10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on August 12, 2024
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
par value $0.000001 per share. |
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N/A |
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 ☐
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).
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 |
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☐ |
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Accelerated filer |
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☐ |
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☒ |
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Smaller reporting company |
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Emerging growth company |
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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
As of July 31, 2024, the registrant had
(1) We are a remote-first company. Accordingly, we do not maintain a headquarters. For purposes of compliance with applicable requirements of the Securities Act of 1933, as amended, and Securities Exchange Act of 1934, as amended, communications may be directed to the listed address.
Table of Contents
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Page |
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PART I. |
2 |
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Item 1. |
2 |
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2 |
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Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income |
3 |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity |
4 |
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5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
6 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 |
Item 3. |
22 |
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Item 4. |
23 |
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PART II. |
24 |
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Item 1. |
24 |
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Item 1A. |
24 |
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Item 2. |
24 |
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Item 3. |
24 |
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Item 4. |
24 |
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Item 5. |
24 |
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Item 6. |
25 |
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26 |
i
Cautionary Note on Forward-Looking Statements
This Report contains “forward-looking statements,” as that term is defined by the federal securities laws. All forward-looking statements are based upon our current expectations and various assumptions and apply only as of the date made. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs and projections will be achieved. Forward-looking statements are generally identified by the words “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “forecast,” as well as variations of such words or similar expressions.
Forward-looking statements include statements concerning:
There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed or implied by our forward-looking statements, including those set forth in “Item 1. Business” and “Item 1A. Risk Factors” of Amendment No. 2 to our Registration Statement on Form 10 filed with the Securities and Exchange Commission (the “SEC”) on July 10, 2024 (the "Form 10"). All forward-looking statements are expressly qualified in their entirety by such cautionary statements. Readers are cautioned not to place undue reliance on such forward-looking statements. Except as required by law, we undertake no obligation to update or revise any forward-looking statements that have been made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.
1
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Exodus Movement, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except share and par value value)
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June 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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U.S. dollar coin ($ |
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Treasury bills |
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Accounts receivable |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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OTHER ASSETS |
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Fixed assets, net |
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Digital assets |
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Software assets, net |
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Other long-term asset |
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- |
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Indefinite-lived assets |
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Other investments |
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Deferred tax assets |
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- |
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Total other assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES |
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Accounts payable |
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$ |
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$ |
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Other current liabilities |
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Total current liabilities |
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LONG-TERM LIABILITIES |
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Other long-term liabilities |
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Deferred tax liability |
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- |
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Total long-term liabilities |
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Total liabilities |
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STOCKHOLDERS' EQUITY |
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Preferred stock |
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$ |
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- |
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- |
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Class A Common Stock |
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$ |
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- |
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- |
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- |
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- |
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- |
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- |
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Class B Common Stock |
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$ |
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- |
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- |
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- |
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- |
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- |
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- |
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ADDITIONAL PAID IN CAPITAL |
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ACCUMULATED OTHER COMPREHENSIVE LOSS |
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( |
) |
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( |
) |
RETAINED EARNINGS (ACCUMULATED DEFICIT) |
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( |
) |
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Total stockholders' equity |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Exodus Movement, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)
(In thousands, except per share amounts)
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Three Months Ended |
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Three Months Ended |
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Six Months Ended |
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Six Months Ended |
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OPERATING REVENUES |
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$ |
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$ |
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$ |
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$ |
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COST OF REVENUES |
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GROSS PROFIT |
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OPERATING EXPENSES |
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General and administrative |
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Loss (gain) on digital assets, net |
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( |
) |
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( |
) |
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( |
) |
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Total operating expense (income) |
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( |
) |
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(Loss) income from operations |
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( |
) |
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OTHER INCOME |
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Staking and other income |
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Unrealized gain (loss) on investments |
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( |
) |
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Interest income |
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Total other income |
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(Loss) income before income taxes |
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( |
) |
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INCOME TAX BENEFIT (EXPENSE) |
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( |
) |
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( |
) |
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( |
) |
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NET (LOSS) INCOME |
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$ |
( |
) |
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$ |
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$ |
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$ |
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OTHER COMPREHENSIVE (LOSS) INCOME |
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Foreign currency translation adjustment |
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( |
) |
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( |
) |
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( |
) |
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COMPREHENSIVE (LOSS) INCOME |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Net (loss) income per share |
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Basic net (loss) income per share of common stock - Class A |
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$ |
( |
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$ |
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$ |
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$ |
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Basic net (loss) income per share of common stock - Class B |
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$ |
( |
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$ |
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$ |
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$ |
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Diluted net (loss) income per share of common stock - Class A |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Diluted net (loss) income per share of common stock - Class B |
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$ |
( |
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$ |
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$ |
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$ |
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Weighted average number of shares and share equivalents outstanding |
