UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): September 18, 2019

 

BTCS INC.

(Exact name of registrant as specified in its charter)

 

Nevada   000-55141   90-1096644
(State or Other Jurisdiction   (Commission   (I.R.S. Employer
of Incorporation)   File Number)   Identification No.)

 

9466 Georgia Avenue #124, Silver Spring, MD 20901

(Address of Principal Executive Offices, and Zip Code)

 

(202) 430-6576

Registrant’s Telephone Number, Including Area Code

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
         

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

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. [  ]

 

 

 

     
 

 

Item 1.02 Termination of a Material Definitive Agreement.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

On September 18, 2019, BTCS Inc. (the “Company”) and Cavalry Fund I LP (the “Fund”) entered into an Exchange Agreement whereby the Fund exchanged that certain $200,000 Promissory Note issued on December 18, 2018 (of which $17,973 of accrued interest was due) (the “Old Note”) for a $217,973 Convertible Promissory Note due on December 18, 2019 (the “New Note”). The New Note is: (i) convertible at a 20% discount to the closing price of the Company’s common stock on the date before exercise with a floor price of $0.10 per share, (ii) shall bear interest at 12% per annum (payable at maturity) and (iii) may be prepaid by the Company.

 

Item 9.01 Financial Statements and Exhibits.

 

4.1 Convertible Note dated as of September 18, 2019
   
10.1 Calvary Note Exchange Agreement dated as of September 18, 2019

 

     
 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  BTCS INC.
     
Date: September 19, 2019 By: /s/ Charles W. Allen
  Name: Charles W. Allen
  Title: Chief Executive Officer

 

     
 

 

 

THE SHARES UNDERLYING THIS CONVERTIBLE NOTE AND THE CONVERTIBLE NOTE HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR HYPOTHECATED IN ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS AS MAY BE APPLICABLE OR, AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM SUCH APPLICABLE LAWS EXIST.

 

CONVERTIBLE NOTE

 

$217,973 Original Issuance Date: September 18, 2019
  Maturity Date: December 18, 2019

 

FOR VALUE RECEIVED, BTCS Inc., a Nevada corporation (the “Company”), hereby promises to pay to the order of Calvary Fund I LP, a Delaware limited partnership or its assigns (the “Holder”), the principal sum of $217,973 together with interest thereon computed at the annual rate of 12% calculated on a 365 day year. Principal and interest shall be due and payable three months from the Original Issuance Date (defined above) of this Convertible Note (the “Maturity Date”) unless this Convertible Note (the “Note”) has been converted or prepaid as provided below. While in default, this Note shall bear interest at the rate of 20% per annual or such maximum rate of interest allowable under the laws of the State of New York. This Note replaces a 12% Promissory Note issued on December 18, 2018, including accrued and unpaid interest.

 

1. Conversion to Common Stock.

 

(a) Conversion Upon Election of Holder. At any time following the Original Issuance Date, the Holder shall be entitled, upon written notice to the Company, to convert all or any part of the outstanding balance of this Note into a number of fully paid and nonassessable shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) in accordance with Section 1(c). A form of the Conversion Notice is attached as Exhibit I. In order to convert the Note in full, the Company must first receive the original Note or an affidavit of lost Note as set forth in Section 1(e).

 

(b) Conversion Time. The “Conversion Time” shall mean with respect to a conversion by the Holder pursuant to Section 1(a), the date notice and either the original Note or affidavit of lost Note was provided by the Holder in accordance with this Note.

 

(c) Conversion Formula. At the Conversion Time, the unpaid principal of this Note subject to conversion shall be convertible into the number of shares of Common Stock which results from dividing the outstanding principal being converted by the conversion price that is in effect at the time of conversion (the “Conversion Price”). The Conversion Price shall be subject to adjustment pursuant to Section 2 from time to time. Following each adjustment, such adjusted Conversion Price shall remain in effect until a further adjustment hereunder. The Conversion Price for any conversion shall be based on a 20% discount to the closing price of the Company’s stock as quoted by OTC Markets on the day prior to the Conversion Time. Provided however that the Conversion Price shall have a floor of $0.10 which floor price may be adjusted pursuant to Section 2 from time to time.

