NEW YORK, Dec. 23, 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 third quarter
ended September 30, 2021.
Financial Highlights for the Third Quarter 2021
- Revenue from bitcoin mining was $10.4
million.
- We earned 248.4 bitcoins. The decrease
from 562.9 earned during the second quarter was due to miner
migration and fleet reposition.
- We had no miners remaining in China. 100% of our miner fleet was deployed,
in transit to, or awaiting installation in North America at September 30, 2021.
- We owned 27,744 miners including 851 miners acquired in the
third quarter of 2021.
- Non-GAAP income from operations* was $4.8 million, or $0.09 per ordinary share.
- Non-GAAP net income** was $4.0
million, or $0.07 per ordinary
share.
- We had cash and cash equivalents of
$26.5 million, and total liquidity
(defined as cash and digital assets) of approximately $61.5 million, as of September 30, 2021.
* Non-GAAP income
from operations excludes the impact of depreciation of property and
equipment, and share-based compensation expense.
|
** Non-GAAP net
income excludes the impact of depreciation of property and
equipment, impairment on digital assets, loss from disposal of
property and equipment, and share-based compensation
expense.
|
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
e 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 Technologies
Limited ("Bitmain") and MicroBT Electronics Technology Co., Ltd
("MicroBT"), we initially chose to acquire miners on the spot
market, which can typically result in delivery within a few weeks.
In parallel, we also enjoy strategic relationships with leading
manufacturers, enabling us to access ASICs on advantageous terms.
On October 7, 2021, the Company
contracted to purchase an additional 10,000 Antminers from Bitmain
under a Sales and Purchase Agreement (the "SPA") at an estimated
cost of $65 million. These miners are
expected to increase the Company's miner hash rate by approximately
1.0 Exahash ("EH/s"). Pro Forma for the announced purchases, our
maximum total hash rate is expected to be approximately 2.603
EH/s.
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
New York is maintained by
BlockFusion USA, Inc. Our new
mining facility in New York will
be maintained by Digihost Technologies. Our former mining facility
in Alberta, Canada was 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 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.
As of September 30, 2021, we had
no miners in China: 79.1% of our
fleet was already deployed or awaiting installation in North America, and 20.9% was in transit. As of
the date of this report, 100% of our fleet had arrived in
North America.
Power and Hosting Overview
During the third quarter, the Company signed two new hosting
agreements in the United States,
representing 135 megawatts ("MW") of additional power capacity.
Both are expected to be powered by a substantial component of
renewable and/or carbon-free energy, contributing to our ongoing
efforts to decarbonize our mining operations.
On July 22, 2021, we signed a 100
MW agreement with Digihost Technologies ("Digihost") that is
expected to be powered by approximately half renewable and/or
carbon free energy sources, subject to finalizing our energy
procurement strategy with Digihost. This second agreement brings
our total contracted hosting capacity with Digihost to 120 MW.
Digihost is expected to deliver the first 20 MW of contracted power
capacity during the fourth quarter of 2021. The remaining 100 MW is
scheduled for delivery during the first and second quarters of
2022.
On August 25, 2021, we signed a 35
MW hosting agreement with Blockfusion USA ("Blockfusion") that is expected to be
powered primarily from zero carbon emission energy sources. As of
the date of this report, Blockfusion had completed the first (of
four) phases of miner deployments, representing approximately 5 MW
of power consumption. The remaining three phases are scheduled for
delivery in fourth quarter of 2021 and the first quarter of 2022.
During the term of our agreement and for twelve months thereafter,
Bit Digital has a right of first refusal to match any bona fide
offer from a third party to finance or acquire securities and/or
assets of Blockfusion, and to receive a credit or refund of certain
expenses incurred in the development of infrastructure.
As a result of these two new agreements, as of September 30, 2021, the Company had secured
hosting capacity sufficient to complete the redeployment of its
fleet in North America, with
additional signed capacity to facilitate future fleet growth. The
Company continues to evaluate additional hosting arrangements with
existing and prospective new hosting partners in North America.
Our hosting partner Compute North LLC ("Compute North") has
advised us that its delivery of a portion of its contracted hosting
capacity has been delayed. Compute North has not yet determined
updated delivery timing for this delayed capacity, which represents
a minority of our total hosting contracted with Compute North.
Pending revised delivery timing, Bit Digital expects to redirect
miner deployments to other hosting partners.
Our hosting partner Link Global Technologies ("Link") has
advised us that Link's facility in Alberta, Canada that had supplied
approximately 3.3 MW for hosting our miners was required to
discontinue operations as a result of a permitting dispute. Link is
currently evaluating alternative sites to accommodate our miners.
In the interim, pending further updates, Bit Digital expects to
redirect miners formerly hosted with Link to other hosting
partners.
Miner Fleet Overview
During the third quarter, we purchased 851 miners, including 451
Bitmain S17 and 400 Bitmain S19pro models. As of September 30, 2021, these newly purchased miners
had already been deployed in North
America.
During the quarter, we continued repositioning our fleet by
selling 4,200 miners that were deemed to have a lower expected
return on invested capital than miners we believe we can purchase,
and/or were deemed unsuitable for long-distance migration to
North America. The sold miners
included 4,000 Bitmain S17 and 200 Bitmain T17 models. As a result,
we recognized a $3,789,683 net loss,
comprised of a $341,240 gain from
sales and a $4,130,923 loss from
disposals. In addition, we abandoned 1,407 miners 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 or migrate.
As of September 30, 2021, we had
27,744 miners, with a total maximum hash rate of 1.60 EH/S, a
decrease from 32,500 miners and 1.92 EH/s as of June 30, 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
September
30,
2021
|
|
MicroBT Whatsminer
M21S
|
|
|
16,296
|
|
MicroBT Whatsminer
M20S
|
|
|
3,690
|
|
Bitmain Antminer
S17
|
|
|
3,641
|
|
MicroBT Whatsminer
M10
|
|
|
1,938
|
|
Bitmain Antminer
T3
|
|
|
769
|
|
Bitmain Antminer S19
Pro
|
|
|
605
|
|
Bitmain Antminer
T17+
|
|
|
500
|
|
MicroBT Whatsminer
M30S
|
|
|
261
|
|
Bitmain Antminer
T17+
|
|
|
44
|
|
Total
|
|
|
27,744
|
|
On October 7, 2021, we contracted
to purchase an additional 10,000 Antminers from Bitmain under a
Sales and Purchase Agreement (the "SPA") at an estimated cost of
$65 million. These miners are
expected to increase the Company's miner hash rate by approximately
1.0 Exahash ("EH/s"). Pro Forma for the announced purchases, our
maximum total hash rate is expected to be approximately 2.60
EH/s.
Bitcoin Production
From the inception of our bitcoin mining business in
February 2020 to September 30, 2021, we earned an aggregate of
3,334.9 bitcoins. The following table
presents the number of bitcoins mined on a quarterly
basis:
The Company earned 248.4 bitcoins in the third quarter of 2021.
The reduction from the second 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.
The following table presents our bitcoin mining activities for
the third quarter of 2021. During the quarter, the Company
exchanged 101.0 bitcoins for same amount of wrapped BTC ("WBTC").
