     378,887  
Accumulated deficit     (114,618,680 )     (63,027 )     (114,681,707 )
Total stockholders’ equity     411,519       (63,027 )     348,492  
Total Liabilities and stockholders’ equity     441,914       (63,027 )     378,887  

 

The effect of the restatement on the Company’s consolidated statement of operations for the three months ended March 31, 2018 are as follows:

 

    For the three months ended March 31, 2018  
    As Previously Reported     Restatement Adjustment     As Restated  
Total operating expenses     257,146       2       257,148  
Net loss from operations     (257,146 )     (2 )     (257,148 )
Revaluation of digital currencies     (180,816 )     180,816       -  
Realized gain (loss) on sale of digital currencies     (63,179 )     155,392       92,213  
Total other expenses (income)     (243,995 )     336,207       92,213  
Net loss     (501,141 )     336,206       (164,935 )
Basic and Diluted Loss per Share     (0.00 )     0.00       (0.00 )
Basic and Diluted Shares     368,219,169       -       368,219,169  

 

The effect of the restatement on the Company’s consolidated statement of cash flows for the three months ended March 31, 2018 are as follows:

 

    For the three months ended March 31, 2018  
    As Previously Reported     Restatement Adjustment     As Restated  
Net loss   $ (501,141 )   $ 336,206     $ (164,935 )
Change in fair value of digital currencies     180,816       (180,816 )     -  
Realized loss (gain) on sale of digital currencies     63,179       (155,392 )     (92,213 )
Net cash used in operating activities     (308,734 )     172,437       (136,297 )
Net cash provided by investing activities     172,437       (172,437 )     -  

 

The impact of the restatement has been reflected throughout these financial statements, including the applicable footnotes, as appropriate

XML 17 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation

Note 3 - Basis of Presentation

 

The accompanying unaudited condensed consolidated 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 condensed consolidated 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 condensed consolidated financial statements and notes should be read in conjunction with the financial statements and notes for the year ended December 31, 2017.

XML 18 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
Liquidity, Financial Condition and Management's Plans
3 Months Ended
Mar. 31, 2018
Liquidity Financial Condition And Managements Plans  
Liquidity, Financial Condition and Management's Plans

Note 4 - 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.

 

Our working capital needs are influenced by our level of operations, and generally decrease with higher levels of revenue. The Company used approximately $0.1 million of cash in its operating activities for the three months ended March 31, 2018. The Company incurred $0.2 million net loss for the three months ended March 31, 2018. The Company had cash of approximately $0.17 million, digital currencies of approximately $0.1 million and a working capital of approximately $0.3 million at March 31, 2018. 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 debt or equity financing, however there are currently no commitments 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 condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has not made adjustments to the accompanying condensed consolidated 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

XML 19 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 5 - Summary of Significant Accounting Policies

 

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2017 Annual Report.

 

Basis of Presentation and Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary BTCS Digital Manufacturing. All significant intercompany balances and transactions have been eliminated in consolidation.

 

Concentration of Cash

 

The Company maintains cash balances at two financial institutions in checking accounts and money market accounts. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. As of March 31, 2018, and December 31, 2017, the Company had approximately $167,000 and $303,000 in cash and cash equivalents. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

 

Digital Currencies Translations and Remeasurements

 

Digital currencies are included in current assets in the consolidated balance sheets. Digital currencies 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 that is amortized over the remaining useful life of that asset, if any. Subsequent reversal of impairment losses is not permitted.

 

Realized gain (loss) on sale of digital currencies is included in other income (expense) in the consolidated statements of operations.

 

Use of Estimates

 

The accompanying condensed consolidated 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, 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.

 

Fair Value of Financial Instruments

 

Financial instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

  

The Company uses three levels of inputs that may be used to measure fair value:

 

Level 1 - quoted prices in active markets for identical assets or liabilities

 

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

 

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 and warrants. Diluted loss per share excludes the shares issuable upon the conversion of preferred stock 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, 2018 and 2017 because their effect was anti-dilutive:

 

    As of March 31,  
    2018     2017  
Warrants to purchase common stock     62,064,634       105,610,725  
Series B Convertible Preferred stock     -       225,848,200  
Series C-1 Convertible Preferred stock     10,000,800       -  
Total     72,065,434       331,458,925  

 

Adoption of Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-09) as modified by ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” and ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” The revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, new and enhanced disclosures will be required. Companies may adopt the new standard either using the full retrospective approach, a modified retrospective approach with practical expedients, or a cumulative effect upon adoption approach. The Company adopted ASU 2014-09 on January 1, 2018, using the modified retrospective approach. The adoption of ASU 2014-09 did not have a material impact on the Company’s condensed consolidated financial position, results of operations, equity or cash flows.

XML 20 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Stockholders' Equity

Note 6 - Stockholders’ Equity

 

On January 1, 2018, the Company issued 5,175,400 shares of Common Stock upon the conversion of 25,877 shares of Series B Convertible Preferred stock.

