Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 16, 2024

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

For the quarterly period ended March 31, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 000-56643

 

 

Exodus Movement, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

81-3548560

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

15418 Weir St. #333

Omaha, NE(1)

68137

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (833) 992-2566

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock,

par value $0.000001 per share.

 

EXOD

 

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 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). 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

Smaller reporting company

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

As of April 30, 2024, the registrant had 4,878,884 shares of Class A common stock, par value $0.000001 per share, outstanding.

 

 

 

 

 

 

 

 

 

(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

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

2

 

 

 

Item 1.

Financial Statements (Unaudited)

2

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations and Comprehensive Income

3

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

5

 

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.

Quantitative and Qualitative Disclosures About Market Risk

20

Item 4.

Controls and Procedures

21

 

 

 

PART II.

OTHER INFORMATION

22

 

 

 

Item 1.

Legal Proceedings

22

Item 1A.

Risk Factors

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

Item 3.

Defaults Upon Senior Securities

22

Item 4.

Mine Safety Disclosures

22

Item 5.

Other Information

22

Item 6.

Exhibits

23

Signatures

24

 

 

 

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 of this Report. 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:

our business plans and strategy;
projected profitability, performance or cash flows;
future capital expenditures;
our growth strategy, including our ability to grow organically and through mergers and acquisitions (“M&A”);
anticipated financing needs;
business trends;
our capital allocation strategy;
liquidity and capital management; and
other information that is not historical information.

 

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those suggested by our forward-looking statements, including those set forth in “Item 1. Business” and “Item 1A. Risk Factors” of Amendment No. 1 to our General Form for Registration of Securities on Form 10 filed with the Securities and Exchange Commission (the “SEC”) on May 1, 2024 (such Amendment, "the Form 10"). All forward-looking statements are expressly qualified in their entirety by such cautionary statements. 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)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,034

 

 

$

11,376

 

U.S. dollar coin ($500 restricted as of both periods March 31, 2024 and December 31, 2023)

 

 

560

 

 

 

517

 

Treasury bills

 

 

43,813

 

 

 

43,151

 

Accounts receivable

 

 

6,605

 

 

 

3,240

 

Prepaid expenses

 

 

1,331

 

 

 

1,440

 

Other current assets

 

 

-

 

 

 

5

 

Total current assets

 

 

73,343

 

 

 

59,729

 

OTHER ASSETS

 

 

 

 

 

 

Fixed assets, net

 

 

414

 

 

 

317

 

Digital assets

 

 

141,540

 

 

 

35,010

 

Software assets, net

 

 

8,036

 

 

 

8,051

 

Other long term asset

 

 

40

 

 

 

-

 

Indefinite-lived assets

 

 

1,945

 

 

 

1,945

 

Other investments

 

 

100

 

 

 

100

 

Deferred tax assets

 

 

-

 

 

 

6,567

 

Total other assets

 

 

152,075

 

 

 

51,990

 

TOTAL ASSETS

 

$

225,418

 

 

$

111,719

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

$

1,770

 

 

$

1,061

 

Other current liabilities

 

 

8,998

 

 

 

6,485

 

Total current liabilities

 

 

10,768

 

 

 

7,546

 

LONG-TERM LIABILITIES

 

 

 

 

 

 

Other-long term liabilities

 

 

424

 

 

 

412

 

Deferred tax liability

 

 

15,152

 

 

 

-

 

Total long-term liabilities

 

 

15,576

 

 

 

412

 

Total liabilities

 

 

26,344

 

 

 

7,958

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

$0.000001 par value, 5,000,000 shares authorized, no shares issued and outstanding

 

 

-

 

 

 

-

 

Class A Common Stock

 

 

 

 

 

 

$0.000001 par value, 32,500,000 shares authorized,

 

 

-

 

 

 

-

 

4,793,590 issued and outstanding as of March 31, 2024

 

 

-

 

 

 

-

 

4,320,005 issued and outstanding as of December 31, 2023

 

 

-

 

 

 

-

 

Class B Common Stock

 

 

