NEW
YORK, June 22, 2022 /PRNewswire/ -- Bit
Digital, Inc. (Nasdaq: BTBT) (the "Company"), a digital asset
mining company headquartered in New
York, today announced its unaudited financial results for
the first quarter ended March 31,
2022.
Financial Highlights for the First Quarter 2022
- Bitcoin mining revenue was $8.0
million for the first quarter of 2022. Revenue from Ethereum
mining was $0.5 million.
- We had cash and cash equivalents of $28.1 million, and total liquidity (defined as
cash and digital assets) of approximately $73.3 million, as of March
31, 2022. Total assets were $169.6
million as of March 31,
2022.
- Non-GAAP income* from operations was $0.5 million.
- Non-GAAP net income** was $2.9
million, or $0.04 earnings per
share.
* Non-GAAP income from operations excludes the impact of
depreciation of property and equipment, and share-based
compensation expense.
** Non-GAAP net income excludes depreciation of property and
equipment, share-based compensation expenses, impairment of digital
assets, gain from disposal of property and equipment, gain from
sale of investment security and gain from sales of a
subsidiary.
Operational Highlights for the First Quarter 2022
- The Company earned 194.48 bitcoins and 189.26 ETH during the
quarter. Factors impacting production included the Company's
ongoing miner redeployment program, growth in the overall bitcoin
network hash rate, and the number of days in the quarter.
- Treasury holdings of BTC and ETH were 832.14 and 266.71, with a
fair market value of approximately $27.6
million and $0.6 million on
March 31, 2022, respectively.
- The Company owned 27,644 bitcoin miners and 731 Ethereum miners
as of March 31, 2022, with an
estimated maximum total hash rate of 1.6 EH/s and 0.3 TH/s,
respectively. As of May 31, 2022, the
Company owned 33,376 bitcoin miners with an estimated maximum total
hash rate of 2.17 EH/s.
- Subsequent to quarter-end, the Company signed a miner swap
agreement with Riot Blockchain, Inc. (Riot), which provides for
Riot to deliver miners rated at 0.625 EH/s to the Company in
exchange for 0.5 EH/s delivered from the Company to Riot, a 25%
boost in favor of the Company.
- As of May 31, 2022, the Company
had received 5,023 machines pursuant to its previously announced
10,000-unit purchase agreement with Bitmain Technologies Limited.
The final installment is expected to ship in June 2022. Pro forma for these announced
purchases and the miner swap with Riot, our maximum total hash rate
is expected to be approximately 2.8 EH/s.
- The Company purchased 706 bitcoin miners on the spot market
during the first quarter, and took delivery of these machines
during April 2022. The Company also
sold 100 MicroBT Whatsminer M21S bitcoin miners during the
quarter.
- Subsequent to quarter end, the Company signed a new 20 MW
hosting agreement with Coinmint LLC ("Coinmint"). Approximately
half of this capacity has been delivered as of the date of this
report, with the remainder scheduled for early July. The Coinmint
facility utilizes power that is 90% emissions-free.
- Approximately 67% of our fleet's run-rate electricity
consumption was generated from carbon-free energy sources as of
March 31, 2022, based on data
provided by our hosts, publicly available sources, and internal
estimates, demonstrating our commitment to sustainable practices in
the digital asset mining industry.
Management Commentary
"The first quarter of 2022 marked the first full quarter in
which 100% of our mining fleet was on North American soil. With
migration complete, our focus remains deploying our fleet while
remaining a leader in sustainability. We're proud of our progress
and especially our team's rapid response to recent operational
challenges.
As previously announced, subsequent to quarter end, we faced
interruptions at certain hosting partners' sites. We quickly signed
a new hosting agreement with Coinmint for 20 MW of primarily
carbon-free power, more than enough to offset the effect of the
interruptions. Coinmint has already fulfilled approximately half of
this capacity, with the remainder scheduled for early July.
