NEW YORK, Aug. 20, 2021 /PRNewswire/ -- Bit Digital, Inc.
(Nasdaq: BTBT) (the "Company"), a bitcoin mining company
headquartered in New York, today
announced its unaudited financial results for the second quarter
ended June 30, 2021.
Financial Highlights for the Second Quarter 2021
- Revenue from bitcoin mining was $28.3
million.
- The number of bitcoins earned was 562.9.
- 70.8% of our miner fleet was deployed, in transit to, or
awaiting installation in North
America at June 30, 2021.
- We owned 32,500 miners, with 3,515 miners acquired in the
second quarter of 2021.
- Net loss was $1.3 million and
loss per share was $0.03, compared
with a net loss of $0.3 million and a
loss per share of $0.01 for the same
period last year.
Forward Looking Statements
The following discussion and analysis of our financial
condition and results of operations should be read in conjunction
with our financial statements and the related notes included
elsewhere in this news release. Except for the statements of
historical fact, this news release contains "forward-looking
information" and "forward-looking statements reflecting our current
expectations that involve risks and uncertainties (collectively,
"forward-looking information") that is based on expectations,
estimates and projections as at the date of this news release.
Actual results and the timing of events in this news release
includes information about hash rate expansion, diversification of
operations, potential further improvements to profitability and
efficiency across mining operations, potential for the Company's
long-term growth, and the business goals and objectives of the
Company. Factors that could cause actual results, performance or
achievements to differ materially from those discussed in our such
forward-looking statements as a result of many factors, including,
but not limited to: continued effects of the COVID19 pandemic may
have a material adverse effect on the Company's performance as
supply chains are disrupted and may prevent the Company from
operating its assets; the ability to establish new facilities for
bitcoin mining in North America; a
decrease in cryptocurrency migrating and then operating its assets;
a decrease in cryptocurrency pricing; volume of transaction
activity or generally, the profitability of cryptocurrency mining;
further improvements to profitability and efficiency may not be
realized; the digital currency market; the Company's ability to
successfully mine digital currency on the cloud; the Company may
not be able to profitably liquidate its current digital currency
inventory, or at all; a decline in digital currency prices may have
a significant negative impact on the Company's operations; the
volatility of digital currency prices; and other related risks as
more fully set forth under "Risk Factors" and elsewhere in our
Annual Report on Form 20-F for the year ended December 31, 2020 and other documents disclosed
under the Company's filings at www.sec.gov. The forward-looking
information in this news release reflects the current expectations,
assumptions and/or beliefs of the Company based on information
currently available to the Company. In connection with the
forward-looking information contained in this news release, the
Company has made assumptions about: the current profitability in
mining cryptocurrency (including pricing and volume of current
transaction activity); profitable use of the Company's assets going
forward; the Company's ability to profitably liquidate its digital
currency inventory as required; historical prices of digital
currencies and the ability of the Company to mine digital
currencies on the cloud will be consistent with historical prices;
and there will be no regulation or law that will prevent the
Company from operating its business. The Company has also assumed
that no significant events occur outside of the Company's normal
course of business. Although the Company believes that the
assumptions inherent in the forward-looking information are
reasonable, forward-looking information is not a guarantee of
future performance and accordingly undue reliance should not be put
on such information due to the inherent uncertainty
therein.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview
Bitcoin Mining Business
We are a bitcoin mining company with mining operations in
the United States and Canada. We commenced our bitcoin mining
business in February 2020. Our
bitcoin mining operations, hosted by third party hosting providers,
use specialized computers, known as miners, to generate bitcoins, a
cryptocurrency. The miners use application specific integrated
circuit ("ASIC") chips. These chips enable the miners to apply
greater computational power, or "hash rate", to provide transaction
verification services (known as "solving a block") which helps
support the bitcoin blockchain. For every block added, the bitcoin
blockchain awards a bitcoin award equal to a set number of bitcoins
per block. Miners with a greater hash rate have a higher chance of
solving a block and receiving a bitcoin award.
We operate our mining assets with the primary intent of
accumulating bitcoin which we may sell for fiat currency from time
to time depending on market conditions and management's
determination of our cash flow needs. Our mining strategy has been
to mine bitcoins as quickly and as many as possible given the fixed
supply of bitcoins. In view of the long delivery lead time to
purchase miners from manufacturers like Bitmain and MicroBT, we
generally choose to acquire miners on the spot market, which can
typically result in delivery within a few weeks.
We have signed services agreements with third party hosting
partners in North America. These
partners operate specialized mining data centers, where they
install and operate our miners and provide IT consulting,
maintenance, and repair work on-site for us. Our mining facilities
in Texas and Nebraska are maintained by Compute North LLC.
Our mining facility in Georgia is
maintained by Core Scientific, Inc. Our mining facility in
Alberta, Canada is maintained by
Link Global Technologies Inc.
Miner Migration and Geographic Distribution
In October 2020, we commenced our
strategy of migrating our mining assets from China to North
America. Following the recent announcement of the Chinese
government's decision to ban bitcoin mining, we immediately
suspended our remaining mining operations in mainland China, effective June
21, 2021. Accordingly, we further accelerated our migration
strategy that had been ongoing since October
2020. As a result, a greater proportion of our fleet was
offline than in the prior quarter, due to more miners being in
transit to or awaiting installation in North America. Prior to shipment, we generally
refurbish our miners in a facility in Shenzhen, China, to ensure their resilience
during transport and operability upon arrival. Miners are securely
packaged and shipped by air or by sea, depending on market
conditions.
During April through June 2021, we
shipped 14,500 miners to the United
States. We expect to complete the migration of all, or the
majority, of our remaining China-based miners to North America in the third quarter of 2021,
although we anticipate the possibility that certain miner shipments
may arrive in US early in the fourth quarter of 2021.
The following table represents our miners' geographic locations
as of June 30, 2021:
Location
|
|
Number of
Miners
|
|
|
Percentage of
Total Miners
|
|
In transit to or
awaiting installation in US
|
|
|
14,500
|
|
|
|
44.6
|
%
|
China
|
|
|
9,484
|
|
|
|
29.2
|
%
|
United
States
|
|
|
7,090
|
|
|
|
21.8
|
%
|
Canada
|
|
|
1,426
|
|
|
|
4.4
|
%
|
Total
|
|
|
32,500
|
|
|
|
100.0
|
%
|
Power and Hosting Overview
During the second quarter, we entered into two new hosting
agreements in North America,
representing 60 megawatts of additional power capacity. In July, we
entered into an additional new hosting co-mining agreement with
Digihost Technology Inc. ("Digihost"), representing a further 100
megawatts of capacity. Consequently, we believe we have secured the
majority of power and hosting capacity required to complete the
redeployment of our remaining China-based fleet in North America. We will continue to evaluate
additional hosting arrangements with existing and new partners in
North America, to secure
additional capacity and in anticipation of an expected increase in
our spot market miner purchase activity and growth of our miner
fleet in the coming months.
Miner Fleet Overview
During the second quarter, we purchased 3,515 miners on the
Chinse spot market, including 1,259 Bitmain S17Pro, 954 MicroBT
M20S, 930 Bitmain S17+, 261 MicroBT M30S, 101 Bitmain S17 and 10
Bitmain S17E models. As of August 5,
2021, 1,678 of the newly purchased miners had already been
deployed in North America and 878
were in transit to North
America.
During the second quarter, we also sold 11,608 miners to three
un-affiliated third parties in anticipation of purchase
opportunities for newer, more efficient machines. Additionally, we
disposed of 372 miners, at $nil consideration, that were deemed to
have reached the end of their useful lives, were no longer
operational and/or would have been uneconomical or impossible to
repair. As a result, we recognized a $43,436 net gain, comprised of a $269,280 gain from sales and a $225,844 loss from disposals.
As of June 30, 2021, we had 32,500
miners, with a total maximum hash rate of 1.92 EH/S, a decrease
from 40,965 miners and 2.26 EH/s as of March
31, 2021. The reduction was due to the aforementioned sales
and disposals of certain miners, partially offset by miner
purchases. Our fleet of owned miners comprised the following
models:
Model
|
|
Owned as of
June 30,
2021
|
|
MicroBT Whatsminer
M21S
|
|
|
15,072
|
|
Bitmain Antminer
S17+
|
|
|
7,955
|
|
MicroBT Whatsminer
M20S
|
|
|
3,691
|
|
MicroBT Whatsminer
M10
|
|
|
2,190
|
|
Bitmain Antminer S17
Pro
|
|
|
1,259
|
|
Bitmain Antminer
T3
|
|
|
800
|
|
Bitmain Antminer
T17
|
|
|
700
|
|
MicroBT Whatsminer
M30S
|
|
|
261
|
|
Bitmain Antminer
T17+
|
|
|
256
|
|
Bitmain Antminer S19
Pro
|
|
|
205
|
|
Bitmain Antminer
S17
|
|
|
101
|
|
Bitmain Antminer
S17E
|
|
|
10
|
|
Total
|
|
|
32,500
|
|
Bitcoin Production
From the inception of our bitcoin mining business in
February 2020 to June 30, 2021, we earned an aggregate of 3,086.53
bitcoins. The following table presents the number of bitcoins mined
on a quarterly basis:
The Company earned 562.9 bitcoins in the second quarter of 2021.
The reduction from the first quarter was due to the aforementioned
accelerated migration program, in which more miners were offline
while in transit to or awaiting installation in North America, as well as miner sales and
disposals.