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Weighted average number of shares used in basic |
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Weighted average number of shares used in basic |
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Weighted average number of shares used in diluted |
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Weighted average number of shares used in diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Exodus Movement, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(In thousands)
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Accumulated |
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Retained |
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Additional |
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Other |
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Earnings |
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Total |
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Class A |
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Class B |
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Paid In |
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Comprehensive |
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(Accumulated |
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Stockholders' |
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Shares |
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Shares |
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Capital |
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Loss |
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Deficit) |
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Equity |
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BALANCES as of January 1, 2023 |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Exercised options |
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- |
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- |
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- |
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Issuance of Common Stock upon settlement of restricted stock units, net of shares withheld for taxes |
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- |
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( |
) |
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- |
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- |
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( |
) |
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Foreign currency translation adjustment |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Net income |
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- |
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- |
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- |
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- |
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BALANCES as of March 31, 2023 |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Issuance of Common Stock upon settlement of restricted stock units, net of shares withheld for taxes |
|
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- |
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( |
) |
|
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- |
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- |
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( |
) |
||
Foreign currency translation adjustment |
|
- |
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- |
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- |
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( |
) |
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- |
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( |
) |
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Net income |
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- |
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- |
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- |
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- |
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BALANCES as of June 30, 2023 |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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BALANCES as of January 1, 2024 |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Cumulative effect adjustment to the opening balance of retained earnings for adoption, net of tax |
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- |
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- |
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- |
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- |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Issuance of Common Stock upon settlement of restricted stock units, net of shares withheld for taxes |
|
|
|
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- |
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( |
) |
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- |
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- |
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( |
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Conversion from Class B to Class A |
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( |
) |
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- |
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- |
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- |
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- |
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Foreign currency translation adjustment |
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- |
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- |
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- |
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- |
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||
Net income |
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- |
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- |
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- |
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- |
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BALANCES as of March 31, 2024 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Issuance of Common Stock upon settlement of restricted stock units, net of shares withheld for taxes |
|
|
|
|
- |
|
|
|
( |
) |
|
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- |
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|
- |
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|
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( |
) |
||
Foreign currency translation adjustment |
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- |
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- |
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|
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- |
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( |
) |
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- |
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( |
) |
Net loss |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
BALANCES as of June 30, 2024 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Exodus Movement, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
|
Six Months Ended |
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Six Months Ended |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income |
$ |
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$ |
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Net cash provided by operating activities |
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Depreciation and amortization |
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Deferred tax expense |
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- |
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Impairment of digital assets |
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- |
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Gain on digital assets, net |
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( |
) |
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( |
) |
Staking and other income |
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( |
) |
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- |
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Unrealized loss (gain) on investments |
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( |
) |
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Stock based compensation |
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Accrued interest income |
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( |
) |
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( |
) |
Other operating activities settled in digital assets and USDC (1) |
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( |
) |
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( |
) |
Change in operating assets and liabilities: |
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Accounts receivable |
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( |
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- |
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Prepaid expenses |
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( |
) |
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Other current assets |
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( |
) |
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Other long-term asset |
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( |
) |
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- |
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Accounts payable |
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Other current liabilities |
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( |
) |
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Other long-term liabilities |
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- |
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Net cash (used in) provided by operating activities |
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( |
) |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchase of domain name |
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( |
) |
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- |
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Purchases of fixed assets |
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( |
) |
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( |
) |
Purchase of treasury bills |
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( |
) |
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( |
) |
Redemption of treasury bills |
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||
Purchases of digital assets |
|
( |
) |
|
|
- |
|
Disposal of digital assets held |
|
|
|
|
- |
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
( |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
||
Repurchase of shares to pay employee withholding taxes |
|
( |
) |
|
|
( |
) |
Exercise of stock options |
|
- |
|
|
|
|
|
Net cash used in financing activities |
|
( |
) |
|
|
( |
) |
Change in cash and cash equivalents |
|
|
|
|
( |
) |
|
Cash and cash equivalents |
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
||
End of period |
|
|
|
|
|
||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
||
Non-cash issuance of stock |
$ |
|
|
$ |
- |
|
|
Non-cash capitalized software costs settled in digital assets |
|
|
|
|
|
||
(including stock based compensation of $ |
$ |
( |
) |
|
$ |
( |
) |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
||
Cash paid for income taxes |
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
(1)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Exodus Movement, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
1. Nature of Business
Exodus Movement, Inc. (“Exodus” or “the Company” or “we”) was incorporated in Delaware in July 2016. The Company operates in the FinTech subsector of the greater blockchain and digital asset industry. The Company has developed an un-hosted self-custodial digital asset wallet on the Exodus Platform and contracts with third parties to provide various services to users that utilize the Company’s wallet through the platform.