Further, we signed a miner swap agreement with Riot Blockchain Inc.
("Riot") which provides a 25% boost to our swapped hash rate; half
of the swap has already been executed. The combined effect of our
agreements with Coinmint and Riot is expected to roughly triple our
active hash rate over the span of about one month. Finally, power
has already been partially restored at our partner Digihost's
North Tonawanda, NY site, and
remediation and repair work is underway at Blockfusion's
Niagara Falls, NY site.
Unsurprisingly, our first quarter results faced difficult
comparisons to the prior year, when a majority of our fleet was
deployed in China, and network
hash rates were lower. Further, the decrease in bitcoin price since
late 2021 has coincided with an increase in network hash, reducing
industrywide margins and heightening competition. Our strong
balance sheet positions us to successfully navigate these market
headwinds. We remain debt-free, and had over $70M of cash and digital assets as of
March 31, 2022. We have already paid
all of our miner purchase obligations and have no other significant
capital commitments as of the date of this report. Against this
backdrop, we are excited for yet another transformational year for
Bit Digital."
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 (loss) 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
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Reconciliation of
non-GAAP income from operations:
|
|
|
|
|
|
|
Income (Loss) from
Operations
|
|
$
|
(3,766,828)
|
|
|
$
|
25,609,778
|
|
Depreciation and
amortization expenses
|
|
|
3,799,629
|
|
|
|
3,650,374
|
|
Share based
compensation expenses
|
|
|
463,900
|
|
|
|
-
|
|
Non-GAAP Income from
Operations
|
|
$
|
496,701
|
|
|
$
|
29,260,152
|
|
The following is a reconciliation of non-GAAP net income (loss),
which excludes the impact of (i) depreciation of property and
equipment, (ii) share based compensation expenses, (iii) impairment
of digital assets, (iv) gain from disposal of property and
equipment, (v) gain from sale of investment security and (vi) gain
from sales of a subsidiary, to its most directly comparable GAAP
measures for the periods indicated:
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Reconciliation of
non-GAAP net income:
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(10,179,789)
|
|
|
$
|
35,786,323
|
|
Depreciation and
amortization expenses
|
|
|
3,799,629
|
|
|
|
3,650,374
|
|
Share based
compensation expenses
|
|
|
463,900
|
|
|
|
-
|
|
Impairment of digital
assets
|
|
|
10,045,603
|
|
|
|
-
|
|
Gain from disposal of
property and equipment
|
|
|
(174,568)
|
|
|
|
-
|
|
Gain from sale of
investment security
|
|
|
(1,039,999)
|
|
|
|
-
|
|
Gain from sales of a
subsidiary
|
|
|
(52,383)
|
|
|
|
-
|
|
Non-GAAP Net
Income
|
|
$
|
2,862,393
|
|
|
$
|
39,436,697
|
|
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Reconciliation of
non-GAAP Basic and Dilutive Earnings (Loss) Per
Share:
|
|
|
|
|
|
|
Basic and dilutive
(loss) earnings per share
|
|
$
|
(0.15)
|
|
|
$
|
0.74
|
|
Depreciation and
amortization expenses
|
|
|
0.05
|
|
|
|
0.08
|
|
Share based
compensation expenses
|
|
|
0.01
|
|
|
|
-
|
|
Impairment of digital
assets
|
|
|
0.14
|
|
|
|
-
|
|
Gain from disposal of
property and equipment
|
|
|
(0.00)
|
|
|
|
-
|
|
Gain from sale of
investment security
|
|
|
(0.01)
|
|
|
|
-
|
|
Gain from sales of a
subsidiary
|
|
|
(0.00)
|
|
|
|
-
|
|
Non-GAAP basic and
dilutive earnings per share
|
|
$
|
0.04
|
|
|
$
|
0.82
|
|
About Bit Digital
Bit Digital, Inc. is a digital assets mining company
headquartered in New York City.