 

 

 

 

$0.000001 par value, 27,500,000 shares authorized,

 

 

-

 

 

 

-

 

21,520,469 issued and outstanding as of March 31, 2024

 

 

-

 

 

 

-

 

21,760,855 issued and outstanding as of December 31, 2023

 

 

-

 

 

 

-

 

ADDITIONAL PAID IN CAPITAL

 

 

124,127

 

 

 

122,558

 

ACCUMULATED OTHER COMPREHENSIVE LOSS

 

 

(774

)

 

 

(1,477

)

RETAINED EARNINGS (ACCUMULATED DEFICIT)

 

 

75,721

 

 

 

(17,320

)

Total stockholders' equity

 

 

199,074

 

 

 

103,761

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

225,418

 

 

$

111,719

 

 

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 Income (Unaudited)

(In thousands, except per share amounts)

 

 

 

Three Months Ended
March 31,
2024

 

 

Three Months Ended
March 31,
2023

 

OPERATING REVENUES

 

$

29,060

 

 

$

13,345

 

COST OF REVENUES

 

 

10,704

 

 

 

6,857

 

GROSS PROFIT

 

 

18,356

 

 

 

6,488

 

OPERATING EXPENSES

 

 

 

 

 

 

General and administrative

 

 

8,055

 

 

 

5,972

 

Gain on digital assets, net

 

 

(56,799

)

 

 

(441

)

Total operating (income) expenses

 

 

(48,744

)

 

 

5,531

 

Income from operations

 

 

67,100

 

 

 

957

 

OTHER INCOME

 

 

 

 

 

 

Staking and other income

 

 

150

 

 

 

16

 

Unrealized (loss) gain on investments

 

 

(244

)

 

 

104

 

Interest income

 

 

947

 

 

 

403

 

Total other income

 

 

853

 

 

 

523

 

Income before income taxes

 

 

67,953

 

 

 

1,480

 

INCOME TAX EXPENSE

 

 

(13,166

)

 

 

(707

)

NET INCOME

 

$

54,787

 

 

$

773

 

OTHER COMPREHENSIVE INCOME

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

703

 

 

 

(50

)

COMPREHENSIVE INCOME

 

$

55,490

 

 

$

723

 

Net income per share

 

 

 

 

 

 

Basic net income per share of common stock - Class A

 

$

2.09

 

 

$

0.03

 

Diluted income per share of common stock - Class A

 

$

1.75

 

 

$

0.02

 

Basic net income per share of common stock - Class B

 

$

2.09

 

 

$

0.03

 

Diluted income per share of common stock - Class B

 

$

1.75

 

 

$

0.02

 

Weighted average number of shares and share equivalents
   outstanding

 

 

 

 

 

 

Weighted average number of shares used in basic
   computation - Class A

 

 

4,589

 

 

 

3,632

 

Weighted average number of shares used in diluted
    computation - Class A

 

 

7,539

 

 

 

7,185

 

Weighted average number of shares used in basic
   computation - Class B

 

 

21,620

 

 

 

21,833

 

Weighted average number of shares used in diluted
   computation - Class B

 

 

23,776

 

 

 

24,022

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Retained

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

Earnings

 

 

Total

 

 

 

Class A

 

 

Class B

 

 

Paid In

 

 

Comprehensive

 

 

(Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Shares

 

 

Capital

 

 

Loss

 

 

Deficit)

 

 

Equity

 

BALANCES as of January 1, 2023

 

 

3,544

 

 

 

21,798

 

 

$

116,644

 

 

$

(694

)

 

$

(30,106

)

 

$

85,844

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

2,326

 

 

 

-

 

 

 

-

 

 

 

2,326

 

Exercised options

 

 

-

 

 

 

1

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

1

 

Issuance of Common Stock upon settlement of restricted stock units, net of shares
   withheld for taxes

 

160

 

 

 

-

 

 

 

(152

)

 

 

-

 

 

 

-

 

 

 

(152

)

Foreign currency translation adjustment

 

-

 

 

 

-

 

 

 

-

 