As of June 30, 2021, we had 588.40
bitcoins on hand. The following table presents our bitcoin mining
activities in coins for the six months ended June 30, 2021.
|
|
Number
of
bitcoins
|
|
|
Amount
(1)
|
|
Balance at January
1, 2021
|
|
|
262.62
|
|
|
$
|
6,237,917
|
|
Receipt of BTC from
mining services
|
|
|
1,576.34
|
|
|
|
72,295,744
|
|
Sales and payment of
BTC
|
|
|
(1,256.29)
|
|
|
|
(55,994,314)
|
|
Lending of BTC to a
third party, net
|
|
|
5.73
|
|
|
|
97,772
|
|
Realized gain on sale
of BTC
|
|
|
-
|
|
|
|
6,952,652
|
|
Impairment of
BTC
|
|
|
-
|
|
|
|
(8,985,662)
|
|
Balance at June
30, 2021
|
|
|
588.40
|
|
|
$
|
20,604,109
|
|
(1)
|
Receipt of
cryptocurrencies from mining services are the product of the number
of bitcoins received multiplied by the bitcoin price published on
https://coinmarketcap.com/currencies/bitcoin/historical-data/,
calculated on a daily basis. Sales of cryptocurrencies are the
actual amount received from sales.
|
Environmental, Social and Governance
Sustainability is a major strategic focus for us. Our mining
locations in the US and Canada
provide affordable access to carbon-free energy and
other sustainability-related solutions, in varying amounts
depending on location, including hydroelectric, solar, wind and
other carbon-free sources, which we believe help mitigate the
environmental impact of our operations. We work with an independent
ESG (Environmental, Social and Governance) consultant to
self-monitor, set targets and help us to improve our percentage of
green electricity and other sustainability initiatives. As we
continue to align ourselves with the future of technology and
business, we are dedicated to continuously enhancing the
sustainability of our operations, and the larger bitcoin network,
future-proofing for a world in flux.
We believe that the bitcoin network and the mining that powers
it are important inventions in human progress, with over
$1 trillion in bitcoin being held
today and the currency being used by millions around the world. But
the process of problem-solving and verifying bitcoin transactions
using advanced computers is energy-intensive and much scrutiny has
been applied to the industry for this reason. It follows that the
environmental costs of mining bitcoin should be surveyed and
mitigated by every company in our fast-growing sector. We aim to
contribute to the acceleration of bitcoin's decarbonization and act
as role models in our industry, responsibly stewarding digital
assets.
We are currently working with Apex Group Ltd, an independent ESG
consultancy, to become one the first publicly-listed bitcoin
miners to receive an independent ESG rating on our operations,
which we anticipate will provide transparency on the environmental
sustainability of our operations, as well as other metrics. Apex's
ESG Ratings & Advisory tools allow us to benchmark our ESG
performance against international standards and our peers to
identify opportunities for improvement and progress over time. We
believe this is an integral approach to improving our sustainable
practices and mitigating our environmental impact. By measuring the
sustainability and footprint of Bit Digital's mining, we are able
to develop targets to continuously improve as we continuously shift
towards our goal of 100% clean energy usage.
COVID-19
In March 2020, the World Health
Organization declared the COVID-19 outbreak ("COVID-19") a global
pandemic. We operate in locations that have been impacted by
COVID-19, and the pandemic has impacted and could further impact
our operations and the operations of our customers as a result of
quarantines, various local, state and federal government public
health orders, facility and business closures, and travel and
logistics restrictions. Conditions may improve or worsen as
governments and businesses continue to take actions to respond to
the risks of the COVID-19 pandemic. While the COVID-19 pandemic
continues to cause uncertainty in the global economy and
restrictive measures by governments and businesses remain in place,
we expect our business and results of operations may be materially
and adversely affected. Company is actively monitoring this
situation and the possible effects on its financial condition,
liquidity, operations, suppliers, and industry.
Beginning in the middle of March
2020, the outbreak of COVID-19 led to adverse impacts on the
US and global economies, bringing uncertainty to our operations and
customer demand. Various local governments issued orders requiring
the closure of non-essential businesses and to curtail all
unnecessary travel and requiring individuals to comply with various
shelter-in-place and social distancing orders. We, however,
experienced positive growth from our efforts in investment in
miners together with continuous increase in bitcoin market price as
investors presented increasing confidence in bitcoins.
Additionally, we have evaluated the potential impact of the
COVID-19 outbreak on our financial statements, including, but not
limited to, the impairment of long-lived assets and valuation of
cryptocurrencies. Where applicable, we have incorporated judgments
and estimates of the expected impact of COVID-19 in the preparation
of the financial statements based on information currently
available. These judgments and estimates may change, as new events
develop and additional information is obtained, and are recognized
in the consolidated financial statements as soon as they become
known.
We continue to actively monitor the situation and may take
further actions that alter our operations and business practices as
may be required by federal, state or local authorities or that we
determine are in the best interests of our partners, customers,
suppliers, vendors, employees and shareholders. The extent to which
the COVID-19 outbreak will further impact the Company's financial
results will depend on future developments, which are unknown and
cannot be predicted, including the duration and ultimate scope of
the pandemic, advances in testing, treatment and prevention, as
well as actions taken by governments and businesses. With miners
transferred to the United Stated and Canada, the COVID-19 situation continued to
create travel and transportation difficulties. The US operations
are heavily dependent on our partners, who may also be impacted by
COVID-19.
Results of operations
Results of Operations for the Three Months Ended June 30, 2021 and 2020
The following table summarizes the results of our operations
during the three months ended June 30,
2021 and 2020, respectively, and provides information
regarding the dollar increase or (decrease) during period.
|
|
For the Three
Months Ended
June 30,
|
|
|
Variance
in
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
Revenue from
cryptocurrency mining
|
|
$
|
28,342,694
|
|
|
$
|
674,467
|
|
|
$
|
27,668,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and amortization
shown below)
|
|
|
(10,883,650
|
)
|
|
|
(636,926
|
)
|
|
|
(10,246,724
|
)
|
Depreciation and
amortization expenses
|
|
|
(2,348,657
|
)
|
|
|
(70,501
|
)
|
|
|
(2,278,156
|
)
|
General and
administrative expenses
|
|
|
(4,335,983
|
)
|
|
|
(221,591
|
)
|
|
|
(4,114,392
|
)
|
Total operating
expenses
|
|
|
(17,568,290
|
)
|
|
|
(929,018
|
)
|
|
|
(16,639,272
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
operations
|
|
|
10,774,404
|
|
|
|
(254,551
|
)
|
|
|
11,028,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on exchange of cryptocurrencies
|
|
|
(3,503,845
|
)
|
|
|
6,194
|
|
|
|
(3,510,039
|
)
|
Impairment of
cryptocurrencies
|
|
|
(9,045,007
|
)
|
|
|
-
|
|
|
|
(9,045,007
|
)
|
Interest
income
|
|
|
-
|
|
|
|
40
|
|
|
|
(40
|
)
|
Gain from disposal of
property and equipment
|
|
|
43,436
|
|
|
|
-
|
|
|
|
43,436
|
|
Other
income
|
|
|
493,519
|
|
|
|
(1,964
|
)
|
|
|
495,483
|
|
Total other
(expenses) income, net
|
|
|
(12,011,897
|
)
|
|
|
4,270
|
|
|
|
(12,016,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
|
(1,237,493
|
)
|
|
|
(250,281
|
)
|
|
|
(987,212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expenses
|
|
|
(101,907
|
)
|
|
|
-
|
|
|
|
(101,907
|
)
|
Net
loss
|
|
$
|
(1,339,400
|
)
|
|
|
(250,281
|
)
|
|
$
|
(1,089,119
|
)
|
Revenues
We generate revenues from provision of computing power to
digital asset mining pools, and receive consideration in the form
of cryptocurrencies, the value of which is determined using the
market price of the related cryptocurrency at the time of receipt.
By providing computing power to successfully add a block to the
blockchain, the Company is entitled to a fractional share of the
fixed cryptocurrency award from the mining pool, which is based on
the proportion of computing power the Company contributed to the
mining pool to the total computing power contributed by all mining
pool participants in solving the current algorithm.
For the three months ended June 30,
2021, we received 562.94 bitcoins from three mining pool
operators. As of June 30, 2021, our
maximum hash rate was 1.92 EH/s. For the three months ended
June 30, 2021, we recognized revenue
of $28,342,694.
For the three months ended June 30,
2020, we received 72.24 bitcoins from two mining pool
operators by providing computing power.
During the three months ended June 30,
2021, we sold or disposed of certain miner models, in
anticipation of purchase opportunities for newer, more efficient
machines, resulting in a net reduction of 0.34 EH/s in hash rate
from the three months ended March 31,
2021. However, we expect to continue to invest in miners to
increase the hash rate capacity.
Cost of revenues
Cost of revenues of $10,883,650
for the three months ended June 30,
2021 was primarily comprised of direct production cost of
the mining operations, including utilities and other service
charges, but excluding depreciation and amortization expenses which
are separately presented. During the quarter, we signed two new
hosting agreements in North
America, representing 60 megawatts of additional hosting
power capacity. Our fleet aggregated 105 megawatts of maximum power
consumption for the three months ended June
30, 2021.
For the three months ended June 30,
2020, we incurred cost of revenues of $636,926 from utilities and other service
charges.
We expect an increase in cost of revenues in fiscal year 2021 as
we continue to focus on expansion and upgrade of our miner
fleet.
Depreciation and amortization expenses
For the three months ended June 30,
2021, depreciation and amortization expenses of $2,348,657 represented depreciation of miners
computed with an estimated useful life of 3 years.
For the three months ended June 30,
2020, depreciation and amortization expenses of $70,501 represented depreciation of miners
computed with an estimated useful life of 3 years.
General and administrative expenses
For the three months ended June 30,
2021, our general and administrative expenses were primarily
comprised of professional and consulting expenses of $1,763,602, transportation expenses of
$482,231 to relocate certain miners
from China to the US, payroll
expenses of $627,973, insurance
expenses of $924,991, travel expenses
of $252,296 and office expenses of
$227,248.
For the three months ended June 30,
2020, our general and administrative expenses were primarily
comprised of professional and consulting expenses of $180,028.
Realized gain (loss) on exchange of cryptocurrencies
We record cryptocurrencies at cost and any gains or losses from
sales of cryptocurrencies are recorded as "Realized gain (loss) on
exchange of cryptocurrencies" in the consolidated statements of
operations. For the three months ended June
30, 2021, we recorded a loss of $3,503,845 from exchange of 599.70 bitcoins. For
the three months ended June 30, 2020,
we recorded a gain of $6,194 from
sales of 57.76 bitcoins.
Impairment of cryptocurrencies
Impairment of cryptocurrencies was $9,045,007 for the three months ended
June 30, 2021, which was recorded to
reflect our cryptocurrencies at the lower of cost or fair value as
of June 30, 2021.
Gain from disposal of property and equipment
During the three months ended June 30,
2021, we sold or disposed of certain miner models, in
anticipation of purchase opportunities for newer, more efficient
machines. As a result, we recognized gain of $43,436 from sales and disposal of these miners,
comprised of a gain of $269,280 from
sales of 11,608 miners to three third parties and a loss of
$225,844 from disposal of 372 miners
at $nil consideration.