XML 21 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events
3 Months Ended
Mar. 31, 2018
Subsequent Events [Abstract]  
Subsequent Events

Note 7 - Subsequent Events

 

On April 4, 2018, the Company approved the sale and transfer of all 100 issued and outstanding shares of the Company’s super voting Series A Preferred Stock (the “Series A”). Charles Allen, the Company’s Chief Executive Officer, sold all 100 shares of the Series A to David Garrity, one of the Company’s directors.

 

During April 2018 the Company issued 4,118,000 shares of Common Stock upon the conversion of 20,590 shares of Series C-1 Convertible Preferred stock.

XML 22 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary BTCS Digital Manufacturing. All significant intercompany balances and transactions have been eliminated in consolidation.

Concentration of Cash

Concentration of Cash

 

The Company maintains cash balances at two financial institutions in checking accounts and money market accounts. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. As of March 31, 2018, and December 31, 2017, the Company had approximately $167,000 and $303,000 in cash and cash equivalents. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

Digital Currencies Translations and Remeasurements

Digital Currencies Translations and Remeasurements

 

Digital currencies are included in current assets in the consolidated balance sheets. Digital currencies 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 that is amortized over the remaining useful life of that asset, if any. Subsequent reversal of impairment losses is not permitted.

 

Realized gain (loss) on sale of digital currencies is included in other income (expense) in the consolidated statements of operations.

Use of Estimates

Use of Estimates

 

The accompanying condensed consolidated 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, 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.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

Financial instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

 

The Company uses three levels of inputs that may be used to measure fair value:

 

Level 1 - quoted prices in active markets for identical assets or liabilities

 

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

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 and warrants. Diluted loss per share excludes the shares issuable upon the conversion of preferred stock 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, 2018 and 2017 because their effect was anti-dilutive:

 

    As of March 31,  
    2018     2017  
Warrants to purchase common stock     62,064,634       105,610,725  
Series B Convertible Preferred stock     -       225,848,200  
Series C-1 Convertible Preferred stock     10,000,800       -  
Total     72,065,434       331,458,925  

Adoption of Recent Accounting Pronouncements

Adoption of Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-09) as modified by ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” and ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” The revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, new and enhanced disclosures will be required. Companies may adopt the new standard either using the full retrospective approach, a modified retrospective approach with practical expedients, or a cumulative effect upon adoption approach. The Company adopted ASU 2014-09 on January 1, 2018, using the modified retrospective approach. The adoption of ASU 2014-09 did not have a material impact on the Company’s condensed consolidated financial position, results of operations, equity or cash flows.

XML 23 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Restatement of the Consolidated Financial Statements (Tables)
3 Months Ended
Mar. 31, 2018
Accounting Changes and Error Corrections [Abstract]  
Schedule of Error Corrections and Prior Period Adjustments

The effect of the restatement on the Company’s consolidated balance sheet as of March 31, 2018 are as follows:

 

    March 31, 2018  
    As Previously Reported     Restatement Adjustment     As Restated  
Digital currencies   $ 199,920     $ (63,027 )   $ 136,893  
Total current assets     440,801       (63,027 )     377,774  
Total Assets     441,914       (63,027 )     378,887  
Accumulated deficit     (114,618,680 )     (63,027 )     (114,681,707 )
Total stockholders’ equity     411,519       (63,027 )     348,492  
Total Liabilities and stockholders’ equity     441,914       (63,027 )     378,887  

 

The effect of the restatement on the Company’s consolidated statement of operations for the three months ended March 31, 2018 are as follows:

 

    For the three months ended March 31, 2018  
    As Previously Reported     Restatement Adjustment     As Restated  
Total operating expenses     257,146       2       257,148  
Net loss from operations     (257,146 )     (2 )     (257,148 )
Revaluation of digital currencies     (180,816 )     180,816       -  
Realized gain (loss) on sale of digital currencies     (63,179 )     155,392       92,213  
Total other expenses (income)     (243,995 )     336,207       92,213  
Net loss     (501,141 )     336,206       (164,935 )
Basic and Diluted Loss per Share     (0.00 )     0.00       (0.00 )
Basic and Diluted Shares     368,219,169       -       368,219,169  

 

The effect of the restatement on the Company’s consolidated statement of cash flows for the three months ended March 31, 2018 are as follows:

 

    For the three months ended March 31, 2018  
    As Previously Reported     Restatement Adjustment     As Restated  
Net loss   $ (501,141 )   $ 336,206     $ (164,935 )
Change in fair value of digital currencies     180,816       (180,816 )     -  
Realized loss (gain) on sale of digital currencies     63,179       (155,392 )     (92,213 )
Net cash used in operating activities     (308,734 )     172,437       (136,297 )
Net cash provided by investing activities     172,437       (172,437 )     -  

XML 24 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2018
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, 2018 and 2017 because their effect was anti-dilutive:

 