 

 

(50

)

 

 

-

 

 

 

(50

)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

773

 

 

 

773

 

BALANCES as of March 31, 2023

 

 

3,704

 

 

 

21,799

 

 

$

118,819

 

 

$

(744

)

 

$

(29,333

)

 

$

88,742

 

BALANCES as of January 1, 2024

 

 

4,320

 

 

 

21,760

 

 

$

122,558

 

 

$

(1,477

)

 

$

(17,320

)

 

$

103,761

 

Cumulative effect adjustment to the opening balance of retained earnings for ASU 2023-08 adoption, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

38,254

 

 

 

38,254

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

1,903

 

 

 

-

 

 

 

-

 

 

 

1,903

 

Issuance of Common Stock upon settlement of restricted stock units, net of shares
   withheld for taxes

 

234

 

 

 

-

 

 

 

(334

)

 

 

-

 

 

 

-

 

 

 

(334

)

Conversion from Class B to Class A

 

 

240

 

 

 

(240

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

703

 

 

 

-

 

 

 

703

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

54,787

 

 

 

54,787

 

BALANCES as of March 31, 2024

 

 

4,794

 

 

 

21,520

 

 

$

124,127

 

 

$

(774

)

 

$

75,721

 

 

$

199,074

 

 

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)

 

 

 

Three Months Ended
March 31,
2024

 

 

Three Months Ended
March 31,
2023

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

54,787

 

 

$

773

 

Adjustments to reconcile net income to

 

 

 

 

 

 

Net cash provided by operating activities

 

 

 

 

 

 

Depreciation and amortization

 

 

1,243

 

 

 

987

 

Deferred tax expense

 

 

11,298

 

 

 

-

 

Impairment of digital assets

 

 

-

 

 

 

827

 

Gain on digital assets, net

 

 

(56,799

)

 

 

(1,268

)

Accrued interest income

 

 

(756

)

 

 

(261

)

Unrealized loss (gain) on investments

 

 

244

 

 

 

(104

)

Stock based compensation

 

 

1,674

 

 

 

1,882

 

Other operating activities settled in digital assets and USDC (1)

 

 

(13,923

)

 

 

(3,768

)

Change in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses

 

 

129

 

 

 

1,141

 

Other current assets

 

 

5

 

 

 

20

 

Long term assets

 

 

(40

)

 

 

-

 

Accounts payable

 

 

718

 

 

 

340

 

Other current liabilities

 

 

1,858

 

 

 

731

 

Other long term liabilities

 

 

12

 

 

 

-

 

Net cash provided by operating activities

 

 

450

 

 

 

1,300

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Purchases of fixed assets

 

 

(150

)

 

 

(11

)

Purchase of treasury bills

 

 

(29,800

)

 

 

(21,978

)

Redemption of treasury bills

 

 

29,649

 

 

 

18,200

 

Purchases of digital assets

 

 

(2,031

)

 

 

-

 

Disposal of digital assets held

 

 

11,884

 

 

 

-

 

Net cash provided by (used in) investing activities

 

 

9,552

 

 

 

(3,789

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Repurchase of shares to pay employee withholding taxes

 

 

(344

)

 

 

(152

)

Exercise of stock options

 

 

-

 

 

 

1

 

Net cash used in financing activities

 

 

(344

)

 

 

(151

)

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

 

9,658

 

 

 

(2,640

)

Cash and cash equivalents

 

 

 

 

 

 

Beginning of period

 

 

11,376

 

 

 

20,494

 

End of period

 

$

21,034

 

 

$

17,854

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

Non-cash issuance of stock

 

$

10

 

 

$

-

 

Non-cash capitalized software costs settled in digital assets
   (including stock based compensation of $
229 and $444 respectively)

 

$

(1,155

)

 

$

(1,860

)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

Cash paid for income taxes

 

$

-

 

 

$

(2

)

 

(1) See Note 5, "Intangible Assets".