 

     

 

 

(d) Mechanics of Conversion. Before the Holder shall be entitled to convert this Note into shares of Common Stock in connection with a conversion pursuant to Section 1(a), the Holder shall surrender this Note (or, if the Holder alleges that this Note has been lost, stolen or destroyed, a lost affidavit and agreement reasonably acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of such original promissory note), at the office of the Company together with the Conversion Notice. If required by the Company, this Note shall be endorsed or accompanied by an investment letter in customary form and a written instrument or instruments of transfer, in form reasonably satisfactory to the Company, duly executed by the Holder or his, her or its attorney duly authorized in writing. If the Company fails for any reason to deliver to the Holder such certificate or certificates within two Trading Days of the Conversion Time (“Share Delivery Date”), the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of shares of Common Stock (based on the Volume Weighted Average Price of the Common Stock on the date of such Conversion Time), $10 per Trading Day (increasing to $20 per Trading Day beginning five Trading Days after such damages have begun to accrue) for each Trading Day after the Conversion Time until such certificates are delivered or the Holder rescinds such conversion.

 

(e) New Promissory Note. In the event less than all of the remaining balance of this Note is converted, the Company shall promptly issue to the Holder a similar promissory note representing the outstanding balance of this Note.

 

(f) Prepayment. The Company shall be entitled to prepay this Note at its option at anytime.

 

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(g) Holder’s Conversion Limitations. The Company shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s affiliates, and any persons acting as a group together with the Holder or any of the Holder’s affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 1(g), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 1(g) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Conversion Notice shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Conversion Notice that such conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(g), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the SEC, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase the Beneficial Ownership Limitation provisions of this Section 1(g) solely with respect to the Holder’s Note, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the provisions of this Section 1(g) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The Holder may also decrease the Beneficial Ownership Limitation provisions of this Section 1(g) solely with respect to the Holder’s Note at any time, which decrease shall be effectively immediately upon delivery of notice to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(g) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note. For the purpose of this Note, “Trading Days” means a day on which the Company’s principal trading market is open for trading.

 

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2. Adjustments.

 

(a) Adjustment Upon Common Stock Event. At any time or from time to time after the Original Issuance Date, upon the happening of a Common Stock Event (as hereinafter defined), the Conversion Price shall, simultaneously with the happening of such Common Stock Event, be adjusted by dividing the Conversion Price in effect immediately prior to such Common Stock Event by a fraction, (i) the numerator of which shall be the number of shares of Common Stock issued and outstanding immediately after such Common Stock Event, and (ii) the denominator of which shall be the number of shares of Common Stock issued and outstanding immediately prior to such Common Stock Event, and the product so obtained shall thereafter be the Conversion Price. The Conversion Price shall be readjusted in the same manner upon the happening of each subsequent Common Stock Event. As used herein, the term “Common Stock Event” shall mean (i) the issue by the Company of additional shares of Common Stock as a dividend or other distribution on outstanding Common Stock, (ii) a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock, or (iii) a combination of the outstanding shares of Common Stock into a smaller number of shares of Common Stock.

 

(b) Adjustments for Other Dividends and Distributions. If at any time or from time to time after the Original Issuance Date the Company pays a dividend or makes another distribution to the holders of the Common Stock payable in securities of the Company, other than an event constituting a Common Stock Event, then in each such event provision shall be made so that the Holder shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable upon conversion thereof, the amount of securities of the Company which the Holder would have received had this Note been converted into Common Stock on the date of such event (or such record date, as applicable) and had they thereafter, during the period from the date of such event (or such record date, as applicable) to and including the conversion date, retained such securities receivable by them as aforesaid during such period, subject to all other adjustments called for during such period under this Section 2 with respect to the rights of the Holder or with respect to such other securities by their terms.