Our mining operations are located in North America. For additional information,
please contact IR@bit-digital.com or visit our website at
www.bit-digital.com.
Investor Notice
Investing in our securities involves a high degree of risk.
Before making an investment decision, you should carefully consider
the risks, uncertainties and forward-looking statements described
under "Risk Factors" in Item 3.D of our most recent Annual Report
on Form 20-F for the fiscal year ended December 31, 2021. If any material risk was to
occur, our business, financial condition or results of operations
would likely suffer. In that event, the value of our securities
could decline and you could lose part or all of your investment.
The risks and uncertainties we describe are not the only ones
facing us. Additional risks not presently known to us or that we
currently deem immaterial may also impair our business operations.
In addition, our past financial performance may not be a reliable
indicator of future performance, and historical trends
should not be used to anticipate results in the future. Future
changes in the network-wide mining difficulty rate or bitcoin hash
rate may also materially affect the future performance of Bit
Digital's production of bitcoin. Actual operating results will vary
depending on many factors including network difficulty rate, total
hash rate of the network, the operations of our facilities, the
status of our miners, and other factors. Additionally, all
discussions of financial metrics assume mining difficulty rates as
of June 2022. See "Safe Harbor
Statement" below.
Safe Harbor Statement
This press release may contain certain "forward-looking
statements" relating to the business of Bit Digital, Inc., and its
subsidiary companies. All statements, other than statements of
historical fact included herein are "forward-looking statements."
These forward-looking statements are often identified by the use of
forward-looking terminology such as "believes," "expects," or
similar expressions, involving known and unknown risks and
uncertainties. Although the company believes that the expectations
reflected in these forward-looking statements are reasonable, they
do involve assumptions, risks and uncertainties, and these
expectations may prove to be incorrect. Investors should not place
undue reliance on these forward-looking statements, which speak
only as of the date of this press release. The company's actual
results could differ materially from those anticipated in these
forward-looking statements as a result of a variety of factors,
including those discussed in the company's periodic reports that
are filed with the Securities and Exchange Commission and available
on its website at http://www.sec.gov. All forward-looking
statements attributable to the company or persons acting on its
behalf are expressly qualified in their entirety by these factors.
Other than as required under the securities laws, the company does
not assume a duty to update these forward-looking statements.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview
Digital Asset Mining Business
We are a digital asset mining company with mining operations in
the United States and Canada. We commenced our bitcoin mining
business in February 2020, and
commenced limited Ethereum mining operations in January 2022. Our mining operations, hosted by
third party providers, use specialized computers, known as miners,
to generate digital assets. 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 blockchain. For every block added, the
blockchain provides an award equal to a set number of digital
assets per block. Miners with a greater hash rate have a higher
chance of solving a block and receiving an award.
We operate our mining assets with the primary intent of
accumulating digital assets 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, which we believe enables our access to ASICs on
advantageous terms.
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 facilities in
New York are maintained by
Blockfusion USA, Inc.
("Blockfusion") and Digihost Technologies Inc. ("Digihost")
We are a sustainability-focused bitcoin mining company. On
June 24, 2021, we signed the Crypto
Climate Accord, a private sector-led initiative that aims to
decarbonize the crypto and blockchain sectors.
On December 7, 2021, we became a
member of the Bitcoin Mining Council ("BMC"), joining MicroStrategy
and other founding members to promote transparency, share best
practices, and educate the public on the benefits of bitcoin and
bitcoin mining.
Miner Deployments
During the first quarter of 2022, we continued to work with our
hosting partners to deploy our miners in North America. As of March 31, 2022, 36.9% of our currently-owned
fleet, or 9,748 bitcoin miners and 713 Ethereum miners,
representing 0.544 Exahash ("EH/s") and 0.188 Terahash ("TH/s"),
respectively, was deployed in North
America.
As of December 31, 2021, 27.8% of
our currently-owned fleet, or 7,710 bitcoin miners representing
0.457 EH/s was deployed in North
America.
