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BTCS(BTCS) - 2020 Q2 - Quarterly Report
BTCSBTCS(US:BTCS)2020-08-05 18:46

PART I - FINANCIAL INFORMATION Financial Statements The unaudited condensed financial statements for June 30, 2020, show increased assets and liabilities, widened net losses due to interest and digital asset impairment, and negative operating cash flow offset by financing activities Condensed Balance Sheets As of June 30, 2020, total assets more than doubled to $862,709 driven by digital currency holdings, while liabilities increased to $800,141, resulting in a shift from a stockholders' deficit to positive equity Condensed Balance Sheet Comparison (Unaudited) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash | $83,788 | $143,098 | | Digital currencies | $728,305 | $252,903 | | Total current assets | $862,042 | $420,009 | | Total Assets | $862,709 | $421,353 | | Liabilities & Equity | | | | Convertible notes payable, net | $295,877 | $159,854 | | Total current liabilities | $800,141 | $605,113 | | Total stockholders' equity (deficit) | $62,568 | ($183,760) | | Total Liabilities and stockholders' equity (deficit) | $862,709 | $421,353 | Condensed Statements of Operations For the three and six months ended June 30, 2020, net loss significantly widened to $420,302 and $790,573 respectively, primarily driven by increased interest expenses and new digital currency impairment losses Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total operating expenses | $257,301 | $299,732 | $530,519 | $552,231 | | Interest expense | ($102,792) | ($6,000) | ($125,420) | ($12,000) | | Impairment loss on digital currencies | ($58,527) | $0 | ($132,952) | $0 | | Net loss | ($420,302) | ($305,732) | ($790,573) | ($564,231) | | Net loss per share | ($0.02) | ($0.02) | ($0.03) | ($0.05) | Condensed Statements of Cash Flows For the six months ended June 30, 2020, net cash used in operating activities increased to $1.12 million due to digital currency purchases, while financing activities provided $1.06 million from loans and stock issuance, resulting in a net cash decrease of $59,310 Cash Flow Summary (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,115,523) | ($405,061) | | Net cash provided by financing activities | $1,056,213 | $913,376 | | Net (decrease) increase in cash | ($59,310) | $508,315 | | Cash, end of period | $83,788 | $560,432 | Notes to the Unaudited Condensed Financial Statements The notes detail the company's digital asset acquisition strategy, highlight significant liquidity challenges and a 'going concern' warning, outline digital asset accounting policies, and provide specifics on convertible notes and equity financing - The company's strategy focuses on acquiring digital assets like bitcoin and ether, seeking controlling interests in blockchain businesses, and developing a digital asset data analytics platform303275 - Recurring operating losses, negative operating cash flow, and an accumulated deficit raise substantial doubt about the Company's ability to continue as a going concern41 - Digital assets are treated as indefinite-lived intangible assets, recorded at cost less impairment, with quarterly impairment testing and no subsequent reversals permitted444547 - In April 2020, the company issued a $500,000 promissory note due February 2021, bearing 12% interest and convertible at a 35% discount to market price60 - During the first six months of 2020, the company issued approximately 7.0 million common shares under its Purchase Agreement with Cavalry, raising aggregate proceeds of about $558,0006364 - Subsequent to quarter end, from July 15 to July 21, 2020, the company issued an additional 1.9 million common shares, raising approximately $302,00067 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's digital asset strategy, reports increased net losses for the three and six months ended June 30, 2020, due to digital asset impairment and interest expenses, and highlights significant liquidity concerns with substantial doubt about its going concern ability Overview and Strategy The company, an early U.S. public entrant in the Digital Asset space, focuses its strategy on acquiring non-security digital assets, seeking controlling interests in blockchain businesses, and developing a data analytics platform, with digital assets valued at approximately $1.49 million as of August 4, 2020 - The company's strategy includes acquiring Digital Assets like bitcoin and ether, seeking controlling interests in blockchain businesses, and developing a digital asset data analytics platform717475 Fair Market Value of Digital Assets as of August 4, 2020 | Digital Asset | Units Held | Fair Market Value | | :--- | :--- | :--- | | Bitcoin (BTC) | 54.28 | $602,868 | | Ethereum (ETH) | 2,304.58 | $884,271 | | Total | | $1,487,139 | - The company does not plan to re-enter the digital asset mining business in the near term, as it does not believe it offers a positive return on investment at current price levels82 Results of Operations For the three and six months ended June 30, 2020, net loss increased to $420,302 and $790,573 respectively, primarily due to higher other expenses driven by interest and digital asset impairment, despite stable operating expenses Operating Results for the Three Months Ended June 30 | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Total operating expenses | $257,301 | $299,732 | | Total other expenses | ($163,001) | ($6,000) | | Net loss | ($420,302) | ($305,732) | Operating Results for the Six Months Ended June 30 | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Total operating expenses | $530,519 | $552,231 | | Total other expenses | ($260,054) | ($12,000) | | Net loss | ($790,573) | ($564,231) | Liquidity and Capital Resources The company faces significant liquidity pressure with $1.12 million net cash used in operations for the first six months of 2020, funded by $1.06 million in financing activities, resulting in $62,000 working capital and substantial doubt about its going concern ability - Net cash used in operating activities was approximately $1.12 million for the six months ended June 30, 2020, primarily driven by a $790,573 net loss and a $608,000 purchase of digital currencies98 - Net cash from financing activities was approximately $1.06 million for the six months ended June 30, 2020, from a $500,000 convertible note and $556,000 in proceeds from stock issuance100 - As of June 30, 2020, the company had cash of approximately $84,000 and working capital of approximately $62,000104 - The company's auditors have expressed substantial doubt about its ability to continue as a going concern due to recurring operating losses and negative cash flows83108 Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to the company for this reporting period - Not applicable115 Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2020, due to material weaknesses including limited segregation of duties, reliance on outside consultants, and difficulties with complex accounting principles, with no material changes to internal controls during the quarter - The Chief Executive Officer concluded that as of June 30, 2020, the company's disclosure controls and procedures were not effective116 - Material weaknesses identified include limited segregation of duties, reliance on outside consultants for financial report preparation, and difficulty applying complex accounting principles116117118 - There were no material changes in internal control over financial reporting during the quarter120 PART II - OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - None123 Risk Factors This section is not applicable as the company is a smaller reporting company - Not applicable to smaller reporting companies124 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities - None125 Defaults Upon Senior Securities The company reported no defaults upon senior securities - None126 Mine Safety Disclosures This section is not applicable to the company - Not applicable127 Other Information The company reported no other information - None128 Exhibits This section lists the exhibits filed or incorporated by reference as part of the Form 10-Q - The exhibits listed in the 'Exhibit Index' are filed or incorporated by reference as part of this Form 10-Q129