Income tax expense
Income tax expense was $101,907
for the three months ended June 30,
2021, as we generated taxable profits derived from our US
and Canada operations.
Income tax expenses was $nil for the three months ended
June 30, 2020, as we are not subject
to tax on income or capital gain in Cayman, and we did not generate
assessable profits arising in or derived from Hong Kong.
Net loss and loss per share
For the three months ended June 30,
2021, our net loss was $1,339,400, representing a change of $1,089,119 from a net loss of $250,281 for the same period of last year.
Loss per share was $0.03 and
$0.01 for the three months ended
June 30, 2021 and 2020, respectively.
Weighted average number of shares was 49,737,336 and 19,359,625 for
the three months ended June 30, 2021
and 2020, respectively.
Results of Operations for the Six Months Ended June 30, 2021 and 2020
The following table summarizes the results of our operations
during the six months ended June 30,
2021 and 2020, respectively, and provides information
regarding the dollar increase or (decrease) during period.
|
|
For the Six Months
Ended
June 30,
|
|
|
Variance
in
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
Revenue from
cryptocurrency mining
|
|
$
|
72,295,744
|
|
|
$
|
692,698
|
|
|
$
|
71,603,046
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and amortization
shown below)
|
|
|
(23,351,378)
|
|
|
|
(656,014)
|
|
|
|
(22,695,364)
|
Depreciation and
amortization expenses
|
|
|
(5,999,031)
|
|
|
|
(70,501)
|
|
|
|
(5,928,530)
|
General and
administrative expenses
|
|
|
(6,561,153)
|
|
|
|
(340,569)
|
|
|
|
(6,220,584)
|
Total operating
expenses
|
|
|
(35,911,562)
|
|
|
|
(1,067,084)
|
|
|
|
(34,844,478)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
operations
|
|
|
36,384,182
|
|
|
|
(374,386)
|
|
|
|
36,758,568
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses)
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on
exchange of cryptocurrencies
|
|
|
6,952,652
|
|
|
|
5,968
|
|
|
|
6,946,684
|
Impairment of
cryptocurrencies
|
|
|
(9,045,007)
|
|
|
|
-
|
|
|
|
(9,045,007)
|
Interest
income
|
|
|
-
|
|
|
|
40
|
|
|
|
(40)
|
Gain from disposal of
property and equipment
|
|
|
43,436
|
|
|
|
-
|
|
|
|
43,436
|
Other income
(expenses)
|
|
|
495,710
|
|
|
|
(1,964)
|
|
|
|
497,674
|
Total other
(expenses) income, net
|
|
|
(1,553,209)
|
|
|
|
4,044
|
|
|
|
(1,557,253)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss)
before income taxes
|
|
|
34,830,973
|
|
|
|
(370,342)
|
|
|
|
35,201,315
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expenses
|
|
|
(384,049)
|
|
|
|
-
|
|
|
|
(384,049)
|
Net income (loss)
from continuing operations
|
|
|
34,446,924
|
|
|
|
(370,342)
|
|
|
|
34,817,266
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations
|
|
|
-
|
|
|
|
(3,734,498)
|
|
|
|
3,734,498
|
Net income
(loss)
|
|
$
|
34,446,924
|
|
|
|
(4,104,840)
|
|
|
$
|
38,551,764
|
Revenues
We generate revenues from provision of computing power to
digital asset mining pools, and receive consideration in the form
of cryptocurrencies, the value of which is determined using the
market price of the related cryptocurrency at the time of receipt.
By providing computing power to successfully add a block to the
blockchain, the Company is entitled to a fractional share of the
fixed cryptocurrency award from the mining pool operator, which is
based on the proportion of computing power the Company contributed
to the mining pool to the total computing power contributed by all
mining pool participants in solving the current algorithm.
For the six months ended June 30,
2021, we received 1,576.34 bitcoins from four mining pool
operators. As of June 30, 2021, our
maximum hash rate was 1.92 EH/s. For the six months ended
June 30, 2021, we recognized revenue
of $72,295,744.
For the six months ended June 30,
2020, we received 74.72 bitcoins from two mining pool
operators by providing computing power in our 76 miners.
During the six months ended June 30,
2021, we sold or disposed of certain miner models, in
anticipation of purchase opportunities for newer, more efficient
machines. However, we expect to continue to invest in miners to
increase the hash rate capacity. As a result, we expect a
continuous significant increase in revenue for the fiscal year
2021. Also, with more miners operating in the United States and Canada, we expect energy cost per hash to
decrease on an overall basis.
Cost of revenues
Cost of revenues of $23,351,378
for the six months ended June 30,
2021 was primarily comprised of direct production cost of
the mining operations, including utilities and other service
charges, but excluding depreciation and amortization expenses which
are separately presented. During the quarter, we signed two new
hosting agreements in North
America, representing 60 megawatts of additional hosting
power capacity. Our fleet aggregated 125 megawatts of maximum power
consumption for the six months ended June
30, 2021.
For the six months ended June 30,
2020, we incurred cost of revenues of $656,014 from utilities and other service
charges.
We expect an increase in cost of revenues in fiscal year 2021 as
we continue to focus on expansion and upgrade of our miner
fleet.
Depreciation and amortization expenses
For the six months ended June 30,
2021, depreciation and amortization expenses represented
depreciation of 32,500 miners with an estimated useful life of 3
years.
For the six months ended June 30,
2020, depreciation and amortization expenses represented
depreciation of 6,004 miners with an estimated useful life of 3
years.
General and administrative expenses
For the six months ended June 30,
2021, our general and administrative expenses were primarily
comprised of professional and consulting expenses of $2,717,387, transportation expenses of
$1,149,462 to relocate certain miners
from China to the US, payroll
expenses of $979,335, insurance
expenses of $924,991, travel expenses
of $302,516 incurred by senior
management, and office expenses of $324,610.
For the six months ended June 30,
2020, our general and administrative expenses were primarily
comprised of professional and consulting expenses of $294,556.
Realized gain (loss) on exchange of cryptocurrencies
We record cryptocurrencies at cost and any gains or losses from
sales of cryptocurrencies are recorded as "Realized gain (loss) on
exchange of cryptocurrencies" in the consolidated statements of
operations. For the six months ended June
30, 2021, we recorded a gain of $6,952,652 from exchange of 1,256.29 bitcoins.
For the six months ended June 30,
2020, we recorded a gain of $5,968 from sales of 58.45 bitcoins.
Impairment of cryptocurrencies
Impairment of cryptocurrencies was $9,045,007 for the six months ended June 30, 2021, which was recorded to reflect our
cryptocurrencies at the lower of cost or fair value as of
June 30, 2021.
Gain from disposal of property and equipment
During the six months ended June 30,
2021, we sold or disposed of certain miner models, in
anticipation of purchase opportunities for newer, more efficient
machines. As a result, we recognized gain of $43,436 from sales and disposal of these miners,
comprise of a gain of $269,280 from
sales of 11,608 miners to three third parties and a loss of
$225,844 from disposal of 372 miners
at $nil consideration.
Income tax expense
Income tax expense was $384,049
for the six months ended June 30,
2021, as we generated taxable profits derived from our US
and Canada operations.
Income tax expenses was $nil for the six months ended
June 30, 2020, as we are not subject
to tax on income or capital gain in Cayman Islands, and we did not generate
assessable profits arising in or derived from Hong Kong.
Net income (loss) and income (loss) per share
For the six months ended June 30,
2021, our net income was $34,446,924, representing a change of
$38,551,764 from a net loss of
$4,104,840 for the same period of
last year, which comprised of a net loss of $370,342 from continuing operations and a net
loss of $3,734,498 from discontinued
operations.
Income per share was $0.70 and
loss per share was $0.24 for the six
months ended June 30, 2021 and 2020,
respectively. Weighted average number of shares was 49,018,317 and
17,379,405 for the six months ended June 30,
2021 and 2020, respectively.
Liquidity and capital resources
To date, we have financed our operations primarily through cash
flows from operations, working capital loans from our shareholders
and senior management, and equity financing through public and
private offerings of our securities. We plan to support our future
operations primarily from cash generated from our operations and
equity and/or financing. We may also consider debt, preferred and
convertible financing as well. As of June
30, 2021, we had working capital of $56,441,109 as compared with $6,825,455 at December 31,
2020.
As of January 5, 2021, the Company
completed the sale of 262,082 Ordinary Shares at $4.50 per share for gross proceeds of
$1,179,369 to eleven non-US
Persons.
On February 5 and March 12, 2021, the Company completed the sale of
subordinated convertible notes in the principal amounts of
$1,100,000 and $550,000, respectively, to an accredited
institutional investor pursuant to a Securities Purchase Agreement.
On May 5, 2021, the convertible notes
were automatically converted into 289,662 Ordinary Shares at
$5.70 per share.
On May 5, 2021, the Company's Form
F-1 Registration Statement covering the resale of 6,412,500
ordinary shares was declared effective by the SEC. The 6,412,500
ordinary shares consisted of 412,500 shares issuable to Ionic
Ventures, LLC ("Ionic") upon the conversion of $1,650,000 principal amount of senior convertible
notes, and 6,000,000 shares issuable to Ionic pursuant to the
Purchase Agreement dated as of January 11,
2021. During May 20, 2021
through June 28, 2021, the Company
issued an aggregation of 5,215,477 Ordinary Shares to Ionic for
gross proceeds of $30 million. The
Company received net proceeds of $28,550,000 after deducting fees payable to
broker-dealers and certain other transaction expenses, including
fees and expenses of legal counsels in connection with the
transactions.
Revenue from Mining Operations
Funding our operations on a go-forward basis will rely
significantly on our ability to continue to mine cryptocurrency and
the spot or market price of the cryptocurrency we mine. We expect
to generate ongoing revenues from the production of
cryptocurrencies, primarily bitcoin, in our mining facilities. Our
ability to liquidate bitcoin at future values will be evaluated
from time to time to generate cash for operations. Generating
bitcoin, for example, with spot market values which exceed our
production and other costs, will determine our ability to report
profit margins related to such mining operations, although
accounting for our reported profitability is significantly complex.
Furthermore, regardless of our ability to generate revenue from our
cryptocurrency assets, we may need to raise additional capital in
the form of equity or debt to fund our operations and pursue our
business strategy.