As of September 30, 2021, we had a
total of 627.1 bitcoin equivalent on hand, comprised of 526.1
bitcoins and 101.0 WBTC.
|
|
Number of
bitcoins (1)
|
|
|
Amount
(2)
|
|
|
|
|
|
|
|
|
Balance at June
30, 2021
|
|
$
|
588.40
|
|
|
$
|
20,604,109
|
|
Receipt of BTC from
mining services
|
|
|
248.36
|
|
|
|
10,395,894
|
|
Sales of and payments
made in BTC
|
|
|
(209.65)
|
|
|
|
(7,537,329)
|
|
Realized gain on sale
of BTC
|
|
|
-
|
|
|
|
129,935
|
|
Balance at
September 30, 2021
|
|
$
|
627.11
|
|
|
$
|
23,592,609
|
|
(1) Includes bitcoins
and bitcoin equivalents.
|
(2) Receipt of
digital assets 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 digital assets 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 sustainability, which we believe future-proofs our
operations and the larger bitcoin network.
We believe that the bitcoin network and the mining that powers
it are important inventions in human progress, with circa
$1 trillion in market cap and bitcoin
being used around the world. The process of problem-solving and
verifying bitcoin transactions using advanced computers is energy
intensive, and 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 a role model 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 increases in bitcoin market price.
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 States
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.
The effectiveness of the COVID-19 vaccine and vaccination
programs remains to be verified worldwide, including against
variants of the virus. The sweeping nature of the COVID-19 pandemic
makes it extremely difficult to predict how the company's business
and operations will be affected in the longer run. So far, the
likely overall economic impact of the pandemic is widely viewed as
highly negative to the global economy.
Results of operations
Results of Operations for the Three Months Ended September 30, 2021 and 2020
The following table summarizes the results of our operations
during the three months ended September 30,
2021 and 2020, respectively, and provides information
regarding the increase or (decrease) during period.
|
|
For the Three
Months
Ended
September 30,
|
|
|
Variance
in
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
Revenue from
cryptocurrency mining
|
|
$
|
10,395,894
|
|
|
$
|
7,909,528
|
|
|
$
|
2,486,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and amortization shown
below)
|
|
|
(2,607,945)
|
|
|
|
(6,210,712)
|
|
|
|
3,602,767
|
|
Depreciation and
amortization expenses
|
|
|
(3,796,672)
|
|
|
|
(1,171,151)
|
|
|
|
(2,625,521)
|
|
General and
administrative expenses
|
|
|
(19,545,639)
|
|
|
|
(405,705)
|
|
|
|
(19,139,934)
|
|
Total operating
expenses
|
|
|
(25,950,256)
|
|
|
|
(7,787,568)
|
|
|
|
(18,162,688)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
operations
|
|
|
(15,554,362)
|
|
|
|
121,960
|
|
|
|
(15,676,322)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on exchange of Digital assets
|
|
|
129,935
|
|
|
|
(21,721)
|
|
|
|
151,656
|
|
Loss from disposal of
property and equipment
|
|
|
(3,789,683)
|
|
|
|
-
|
|
|
|
(3,789,683)
|
|
Other
income
|
|
|
3,854
|
|
|
|
-
|
|
|
|
3,854
|
|
Total other
expenses, net
|
|
|
(3,655,894)
|
|
|
|
(21,721)
|
|
|
|
(3,634,173)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
|
|
(19,210,256)
|
|
|
|
100,239
|
|
|
|
(19,310,495)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expenses
|
|
|
(938,578)
|
|
|
|
-
|
|
|
|
(938,578)
|
|
Net income (loss)
from continuing operations
|
|
$
|
(20,148,834)
|
|
|
$
|
100,239
|
|
|
$
|
(20,249,073)
|
|
Net loss from
discontinued operations
|
|
|
-
|
|
|
|
(100,185)
|
|
|
|
100,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(20,148,834)
|
|
|
$
|
54
|
|
|
$
|
(20,148,888)
|
|
Revenues
We generate revenues from provision of computing power to
digital asset mining pools, and receive consideration in the form
of digital assets, the value of which is determined using the
market price of the related digital asset 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 September 30,
2021, we received 248.4 bitcoins from one US mining pool
operator. As of September 30, 2021,
our maximum hash rate was 1.60 EH/s. For the three months ended
September 30, 2021, we recognized
revenue of $10,395,894 from mining
activity.
For the three months ended September 30,
2020, we received 739.51 bitcoins from one mining pool
operator and recognized revenue of $7,909,528.
During the three months ended September
30, 2021, we sold or disposed of certain miner models,
partially in anticipation of purchase opportunities for newer, more
efficient machines, resulting in a net reduction of 0.32 EH/s in
hash rate from the three months ended June
30, 2021. We expect to continue to invest in miners to
increase the hash rate capacity.
Cost of revenues
Cost of revenues of $2,607,945 for
the three months ended September 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.
For the three months ended September 30,
2020, we incurred cost of revenues of $6,210,712 from utilities and other service
charges.
We expect an increase in cost of revenues as we continue to
focus on expansion and upgrade of our miner fleet.
Depreciation and amortization expenses
For the three months ended September 30,
2021, depreciation and amortization expenses of $3,796,672 represented depreciation of miners
based on an estimated useful life of 3 years.
For the three months ended September 30,
2020, depreciation and amortization expenses of $1,171,151 represented depreciation of miners
based on an estimated useful life of 3 years.
General and administrative expenses
For the three months ended September 30,
2021, our general and administrative expenses were primarily
comprised of professional and consulting expenses of $1,476,397, transportation expenses of
$865,634 to relocate certain miners
from China to the US, share-based
compensation expenses of $16,066,821
related to restricted stock units ("RSUs") issued to our directors,
management and consultants during the third quarter 2021, travel
expenses of $338,314, payroll expenses of $149,136 and office expenses of $228,409.
For the three months ended September 30,
2020, our general and administrative expenses were primarily
comprised of professional and consulting expenses of $246,518, office expenses of $34,436, payroll expenses of $56,405 and travel expenses of $50,490.
Realized gain (loss) on exchange of digital assets
We record digital assets at cost and any gains or losses from
sales of digital assets are recorded as "Realized gain (loss) on
exchange of digital assets" in the consolidated statements of
operations. For the three months ended September 30, 2021, we recorded a gain of
$129,935 from exchange of 209.6
bitcoins. For the three months ended September 30, 2020, we recorded a loss of
$21,721 from sales of 695.7
bitcoins.
Loss from disposal of property and equipment
During the three months ended September
30, 2021, we sold or disposed of certain miner models,
partly in anticipation of purchase opportunities for newer, more
efficient machines. As a result, we recognized loss of $3,789,683 from sales and disposal of these
miners, comprised of a gain of $341,240 from sales of 4,200 miners to three
third parties and a loss of $4,130,923 from disposal of 1,407 miners at $nil
consideration.
Income tax expense
Income tax expense was $938,578
for the three months ended September 30,
2021, as we generated taxable profits derived from our US
and Canada operations.
Income tax expenses was $nil for the three months ended
September 30, 2020, as we are not
subject to tax on income or capital gain in the Cayman Islands, and we did not generate
assessable profits arising in or derived from Hong Kong.
Net income (loss) and earnings (loss) per share
For the three months ended September 30,
2021, our net loss was $20,148,834, representing a change of
$20,148,888 from a net income of
$54 for the same period of last
year.
