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BTCS(BTCS) - 2021 Q1 - Quarterly Report
BTCSBTCS(US:BTCS)2021-05-12 16:00

Part I - Financial Information Financial Statements Total assets grew to $16.1 million and the company generated its first staking revenue, but recorded a $6.8 million net loss due to high compensation expenses Condensed Balance Sheets Total assets grew to $16.1 million from $1.55 million, primarily fueled by increases in cash and digital assets Condensed Balance Sheet Highlights (Unaudited) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash | $3,367,249 | $524,135 | | Digital assets/currencies | $4,567,385 | $995,652 | | Staked digital assets/currencies | $7,735,390 | $0 | | Total Assets | $16,123,301 | $1,551,892 | | Liabilities & Equity | | | | Total current liabilities | $764,093 | $508,605 | | Total stockholders' equity | $15,359,208 | $1,043,287 | | Total Liabilities and stockholders' equity | $16,123,301 | $1,551,892 | Condensed Statements of Operations The company reported its first staking revenue but operating expenses surged, resulting in a net loss of $6.8 million Condensed Statement of Operations (Unaudited) | Account | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Staking revenue | $72,524 | $0 | | Gross profit | $57,528 | $0 | | Total operating expenses | $7,976,014 | $273,218 | | Realized gains on digital asset/currency transactions | $3,054,418 | $0 | | Impairment loss on digital assets/currencies | $(1,301,764) | $(74,425) | | Net loss | $(6,782,175) | $(370,271) | | Net loss attributable to common stockholders | $(11,620,571) | $(370,271) | | Net loss per share, basic and diluted | $(0.24) | $(0.02) | Condensed Statements of Changes in Stockholders' (Deficit) Equity Stockholders' equity increased substantially to $15.4 million, driven by stock issuances despite a net loss - Stockholders' equity increased from $1,043,287 at Dec 31, 2020 to $15,359,208 at March 31, 202121 - Key activities impacting equity in Q1 2021 included: issuance of common stock and warrants for $8.9 million, issuance of common stock for $2.0 million, issuance of Series C-2 preferred stock for $1.1 million, and stock-based compensation of $7.5 million21 Condensed Statements of Cash Flows Strong financing inflows of $13.4 million offset cash used in operations and investing, resulting in a net cash increase Cash Flow Summary (Unaudited) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,541,258) | $(277,543) | | Net cash used in investing activities | $(7,994,887) | $0 | | Net cash provided by financing activities | $13,379,259 | $413,011 | | Net increase in cash | $2,843,114 | $135,468 | | Cash, end of period | $3,367,249 | $278,566 | Notes to the Unaudited Condensed Financial Statements The notes detail the company's strategic shift to blockchain infrastructure, key accounting policies, and significant financing activities Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses its strategic focus on blockchain, initial staking revenue, and a net loss driven by non-cash expenses - The company's business strategy focuses on three core areas: Blockchain Infrastructure (securing PoS blockchains), a Digital Asset Data Analytics Platform, and a Digital Asset Treasury Strategy109110114 - The fair market value of the company's digital assets grew to $20.1 million in Q1 2021, a 411% increase QoQ, and reached $37.7 million as of May 11, 2021117118 - The company raised approximately $13.4 million from financing activities in Q1 2021, providing adequate cash to fund operations for at least the next twelve months136140 Overview The company's operations focus on securing PoS blockchains, developing a staking platform, and maintaining a digital asset treasury - The company's blockchain infrastructure operations focus on securing Proof-of-Stake (PoS) blockchains, which is more energy-efficient than Proof-of-Work (PoW)110112 - BTCS actively operates 240 nodes on the ethereum beacon chain and is developing a non-custodial staking-as-a-service platform113 - The company is developing a proprietary data analytics platform for users to aggregate portfolio holdings from multiple exchanges and wallets114 Digital Asset Holdings (Fair Market Value) | Period | Total Fair Market Value | | :--- | :--- | | Q1 2021 | $20,136,404 | | Q4 2020 | $3,938,698 | | Q1 2020 | $264,413 | Results of Operations The company generated its first staking revenue but incurred a $6.8 million net loss due to a dramatic increase in operating expenses - Revenue increased to ~$73,000 in Q1 2021 from $0 in Q1 2020, due to the commencement of blockchain infrastructure staking revenue125 - Operating expenses surged to $8.0 million in Q1 2021 from $0.3 million in Q1 2020, primarily due to stock compensation granted to employees and a director127 - Other income of $1.1 million was driven by a $3.1 million realized gain on digital asset transactions, partially offset by a $1.3 million impairment loss129 - Net loss increased to $6.8 million in Q1 2021 compared to $0.4 million in Q1 2020, mainly due to higher operating expenses130 Liquidity and Capital Resources The company secured $13.4 million in financing, ensuring sufficient liquidity for the next twelve months despite cash use in operations and investing - Net cash provided by financing activities was approximately $13.4 million for Q1 2021, primarily from stock and warrant issuances136 - Net cash used in investing activities was $8.0 million, all for the purchase of productive digital assets for staking134 - As of May 11, 2021, the Company had $4.036 million of cash139 - The company had working capital of $7.6 million as of March 31, 2021 and believes it has adequate cash to fund operations for at least the next twelve months139140 Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to the company for this reporting period - Not applicable143 Controls and Procedures Management concluded that disclosure controls were not effective due to material weaknesses in internal financial reporting controls - The CEO concluded that disclosure controls and procedures were not effective as of March 31, 2021144 - Material weaknesses identified include limited segregation of duties and reliance on outside consultants for financial reporting144145 - The company's remediation plan includes actively seeking to hire a full-time Chief Financial Officer146 Part II - Other Information Legal Proceedings The company reported no legal proceedings during the period - None150 Risk Factors This section is not applicable as the company is a smaller reporting company - Not applicable to smaller reporting companies151 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None152 Other Information The company reported no other information for the period - None155 Exhibits This section lists the exhibits filed or incorporated by reference as part of the Form 10-Q - The exhibits listed in the accompanying "Exhibit Index" are filed or incorporated by reference as part of this Form 10-Q156