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., incorporated in Delaware in July 2016, and its wholly owned subsidiaries, Proper Trust AG, a Swiss corporation, 3ZERO, LLC, a Delaware limited liability company, and Osmium, LLC, a Delaware limited liability company (collectively, “Exodus” or the “Company” or “we”), is a technology company that has developed the Exodus Platform, an un-hosted and self-custodial cryptocurrency software wallet for multiple types of digital assets. The Company has created a self-custodial digital asset wallet (meaning Exodus never has any access to wallet holders’ digital assets) and partnered with third parties to provide various services that utilize our wallet through our digital asset platform. Exodus earns revenue from providers of these services, which include digital asset to digital asset swaps, and the ability to earn rewards on staked crypto assets. Exodus operates in the blockchain and digital asset industry. The Exodus Platform can currently be downloaded from the exodus.io website, the iOS app store, the Google Play store, and the Chrome Web Store.

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 months ended March 31, 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 Company’s Form 10 for the year ended December 31, 2023.

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 months ended March 31, 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. The effects of the correction on the prior periods are included below.

 

Three Months Ended
March 31, 2023

 

 

Originally
Reported

 

 

Adjustment

 

 

 As
Corrected

 

Basic net income per share - Class A

$

0.21

 

 

$

0.18

 

 

$

0.03

 

Basic net income per share - Class B

$

0.04

 

 

$

0.01

 

 

$

0.03

 

Diluted net income per share - Class A

$

0.11

 

 

$

0.09

 

 

$

0.02

 

Diluted net income per share - Class B

$

0.03

 

 

$

0.01

 

 

$

0.02

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31, 2023

 

 

Originally
Reported

 

 

Adjustment

 

 

 As
Corrected

 

Digital assets expense

$

9,000

 

 

$

(4,034

)

 

$

4,966

 

Conversion of digital assets and USDC to cash

$

-

 

 

$

4,034

 

 

$

4,034

 

Concentration of Credit Risk

The Company maintains its cash and cash equivalents in checking accounts, various investment grade institutional money market accounts, bank term deposits and licensed digital asset exchanges. Deposited funds held with financial institutions may exceed the $250,000 limit insured by the Federal Deposit Insurance Corporation (“FDIC”). Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit. The Company has not experienced any losses on funds

 

6


 

deposited to these accounts and, therefore, does not believe it is exposed to any significant credit risk with respect to these accounts. The Company also holds cash at digital asset trading venues and performs a regular assessment of these trading venues as part of its risk management process.

Operating revenue from major API providers exceeding 10% of the total operating revenues for the three months ended March 31, 2024 and 2023 were as follows (in thousands):

 

 

Three Months Ended
March 31, 2024

 

 

Three Months Ended
March 31, 2023

 

Exchange revenue

 

 

 

 

 

 

Company A

 

$

6,700

 

 

$

1,702

 

Company B

 

 

5,657

 

 

 

2,328

 

Company C

 

 

4,734

 

 

 

2,138

 

Company D

 

 

4,115

 

 

 

2,888

 

Company E (1)

 

 

-

 

 

 

2,192

 

(1) Company did not have over 10% of revenue during the three months ended March 31, 2024.

Digital Assets

As of March 31, 2024, the Company held $141.5 million of digital assets at fair value. The Company presents digital assets separately from other intangible assets, recorded as digital assets on the condensed consolidated balance sheets. The net activity from remeasurement of digital assets at fair value is reflected in the condensed consolidated statements of operations and comprehensive income within operating (income) expense. Digital assets that are received as noncash consideration in our revenue arrangements and sold for cash within seven days are presented as cash flows from operating activities, while other digital asset activity held longer than seven days is reflected as cash flows from investing activities in the consolidated statements of cash flows. The Company uses a mix of non-custodial and custodial services at multiple locations that are geographically dispersed to store its digital assets. The company has performed an analysis of the principal market. Refer to Note 5, Digital Assets, and Note 12, Fair Value Measurements, for additional information. The Company has ownership of and control over its digital assets. The cost basis is calculated on a first-in first-out basis.

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:

Level 1 – Quoted prices for identical instruments in active markets.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs are not observable.