The ability to raise funds as equity, debt or conversion of
cryptocurrency to maintain our operations is subject to many risks
and uncertainties and, even if we were successful, future equity
issuances would result in dilution to our existing stockholders and
any future debt or debt securities may contain covenants that limit
our operations or ability to enter into certain transactions. Our
ability to realize revenue through bitcoin production and
successfully convert bitcoin into cash or fund overhead with
bitcoin is subject to a number of risks, including regulatory,
financial and business risks, many of which are beyond our control.
Additionally, the value of bitcoin currency rewards has been
extremely volatile historically. While such volatility has recently
decreased, future prices cannot be predicted.
If we are unable to generate sufficient revenue from our bitcoin
production when needed or secure additional sources of funding, it
may be necessary to significantly reduce our current rate of
expansion or to explore other strategic alternatives.
Cash flows
|
|
For the Six Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash at beginning
of period
|
|
|
405,133
|
|
|
|
615,988
|
|
Net Cash Used in
Operating Activities
|
|
|
(4,821,979)
|
|
|
|
(962,819)
|
|
Net Cash Provided by
(Used in) Investing Activities
|
|
|
2,852,912
|
|
|
|
(10,681,795)
|
|
Net Cash Provided by
Financing Activities
|
|
|
29,818,000
|
|
|
|
13,539,852
|
|
Net increase in
cash, cash equivalents and restricted cash
|
|
|
27,848,933
|
|
|
|
1,895,238
|
|
Cash at end of
period
|
|
$
|
28,254,066
|
|
|
$
|
2,511,226
|
|
Operating Activities
Net cash used in operating activities was $4,821,979 for the six months ended June 30, 2021, mainly derived from (i) net income
of $34,446,924 from continuing
operations for the six months adjusted for depreciation expenses of
miners of $5,999,031, impairment of
cryptocurrencies of $9,045,007 and
issuance of ordinary shares to two service providers as promotion
and marketing expenses of $933,098,
and (ii) net of changes in our operating assets and liabilities,
principally comprising of (a) an increase in cryptocurrencies of
$78,531,704 as rewards to us for
provision of mining services, and (b) an increase in accounts
payable of $22,985,200, primarily
because we paid maintenance services fees of $21,894,860 in cryptocurrencies.
Net cash used in operating activities was $962,819 for the six months ended June 30, 2020, derived mainly from a net loss of
$370,342 from continuing operations
and cryptocurrencies of $705,118
awarded to the Company through its mining activities for the six
months ended June 30, 2020.
Investing Activities
Net cash provided by investing activities was $2,852,912 for the six months ended June 30, 2021, primarily provided by cash
proceeds of $3,539,450 from sales of
cryptocurrencies, and netting off against purchases of miners of
$686,538.
Net cash provided by investing activities was $10,681,795 for the six months ended June 30, 2020, resulting from purchases of miners
of $11,244,761, and netting off
against cash proceeds of $551,640
from sales of cryptocurrencies.
Financing Activities
Net cash provided by financing activities was $29,818,000 for the six months ended June 30, 2021, primarily provided by net proceeds
of $28,550,000 from direct offering
with Ionic, an institutional investor, and proceeds of $1,280,000 from the issuance of convertible notes
to Ionic.
Net cash provided by financing activities was $13,539,852 for the six months ended June 30, 2020, resulting from proceeds
aggregating $12,763,718 under certain
private placement transactions, and borrowings of $776,134 from a related party.
Off-balance sheet arrangements
We have not entered into any derivative contracts that are
indexed to our shares and classified as shareholders' equity or
that are not reflected in our consolidated financial statements.
Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity. We do not
have any variable interest in any unconsolidated entity that
provides financing, liquidity, market risk or credit support or
that engages in leasing, hedging or research and development
services with us.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial
statements. These financial statements are prepared in accordance
with US GAAP, which requires the Company to make estimates and
assumptions that affect the reported amounts of our assets and
liabilities and revenues and expenses, to disclose contingent
assets and liabilities on the dates of the consolidated financial
statements, and to disclose the reported amounts of revenues and
expenses incurred during the financial reporting periods. The most
significant estimates and assumptions include the valuation of
cryptocurrencies and other current assets, useful lives of property
and equipment, the recoverability of long-lived assets, provision
necessary for contingent liabilities and realization of deferred
tax assets. We continue to evaluate these estimates and assumptions
that we believe to be reasonable under the circumstances. We rely
on these evaluations as the basis for making judgments about the
carrying values of assets and liabilities that are not readily
apparent from other sources. Since the use of estimates is an
integral component of the financial reporting process, actual
results could differ from those estimates as a result of changes in
our estimates. Some of our accounting policies require higher
degrees of judgment than others in their application. We believe
critical accounting policies as disclosed in this release reflect
the more significant judgments and estimates used in preparation of
our consolidated financial statements.
Recently issued and adopted accounting pronouncements
The Company has evaluated all other recently issued accounting
pronouncements and believes such pronouncements do not have a
material effect on the Company's financial statements. See Note 2
of the unaudited condensed consolidated financial statements as of
June 30, 2021.
BIT DIGITAL, INC.
UNAUDITED
CONDENSED CONSOLIDATED BALANCE
SHEETS
As of June 30, 2021
and December 31,
2020
(Expressed in US dollars, except for the
number of shares)
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
28,254,066
|
|
|
$
|
405,133
|
|
Cryptocurrencies
|
|
|
20,989,096
|
|
|
|
6,293,922
|
|
Other current
assets
|
|
|
10,366,860
|
|
|
|
2,020,374
|
|
Total Current
Assets
|
|
|
59,610,022
|
|
|
|
8,719,429
|
|
|
|
|
|
|
|
|
|
|
Investment
security
|
|
|
1,000,000
|
|
|
|
-
|
|
Deposits for plant
and equipment
|
|
|
11,495,450
|
|
|
|
1,324,963
|
|
Property and
equipment, net
|
|
|
35,953,562
|
|
|
|
29,849,157
|
|
Total
Assets
|
|
$
|
108,059,034
|
|
|
$
|
39,893,549
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
2,455,694
|
|
|
$
|
1,365,716
|
|
Due to related
parties
|
|
|
-
|
|
|
|
336,722
|
|
Income tax
payable
|
|
|
211,365
|
|
|
|
-
|
|
Other payables and
accrued liabilities
|
|
|
501,854
|
|
|
|
191,536
|
|
Total Current
Liabilities
|
|
|
3,168,913
|
|
|
|
1,893,974
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
liabilities
|
|
|
47,684
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
3,216,597
|
|
|
|
1,893,974
|
|
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
|
|
Common shares, $0.01
par value, 140,000,000 and 50,000,000 shares authorized, 53,906,241
and 48,043,788 shares issued and outstanding of June 30, 2021 and
December 31, 2020, respectively
|
|
|
539,063
|
|
|
|
480,438
|
|
Additional paid-in
capital
|
|
|
85,556,939
|
|
|
|
53,219,626
|
|
Retained earnings
(Accumulated deficit)
|
|
|
18,746,435
|
|
|
|
(15,700,489)
|
|
Total
Shareholders' Equity
|
|
|
104,842,437
|
|
|
|
37,999,575
|
|
Total Liabilities
and Shareholders' Equity
|
|
$
|
108,059,034
|
|
|
$
|
39,893,549
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
BIT DIGITAL, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS)
For the Three And Six Months Ended
June 30, 2021 and
2020
(Expressed in US dollars, except for the number of
shares)
|
|
For the Three
Months Ended
June 30,
|
|
|
For the Six Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenue from
cryptocurrency mining
|
|
$
|
28,342,694
|
|
|
$
|
674,467
|
|
|
$
|
72,295,744
|
|
|
$
|
692,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and
amortization shown below)
|
|
|
(10,883,650)
|
|
|
|
(636,926)
|
|
|
|
(23,351,378)
|
|
|
|
(656,014)
|
|
Depreciation and
amortization expenses
|
|
|
(2,348,657)
|
|
|
|
(70,501)
|
|
|
|
(5,999,031)
|
|
|
|
(70,501)
|
|
General and
administrative expenses
|
|
|
(4,335,983)
|
|
|
|
(221,591)
|
|
|
|
(6,561,153)
|
|
|
|
(340,569)
|
|
Total operating
expenses
|
|
|
(17,568,290)
|
|
|
|
(929,018)
|
|
|
|
(35,911,562)
|
|
|
|
(1,067,084)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
Operations
|
|
|
10,774,404
|
|
|
|
(254,551)
|
|
|
|
36,384,182
|
|
|
|
(374,386)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on exchange of cryptocurrencies
|
|
|
(3,503,845)
|
|
|
|
6,194
|
|
|
|
6,952,652
|
|
|
|
5,968
|
|
Impairment of
cryptocurrencies
|
|
|
(9,045,007)
|
|
|
|
-
|
|
|
|
(9,045,007)
|
|
|
|
-
|
|
Interest
income
|
|
|
-
|
|
|
|
40
|
|
|
|
-
|
|
|
|
40
|
|
Gain from disposal of
property and equipment
|
|
|
43,436
|
|
|
|
-
|
|
|
|
43,436
|
|
|
|
-
|
|
Other
income
|
|
|
493,519
|
|
|
|
(1,964)
|
|
|
|
495,710
|
|
|
|
(1,964)
|
|
Total other
(expenses) income, net
|
|
|
(12,011,897)
|
|
|
|
4,270
|
|
|
|
(1,553,209)
|
|
|
|
4,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
from continuing operations before income taxes
|
|
|
(1,237,493)
|
|
|
|
(250,281)
|
|
|
|
34,830,973
|
|
|
|
(370,342)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expenses
|
|
|
(101,907)
|
|
|
|
-
|
|
|
|
(384,049)
|
|
|
|
-
|
|
Net income (loss)
from continuing operations
|
|
|
(1,339,400)
|
|
|
|
(250,281)
|
|
|
|
34,446,924
|
|
|
|
(370,342)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,734,498)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
and comprehensive income (loss)
|
|
$
|
(1,339,400)
|
|
|
$
|
(250,281)
|
|
|
$
|
34,446,924
|
|
|
$
|
(4,104,840)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of ordinary share outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
|
|
49,737,336
|
|
|
|
19,359,625
|
|
|
|
49,018,317
|
|
|
|
17,379,405
|
|
Income (loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
|
$
|
(0.03)
|
|
|
$
|
(0.01)
|
|
|
$
|
0.70
|
|
|
$
|
(0.24)
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
BIT DIGITAL, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the
Six Months Ended June 30, 2021 and
2020
(Expressed in US dollars)
|
|
For the Six Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