Loss per share was $0.37 and
earnings per share was $0.00 for the
three months ended September 30, 2021
and 2020, respectively. Weighted average number of shares was
54,675,621 and 42,297,011 for the three months ended September 30, 2021 and 2020, respectively.
Results of Operations for the Nine Months Ended September 30, 2021 and
2020
The following table summarizes the results of our operations
during the nine months ended September 30,
2021 and 2020, respectively, and provides information
regarding the dollar increase or (decrease) during period.
|
|
For the Nine
Months
Ended
September 30,
|
|
|
Variance
in
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
Revenue from
cryptocurrency mining
|
|
$
|
82,691,638
|
|
|
$
|
8,602,226
|
|
|
$
|
74,089,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and amortization shown
below)
|
|
|
(25,959,323)
|
|
|
|
(6,866,726)
|
|
|
|
(19,092,597)
|
|
Depreciation and
amortization expenses
|
|
|
(9,795,703)
|
|
|
|
(1,241,652)
|
|
|
|
(8,554,051)
|
|
General and
administrative expenses
|
|
|
(26,106,792)
|
|
|
|
(1,202,274)
|
|
|
|
(24,904,518)
|
|
Total operating
expenses
|
|
|
(61,861,818)
|
|
|
|
(9,310,652)
|
|
|
|
(52,551,166)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
operations
|
|
|
20,829,820
|
|
|
|
(708,426)
|
|
|
|
21,538,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on
exchange of digital assets
|
|
|
7,082,587
|
|
|
|
(15,753)
|
|
|
|
7,098,340
|
|
Impairment of digital
assets
|
|
|
(9,045,007)
|
|
|
|
-
|
|
|
|
(9,045,007)
|
|
Interest
income
|
|
|
81
|
|
|
|
40
|
|
|
|
41
|
|
Loss from disposal of
property and equipment
|
|
|
(3,746,247)
|
|
|
|
-
|
|
|
|
(3,746,247)
|
|
Other income
(expenses)
|
|
|
499,483
|
|
|
|
(1,964)
|
|
|
|
501,447
|
|
Total expenses,
net
|
|
|
(5,209,103)
|
|
|
|
(17,677)
|
|
|
|
(5,191,426)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss)
before income taxes
|
|
|
15,620,717
|
|
|
|
(726,103)
|
|
|
|
16,346,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expenses
|
|
|
(1,322,627)
|
|
|
|
-
|
|
|
|
(1,322,627)
|
|
Net income (loss)
from continuing operations
|
|
|
14,298,090
|
|
|
|
(726,103)
|
|
|
|
15,024,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations
|
|
|
-
|
|
|
|
(3,834,683)
|
|
|
|
3,834,683
|
|
Net income
(loss)
|
|
$
|
14,298,090
|
|
|
$
|
(4,560,786)
|
|
|
$
|
18,858,876
|
|
Revenues
We generate revenues from provision of computing power to
digital asset mining pools, and receive consideration in the form
of digital assets, the value of which is determined using the
market price of the related digital asset 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 nine months ended September 30,
2021, we received 1,824.7 bitcoins from three mining pool
operators. As of September 30, 2021,
our maximum hash rate was 1.60 EH/s. For the nine months ended
September 30, 2021, we recognized
revenue of $82,691,638.
For the nine months ended September 30,
2020, we received 814.2 bitcoins from two mining pool
operators and recognized revenue of $8,602,226.
During the nine months ended September
30, 2021, we sold or disposed of certain miner models,
partially in anticipation of purchase opportunities for newer, more
efficient machines. We expect to continue to invest in miners to
increase the hash rate capacity. As a result, we expect a
continuous 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 $25,959,323
for the nine months ended September 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.
For the nine months ended September 30,
2020, we incurred cost of revenues of $6,866,726 from utilities and other service
charges.
We expect an increase in cost of revenues as we continue to
focus on expansion and upgrade of our miner fleet.
Depreciation and amortization expenses
For the nine months ended September 30,
2021, depreciation and amortization expenses represented
depreciation of 27,744 miners based on an estimated useful life of
3 years.
For the nine months ended September 30,
2020, depreciation and amortization expenses represented
depreciation of 22,869 miners based on an estimated useful life of
3 years.
General and administrative expenses
For the nine months ended September 30,
2021, our general and administrative expenses were primarily
comprised of professional and consulting expenses of $4,193,784, transportation expenses of
$2,015,096 to relocate certain miners
from China to North America, shared-based compensation
expenses of $16,579,821 related to
RSUs issued to our directors, management and consultants, insurance
expenses of $924,991, travel expenses
of $640,803, payroll expenses of $615,471 and office expenses of $553,019.
For the nine months ended September 30,
2020, our general and administrative expenses were primarily
comprised of stock compensation expenses for consulting services of
$456,000, professional and consulting
expenses of $541,074, office expenses
of $64,211, payroll expenses of
$56,405 and travel expenses of
$50,490.
Realized gain (loss) on exchange of digital assets
We record digital assets at cost and any gains or losses from
sales of digital assets are recorded as "Realized gain (loss) on
exchange of digital assets" in the consolidated statements of
operations. For the nine months ended September 30, 2021, we recorded a gain of
$7,082,587 from exchange of 1,465.9
bitcoins. For the nine months ended September 30, 2020, we recorded a loss of
$15,753 from sales of 754.2
bitcoins.
Impairment of digital assets
Impairment of digital assets was $9,045,007 for the nine months ended September 30, 2021, which was recorded to reflect
our digital assets at the lower of cost or fair value as of
September 30, 2021.
Gain from disposal of property and equipment
During the nine months ended September
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 loss of $3,746,247 from sales and disposal of these
miners, comprise of a gain of $610,520 from sales of 15,808 miners to three
third parties and a loss of $4,356,767 from disposal of 1,779 miners at $nil
consideration.
Income tax expense
Income tax expense was $1,322,627
for the nine months ended September 30,
2021, as we generated taxable profits derived from our US
and Canada operations.
Income tax expenses was $nil for the nine months ended
September 30, 2020, as we are not
subject to tax on income or capital gain in the Cayman Islands, and we did not generate
assessable profits arising in or derived from Hong Kong.
Net income (loss) and earnings (loss) per share
For the nine months ended September 30,
2021, our net income was $14,298,090, representing a change of
$18,858,876 from a net loss of
$4,560,786 for the same period of
last year, which comprised of a net loss of $726,103 from continuing operations and a net
loss of $3,834,683 from discontinued
operations.
Earnings per share was $0.28 and
loss per share was $0.18 for the nine
months ended September 30, 2021 and
2020, respectively. Weighted average number of shares was
50,921,037 and 25,745,900 for the nine months ended September 30, 2021 and 2020, respectively.
Non-GAAP Financial Measures
We are providing supplemental financial measures for (i)
non-GAAP income from operations and (ii) non-GAAP net income. These
supplemental financial measures are not measurements of financial
performance under US GAAP and, as a result, these supplemental
financial measures may not be comparable to similarly titled
measures of other companies. Management uses these non-GAAP
financial measures internally to help understand, manage, and
evaluate our business performance and to help make operating
decisions. We believe that these non-GAAP financial measures are
also useful to investors and analysts in comparing our performance
across reporting periods on a consistent basis.