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 adopted the amendments prescribed in ASU 2023-08. As a result of adopting the amendments, the Company’s cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period, or as of January 1, 2024, amounted to $38.3 million, which consisted of a $48.7 million of fair value adjustments offset by a $10.4 million tax impact related to the fair value adjustments. As of March 31, 2024, the Company held $141.5 million of digital assets at fair market value, which are presented separately from other intangible assets in the consolidated balance sheets. During the three months ended March 31, 2024, the Company recognized net realized gains from exchange of digital assets and net unrealized gains from remeasurement of digital assets of $4.0 million and $52.8 million, respectively. The company included realized and unrealized gains and losses in net income for the period ended March 31, 2024, which is presented separately from changes in the carrying amount of other intangible assets

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
March 31,

 

 

 

 

2024

 

 

 

2023

 

 

Republic of the Marshall Islands

 

$

8,849

 

 

 

30.4

 

%

 

$

5,026

 

 

 

37.6

 

%

British Virgin Islands

 

 

-

 

 

 

-

 

 

 

 

3,197

 

 

 

24.0

 

 

Seychelles

 

 

6,700

 

 

 

23.1

 

 

 

 

1,734

 

 

 

13.0

 

 

Hong Kong

 

 

6,009

 

 

 

20.7

 

 

 

 

2,321

 

 

 

17.4

 

 

Other(1)

 

 

7,502

 

 

 

25.8

 

 

 

 

1,067

 

 

 

8.0

 

 

Operating revenues

 

$

29,060

 

 

 

100.0

 

%

 

$

13,345

 

 

 

100.0

 

%

 

(1) 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
March 31,

 

 

 

 

2024

 

 

 

2023

 

 

Exchange aggregation

 

$

26,750

 

 

 

92.1

 

%

 

$

12,630

 

 

 

94.7

 

%

Fiat onboarding

 

 

1,011

 

 

 

3.5

 

 

 

 

527

 

 

 

3.9

 

 

Staking

 

 

645

 

 

 

2.2

 

 

 

 

158

 

 

 

1.2

 

 

Other

 

 

604

 

 

 

2.0

 

 

 

 

5

 

 

 

-

 

 

Wallet as a service

 

 

25

 

 

 

0.1

 

 

 

 

-

 

 

 

-

 

 

Consulting

 

 

25

 

 

 

0.1

 

 

 

 

25

 

 

 

0.2

 

 

Operating revenues

 

$

29,060

 

 

 

100.0

 

%

 

$

13,345

 

 

 

100.0

 

%

 

The following table presents the Company's contract balances as of March 31, 2024 and December 31, 2023 (in thousands):

Balance January 1, 2023

 

 

$

-

 

Contract liability

 

 

 

1,000

 

Performance obligation satisfied

 

 

 

(273

)

Balance December 31, 2023

 

 

 

727

 

Contract liability

 

 

 

-

 

Performance obligation satisfied

 

 

 

-

 

Balance March 31, 2024

 

 

$

727

 

 

Cumulative revenue recognized related to the performance obligations was $0.3 million through March 31, 2024. The remaining future performance obligations of $0.7 million will be satisfied after March 31, 2024.

 

8


 

4. Prepaid Expenses

The Company prepays certain expenses due to the nature of the service provided or to capture certain discounts. The table below shows a breakout of these prepaid expenses for the periods presented (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Prepaid software

 

$

686

 

 

$

281

 

Prepaid cloud services

 

 

448

 

 

 

413

 

Accounting, consulting, and legal services

 

 

182

 

 

 

688

 

Prepaid insurance

 

 

15

 

 

 

58

 

Prepaid expenses

 

$

1,331

 

 

$

1,440

 

 

5. Intangible Assets

Indefinite-Lived Asset

Indefinite-lived assets consisted of the following (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Domain name

 

$

1,945

 

 

$

1,945

 

Indefinite-lived assets, net

 

$

1,945

 

 

$

1,945

 

 

The Company purchased the exodus.com domain name in the first quarter of 2021 for $1.9 million. The Company considers this asset to be indefinite-lived assets resulting in no recognition of amortization.