34,446,924
|
|
|
$
|
(4,104,840)
|
|
Less: Net loss from
discontinued operations
|
|
|
-
|
|
|
|
3,734,498
|
|
Net income (loss)
from continuing operations
|
|
|
34,446,924
|
|
|
|
(370,342)
|
|
Adjustments to
reconcile net income (loss) from continuing operations to net cash
used
in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
|
5,999,031
|
|
|
|
70,501
|
|
Gain from disposal of
property and equipment
|
|
|
(43,436)
|
|
|
|
-
|
|
Impairment of
cryptocurrencies
|
|
|
9,045,007
|
|
|
|
-
|
|
Share based
compensation expenses with management
|
|
|
509,794
|
|
|
|
-
|
|
Share based
compensation expenses with non-employees
|
|
|
933,098
|
|
|
|
-
|
|
Loss from acquisition
of a subsidiary
|
|
|
-
|
|
|
|
1,964
|
|
Deferred tax
expenses
|
|
|
47,684
|
|
|
|
-
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Cryptocurrencies
|
|
|
(78,531,704)
|
|
|
|
(705,118)
|
|
Other current
assets
|
|
|
(1,750,324)
|
|
|
|
(300)
|
|
Accounts
payable
|
|
|
22,985,200
|
|
|
|
97,490
|
|
Income tax
payable
|
|
|
211,365
|
|
|
|
-
|
|
Other payables and
accrued liabilities
|
|
|
1,325,382
|
|
|
|
(57,014)
|
|
Net Cash Used in
Operating Activities
|
|
|
(4,821,979)
|
|
|
|
(962,819)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
|
|
(686,538)
|
|
|
|
(11,244,761)
|
|
Proceeds from sales
of cryptocurrencies
|
|
|
3,539,450
|
|
|
|
551,640
|
|
Acquisition of cash
in connection with acquisition of a subsidiary
|
|
|
-
|
|
|
|
11,326
|
|
Net Cash Provided
by (Used in) Investing Activities
|
|
|
2,852,912
|
|
|
|
(10,681,795)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of ordinary shares under direct offering
|
|
|
28,550,000
|
|
|
|
-
|
|
Proceeds from
issuance of convertible notes, net of issuance costs
|
|
|
1,280,000
|
|
|
|
-
|
|
Proceeds from
issuance of common stock under private placement
transaction
|
|
|
-
|
|
|
|
2,600,000
|
|
Proceeds from
borrowings from related parties
|
|
|
-
|
|
|
|
776,134
|
|
Repayment of
borrowings to related parties
|
|
|
(12,000)
|
|
|
|
-
|
|
Advances of share
subscription fees from shareholders under private placement
transaction
|
|
|
-
|
|
|
|
10,163,718
|
|
Net Cash Provided
by Financing Activities
|
|
|
29,818,000
|
|
|
|
13,539,852
|
|
|
|
|
|
|
|
|
|
|
Net increase in
cash
|
|
|
27,848,933
|
|
|
|
1,895,238
|
|
Cash at beginning of
period
|
|
|
405,133
|
|
|
|
615,988
|
|
Cash at end of
period
|
|
$
|
28,254,066
|
|
|
$
|
2,511,226
|
|
Supplemental Cash
Flow Information
|
|
|
|
|
|
|
|
|
Cash paid for
interest expense
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income
tax
|
|
$
|
125,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash
Transactions of Investing and Financing Activities
|
|
|
|
|
|
|
|
|
Collection of USDC
from private placement
|
|
$
|
1,179,368
|
|
|
$
|
-
|
|
Receivable due from
three third parties for sales of miners
|
|
$
|
5,410,349
|
|
|
$
|
-
|
|
Investment in an
investment security in USDC
|
|
$
|
(1,000,000)
|
|
|
$
|
-
|
|
Purchases of property
and equipment in USDT
|
|
$
|
(17,503,910)
|
|
|
$
|
-
|
|
Purchases of property
and equipment in USDC
|
|
$
|
(895,893)
|
|
|
$
|
-
|
|
Payment of deposits
on equipment in BTC
|
|
$
|
(9,327,997)
|
|
|
$
|
-
|
|
Repayment of USDC to
a related party
|
|
$
|
(329,722)
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Bit Digital, Inc. ("BTBT" or the "Company"), formerly known as
Golden Bull Limited, is a holding company incorporated on
February 17, 2017, under the laws of
the Cayman Islands. The Company is
currently engaged in the bitcoin mining business through its wholly
owned subsidiaries in the United
States, Canada and
Hong Kong.
The accompanying consolidated financial statements reflect the
activities of the Company and each of the following entities:
Name
|
|
Background
|
|
Ownership
|
Golden Bull USA, Inc.
("Golden Bull USA")
|
|
● A United States
company
● Incorporated on June 3, 2019
● Inactive
|
|
100% owned by Bit
Digital, Inc.
|
Bit Digital Hong Kong
Limited ("BT HK")
|
|
● A Hong Kong
company
● Acquired on April 8, 2020
● Engaged in bitcoin mining business
|
|
100% owned by Bit
Digital, Inc.
|
Bit Digital USA, Inc.
("BT USA")
|
|
● A United States
company
● Incorporated on September 1, 2020
● Engaged in bitcoin mining business
|
|
100% owned by Bit
Digital, Inc.
|
Bit Digital Canada,
Inc. ("BT Canada")
|
|
● A Canadian
company
● Incorporated on February 23, 2021
● Engaged in bitcoin mining business
|
|
100% owned by Bit
Digital, Inc.
|
Bit Digital
Strategies Limited ("BT Strategy")
|
|
● A Hong Kong
company
● Incorporated on June 1, 2021
● Engaged in cryptocurrency decentralized finance
business
|
|
100% owned by Bit
Digital, Inc.
|
Bit Digital Singapore
PTE. LTD. ("BT Singapore")
|
|
● A Singapore
company
● Incorporated on July 1, 2021
● Engaged in cryptocurrency decentralized finance
business
|
|
100% owned by Bit
Digital, Inc.
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The interim unaudited condensed consolidated financial
statements are prepared and presented in accordance with accounting
principles generally accepted in the
United States ("US GAAP").
The unaudited condensed consolidated financial information as of
June 30, 2021 and for the three and
six months ended June 30, 2021 and
2020 has been prepared without audit, pursuant to the rules and
regulations of the SEC and pursuant to Regulation S-X. Certain
information and footnote disclosures, which are normally included
in annual financial statements prepared in accordance with US GAAP,
have been omitted pursuant to those rules and regulations. The
unaudited interim financial information should be read in
conjunction with the audited financial statements and the notes
thereto, included in the Form 20-F for the fiscal year ended
December 31, 2020, which was filed
with the SEC on March 30, 2021.
In the opinion of the management, the accompanying unaudited
condensed consolidated financial statements reflect all normal
recurring adjustments, which are necessary for a fair presentation
of financial results for the interim periods presented. The Company
believes that the disclosures are adequate to make the information
presented not misleading. The accompanying unaudited condensed
consolidated financial statements have been prepared using the same
accounting policies as used in the preparation of the Company's
consolidated financial statements for the year ended December 31, 2020. The results of operations for
the three and six months ended June 30,
2021 and 2020 are not necessarily indicative of the results
for the full years.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Fair value of financial instruments
ASC 825-10 requires certain disclosures regarding the fair value
of financial instruments. Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date. A three-level fair value hierarchy prioritizes
the inputs used to measure fair value. The hierarchy requires
entities to maximize the use of observable inputs and minimize the
use of unobservable inputs. The three levels of inputs used to
measure fair value are as follows:
|
●
|
Level 1 - inputs to
the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets.
|
|
|
|
|
●
|
Level 2 - inputs to
the valuation methodology include quoted prices for similar assets
and liabilities in active markets, quoted market prices for
identical or similar assets in markets that are not active, inputs
other than quoted prices that are observable and inputs derived
from or corroborated by observable market data.
|
|
|
|
|
●
|
Level 3 - inputs to
the valuation methodology are unobservable.
|
Fair value of cryptocurrencies is based on quoted prices in
active markets. The fair value of the Company's other financial
instruments including cash and cash equivalents, restricted cash,
deposits, other receivables, accounts payable, due to related
parties, accounts payable and other payables, approximate their
fair values because of the short-term nature of these assets and
liabilities. The convertible note approximates its fair value,
because the bearing interest rate approximates market interest
rate, and market interest rates have not fluctuated significantly
since the commencement of contract signed.
Cryptocurrencies
Cryptocurrencies (including bitcoin and bitcoin cash) are
included in current assets in the accompanying consolidated balance
sheets. Cryptocurrencies purchased are recorded at cost and
cryptocurrencies awarded to the Company through its mining
activities are accounted for in connection with the Company's
revenue recognition policy disclosed below.
Cryptocurrencies held are accounted for as intangible assets
with indefinite useful lives. An intangible asset with an
indefinite useful life is not amortized but assessed for impairment
annually, or more frequently, when events or changes in
circumstances occur indicating that it is more likely than not that
the indefinite-lived asset is impaired. Impairment exists when the
carrying amount exceeds its fair value, which is measured using the
quoted price of the cryptocurrency at the time its fair value is
being measured. In testing for impairment, the Company has the
option to first perform a qualitative assessment to determine
whether it is more likely than not that an impairment exists. If it
is determined that it is not more likely than not that an
impairment exists, a quantitative impairment test is not necessary.
If the Company concludes otherwise, it is required to perform a
quantitative impairment test. To the extent an impairment loss is
recognized, the loss establishes the new cost basis of the asset.
Subsequent reversal of impairment losses is not permitted.
Purchases of cryptocurrencies by the Company are included within
investing activities in the accompanying consolidated statements of
cash flows, while cryptocurrencies awarded to the Company through
its mining activities are included within operating activities on
the accompanying consolidated statements of cash flows. The sales
of cryptocurrencies are included within investing activities in the
accompanying consolidated statements of cash flows and any realized
gains or losses from such sales are included in "realized gain
(loss) on exchange of cryptocurrencies" in the consolidated
statements of operations and comprehensive income (loss). The
Company accounts for its gains or losses in accordance with the
first-in first-out method of accounting.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Investment security
As of June 30, 2021, investment
security represents the Company's investment in one privately held
company over which the Company neither has control nor significant
influence through investment in common stock.