Power and Hosting Overview
During the first quarter of 2022, our hosting partners continued
to prepare sites to deliver our contracted hosting capacity,
bringing additional power online for our miners.
As of March 31, 2022, Compute
North provided approximately 20 MW of capacity for our miners. Our
overall expected future hosting capacity with Compute North is
approximately 48 MW. We expect the remaining approximately 28 MW of
anticipated hosting deployments to begin following our delivery of
related equipment in the second half of 2022. As previously
announced, during the quarter we signed a renewal hosting agreement
extending the term of a prior agreement for an additional 5 years
for approximately 6.5 MW of our total hosting capacity with Compute
North. In April 2022, we amended and
restated an additional existing hosting agreement for approximately
30 MW of our total hosting capacity with Compute North, to provide
for deployment of our miners at a new site in Texas. The amendment did not materially change
the total hosting capacity to be provided by Compute North.
As of March 31, 2022, our facility
with Blockfusion in Niagara Falls, New
York provided approximately 9.4 MW to power our miners. Upon
completion, this facility is expected to deliver an aggregate of 35
MW to power our miners.
As of March 31, 2022, our
facilities with Digihost in North
Tonawanda and Buffalo, New
York provided approximately 7 MW to power our miners. Upon
completion, these combined facilities are expected to deliver an
aggregate of 20 MW to power our miners. Additionally, Digihost has
informed us that they continue to work to identify a location to
fulfill the remaining 100 MW of contracted hosting capacity
pursuant to our agreements.
As of March 31, 2022, our facility
with Core Scientific in Georgia
provided approximately 0.3 MW to power our miners.
Miner Fleet Overview
As of December 31, 2021, we had
27,744 miners for bitcoin mining, with a total maximum hash rate of
1.60 EH/S. As of March 31, 2022, we
had 27,644 miners for bitcoin mining and 731 miners for Ethereum
mining, with a total maximum hash rate of 1.6 EH/S and 0.3 TH/s,
respectively. As of May 31, 2022, we
had 33,373 miners for bitcoin mining and 731 miners for Ethereum
mining, with a total maximum hash rate of 2.17 EH/S and 0.3 TH/s,
respectively.
Our fleet of owned miners comprised the following models
as of March 31,
2022:
Model
|
|
Owned as
of
March 31,
2022
|
|
MicroBT Whatsminer
M21S
|
|
|
16,196
|
|
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 number for
bitcoin miners
|
|
|
27,644
|
|
Innosilicon A10 series
ETH miners
|
|
|
731
|
|
Total
miners
|
|
|
28,375
|
|
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. As of the date of this
report, the Company has received 5,023 miners. The final
installment is expected to ship in June
2022. Pro forma for these announced purchases, our maximum
total hash rate is expected to be approximately 2.67 EH/s for
bitcoin mining.
On March 27, 2022, we entered into
Asset Purchase Agreements with each of four unaffiliated sellers of
bitcoin mining computers, from whom we acquired an aggregate of 706
bitcoin miners on the spot market, including 184 S19 J Pro miners;
197 S19 miners; 197 S19 miners; and 128 S19/S19 Pro miners,
respectively. The acquired miners were delivered during
April 2022.
The Company sold 100 MicroBT Whatsminer M21S miners during the
quarter ended March 31, 2022.