The following is a reconciliation of non-GAAP income from
operations, which excludes the impact of (i) depreciation of
property and equipment, and (ii) share based compensation expenses,
to its most directly comparable GAAP measures for the periods
indicated:
|
|
For the Three
Months
Ended
September 30,
|
|
|
For the Nine
months
Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Reconciliation of
non-GAAP income from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
Operations
|
|
$
|
(15,554,362)
|
|
|
$
|
121,960
|
|
|
$
|
20,829,820
|
|
|
$
|
(708,426)
|
|
Depreciation and
amortization expenses
|
|
|
3,796,672
|
|
|
|
1,171,151
|
|
|
|
9,795,703
|
|
|
|
1,241,652
|
|
Share based
compensation expenses
|
|
|
16,579,821
|
|
|
|
456,000
|
|
|
|
18,022,713
|
|
|
|
456,000
|
|
Non-GAAP Income
from Operations
|
|
$
|
4,822,131
|
|
|
$
|
1,749,111
|
|
|
$
|
48,658,236
|
|
|
$
|
989,226
|
|
The following is a reconciliation of non-GAAP net income (loss),
which excludes the impact of (i) depreciation of property and
equipment, (ii) impairment of digital assets, (iii) loss from
disposal of property and equipment and (iii) share based
compensation expenses, to its most directly comparable GAAP
measures for the periods indicated:
|
|
For the Three
Months
Ended
September 30,
|
|
|
For the Nine
months
Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Reconciliation of
non-GAAP net income from
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
|
$
|
(20,148,834)
|
|
|
$
|
54
|
|
|
$
|
14,298,090
|
|
|
$
|
(4,560,786)
|
|
Depreciation and
amortization expenses
|
|
|
3,796,672
|
|
|
|
1,171,151
|
|
|
|
9,795,703
|
|
|
|
1,241,652
|
|
Impairment of digital
assets
|
|
|
-
|
|
|
|
-
|
|
|
|
9,045,007
|
|
|
|
-
|
|
Loss from disposal of
property and equipment
|
|
|
3,789,683
|
|
|
|
-
|
|
|
|
3,746,247
|
|
|
|
-
|
|
Share based
compensation expenses
|
|
|
16,579,821
|
|
|
|
456,000
|
|
|
|
18,022,713
|
|
|
|
456,000
|
|
Non-GAAP Net
Income (Loss)
|
|
$
|
4,017,342
|
|
|
$
|
1,627,205
|
|
|
$
|
54,907,760
|
|
|
$
|
(2,863,134)
|
|
|
|
For the Three
Months
Ended
September 30,
|
|
|
For the Nine
months
Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Reconciliation of
non-GAAP Basic and Diluted Earnings
(Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
per share
|
|
$
|
(0.37)
|
|
|
$
|
0.00
|
|
|
$
|
0.28
|
|
|
$
|
(0.18)
|
|
Depreciation and
amortization expenses (per basic and diluted share)
|
|
|
0.07
|
|
|
|
0.03
|
|
|
|
0.19
|
|
|
|
0.05
|
|
Impairment of digital
assets (per basic and diluted share)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.18
|
|
|
|
-
|
|
Loss from disposal of
property and equipment (per basic and diluted share)
|
|
|
0.07
|
|
|
|
-
|
|
|
|
0.07
|
|
|
|
-
|
|
Share based
compensation expenses (per basic and diluted share)
|
|
|
0.30
|
|
|
|
-
|
|
|
|
0.35
|
|
|
|
0.02
|
|
Non-GAAP Basic and
Diluted Earnings (Loss) Per Share (per basic and diluted
share)
|
|
$
|
0.07
|
|
|
$
|
0.03
|
|
|
$
|
1.07
|
|
|
$
|
(0.11)
|
|
Liquidity and capital resources
To date, we have financed our operations primarily through cash
flows from operations, working capital loans from our shareholders,
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 financings. We may
also consider debt, preferred and convertible financing as well. As
of September 30, 2021, we had working
capital of $60,966,193 as
compared with $6,825,455 at December 31, 2020.
Working capital included digital assets of $35,020,251 and $6,293,922 as of September
30, 2021 and December 31,
2020, respectively.
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 September 30, 2021, the
Company issued a net aggregate of 5,972,194 Ordinary Shares to
Ionic for gross proceeds of $36
million. The Company received net proceeds of $33,235,400 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 digital assets,
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
digital assets 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 rewards has been extremely
volatile historically, and 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 become necessary to significantly reduce our current rate of
expansion or to explore other strategic alternatives.
Cash flows
|
|
For the Nine
Months
Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash at beginning
of period
|
|
$
|
405,133
|
|
|
$
|
615,988
|
|
Net Cash Used in
Operating Activities
|
|
|
(11,191,887)
|
|
|
|
(8,578,704)
|
|
Net Cash Provided by
(Used in) Investing Activities
|
|
|
2,744,450
|
|
|
|
(10,851,166)
|
|
Net Cash Provided by
Financing Activities
|
|
|
34,503,400
|
|
|
|
19,935,530
|
|
Net increase in
cash, cash equivalents and restricted cash
|
|
|
26,055,963
|
|
|
|
505,660
|
|
Cash at end of
period
|
|
$
|
26,461,096
|
|
|
$
|
1,121,648
|
|
Operating Activities
Net cash used in operating activities was $11,191,887 for the nine months ended
September 30, 2021, mainly derived
from (i) net income of $14,298,090
from continuing operations for the nine months adjusted for
depreciation expenses of miners of $9,795,703, impairment of digital assets of
$9,045,007, loss from sales and
disposal of miners of $3,746,247,
issuance of ordinary shares to certain service providers as
promotion and marketing expenses of $1,446,098, grant of restricted share units to
the Company's directors, senior management and consultants
of $16,576,615 and
(ii) net of changes in our operating assets and liabilities,
principally comprising of (a) an increase in digital assets of
$89,079,726 as rewards to us for
provision of mining services, and (b) a change in accounts payable
of $25,680,947, primarily because we
paid hosting and power cost of $24,078,955 in digital assets.
Net cash used in operating activities was $8,578,704 for the nine months ended September 30, 2020, mainly derived from (i) net
loss of $726,103 from continuing
operations for the nine months adjusted for noncash provision for
depreciation expenses of miners of $1,241,652, and amortization of stock
compensation expenses for consulting services of $456,000, and (ii) net changes in our operating
assets and liabilities, principally comprising of (a) an increase
in digital assets of $8,586,472 as
rewards to us for provision of mining services, and (b) an increase
in other current assets of $1,196,869, primarily attributable to payment of
deposits of $1,172,165 to one service
provider who paid utility charges in mining facilities on behalf of
us.
Investing Activities
Net cash provided by investing activities was $2,744,450 for the nine months ended September 30, 2021, primarily provided by cash
proceeds of $3,539,450 from sales of
digital assets, offset by miner purchases of $795,000.
Net cash used in investing activities was $10,851,166 for the nine months ended
September 30, 2020, primarily used in
purchases of miners of $18,796,938,
offset by proceeds of $7,934,446 from
sales of digital assets.
Financing Activities
Net cash provided by financing activities was $34,503,400 for the nine months ended
September 30, 2021, primarily
provided by net proceeds of $33,235,400 from our direct offering with Ionic,
an institutional investor, and net proceeds of $1,280,000 from the issuance of convertible notes
to Ionic.