Digital Assets

The table below outlines the value of our digital assets based on publicly available rates as of the dates presented as well as the book value (in thousands, except units and market values):

 

 

Units

 

 

Cost Basis

 

 

Fair Value

 

As of March 31, 2024

 

 

 

 

 

 

 

 

 

Bitcoin

 

 

1,792

 

 

$

52,203

 

 

$

127,646

 

Ethereum

 

 

2,550

 

 

 

4,648

 

 

 

9,284

 

Other

 

 

4,662,140

 

 

 

6,516

 

 

 

4,610

 

Digital assets, net

 

 

 

$

63,367

 

 

$

141,540

 

 

For the three months ended March 31, 2024, the Company recognized realized gains from exchange of digital assets of $4.3 million and realized losses of $0.3 million which is included on the condensed consolidated statements of operations and comprehensive income. The Company recognized unrealized gains from remeasurement of digital assets of $52.8 million and unrealized losses from remeasurement of digital assets of less than $0.1 million which is included on the condensed consolidated statements of operations and comprehensive income. For the three months ended March 31, 2024, there were no digital assets held with contractual sale restrictions.

The following table summarizes other operating activities settled in digital assets and USDC (in thousands):

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Revenue

 

$

(25,695

)

 

$

(13,345

)

Expenses

 

 

5,207

 

 

 

4,968

 

Conversion to cash

 

 

8,571

 

 

 

4,033

 

Accounts receivable

 

 

(3,365

)

 

 

(302

)

Payroll liabilities

 

 

656

 

 

 

928

 

Currency translation

 

 

703

 

 

 

(50

)

Other operating activities settled in digital assets and USDC

 

$

(13,923

)

 

$

(3,768

)

 

 

9


 

The following table summarizes the digital asset activities as of March 31, 2024 and December 31, 2023 (in thousands, except units):

 

BTC

 

 

ETH

 

 

Other*

 

 

Units

 

 

Value

 

 

Units

 

 

Value

 

 

Units

 

 

Value

 

Balance, December 31, 2023

 

1,787

 

 

 

32,262

 

 

 

2,538

 

 

$

2,022

 

 

 

4,625,187

 

 

$

726

 

Adoption of ASU 2023-08

 

-

 

 

 

43,162

 

 

 

-

 

 

 

3,764

 

 

 

-

 

 

 

1,750

 

Balance, January 1, 2024

 

1,787

 

 

 

75,424

 

 

 

2,538

 

 

 

5,786

 

 

 

4,625,187

 

 

 

2,476

 

Additions (1)

 

390

 

 

 

20,244

 

 

 

12

 

 

 

39

 

 

 

143,003

 

 

 

544

 

Disposals (2)

 

(385

)

 

 

(19,545

)

 

 

-

 

 

 

-

 

 

 

(106,050

)

 

 

(227

)

Gains (3)

 

-

 

 

 

51,832

 

 

 

-

 

 

 

3,460

 

 

 

-

 

 

 

1,825

 

Losses (3)

 

-

 

 

 

(309

)

 

 

-

 

 

 

(1

)

 

 

-

 

 

 

(8

)

Balance, March 31, 2024

 

1,792

 

 

$

127,646

 

 

 

2,550

 

 

$

9,284

 

 

 

4,662,140

 

 

$

4,610

 

 

(1) Additions primarily relate to revenue generated from customers and staked assets for the three months ended March 31, 2024.

(2) Disposals primarily relate to payment of liabilities pertaining to vendor invoices and payroll payments. Disposals of digital assets to cash are primarily used for operational purposes.

(3) The Company recognized cumulative realized gains from exchange of digital assets of $4.3 million and cumulative realized losses of $0.3 million which is included on the condensed consolidated statements of operations and comprehensive income.