Equity securities not accounted for using the equity method are
carried at fair value with unrealized gains and losses recorded in
the consolidated income statements, according to ASC 321,
Investments - Equity Securities. The Company elected to
record the equity investments in privately held companies using the
measurement alternative at cost, less impairment, with subsequent
adjustments for observable price changes resulting from orderly
transactions for identical or similar investments of the same
issuer.
Equity investments in privately held companies accounted for
using the measurement alternative are subject to periodic
impairment reviews. The Company's impairment analysis considers
both qualitative and quantitative factors that may have a
significant effect on the fair value of these equity securities,
including consideration of the impact of the COVID-19 pandemic. In
computing realized gains and losses on equity securities, the
Company determines cost based on amounts paid using the average
cost method. Dividend income is recognized when the right to
receive the payment is established.
Impairment of long-lived assets
Long-lived assets, including property and equipment are reviewed
for impairment whenever events or changes in circumstances (such as
a significant adverse change to market conditions that will impact
the future use of the assets) indicate that the carrying value of
an asset may not be recoverable. The Company assesses the
recoverability of the assets based on the undiscounted future cash
flows the assets are expected to generate and recognize an
impairment loss when estimated undiscounted future cash flows
expected to result from the use of the asset plus net proceeds
expected from disposition of the asset, if any, are less than the
carrying value of the asset. If an impairment is identified, the
Company would reduce the carrying amount of the asset to its
estimated fair value based on a discounted cash flows approach or,
when available and appropriate, to comparable market values.
Revenue recognition
The Company recognizes revenue in accordance with ASC 606,
Revenue from Contracts with Customers ("ASC 606").
To determine revenue recognition for contracts with customers,
the Company performs the following five steps: (i) identify the
contract with the customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price,
including variable consideration to the extent that it is probable
that a significant future reversal will not occur,
(iv) allocate the transaction price to the respective performance
obligations in the contract, and (v) recognize revenue when (or as)
the Company satisfies the performance obligation.
The Company recognizes revenue when it transfers its goods and
services to customers in an amount that reflects the consideration
to which the Company expects to be entitled in such exchange.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Revenue recognition (continued)
Cryptocurrency mining
The Company has entered into digital asset mining pools by
executing contracts with the mining pool operators to provide
computing power to the mining pool. The contracts are
terminable at any time by either party and the Company's
enforceable right to compensation only begins when the Company
provides computing power to the mining pool operator. In exchange
for providing computing power, the Company is entitled to a
fractional share of the fixed cryptocurrency award the mining pool
operator receives (less digital asset transaction fees to the
mining pool operator which are recorded as a component of cost of
revenues), for successfully adding a block to the blockchain. The
Company's fractional share is based on the proportion of computing
power the Company contributed to the mining pool operator to the
total computing power contributed by all mining pool participants
in solving the current algorithm.
Providing computing power in digital asset transaction
verification services is an output of the Company's ordinary
activities. The provision of providing such computing power is the
only performance obligation in the Company's contracts with mining
pool operators. The transaction consideration the Company receives,
if any, is noncash consideration, which the Company measures at
fair value on the date received, which is not materially different
than the fair value at contract inception or the time the Company
has earned the award from the pools. The consideration is all
variable. Because it is not probable that a significant reversal of
cumulative revenue will not occur, the consideration is constrained
until the mining pool operator successfully places a block (by
being the first to solve an algorithm) and the Company receives
confirmation of the consideration it will receive, at which time
revenue is recognized. There is no significant financing component
in these transactions.
Fair value of the cryptocurrency award received is determined
using the quoted price of the related cryptocurrency at the time of
receipt.
There is currently no specific definitive guidance under US GAAP
or alternative accounting framework for the accounting for
cryptocurrencies recognized as revenue or held, and management has
exercised significant judgment in determining the appropriate
accounting treatment. In the event authoritative guidance is
enacted by the FASB, the Company may be required to change its
policies, which could have an effect on the Company's consolidated
financial position and results from operations.
Share-based compensation
Share-based awards granted are measured at fair value on grant
date and share-based compensation expense is recognized (i)
immediately at the grant date if no vesting conditions are
required, or (ii) using the straight-line attribution method, net
of estimated forfeitures, over the requisite service period. The
fair values of restricted share units ("RSUs") and restricted
shares are determined with reference to the fair value of the
underlying shares and the fair value of share options is generally
determined using the Black-Scholes valuation model. The value is
recognized as an expense over the respective service period, net of
estimated forfeitures. Share-based compensation expense, when
recognized, is charged to the consolidated income statements with
the corresponding entry to additional paid-in capital, liability or
noncontrolling interests.
On each measurement date, the Company reviews internal and
external sources of information to assist in the estimation of
various attributes to determine the fair value of the share-based
awards granted by the Company, including the fair value of the
underlying shares, expected life and expected volatility. The
Company recognizes the impact of any revisions to the original
forfeiture rate assumptions in the consolidated income statements,
with a corresponding adjustment to equity.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Share-based compensation (continued)
In April 2019, the Company adopted
ASU 2018-07, Compensation – Stock Compensation (Topic 718):
Improvements to Nonemployee Share-Based Payment Accounting,
which expands the scope of ASC 718 to include share-based payment
transactions for acquiring goods and services from non-employees.
The amendments specify that ASC 718 applies to all share-based
payment transactions in which a grantor acquires goods or services
to be used or consumed in a grantor's own operations by issuing
share-based payment awards. Upon the adoption of this guidance, the
Company no longer re-measures equity-classified share-based awards
granted to consultants or non-employees at each reporting date
through the vesting date and the accounting for these share-based
awards to consultants or non-employees and employees will be
substantially aligned. The adoption of this guidance did not have a
material impact on the Company's financial position, results of
operations and cash flows. The consolidated financial statements
for the years ended December 31, 2020
and 2019 were not retrospectively adjusted.
Reclassification
The Company reclassified USDC to cryptocurrencies in the 2020
financial statements to conform to the presentation as of
June 30, 2021. The reclassification
has no impact on the total assets and total liabilities as of
June 30, 2021.
Recent accounting pronouncements
In June 2016, the FASB issued ASU
2016-13, Financial Instruments-Credit Losses (Topic 326),
which requires entities to measure all expected credit losses for
financial assets held at the reporting date based on historical
experience, current conditions, and reasonable and supportable
forecasts. This replaces the existing incurred loss model and is
applicable to the measurement of credit losses on financial assets
measured at amortized cost. ASU 2016-13 was subsequently amended by
Accounting Standards Update 2018-19, Codification Improvements to
Topic 326, Financial Instruments—Credit Losses, Accounting
Standards Update 2019-04 Codification Improvements to Topic 326,
Financial Instruments—Credit Losses, Topic 815, Derivatives and
Hedging, and Topic 825, Financial Instruments, and Accounting
Standards Update 2019-05, Targeted Transition Relief. For public
entities, ASU 2016-13 and its amendments are effective for fiscal
years, and interim periods within those fiscal years, beginning
after December 15, 2019. For all
other entities, this guidance and its amendments will be effective
for fiscal years beginning after December
15, 2022, including interim periods within those fiscal
years. Early application will be permitted for all entities for
fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2018. As
an emerging growth company, the Company plans to adopt this
guidance effective January 1, 2023.
The Company is currently evaluating the impact of its pending
adoption of ASU 2016-13 on its consolidated financial
statements.
3. CRYPTOCURRENCIES
The cryptocurrencies were comprised of the following:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Bitcoins
|
|
$
|
20,604,109
|
|
|
$
|
6,237,917
|
|
ETH
|
|
|
230,323
|
|
|
|
-
|
|
USDC
|
|
|
6,144
|
|
|
|
56,005
|
|
USDT
|
|
|
148,520
|
|
|
|
-
|
|
Total
|
|
$
|
20,989,096
|
|
|
$
|
6,293,922
|
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. CRYPTOCURRENCIES (CONTINUED)
Additional information about Bitcoin and ETH
For the six months ended June 30,
2021 and 2020, the Company generated bitcoins through
provision of mining services. The following table presents
additional information about bitcoins for the six months ended
June 30, 2021 and 2020,
respectively:
|
|
For the Six Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
6,237,917
|
|
|
$
|
-
|
|
Receipt of bitcoins
from mining services
|
|
|
72,295,744
|
|
|
|
692,698
|
|
Sales of bitcoins in
exchange of cash
|
|
|
(3,539,450)
|
|
|
|
(545,188)
|
|
Payment of BTC as
deposits on plant and equipment
|
|
|
(9,327,997)
|
|
|
|
-
|
|
Payment of BTC for
utility charges in mining facilities
|
|
|
(21,894,860)
|
|
|
|
-
|
|
Payment of BTC for
other expenses
|
|
|
(480,172)
|
|
|
|
-
|
|
Exchange of BTC into
USDT and USDC
|
|
|
(20,751,835)
|
|
|
|
-
|
|
Lending of bitcoins
to a third party (Note 4)
|
|
|
97,772
|
|
|
|
-
|
|
Realized gain on sale
of cryptocurrencies
|
|
|
6,952,652
|
|
|
|
5,968
|
|
Impairment of
bitcoins
|
|
|
(8,985,662)
|
|
|
|
|
|
Ending
balance
|
|
$
|
20,604,109
|
|
|
$
|
153,478
|
|
For the six months ended June 30,
2021, the Company purchased 101 ETH at an aggregated cost of
$289,668, among which 96 ETH was
staked with an unaffiliate third party in June 2021. The Company won't be able to withdraw
the stake within 12 months.