Net cash provided by financing activities was $19,935,530 for the nine months ended
September 30, 2020, primarily
provided by proceeds of $19,800,000
from certain shareholders under private placement transactions and
borrowings of $135,530 from related
parties.
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
digital assets 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
September 30, 2021.
BIT DIGITAL,
INC.
|
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
As of September
30, 2021 and December 31, 2020
|
(Expressed in US
dollars, except for the number of shares)
|
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
26,461,096
|
|
|
$
|
405,133
|
|
Digital
assets
|
|
|
35,020,251
|
|
|
|
6,293,922
|
|
Other current
assets
|
|
|
3,144,300
|
|
|
|
2,020,374
|
|
Total Current
Assets
|
|
|
64,625,647
|
|
|
|
8,719,429
|
|
|
|
|
|
|
|
|
|
|
Investment
security
|
|
|
1,000,000
|
|
|
|
-
|
|
Deposits for plant
and equipment
|
|
|
7,930,061
|
|
|
|
1,324,963
|
|
Property and
equipment, net
|
|
|
29,978,400
|
|
|
|
29,849,157
|
|
Other noncurrent
assets
|
|
|
6,844,416
|
|
|
|
-
|
|
Total
Assets
|
|
$
|
110,378,524
|
|
|
$
|
39,893,549
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
3,011,122
|
|
|
$
|
1,365,716
|
|
Due to related
parties
|
|
|
-
|
|
|
|
336,722
|
|
Income tax
payable
|
|
|
493,703
|
|
|
|
-
|
|
Other payables and
accrued liabilities
|
|
|
154,629
|
|
|
|
191,536
|
|
Total Current
Liabilities
|
|
|
3,659,454
|
|
|
|
1,893,974
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
liabilities
|
|
|
703,924
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
4,363,378
|
|
|
|
1,893,974
|
|
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
|
|
Preferred shares,
$0.01 par value, 10,000,000 and nil shares authorized, 1,000,000
and
nil shares issued and outstanding of September 30,
2021 and December 31, 2020,
respectively
|
|
|
9,050,000
|
|
|
|
-
|
|
Common shares, $0.01
par value, 340,000,000 and 50,000,000 shares authorized,
55,817,358 and 48,043,788 shares issued and
outstanding of September 30, 2021
and December 31, 2020, respectively
|
|
|
558,174
|
|
|
|
480,438
|
|
Additional paid-in
capital
|
|
|
106,849,371
|
|
|
|
53,219,626
|
|
Accumulated
deficit
|
|
|
(10,442,399)
|
|
|
|
(15,700,489)
|
|
Total
Shareholders' Equity
|
|
|
106,015,146
|
|
|
|
37,999,575
|
|
Total Liabilities
and Shareholders' Equity
|
|
$
|
110,378,524
|
|
|
$
|
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
Nine months Ended September 30, 2021 and 2020
|
(Expressed in US
dollars, except for the number of shares)
|
|
|
|
For the Three
Months
Ended
September 30,
|
|
|
For the Nine
months
Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenue from
cryptocurrency mining
|
|
$
|
10,395,894
|
|
|
$
|
7,909,528
|
|
|
$
|
82,691,638
|
|
|
$
|
8,602,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and
amortization shown below)
|
|
|
(2,607,945)
|
|
|
|
(6,210,712)
|
|
|
|
(25,959,323)
|
|
|
|
(6,866,726)
|
|
Depreciation and
amortization expenses
|
|
|
(3,796,672)
|
|
|
|
(1,171,151)
|
|
|
|
(9,795,703)
|
|
|
|
(1,241,652)
|
|
General and
administrative expenses
|
|
|
(19,545,639)
|
|
|
|
(405,705)
|
|
|
|
(26,106,792)
|
|
|
|
(1,202,274)
|
|
Total operating
expenses
|
|
|
(25,950,256)
|
|
|
|
(7,787,568)
|
|
|
|
(61,861,818)
|
|
|
|
(9,310,652)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
Operations
|
|
|
(15,554,362)
|
|
|
|
121,960
|
|
|
|
20,829,820
|
|
|
|
(708,426)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on exchange of Digital assets
|
|
|
129,935
|
|
|
|
(21,721)
|
|
|
|
7,082,587
|
|
|
|
(15,753)
|
|
Impairment of digital
assets
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,045,007)
|
|
|
|
-
|
|
Loss from disposal of
property and equipment
|
|
|
(3,789,683)
|
|
|
|
-
|
|
|
|
(3,746,247)
|
|
|
|
-
|
|
Other income
(expense)
|
|
|
3,854
|
|
|
|
-
|
|
|
|
499,564
|
|
|
|
(1,924)
|
|
Total other
expenses, net
|
|
|
(3,655,894)
|
|
|
|
(21,721)
|
|
|
|
(5,209,103)
|
|
|
|
(17,677)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
from continuing operations before
income taxes
|
|
|
(19,210,256)
|
|
|
|
100,239
|
|
|
|
15,620,717
|
|
|
|
(726,103)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expenses
|
|
|
(938,578)
|
|
|
|
-
|
|
|
|
(1,322,627)
|
|
|
|
-
|
|
Net income (loss)
from continuing operations
|
|
|
(20,148,834)
|
|
|
|
100,239
|
|
|
|
14,298,090
|
|
|
|
(726,103)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations
|
|
|
-
|
|
|
|
(100,185)
|
|
|
|
-
|
|
|
|
(3,834,683)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
and comprehensive income (loss)
|
|
$
|
(20,148,834)
|
|
|
$
|
54
|
|
|
$
|
14,298,090
|
|
|
$
|
(4,560,786)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of ordinary share
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
54,675,621
|
|
|
|
42,297,011
|
|
|
|
50,921,037
|
|
|
|
25,745,900
|
|
Income (loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
$
|
(0.37)
|
|
|
$
|
0.00
|
|
|
$
|
0.28
|
|
|
$
|
(0.18)
|
|
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 Nine
months Ended September 30, 2021 and 2020
|
(Expressed in US
dollars)
|
|
|
|
For the Nine
months
Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
14,298,090
|
|
|
$
|
(4,560,786)
|
|
Less: Net loss from
discontinued operations
|
|
|
-
|
|
|
|
3,834,683
|
|
Net income (loss)
from continuing operations
|
|
|
14,298,090
|
|
|
|
(726,103)
|
|
Adjustments to
reconcile net income (loss) from continuing operations to net cash
used
in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
|
9,795,703
|
|
|
|
1,241,652
|
|
Loss from disposal of
property and equipment
|
|
|
3,746,247
|
|
|
|
-
|
|
Impairment of digital
assets
|
|
|
9,045,007
|
|
|
|
-
|
|
Share based
compensation expenses in connection with issuance of restricted
shares
|
|
|
16,576,615
|
|
|
|
-
|
|
Share based
compensation expenses in connection with issuance of ordinary
shares
|
|
|
1,446,098
|
|
|
|
456,000
|
|
Loss from acquisition
of a subsidiary
|
|
|
-
|
|
|
|
1,964
|
|
Deferred tax
expenses
|
|
|
703,924
|
|
|
|
-
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Digital
assets
|
|
|
(89,079,726)
|
|
|
|
(8,586,472)
|
|
Other current
assets
|
|
|
(117,048)
|
|
|
|
(1,196,869)
|
|
Other noncurrent
assets
|
|
|
(6,844,416)
|
|
|
|
|
|
Accounts
payable
|
|
|
25,680,947
|
|
|
|
268,604
|
|
Income tax
payable
|
|
|
493,703
|
|
|
|
-
|
|
Other payables and
accrued liabilities
|
|
|
3,062,969
|
|
|
|
(37,480)
|
|
Net Cash Used in
Operating Activities
|
|
|
(11,191,887)
|
|
|
|
(8,578,704)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
|
|
(795,000)
|
|
|
|
(18,796,938)
|
|
Proceeds from sales
of Digital assets
|
|
|
3,539,450
|