 

(c) Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Original Issuance Date, the Common Stock issuable upon the conversion of this Note is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than by a Common Stock Event or, reorganization, merger, or consolidation provided for elsewhere in this Section 2), then in any such event, but subject to Section 1, the Holder shall have the right thereafter to convert this Note into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the number of shares of Common Stock into which this Note could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.

 

(d) Reorganizations, Mergers and Consolidations. If at any time or from time-to-time after the Original Issue Date there is a reorganization of the Company (other than a recapitalization, subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section 2) or a merger or consolidation of the Company with or into another corporation, then, as a part of such reorganization, merger or consolidation, provision shall be made so that the Holder thereafter shall be entitled to receive, upon conversion of this Note, the number of shares of stock or other securities or property of the Company, or of such successor corporation resulting from such reorganization, merger or consolidation, to which a holder of Common Stock deliverable upon conversion would have been entitled on such reorganization, merger or consolidation. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 2 with respect to the rights of the Holder after the reorganization, merger or consolidation to the end that the provisions of this Section 2 (including adjustment of the Conversion Price then in effect and number of shares issuable upon conversion of this Note) shall be applicable after that event and be as nearly equivalent to the provisions hereof as may be practicable. This Section 2 shall similarly apply to successive reorganizations, mergers and consolidations.

 

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3. Event of Default.

 

(a) For purposes of this Note, an “Event of Default” means:

 

(i) the Company shall default in the payment of principal on this Note;

 

(ii) the Company fails to deliver the shares issuable upon conversion of this Note in accordance with the provisions of Section 1;

 

(iii) the Company shall fail to materially perform any covenant, term, provision, condition, agreement or obligation of the Company under this Note (other than for non- payment or failure to deliver conversion shares) and such failure shall continue uncured for a period of 15 Trading Days after notice from the Holder of such failure (or if such breach is not capable of being cured within such 15 Trading day period but the Company commences to cure and diligently and continuously acts to cure such breach, such longer period as may be necessary to cure such breach);

 

(iv) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (A) liquidation, reorganization or other relief in respect of the Company or any of their debts, or of a substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (B) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or for a substantial part of any of its assets, and, in any such case, such proceeding or petition shall not be dismissed within 30 days;

 

(v) the Company shall (A) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (B) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 3(a)(iii), (C) apply for or consent to the appointment of a receiver, trustee, custodian, conservator or similar official for the Company or for a substantial part of its assets, (D) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (E) make a general assignment for the benefit of creditors or (F) take any action for the purpose of effecting any of the foregoing;

 

4. Miscellaneous

 

(a) Loss, Theft, Destruction or Mutilation of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of loss, theft or destruction, delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Note, the Company shall execute and deliver, in lieu of this Note, a new note executed in the same manner as this Note, in the same principal amount as the unpaid principal amount of this Note and dated the date to which interest shall have been paid on this Note or, if no interest shall have yet been so paid, dated the date of this Note.

 

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(b) Waivers. The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

 

(c) Waiver and Amendment. Any provision of this Note may be amended, waived or modified only by an instrument in writing signed by the party against which enforcement of the same is sought.

 

(d) Notices. All notices, offers, acceptance and any other acts under this Note (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, by FedEx or similar overnight next business day delivery, or by email delivery followed by overnight next business day delivery as follows:

 

  (i) If to the Holder, to: Cavalry Fund I LP
      61 Kinderkamack Road
      Woodcliff Lake, New Jersey 07677
      Email:
       
  (ii) If to the Company: BTCS Inc.
    9466 Georgia Avenue, No. 12affiliat
      Silver Spring, Maryland 20901
      Attention: Charles Allen
      Email:

 

or to such other address as any of them, by notice to the other may designate from time to time. Time shall be counted from, the date of transmission.

 

(e) Expenses; Attorneys’ Fees. If an action is instituted to enforce or collect this Note, the prevailing party shall pay all reasonable costs and expenses.