    As of March 31,  
    2018     2017  
Warrants to purchase common stock     62,064,634       105,610,725  
Series B Convertible Preferred stock     -       225,848,200  
Series C-1 Convertible Preferred stock     10,000,800       -  
Total     72,065,434       331,458,925  

XML 25 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Restatement of the Consolidated Financial Statements (Details Narrative)
Mar. 31, 2018
USD ($)
Restatement Adjustment [Member]  
Digital currencies $ 63,000
XML 26 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
Restatement of the Consolidated Financial Statements - Schedule of Error Corrections and Prior Period Adjustments (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Digital currencies $ 136,893   $ 217,119
Total current assets 377,774   588,189
Total Assets 378,887   589,424
Accumulated deficit (114,681,707)   (114,516,772)
Total stockholders' equity 348,492   513,427
Total Liabilities and stockholders' equity 378,887   $ 589,424
Total operating expenses 257,148 $ 179,446  
Net loss from operations (257,148) (176,265)  
Revaluation of digital currencies    
Realized gain (loss) on sale of digital currencies 92,213  
Total other expenses (income) 92,213 (35,019,279)  
Net loss $ (164,935) $ (35,195,544)  
Basic and Diluted Loss per Share $ (0.00) $ (1.78)  
Basic and Diluted Shares 368,219,169 19,730,929  
Change in fair value of digital currencies $ (180,816)    
Net cash used in operating activities (136,297) $ (90,727)  
Net cash provided by investing activities    
Previously Reported [Member]      
Digital currencies 199,920    
Total current assets 440,801    
Total Assets 441,914    
Accumulated deficit (114,618,680)    
Total stockholders' equity 411,519    
Total Liabilities and stockholders' equity 441,914    
Total operating expenses 257,146    
Net loss from operations (257,146)    
Revaluation of digital currencies (180,816)    
Realized gain (loss) on sale of digital currencies 63,179    
Total other expenses (income) (243,995)    
Net loss $ (501,141)    
Basic and Diluted Loss per Share $ (0.00)    
Basic and Diluted Shares 368,219,169    
Change in fair value of digital currencies $ 180,816    
Net cash used in operating activities (308,734)    
Net cash provided by investing activities 172,437    
Restatement Adjustment [Member]      
Digital currencies (63,027)    
Total current assets (63,027)    
Total Assets (63,027)    
Accumulated deficit (63,027)    
Total stockholders' equity (63,027)    
Total Liabilities and stockholders' equity (63,027)    
Total operating expenses 2    
Net loss from operations (2)    
Revaluation of digital currencies 180,816    
Realized gain (loss) on sale of digital currencies 155,392    
Total other expenses (income) 336,207    
Net loss $ 336,206    
Basic and Diluted Loss per Share $ 0.00    
Basic and Diluted Shares    
Change in fair value of digital currencies $ (180,816)    
Net cash used in operating activities 172,437    
Net cash provided by investing activities $ (172,437)    
XML 27 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Liquidity, Financial Condition and Management's Plans (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Dec. 31, 2016
Liquidity Financial Condition And Managements Plans        
Net cash used in operating activities $ (136,297) $ (90,727)    
Net loss (164,935) (35,195,544)    
Cash 167,037 $ 4,341 $ 303,334 $ 95,068
Digital currencies 136,893   $ 217,119  
Working capital deficiency $ 300,000      
XML 28 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Mar. 31, 2017
Dec. 31, 2016
Accounting Policies [Abstract]        
Cash and cash equivalents $ 167,037 $ 303,334 $ 4,341 $ 95,068
XML 29 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies - Schedule of Earnings Per Share Anti-Diluted (Details) - shares
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Excluded potentially dilutive securities 72,065,434 331,458,925
Warrants to Purchase Common Stock [Member]    
Excluded potentially dilutive securities 62,064,634 105,610,725
Series B Convertible Preferred Stock [Member]    
Excluded potentially dilutive securities 225,848,200
Series C-1 Convertible Preferred Stock [Member]    
Excluded potentially dilutive securities 10,000,800
XML 30 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stockholders' Equity (Details Narrative) - shares
3 Months Ended
Mar. 31, 2018
Dec. 31, 2017
Common stock, shares issued 368,219,169 363,043,769
Series B Convertible Preferred Stock [Member] | January 1, 2018 [Member]    
Common stock, shares issued 5,175,400  
Number of common stock issued to convert estimated liability 25,877  
XML 31 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events (Details Narrative) - shares
3 Months Ended
Apr. 04, 2018
Mar. 31, 2018
Dec. 31, 2017
Common stock, shares issued   368,219,169 363,043,769
Series C-1 Convertible Preferred Stock [Member] | April 2018 [Member]      
Common stock, shares issued   4,118,000  
Number of common stock issued to convert estimated liability   20,590  
Subsequent Event [Member] | David Garrity [Member] | Series A Preferred Stock [Member]      
Number of stock sold 100    
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