2. Summary of Significant Accounting Policies
The accompanying condensed consolidated financial statements of the Company are unaudited. These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) on the same basis as the audited consolidated financial statements and in management’s opinion, reflect all the adjustments, consisting only of normal, recurring adjustments, that are necessary for the fair statement of the Company’s condensed consolidated financial statements for the periods presented. The unaudited condensed consolidated results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year or any other period.
These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and notes included in the Form 10.
There were no changes to the significant accounting policies or recent accounting pronouncements that were disclosed in Note 2 Summary of Significant Accounting Policies to the audited consolidated financial statements included in the Form 10, other than the adoption of ASU 2023-08 Intangibles, Goodwill and Other - Crypto Assets ("ASU 2023-08"), as discussed below.
Correction of Previously Issued Financial Statements
Subsequent to the issuance of the Company’s interim condensed consolidated financial statements as of and for the three and six months ended June 30, 2023, the Company identified an error in the calculation of earnings per share due to the undistributed earnings not being appropriately allocated to each class of common shares and an error in the disclosure of operating activities settled in digital assets and USDC in Note 5.
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
Originally |
|
|
Adjustment |
|
|
As |
|
|
Originally |
|
|
Adjustment |
|
|
As |
|
||||||
Basic net income per share - Class A |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Basic net income per share - Class B |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Diluted net income per share - Class A |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Diluted net income per share - Class B |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|||||||||
|
Originally |
|
|
Adjustment |
|
|
As |
|
|||
Digital assets expense |
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Conversion of digital assets and USDC to cash |
$ |
- |
|
|
$ |
|
|
$ |
|
6
Concentration of Revenue
Operating revenue from Application Programming Interface Providers (“API Providers”) exceeding
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
||||
Company A |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Company B |
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|
||||
Company C |
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||||
Company D |
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|
||||
Company E (1) |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
(1)
Digital Assets
As of June 30, 2024, the Company held $
Fair Value Measurements
Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable:
Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security. In general, securities are priced using third-party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs that market participants presumably would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted. Subsequent to the adoption of ASU 2023-08, the fair value of each digital asset is based on quoted (unadjusted) prices in the principal market for each digital asset. Such prices are based on Level 1 inputs in accordance with ASC 820.
Recent Accounting Pronouncements
Improvements to Reportable Segment Disclosures
In November 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. This guidance will not impact our consolidated financial statements.
Improvements to Crypto Assets Disclosures
On December 13, 2023, the FASB issued ASU 2023-08 which provides an update to existing crypto asset guidance and requires an entity to measure certain crypto assets at fair value. In addition, this guidance requires additional disclosures related to crypto assets once it is adopted. As of January 1, 2024, the Company has adopted ASU 2023-08.
7
The Company has
Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. This guidance only impacts footnote disclosures and will not impact our consolidated financial statements.
3. Revenue Recognition
The following table presents the Company’s operating revenues disaggregated by geography, based on the addresses of the Company’s API Providers (in thousands, except percentages):
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
||||||||||||||||||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
||||||||||||||||||||
Republic of the Marshall Islands |
|
$ |
|
|
|
|
% |
|
$ |
|
|
|
|
% |
|
$ |
|
|
|
|
% |
|
$ |
|
|
|
|
% |
||||||||
British Virgin Islands(1) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
||||
Seychelles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hong Kong |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
||||||||
Other(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating revenues |
|
$ |
|
|
|
|
% |
|
$ |
|
|
|
|
% |
|
$ |
|
|
|
|
% |
|
$ |
|
|
|
|
% |
(1) British Virgin Islands no longer exceeds 10% in 2024 and is now included in Other.
(2) No other individual country accounted for more than 10% of total revenue.
The following table presents the Company’s operating revenues disaggregated by products and services (in thousands, except percentages):
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
||||||||||||||||||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
||||||||||||||||||||
Exchange aggregation |
|
$ |
|
|
|
|
% |
|
$ |
|
|
|
|