 

(f) Successors and Assigns. Upon any endorsement, assignment, or other transfer of this Note by the Holder or by operation of law, the term “Holder,” as used herein, shall mean such endorsee, assignee, or other transferee or successor to the Holder, then becoming the holder of this Note. This Note shall inure to the benefit of the Holder and its successors and assigns and shall be binding upon the undersigned and their successors and assigns. The term “Company” as used herein, shall include the respective successors and assigns of the Company and any other obligor.

 

(g) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

 

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(h) Exclusive Jurisdiction; Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. The Company and the Holder agree that all legal proceedings concerning the interpretation, or enforcement of this Note shall only be commenced in the state and federal courts sitting in New York County, New York (the “New York Courts”). The Company and the Holder each irrevocably submit to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby. The Company and the Holder irrevocably waive, and agree not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. The Company and the Holder each irrevocably waive personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. The Company and the Holder each irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.

 

[The balance of this page is intentionally blank]

 

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IN WITNESS WHEREOF, the Company has caused this Note to be executed as of the date first indicated above.

 

  BTCS INC.
   
  By: /s/ Charles Allen
    Charles Allen, Chief Executive Officer

 

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EXHIBIT I

Conversion Notice

 

Reference is made to the Convertible Note (the “Note”) issued to the undersigned by BTCS Inc., a Nevada corporation (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert all or part of the Note indicated below into shares of Common Stock of the Company, as of the date specified below. Capitalized terms not defined herein shall have the meaning as set forth in the Note.

 

Date of Conversion: ____________________________________________________________________________
 

Amount of Principal to be converted:

 

 

Please confirm the following information:

 

Conversion Price:

 

 

Number of shares of Common Stock to be issued:

 

 

Please issue the Common Stock into which the Note is being converted to Holder, or for its benefit, as follows:

 

[  ] Check here if requesting delivery as a certificate to the following name and to the following address:

 

Issue to: ____________________________________________________________________________________

 

 

 

[  ] Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:

 

DTC Participant: ______________________________________________________________________________
DTC Number:     ______________________________________________________________________________

Account

Number:              ______________________________________________________________________________

 

Date: ___________________, _________

Name of Registered Holder

 

By:    
Name:    
Title:    

 

Tax ID: __________________________________

Facsimile: ________________________________

Email Address: ____________________________

 

     

 

 

 

 

September 18, 2019

 

BTCS Inc. (the “Company”)

 

Dear Thomas:

 

For good and valuable consideration, BTCS Inc. (the “Company”) and Cavalry Fund I LP (the “Fund”) have agreed to exchange that certain $200,000 12% Promissory Note dated December 18, 2018, including $17,973 accrued and unpaid interest (the “Old Note”) for a new $217,973 12% Convertible Note dated September 18, 2019 (the “New Note”) in the form attached hereto as Exhibit A. The New Note shall become due on December 18, 2019 and shall be convertible at 20% of the closing price of the Company’s common stock on the principal trading market on the date before exercise with a floor price of $0.10 per share (all such prices shall be adjusted for stock splits and other adjusting actions on the Company’s common stock). The Fund shall return to the Company the Old Note on or before September 21, 2019.

 

The Fund and the Company confirm that the Company has not received any consideration for the transactions contemplated by this Agreement. Pursuant to Rule 144 pursuant to the Securities Act of 1933 (“Securities Act”) and the rules and regulations promulgated thereunder, the holding period of the New Note tacks back to December 18, 2018, the issue date of the Old Note. The Company hereby confirms that the Fund is not an affiliate as defined under Rule 144. Upon the issuance of any common stock pursuant to the terms of this Agreement and the New Note, the common stock shall be freely tradable under Section 3(a)(9) of the Securities Act and Rule 144. The Company agrees not to take a position contrary to this paragraph.

 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

If you hereby agree, indicate so below and the Company will issue you the New Note.

 

  Sincerely,
   
  Charles

 

We hereby agree:

 

Cavalry Fund I LP

 

By: /s/ Thomas Walsh  
Name: Thomas Walsh  
Title: Managing Member  

 

BTCS INC.