6. Fixed Assets, Net

Fixed assets, net, consisted of the following (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Computer equipment

 

$

966

 

 

$

870

 

Vehicles

 

 

237

 

 

 

256

 

Furniture and fixtures

 

 

21

 

 

 

21

 

Fixed assets, gross

 

 

1,224

 

 

 

1,147

 

Less: accumulated depreciation

 

 

(810

)

 

 

(830

)

Fixed assets, net

 

$

414

 

 

$

317

 

 

Depreciation expense was $0.1 million for the three months ended March 31, 2024 and 2023 for both periods.

7. Software Assets, Net

Software assets, net, consisted of the following (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Internal use software

 

$

15,645

 

 

$

16,208

 

Less: accumulated amortization

 

 

(7,609

)

 

 

(8,157

)

Software assets, net

 

$

8,036

 

 

$

8,051

 

 

The following summarizes the future amortization expense (in thousands):

 

12 Months Ending March 31,

 

 

 

 

 

Nine months ending December 31, 2024

 

 

 

$

3,663

 

2025

 

 

 

 

3,013

 

2026

 

 

 

 

1,225

 

2027

 

 

 

 

135

 

 

 

 

 

$

8,036

 

 

Amortization expense was $1.2 million and $0.7 million for the three months ended March 31, 2024 and 2023, respectively.

8. Stockholders’ Equity

The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible into one share of Class A common stock.

In April 2024, our Class A Common Stock was listed for quotation on the OTCQX under the symbol “EXOD”. OTC Markets approval was received in April 2024.

 

10


 

In January 2024, our Class A Common Stock was listed for quotation on the OTCQB under the symbol “EXOD”. OTC Markets approval was received in January 2024 and in January the initial qualifying deposit was made and initial trades have occurred.
 

In December 2023, our Class A Common Stock ceased trading on tZERO Markets, LLC ("tZERO"), an alternative trading system that had the ability to support trades of our Class A Common Stock and transfers of our Common Stock Tokens. Our Class A Common Stock previously traded on tZERO under the symbol “EXOD”.

In October 2023, our Class A Common Stock ceased trading on Securitize Markets, an alternative trading system that had the ability to support trades of our Class A Common Stock and transfers of our Common Stock Tokens. Our Class A Common Stock previously traded on Securitize Markets under the symbol “EXOD”.

Stock-Based Compensation

Options and Equity Grants Issued

The 2019 Equity Incentive Plan adopted in September 2019 (the “2019 Plan”) permitted the Company to grant non-statutory stock options, incentive stock options, and other equity awards to Exodus team members, directors, and consultants. The exercise price for options issued under the 2019 Plan is determined by the board of directors, but will be (i) in the case of an incentive stock option granted to an employee or consultant who owns stock representing more than 10% of the voting power of all classes of stock of Exodus, no less than 110% of the fair market value per share on the date of grant; or (ii) granted to any other employee or consultant, no less than 100% of the fair market value per share on the date of grant. The contractual life for all options issued under the 2019 Plan is 10 years. The 2019 Plan authorized grants to issue up to 3,000,000 options (prior to the 2021 Employee Equity Redemption Plan) that are convertible into shares of authorized but unissued Class B common stock. As of March 31, 2024, there were 2,156,330 shares of Class B common stock options outstanding.

In August 2021, the Company also adopted the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan permits the Company to grant non-statutory stock options, incentive stock options and other equity awards, such as restricted stock awards, to Exodus team members, directors, and consultants. The exercise price for options issued under the 2021 Plan is determined by the board of directors, but will be (i) in the case of an incentive stock option granted to an employee who owns stock representing more than 10% of the voting power of all classes of stock of Exodus, no less than 110% of the fair market value per share on the date of grant; or (ii) granted to any other employee or consultant, no less than 100% of the fair market value per share on the date of grant. The contractual life for all options issued under the 2021 Plan is 10 years. The 2021 Plan initially authorized grants to issue up to 2,780,000 awards that are convertible into shares of authorized but unissued Class A common stock. Pursuant to the terms of the 2021 Plan, the Company may increase our share pool by 5% of our total shares of capital stock each year. In 2023 and 2022, the total shares of our Class A common stock reserved for issuance increased by 1,875,000