Additional information about USDT and USDC
The following table presents additional information about USDT
for the six months ended June 30,
2021 and 2020, respectively:
|
|
For the Six Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Addition from
exchange of BTC
|
|
|
19,321,530
|
|
|
|
-
|
|
Collection from sales
of miners
|
|
|
474,480
|
|
|
|
-
|
|
Purchases of
miners
|
|
|
(17,503,910)
|
|
|
|
-
|
|
Payment of
deposits to service providers
|
|
|
(782,526)
|
|
|
|
-
|
|
Payment of
services
|
|
|
(1,071,386)
|
|
|
|
-
|
|
Purchases of
ETH
|
|
|
(289,668)
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
148,520
|
|
|
$
|
-
|
|
The following table presents additional information about USDC
for the six months ended June 30,
2021 and 2020, respectively:
|
|
For the Six Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
56,005
|
|
|
$
|
-
|
|
Addition from
exchange of BTC
|
|
|
1,430,305
|
|
|
|
-
|
|
Collection from
private placement
|
|
|
1,179,368
|
|
|
|
-
|
|
Collection from
borrowings from a related party
|
|
|
-
|
|
|
|
329,722
|
|
Investment in an
investment security
|
|
|
(1,000,000)
|
|
|
|
-
|
|
Purchases of
miners
|
|
|
(895,893)
|
|
|
|
-
|
|
Payment of
services
|
|
|
(433,919)
|
|
|
|
(273,717)
|
|
Repayment of
borrowings from a related party (Note 11)
|
|
|
(329,722)
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
6,144
|
|
|
$
|
56,005
|
|
For the six months ended June 30,
2021, the Company recognized impairment of $8,985,662 against bitcoins and $59,345 against ETH, respectively.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. OTHER CURRENT ASSETS
The other current assets were comprised of the following:
|
|
June 30,
2021
|
|
|
December
31,
2020
|
|
|
|
|
|
|
|
|
Deposits
(a)
|
|
$
|
4,903,126
|
|
|
$
|
1,909,800
|
|
Due from third
parties (b)
|
|
|
5,410,349
|
|
|
|
97,771
|
|
Office rental
deposit
|
|
|
21,943
|
|
|
|
-
|
|
Others
|
|
|
31,442
|
|
|
|
12,803
|
|
Total
|
|
$
|
10,366,860
|
|
|
$
|
2,020,374
|
|
(a)
|
As of June 30, 2021
and December 31, 2020, the balance of deposits represented the
deposits made to four and two service providers who paid utility
charges in mining facilities on behalf of the Company. The deposits
are refundable upon expiration of the agreement between the Company
and the service provider, which was due within 12 months from the
effective date of the agreement.
|
|
|
(b)
|
As of December 31,
2020, the balance of due from third parties represented lending of
5.19 bitcoins. During the three and six months ended June 30, 2021,
the Company lent additional 141.99 and 81.78 bitcoins to two third
parties, respectively. The bitcoins were repayable on demand. As of
June 30, 2021, the third parties repaid all bitcoins.
As of June 30, 2021,
the balance of due from third parties represented receivable
arising from sales of 11,608 miners to three third parties (Note
5). The Company expected to collect the outstanding balance within
12 months from the transaction.
|
5. PROPERTY AND EQUIPMENT, NET
Property and equipment, net was comprised of the following:
|
|
June 30,
2021
|
|
|
December
31,
2020
|
|
|
|
|
|
|
|
|
Miners
|
|
$
|
42,931,933
|
|
|
$
|
33,173,812
|
|
Less: accumulated
depreciation
|
|
|
(6,978,371)
|
|
|
|
(3,324,655)
|
|
Property and
equipment, net
|
|
$
|
35,953,562
|
|
|
$
|
29,849,157
|
|
In anticipation of purchase opportunities for newer, more
efficient machines, the Company sold 11,608 miners to three third
party customers for a total consideration of $5,410,349 during the three and six months ended
June 30, 2021. On the date of
transaction, the original cost and accumulated depreciation of
these 11,608 miners were $6,169,283
and $1,028,214, respectively. The
Company recognized a gain on sales of $269,280, which was recorded in the account of
"gain from disposal of property and equipment". As of the date of
the report, the Company has collected $270,517, 5% of the consideration from the third
parties in the terms of USDT and expected to collect the
outstanding balance by the end of 2021from the transaction.
In addition, during the three and six months ended June 30, 2021, the Company disposed of 372
miners. On the date of disposal, the original cost and accumulated
depreciation of these 372 miners were $323,508 and $97,664, respectively. The Company incurred a
loss of $225,844, which was recorded
in the account of "loss from disposal of property and
equipment".
For the three months ended June 30,
2021 and 2020, depreciation expenses were $2,348,657 and $70,501, respectively. For the six months ended
June 30, 2021 and 2020, depreciation
expenses were $5,999,031 and
$70,501, respectively.
6. INVESTMENT SECURITY
As of June 30, 2021, the balance
of investment security represents the Company's investment of
$1,000,000 in one privately held
company over which the Company neither has control nor significant
influence through investment in common stock. The investment
was made in March 2021, and the cost
of investment approximated the fair value. During the three and six
months ended June 30, 2021, the
Company did not record upward adjustments or downward adjustments
on the investment.
The Company's impairment analysis considers both qualitative and
quantitative factors that may have a significant effect on the fair
value of the equity security. As of June 30,
2021, the Company did not recognize impairment against the
investment security.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. CONVERTIBLE NOTES
On December 31,2020, the Company
entered into a Securities Purchase Agreement (the "SPA") with an
institutional investor (the "Holder") to sell subordinated
convertible notes (the "Notes") up to an aggregate original
principal amount of $1,650,000 with
an original issue discount (OID) of 10% in a private placement.
On February 5 and March 12, 2021, the Company completed the sale of
Notes in the principal amounts of $1,100,000 and $550,000, respectively. The Company received net
proceeds of $1,280,000 after
deducting fees payable to broker-dealers and certain other
transaction expenses, including fees and expenses of legal counsels
in connection with the transactions.
The Notes are unsecured and are expressly junior to any existing
or future debt obligations of the Company. The Notes shall bear
interest at 8% per annum, increasing to 15% if not paid within
three (3) months of the initial closing ("Maturity Date") or
otherwise upon an Event of Default (as defined in the
Notes).
The Company has the right to redeem the Notes in whole and not
in part at 110% of face value plus all accrued and unpaid interest
thereon (and late charges, if any) during the first 60 days from
issuance and at 120% of face value plus all accrued and unpaid
interest on (and late charges, if any) thereafter, payable in cash.
The Notes are also subject to redemption (at the election of the
Holder) at 120% upon an Event of Default or a Change of Control (as
such terms are defined in the Notes). The Notes include certain
customary Events of Default. Upon the occurrence of a Bankruptcy
Event of Default (as defined in the Notes), the Notes would
automatically become immediately due and payable in cash in an
amount equal to all outstanding principal, interest, and late
charges multiplied by a redemption premium of 120%.
If the Notes are not earlier redeemed, the Notes shall be
automatically converted into Ordinary Shares upon the effectiveness
of the Initial Registration Statement at the Conversion Price then
in effect (if no Event of Default has occurred, at the Standard
Conversion Price then in effect, and if an Event of Default has
occurred, at the Event of Default Conversion Price). The Standard
Conversion Price is equal to the lower of $6.00 per share and 80% of the average of the
three lowest VWAPs during the 15 trading days ending and including
the date of conversion. The Event of Default Conversion Price is
equal to 85% of the Standard Conversion Price.
On May 5, 2021, the convertible
notes were automatically converted into 289,662 Ordinary Shares at
$5.70 per share (Note 9).
8. SHARE-BASED AWARDS
Share-based awards such as Restricted stock units ("RSUs"),
incentive and non-statutory stock options, restricted shares,
dividend equivalents, share appreciation rights and share payments
may be granted to any directors, employees and consultants of the
Company or affiliated companies under 2021 Omnibus Equity Incentive
Plan ("2021 Plan"). There are 2,415,293 ordinary shares issued or
issuable under the Plan.
Pursuant to a Consulting Services Agreement dated February 1, 2021, with Wellington Park, Inc., the
Company granted 15,000 RSUs to each of Bryan Bullett and Sam
Tabar, then consultants. On March 31,
2021, the Company granted 120,765 RSUs to Bryan Bullett, the Chief Executive Officer of
the Company and Sam Tabar, the Chief
Strategy Officer, respectively. All of these RSUs are subject to a
24-month service vesting schedule, and, vest 1/24 for each
month.
A summary of the changes in the RSUs relating to ordinary shares
granted by the Company during the six months ended June 30, 2021 is as follows:
|
|
Number of
RSUs
|
|
|
Weighted
average
grant date
fair
value
|
|
|
|
|
|
|
|
|
Awarded and unvested
as of January 1, 2021
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
271,530
|
|
|
$
|
15.02
|
|
Vested
|
|
|
(33,941)
|
|
|
$
|
15.02
|
|
Awarded and unvested
as of June 30, 2021
|
|
|
237,589
|
|
|
$
|
15.02
|
|
Expected to vest as
of June 30, 2021
|
|
|
237,589
|
|
|
$
|
15.02
|
|
As of June 30, 2021, there were
$3,568,587 of unrecognized
compensation costs related to all outstanding RSUs, net of expected
forfeitures. These amounts are expected to be recognized over a
weighted average period of 1.75 years.
During the three and six months ended June 30, 2021, the Company recognized share-based
compensation expense of $509,794 and
$509,794 in connection with the
above RSUs.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. ORDINARY SHARES
As of December 31, 2020, there
were 48,043,788 ordinary shares issued and outstanding.
On January 5, 2021, the
Company completed the sale of 262,082 Ordinary Shares at
$4.50 per share for gross proceeds of
$1,179,368 to eleven (11) non-US
Persons. The exemption from registration was claimed under
Regulation S under the Securities Act based on the representations
and warranties contained in securities purchase agreements signed
by all investors. The proceeds from the private placements were in
the form of USDC.
On May 5, 2021, the Company's Form
F-1 Registration Statement covering the resale of 6,412,500
ordinary shares was declared effective by the SEC. The 6,412,500
ordinary shares consisted of 412,500 shares issuable to Ionic upon
the conversion of $1,650,000
principal amount of senior convertible notes, and 6,000,000 shares
issuable to Ionic pursuant to the Purchase Agreement dated as of
January 11, 2021. On the same date,
the Company issued 289,662 Ordinary Shares at $5.70 per share to the Holders of Convertible
Notes to settle all outstanding Notes plus accrued interest (Note
7).
During May 20, 2021 through
June 28, 2021, the Company issued an
aggregation of 5,215,477 Ordinary Shares to Ionic to finance gross
proceeds of $30 million. The Company
received net proceeds of $28,550,000
after deducting fees payable to broker-dealers and certain other
transaction expenses, including fees and expenses of legal counsels
in connection with the transactions. In connection with the
financing activity with Ionic, the Company issued 15,000 Ordinary
Shares as Filing Default Shares and 10,000 Effectiveness Default
Shares.