|
|
|
7,934,446
|
|
Acquisition of cash
in connection with acquisition of a subsidiary
|
|
|
-
|
|
|
|
11,326
|
|
Net Cash Provided
by (Used in) Investing Activities
|
|
|
2,744,450
|
|
|
|
(10,851,166)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of ordinary shares under direct offering
|
|
|
33,235,400
|
|
|
|
-
|
|
Proceeds from
issuance of convertible notes, net of issuance costs
|
|
|
1,280,000
|
|
|
|
-
|
|
Proceeds from
issuance of common stock under private placement
transaction
|
|
|
-
|
|
|
|
19,800,000
|
|
Proceeds from
borrowings from related parties
|
|
|
-
|
|
|
|
135,530
|
|
Repayment of
borrowings to related parties
|
|
|
(12,000)
|
|
|
|
-
|
|
Net Cash Provided
by Financing Activities
|
|
|
34,503,400
|
|
|
|
19,935,530
|
|
|
|
|
|
|
|
|
|
|
Net increase in
cash
|
|
|
26,055,963
|
|
|
|
505,660
|
|
Cash at beginning of
period
|
|
|
405,133
|
|
|
|
615,988
|
|
Cash at end of
period
|
|
$
|
26,461,096
|
|
|
$
|
1,121,648
|
|
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
|
|
|
$
|
-
|
|
Proceeds from sales
of miners in USDT
|
|
$
|
9,441,561
|
|
|
$
|
-
|
|
Investment in an
investment security in USDC
|
|
$
|
(1,000,000)
|
|
|
$
|
-
|
|
Purchases of property
and equipment in USDT
|
|
$
|
(21,103,910)
|
|
|
$
|
-
|
|
Purchases of property
and equipment in USDC
|
|
$
|
(895,893)
|
|
|
$
|
-
|
|
Payment of deposits
on equipment in BTC
|
|
$
|
(13,226,077)
|
|
|
$
|
-
|
|
Refund of deposits on
equipment in USDT
|
|
$
|
5,600,000
|
|
|
$
|
-
|
|
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 and Canada.
The accompanying consolidated financial statements reflect the
activities of the Company and each of the following entities:
Name
|
|
Background
|
|
Ownership
|
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 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
Strategies Limited ("BT Strategy")
|
|
● A Hong Kong
company
● Incorporated on June 1, 2021
● Engaged in treasury management
activities
|
|
100% owned by Bit
Digital, Inc.
|
Bit Digital Singapore
PTE. LTD. ("BT Singapore")
|
|
● A Singapore
company
● Incorporated on July 1, 2021
● Engaged in treasury management
activities
|
|
100% owned by Bit
Digital, Inc.
|
Golden Bull USA, Inc.
("Golden Bull USA")
|
|
● A United States
company
● Incorporated on June 3, 2019
● Inactive
|
|
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
September 30, 2021 and for the three
and nine months ended September 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 nine months ended September
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 digital assets 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.
Digital assets
Digital assets (including bitcoin, ETH, USDC and USDT) are
included in current assets in the accompanying consolidated balance
sheets. Digital assets purchased are recorded at cost and digital
assets awarded to the Company through its mining activities are
accounted for in connection with the Company's revenue recognition
policy disclosed below.
Digital assets 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 digital assets by the Company, if any, will be
included within investing activities in the accompanying
consolidated statements of cash flows, while digital assets awarded
to the Company through its mining activities are included within
operating activities on the accompanying consolidated statements of
cash flows. The sales of digital assets 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 digital assets" 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 September 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
digital assets 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 digital assets in the 2020
financial statements to conform to the presentation as of
September 30, 2021. The
reclassification has no impact on the total assets and total
liabilities as of September 30,
2021.
Recent accounting pronouncements
In May 2021, the FASB issued
Accounting Standards Update ("ASU") 2021-04, Earnings Per
Share (Topic 260), Debt-Modifications and Extinguishments
(Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and
Derivatives and Hedging-Contracts in Entity's Own Equity
(Subtopic 815-40), ("ASU 2021-04"). This ASU reduces diversity
in an issuer's accounting for modifications or exchanges of
freestanding equity-classified written call options (for example,
warrants) that remain equity classified after modification or
exchange. This ASU provides guidance for a modification or an
exchange of a freestanding equity-classified written call option
that is not within the scope of another Topic. It specifically
addresses: (1) how an entity should treat a modification of the
terms or conditions or an exchange of a freestanding
equity-classified written call option that remains equity
classified after modification or exchange; (2) how an entity should
measure the effect of a modification or an exchange of a
freestanding equity-classified written call option that remains
equity classified after modification or exchange; and (3) how an
entity should recognize the effect of a modification or an exchange
of a freestanding equity-classified written call option that
remains equity classified after modification or exchange. This ASU
will be effective for all entities for fiscal years beginning after
December 15, 2021. An entity should
apply the amendments prospectively to modifications or exchanges
occurring on or after the effective date of the amendments. Early
adoption is permitted, including adoption in an interim period. The
adoption of ASU 2021-04 is not expected to have a material impact
on the Company's financial statements or disclosures.
In 2020, the Financial Accounting Standards Board issued
Accounting Standards Update (ASU) 2020-06, Debt—Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity's Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity's
Own Equity, to address the complexity in accounting for certain
financial instruments with characteristics of liabilities and
equity. Amongst other provisions, the amendments in this ASU
significantly change the guidance on the issuer's accounting for
convertible instruments and the guidance on the derivative scope
exception for contracts in an entity's own equity such that fewer
conversion features will require separate recognition, and fewer
freestanding instruments, like warrants, will require liability
treatment. This guidance is effective for fiscal years beginning
after December 15, 2021, with early
adoption permitted. The Company adopted ASU 2020-06 early as of
January 1, 2021. Such adoption did
not result in any material changes to its financial position,
results of operations or cash flows.