On May 6, 2021, the Company issued
80,232 Ordinary Shares as compensation fees to two service for
marketing and promotion services of the Company. The Company
recorded expenses of $933,098 for the
marketing and promotion services, by reference to the closing price
of $11.63 per share on May 6, 2021.
As of June 30, 2021, there were
53,906,241 ordinary shares issued and outstanding.
10. INCOME TAXES
Cayman Islands
Under the current and applicable laws of the Cayman Islands, the Company is not subject to
tax on income or capital gain. Additionally, upon payments of
dividends by the Company to its shareholders, no Cayman Islands withholding tax will be
imposed.
Hong Kong
Hong Kong profits tax at a rate
of 16.5%. However, the Group did not generate any assessable
profits arising in or derived from Hong
Kong for the three and six months ended June 30, 2021 and 2020, and accordingly no
provision for Hong Kong profits
tax has been made in these periods.
United States of
America
For the US jurisdiction, the Company is subject to federal and
state income taxes on its business operations. As of June 30, 2021, the estimated annual effective tax
rate for Bit Digital USA Inc. is
26.11%, which consists of federal tax rate of 21% and blended state
tax rate of 5.11% after net of federal benefit. For Golden Bull
USA Inc, the entity is expected to
only be subject to state minimum taxes or franchise taxes in
2021.
The Company also evaluated the impact from the recent tax
reforms in the United States,
including the Coronavirus Aid, Relief, and Economic Security Act
("CARES Act") and Health and Economic Recovery Omnibus Emergency
Solutions Act ("HERO Act"), which both were passed in 2020, No
material impact on the Company is expected based on our analysis.
We will continue to monitor the potential impact going forward.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES (CONTINUED)
United States of
America (continued)
In fiscal year 2021, the Company is subject to US federal income
tax and state income tax and franchise tax, primarily from
Nebraska and Texas. The Company will continue to monitor
its exposure to different states and comply with state income taxes
filing requirement as the Company continue to expand its business
in the United States. The Company
has not been under tax examination in any jurisdiction for fiscal
year 2021 and 2020, respectively.
For the three and six months ended June
30, 2021 and 2020, the Company incurred US federal and state
income tax expenses as below:
|
|
For the Three
Months
Ended
June 30,
|
|
|
For the Six
Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
53,694
|
|
|
$
|
-
|
|
|
$
|
254,314
|
|
|
$
|
-
|
|
Deferred
|
|
|
14,045
|
|
|
|
-
|
|
|
|
38,354
|
|
|
|
-
|
|
|
|
|
67,739
|
|
|
|
-
|
|
|
|
292,668
|
|
|
|
-
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
15,225
|
|
|
|
-
|
|
|
|
66,524
|
|
|
|
-
|
|
Deferred
|
|
|
3,416
|
|
|
|
-
|
|
|
|
9,330
|
|
|
|
-
|
|
|
|
|
18,641
|
|
|
|
-
|
|
|
|
75,854
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
86,380
|
|
|
$
|
-
|
|
|
$
|
368,522
|
|
|
$
|
-
|
|
Canada
The estimated effective tax rate for Canada entities is 23% for the three and six
months ended June 30, 2021. The
Company is subject to both federal and provincial income taxes for
its business operation in Canada
as of June 30, 2021.
For the three and six months ended June
30, 2021 and 2020, the Company incurred Canada federal and state current income tax
expenses of $10,126 and $5,401, respectively.
As of June 30, 2021 and
December 31, 2020, the Company had
deferred tax liabilities of $47,684
and $nil, arising from temporary difference of depreciation of
miners between the US GAAP accounting principal and income tax
treatment.
In assessing the realization of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will be realized. As of June 30, 2021, the Company had a total of
US$47,684 in deferred tax liabilities
under the US book.
For unrecognized tax benefits, the Company's policy is to
recognize interest and penalties that would be assessed in relation
to the settlement value of unrecognized tax benefits as a component
of income tax expense. The Company did not accrue either interest
or penalties for the three and six months ended June 30, 2021 and 2020, respectively. During
fiscal year 2021, the Company continues to review its tax positions
and provide for unrecognized tax benefits as they arise.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11. RELATED PARTIES
As of December 31, 2020, the
balance of due to related parties was $336,722, comprised of balance of $329,722 due to Mr. Erke Huang, the Company's
interim Chief Executive Officer and Chief Financial Officer, and
balance of $7,000 due to one
shareholder.
During the Company's normal business operations in the six
months ended June 30, 2021, the
Company fully repaid the borrowings of $329,722 due to Mr. Erke Huang, the Company's
Chief Financial Officer in the form of USDC, and repaid the balance
of $7,000 to the shareholder.
As of June 30, 2021, the Company
had no outstanding balance due to related parties.
12. CONTINGENCIES
On January 20, 2021, a securities
class action lawsuit was filed against the Company and its Chief
Executive Officer and Chief Financial Officer titled Anthony Pauwels v. Bit Digital, Inc.,
Min Hu and Erke Huang (Case No.
1:21-cv-00515) (U.S.D.C. S.D.N.Y.). A second class action lawsuit
was filed, substantially identical on January 26, 2021, titled, Yang v. Bit Digital,
Inc., Min Hu and Erke Huang (Case
No. 1:21-cv- 00721). Several other related cases have since been
filed seeking lead plaintiff status. The class action is on behalf
of persons that purchased or acquired our Ordinary Shares between
December 21, 2020 and January 8, 2021, a period of volatility in our
stock, as well as volatility in the price of bitcoin. We believe
the complaints are based solely upon a research article issued on
January 11, 2021, which included
false claims and to which the Company responded in a press release
filed on Form 6-K on January 19,
2021. On April 21, 2021, the
Court consolidated several related cases under the caption In re
Bit Digital Securities Litigation. Joseph
Franklin Monkam Nitcheu was appointed as lead counsel. We
intend to seek dismissal of the lawsuits and will vigorously defend
the action.
From time to time, the Company is a party to various legal
actions arising in the ordinary course of business. The Company
accrues costs associated with these matters when they become
probable and the amount can be reasonably estimated. Legal costs
incurred in connection with loss contingencies are expensed as
incurred.
13. DISPOSITION OF POINT CATTLE
On September 8, 2020, the Company
entered into a certain share purchase agreement (the "Disposition
SPA") by and among a BVI company, Sharp Whale Limited (the
"Purchaser"), Point Cattle Holding Limited ("Point Cattle", or the
"Subsidiary") and the Company (the "Seller"). Pursuant to the
Disposition SPA, the Purchaser purchased the Subsidiary in exchange
for nominal consideration of $10.00
and other good and valuable consideration. Point Cattle Holdings
Limited was a former wholly owned subsidiary of the Company in the
British Virgin Islands, and its
subsidiaries and VIEs, through which the Company previously
operated its peer-to-peer lending business and the car rental
business in PRC.
On September 8, 2020, the parties
completed all the share transfer registration procedure as required
by the laws of British Virgin
Islands and all the other closing conditions have been
satisfied, as a result, the disposition contemplated by the
Disposition SPA is completed. Upon completion of the disposition,
the Purchaser became the sole shareholder of Point Cattle and as a
result, assumed all assets and obligations of all the subsidiaries
and VIE entities owned or controlled by Point Cattle. Upon the
closing of the transaction, the Company does not bear any
contractual commitment or obligation to the microcredit business or
the employees of Point Cattle and its subsidiaries and VIEs, nor to
the Purchaser.
On the same date, management was authorized to approve and
commit to a plan to sell Point Cattle, therefore the major assets
and liabilities relevant to the disposal are reported as components
of total assets and liabilities separate from those balances of the
continuing operations. At the same time, the results of all
discontinued operations, less applicable income taxes, are reported
as components of net income (loss) separate from the net loss of
continuing operations in accordance with ASC 205-20-45. Considering
the suspension of peer-to-peer lending business and the car rental
business in the PRC, the net assets relevant to the sale of Point
Cattle was fully impaired by the Company in March 2020.
BIT DIGITAL, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13. DISPOSITION OF POINT CATTLE (CONTINUED)
In accordance with ASU No. 2014-08, Reporting Discontinued
Operations and Disclosures of Disposals of Components of an Entity,
a disposal of a component of an entity or a group of components of
an entity is required to be reported as discontinued operations if
the disposal represents a strategic shift that has (or will have) a
major effect on an entity's operations and financial results when
the components of an entity meets the criteria in paragraph
205-20-45-1E to be classified as held for sale. When all of the
criteria to be classified as held for sale are met, including
management, having the authority to approve the action, commits to
a plan to sell the entity, the major current assets, other assets,
current liabilities, and noncurrent liabilities shall be reported
as components of total assets and liabilities separate from those
balances of the continuing operations. At the same time, the
results of all discontinued operations, less applicable income
taxes (benefit), shall be reported as components of net income
(loss) separate from the net income (loss) of continuing operations
in accordance with ASC 205-20-45.
As the transaction was closed on September 8, 2020, the Company had no assets and
liabilities held for sale in the in the consolidated balance sheet
as of June 30, 2021 or December 31, 2020.
The following is a reconciliation of the amounts of major
classes of income from operations classified as discontinued
operations in the consolidated statements of operations and
comprehensive loss for the three and six months ended June 30, 2021 and 2020:
|
|
For the Three
Months Ended
June 30,
|
|
|
For the Six
Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Discontinued
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of net
assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,734,498)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(3,734,498)
|
|
14. SUBSEQUENT EVENTS
During the period from July 1,
2021 to the date of this report, the Company raised gross
proceeds of $6 million from Ionic by
issuance of 756,717 ordinary shares covered by the Company's Form
F-1 Registration Statement (Note 9).
On August 10, the Company issued
200,000 Ordinary Shares to Ionic as a one-time waiver of the
prohibition on Variable Rate Transactions contained in Section 5(m)
of the Share Purchase Agreement with Ionic, with regard to the
Company entering into an at the market offering agreement with H.C.
Wainwright on July 15, 2021 and
disclosing the same in the prospectus supplement portion of the
Company's registration statement (File No.: 333-257934) on Form F-3
on July 15, 2021.
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SOURCE Bit Digital, Inc.