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.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
3. DIGITAL ASSETS
Digital asset holdings were comprised of the following:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
BTC
|
|
$
|
20,047,301
|
|
|
$
|
6,237,917
|
|
USDT
|
|
|
10,991,177
|
|
|
|
-
|
|
WBTC
|
|
|
3,545,308
|
|
|
|
-
|
|
ETH
|
|
|
230,318
|
|
|
|
-
|
|
USDC
|
|
|
206,147
|
|
|
|
56,005
|
|
Total
|
|
$
|
35,020,251
|
|
|
$
|
6,293,922
|
|
Additional information about Bitcoin and ETH
For the nine months ended September 30,
2021 and 2020, the Company generated bitcoins through
provision of mining services. The following table presents
additional information about bitcoins for the nine months ended
September 30, 2021 and 2020,
respectively:
|
|
September 30,
2021
|
|
|
September 31,
2020
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
6,237,917
|
|
|
$
|
-
|
|
Receipt of bitcoins
from mining services
|
|
|
82,691,638
|
|
|
|
8,602,226
|
|
Sales of bitcoins in
exchange of cash
|
|
|
(3,539,450)
|
|
|
|
(7,911,975)
|
|
Payment of BTC as
deposits on plant and equipment
|
|
|
(13,226,077)
|
|
|
|
-
|
|
Payment of BTC for
utility charges in mining facilities
|
|
|
(24,078,955)
|
|
|
|
-
|
|
Payment of BTC for
other expenses
|
|
|
(505,276)
|
|
|
|
-
|
|
Exchange of BTC into
USDT and USDC
|
|
|
(22,181,885)
|
|
|
|
-
|
|
Collection of
bitcoins from a third party (Note 4)
|
|
|
97,772
|
|
|
|
-
|
|
Realized gain on sale
of digital assets
|
|
|
7,082,587
|
|
|
|
(38,224)
|
|
Conversion into
WBTC
|
|
|
(3,545,308)
|
|
|
|
-
|
|
Impairment of
bitcoins
|
|
|
(8,985,662)
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
20,047,301
|
|
|
$
|
652,027
|
|
For the nine months ended September 30,
2021, the Company purchased 101 ETH at an aggregated cost of
$289,668, of which 96 ETH were staked
with an unaffiliated third party in June
2021. The Company won't be able to withdraw the stake within
12 months.
For the nine months ended September 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
3. DIGITAL ASSETS (CONTINUED)
Additional information about USDT and USDC
The following table presents additional information about USDT
for the nine months ended September 30,
2021 and 2020, respectively:
|
|
For the Nine
months
Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Addition from
exchange of BTC
|
|
|
20,251,577
|
|
|
|
-
|
|
Collection from sales
of miners
|
|
|
9,441,561
|
|
|
|
-
|
|
Refund of deposit on
property and equipment
|
|
|
5,600,000
|
|
|
|
-
|
|
Purchases of
miners
|
|
|
(21,103,910)
|
|
|
|
-
|
|
Payment of
deposits to service providers
|
|
|
(782,526)
|
|
|
|
-
|
|
Payment of
services
|
|
|
(2,125,857)
|
|
|
|
-
|
|
Purchases of
ETH
|
|
|
(289,668)
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
10,991,177
|
|
|
$
|
-
|
|
The following table presents additional information about USDC
for the nine months ended September 30,
2021 and 2020, respectively:
|
|
For the Nine
months
Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
56,005
|
|
|
$
|
-
|
|
Exchange of cash into
USDC
|
|
|
200,000
|
|
|
|
-
|
|
Addition from
exchange of BTC
|
|
|
1,930,308
|
|
|
|
-
|
|
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
|
|
|
(933,919)
|
|
|
|
(39,717)
|
|
Repayment of
borrowings from a related party (Note 11)
|
|
|
(329,722)
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
206,147
|
|
|
$
|
290,005
|
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
4. OTHER CURRENT ASSETS
Other current assets were comprised of the following:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Deposits
(a)
|
|
$
|
3,086,210
|
|
|
$
|
1,909,800
|
|
Due from third
parties (b)
|
|
|
-
|
|
|
|
97,771
|
|
Office rental
deposit
|
|
|
30,843
|
|
|
|
-
|
|
Others
|
|
|
27,247
|
|
|
|
12,803
|
|
Total
|
|
$
|
3,144,300
|
|
|
$
|
2,020,374
|
|
(a) As of September
30, 2021 and December 31, 2020, the balance of deposits represented
the deposits made to two service providers respectively, 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 may be due within 12
months from the effective date of the agreement. As of September
30, 2021, the Company made deposits of $6,844,416 to three other
service providers, who will refund the deposits over 12 months from
September 30, 2021. The Company recorded the deposits of $6,844,416
in the account of "other noncurrent assets".
|
(b) As of December
31, 2020, the balance of due from third parties represented lending
of 5.19 bitcoins. During the three and nine months ended September
30, 2021, the Company lent additional nil and 141.99 bitcoins to
two third parties, respectively. The bitcoins were repayable on
demand. As of September 30, 2021, the third parties repaid all
bitcoins.
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
5. PROPERTY AND EQUIPMENT, NET
Property and equipment, net was comprised of the following:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Miners
|
|
$
|
33,268,859
|
|
|
$
|
33,173,812
|
|
Less: accumulated
depreciation
|
|
|
(3,290,459)
|
|
|
|
(3,324,655)
|
|
Property and
equipment, net
|
|
$
|
29,978,400
|
|
|
$
|
29,849,157
|
|
In anticipation of purchase opportunities for newer, more
efficient machines, the Company sold 15,808 miners to three third
party customers for a total consideration of $9,441,561 during the nine months ended
September 30, 2021. On the date of
transaction, the original cost and accumulated depreciation of
these 15,808 miners were $11,044,804
and $2,213,763, respectively. The
Company recognized a gain on sales of $610,520 which was recorded as a reduction
against "loss from disposal of property and equipment". As of the
date of the report, the Company has collected the consideration in
the form of USDT. During the three months ended September 30, 2021, the Company sold 4,200 miners
to one third party. On the date of disposal, the original cost and
accumulated depreciation of these 4,200 miners were $4,875,521 and $1,185,549, respectively. The Company recognized
a gain of $341,240, which was
recorded as a reduction against "loss from disposal of property and
equipment".
In addition, during the nine months ended September 30, 2021, the Company disposed of 1,779
miners. On the date of disposal, the original cost and accumulated
depreciation of these 1,779 miners were $5,307,790 and $951,024, respectively. The Company incurred a
loss of $4,356,767, which was
recorded in the account of "loss from disposal of property and
equipment". During the three months ended September 30, 2021, the Company disposed of 1,407
miners. On the date of disposal, the original cost and accumulated
depreciation of these 1,407 miners were $4,984,282 and $853,360, respectively. The Company incurred a
loss of $4,130,923, which was
recorded in the account of "loss from disposal of property and
equipment".
For the three months ended September 30,
2021 and 2020, depreciation expenses were $3,796,672 and $1,171,151, respectively. For the nine months
ended September 30, 2021 and 2020,
depreciation expenses were $9,795,703
and $1,241,652, respectively.
6. INVESTMENT SECURITY
As of September 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
nine months ended September 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 September 30, 2021, the Company did not recognize
impairment against the investment security.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
7. 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") and 2021 Second Omnibus Equity Incentive Plan
("2021 Second Plan"). An aggregate of 2,415,293 Restricted Stock
awards were granted under the 2021 Plan and no Ordinary Shares
remain reserved for issuance under the 2021 Plan. There are
5,000,000 Ordinary Shares reserved for issuance under the Company's
2021 Second Plan with no shares outstanding.
Pursuant to a Consulting Services Agreement dated February 1, 2021, with Wellington Park, Inc., the
Company granted 15,000 RSUs to each of the CEO, Bryan Bullett and the CSO, 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.
On July 29, 2021, the Company
granted 1,954,400 RSUs to senior management and consultants.
1,920,000 RSUs were immediately vested, and 34,400 RSUs were
subject to service period.
A summary of the changes in the RSUs relating to ordinary shares
granted by the Company during the nine months ended September 30, 2021 is as follows:
|
|
Number of
RSUs
|
|
|
Weighted
average
grant date
fair
value
|
|
|
|
|
|
|
|
|
Awarded and unvested
as of January 1, 2021
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
2,225,930
|
|
|
$
|
8.82
|
|
Vested
|
|
|
(1,999,783)
|
|
|
$
|
8.20
|
|
Awarded and unvested
as of September 30, 2021
|
|
|
226,147
|
|
|
$
|
14.32
|
|
Expected to vest as
of September 30, 2022
|
|
|
158,265
|
|
|
$
|
14.02
|
|
As of September 30, 2021, there
were $3,237,878 of unrecognized
compensation costs related to all outstanding RSUs. These amounts
are expected to be recognized over a weighted average period
of 1.50 years.
During the three and nine months ended September 30, 2021, the Company recognized
share-based compensation expense of $16,066,821 and $16,576,615 in connection with the above
RSUs.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
8. SHARE CAPITAL
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
August 3, 2021, the Company issued an
aggregate of 6,000,000 Ordinary Shares to Ionic to finance gross
proceeds of $36 million. The Company
received net proceeds of $33,235,400
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 August 19, 2021, the
Company cancelled 27,806 Ordinary Shares from Ionic.
On May 6, 2021 and July 19, 20221, the Company issued 80,232 and
100,000 Ordinary Shares, respectively as compensation fees to
certain service providers for marketing and promotion services and
financial consulting services.
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.
On September 7, 2021, the Company
cancelled 1,000,000 Ordinary Shares, and issued 1,000,000 preferred
shares to GDL.
On September 23, 2021, the Company
issued 1,854,400 Ordinary Shares to senior management and
consultants.
As of September 30, 2021, there
were 55,817,358 ordinary shares issued and outstanding.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
8. SHARE CAPITAL (CONTINUED)
Preferred shares
On May 26, 2021, the Company
entered into a Share Exchange Agreement (the "Agreement") with
Geney Development Limited ("GDL"), a corporation formed under the
laws of the British Virgin
Islands. Geney is beneficially owned by Zhaohui Deng, the Company's Chairman of the
Board (70%) and Erke Huang, the Company's Chief Financial Officer
(30%), collectively referred to as the "Shareholders." Under the
Agreement, the Shareholders exchanged 1,000,000 ordinary shares,
$.01 par value which GDL owned for
1,000,000 Preference Shares. The Preference Shares were authorized
at the Company's April 20, 2021,
Annual General Meeting of Shareholders ("AGM"), pursuant to
approval of an amendment to the Company's authorized share capital
and an amended and restated Memorandum and Articles of Association.
At the AGM, the Company's Shareholders approved the repurchase of
the 1,000,000 ordinary shares held by GDL in consideration of the
issuance of 1,000,000 Preference Shares. Subsequently, the Company
cancelled the 1,000,000 ordinary shares and issued 1,000,000
preferred shares.
The preference shares are entitled to the following preference
features: 1) an annual dividend of 8% when declared by the Board of
Directors; 2) a liquidation preference of $10.00 per share; 3) convert on a one for one
basis for ordinary shares, subject to a 4.99% conversion
limitation; 4) rank senior to Ordinary Shares in insolvency; and 5)
solely for voting purposes vote 50 ordinary shares, for each
Preference Share. The purpose of creating and issuing the
preference shares is to enable Messrs. Deng and Huang to implement
and carry out the Company's business plan without obstruction.
As of September 30, 2021, there
were 1,000,000 preferred 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
Subsidiaries in Hong Kong are
taxed 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 nine months ended
September 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 September 30, 2021, the estimated annual
effective tax rate for Bit Digital USA Inc. is 24.62%, which consists of federal
tax rate of 21% and blended state tax rate of 3.62% 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 nine months ended September 30, 2021 and 2020, the Company incurred
US federal and state income tax expenses as below:
|
|
For the Three
Months
Ended
September 30,
|
|
|
For the Nine
months
Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
188,100
|
|
|
$
|
-
|
|
|
$
|
442,414
|
|
|
$
|
-
|
|
Deferred
|
|
|
538,232
|
|
|
|
-
|
|
|
|
576,586
|
|
|
|
-
|
|
|
|
|
726,332
|
|
|
|
-
|
|
|
|
1,019,000
|
|
|
|
-
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
70,376
|
|
|
|
-
|
|
|
|
136,900
|
|
|
|
-
|
|
Deferred
|
|
|
118,007
|
|
|
|
-
|
|
|
|
127,337
|
|
|
|
-
|
|
|
|
|
188,383
|
|
|
|
-
|
|
|
|
264,237
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
914,715
|
|
|
$
|
-
|
|
|
$
|
1,283,237
|
|
|
$
|
-
|
|
Canada
The estimated effective tax rate for Canada entities is 23% for the three and nine
months ended September 30, 2021. The
Company is subject to both federal and provincial income taxes for
its business operation in Canada
as of September 30, 2021.
For the nine months ended September 30,
2021, the Company incurred Canada federal and state current income tax
expenses of $25,689 and $13,701, respectively. For the three months ended
September 30, 2021, the Company
incurred Canada federal and state
current income tax expenses of $15,563 and $8,300,
respectively. As BT Canada was setup in February 2021, the Company was not subject to
federal or state income tax expenses for the three and nine months
ended September 30, 2020.
As of September 30, 2021 and
December 31, 2020, the Company had
deferred tax liabilities of $703,924
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 September 30, 2021, the Company had a total of
$703,924 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 nine months ended September 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 nine
months ended September 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 September 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
have filed a motion to dismiss the lawsuits and will continue to
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 September 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 nine months ended September 30, 2021 and 2020:
|
|
For the Three
Months
Ended
September 30,
|
|
|
For the Nine
months
Ended
September 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
On October 7, 2021, the Company
entered into a Non-Fixed Price Sales and Purchase Agreement (the
"Agreement") with Bitmain Technologies Limited ("Bitmain"). The
Company agreed to purchase 10,000 Antminer bitcoin miners. The
miners are expected to increase the Company's miner fleet hash rate
by approximately 1.0 Exahash ("EH/s"). The total maximum purchase
price is estimated at US $65,000,000
(subject to certain potential discounts), of which the initial
installments have been made, with the final installment due ten
(10) days prior to each shipment through June 2022.
On October 5, 2021, the Company
closed a private placement with institutional investors for the
sale of 13,490,728 ordinary shares. Pursuant to Securities Purchase
Agreement (the "Purchase Agreement"), the Company agreed to issue
and sell, in a private offering (the "Private Placement"), an
aggregate of $80,000,017 of
securities, consisting of 13,490,728 ordinary shares of the
Company, par value $0.01 per share
(the "Ordinary Shares") and Ordinary Share Purchase Warrants
("Warrants") to purchase an aggregate of 10,118,046 Ordinary Shares
at an exercise price of $7.91 per
whole share (subject to adjustment), for a combined purchase price
of $5.93 per share and accompanying
warrant (collectively, the "Securities"). Each Warrant is
exercisable immediately and will expire three and one-half years
after the effective date of Registration Statement No. 333-260241
which was filed pursuant to the Registration Right Agreement. If
and only if, at the time of exercise of the Warrants there is no
effective registration statement, including this registration
statement, registering the Warrant Shares for resale, the Warrants
may be exercised on a cashless basis.
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SOURCE Bit Digital, Inc.