Bitcoin Production
From the inception of our bitcoin mining business in
February 2020 to March 31, 2022, we earned an aggregate of
3,769.95 bitcoins. The following table presents the number of
bitcoins mined on a quarterly basis:
The following table presents our bitcoin mining activities for
the three-month ended March 31,
2022.
|
|
Number
of
bitcoins (1)
|
|
|
Amount
(2)
|
|
|
|
|
|
|
|
|
Balance at December
31, 2021
|
|
|
808.23
|
|
|
$
|
35,025,158
|
|
Receipt of BTC from
mining services
|
|
|
194.48
|
|
|
|
8,031,627
|
|
Sales of and payments
made in BTC
|
|
|
(170.57)
|
|
|
|
(7,231,067)
|
|
Realized gain on sale
of BTC
|
|
|
-
|
|
|
|
1,614,539
|
|
Impairment of
BTC
|
|
|
-
|
|
|
|
(9,887,087)
|
|
Balance at March 31,
2022
|
|
|
832.14
|
|
|
$
|
27,553,170
|
|
(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 obtained from
CryptoCompare, 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. Several of our
major mining locations in the US and Canada provide affordable access to partially
carbon-free energy and other sustainability-related solutions, in
varying amounts depending on location, including components of
hydroelectric, solar, wind, nuclear and other carbon-free
generation sources, based on information provided by our hosts and
publicly available data, which we believe helps mitigate the
environmental impact of our operations. We work with an independent
ESG (Environmental, Social and Governance) consultant to
self-monitor and adopt an environmental policy to 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. 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 shift towards our
goal of 100% clean energy usage.
On December 7, 2021, the Company
became a member of the Bitcoin Mining Council ("BMC"), joining
MicroStrategy and other founding members to promote transparency,
share best practices, and educate the public on the benefits of
bitcoin and bitcoin mining.
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. The Company is actively monitoring this
situation and the possible effects on its financial condition,
liquidity, operations, suppliers, and industry.
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. Based on our current assessment, we do not expect any
material impact on our long-term strategic plans, operations and
liquidity.
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.
Results of operations
Results of Operations for the Three Months Ended March 31, 2022 and 2021
The following table summarizes the results of our operations
during the three months ended March 31,
2022 and 2021, respectively, and provides information
regarding the dollar increase or (decrease) during period.
|
|
For the
Three Months Ended
March 31,
|
|
|
Variance
|
|
|
|
2022
|
|
|
2021
|
|
|
in
Amount
|
|
Revenue from
digital asset mining
|
|
$
|
8,573,747
|
|
|
$
|
43,953,050
|
|
|
|
(35,379,303)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
(exclusive of depreciation and amortization shown
below)
|
|
|
(4,268,251)
|
|
|
|
(12,467,728)
|
|
|
|
8,199,477
|
|
Depreciation and
amortization expenses
|
|
|
(3,799,629)
|
|
|
|
(3,650,374)
|
|
|
|
(149,255)
|
|
General and
administrative expenses
|
|
|
(4,272,695)
|
|
|
|
(2,225,170)
|
|
|
|
(2,047,525)
|
|
Total operating
expenses
|
|
|
(12,340,575)
|
|
|
|
(18,343,272)
|
|
|
|
6,002,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income from
Operations
|
|
|
(3,766,828)
|
|
|
|
25,609,778
|
|
|
|
(29,376,606)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on
exchange of digital assets
|
|
|
1,637,023
|
|
|
|
10,456,497
|
|
|
|
(8,819,474)
|
|
Impairment of digital
assets
|
|
|
(10,045,603)
|
|
|
|
-
|
|
|
|
(10,045,603)
|
|
Gain from disposal of
property and equipment
|
|
|
174,568
|
|
|
|
-
|
|
|
|
174,568
|
|
Gain from sale of
investment security
|
|
|
1,039,999
|
|
|
|
-
|
|
|
|
1,039,999
|
|
Other (expenses)
income, net
|
|
|
(570,890)
|
|
|
|
2,190
|
|
|
|
(573,080)
|
|
Total other
(expenses) income, net
|
|
|
(7,764,903)
|
|
|
|
10,458,687
|
|
|
|
(18,223,590)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income before
income taxes
|
|
|
(11,531,731)
|
|
|
|
36,068,465
|
|
|
|
(47,600,196)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefits
(expenses)
|
|
|
1,351,942
|
|
|
|
(282,142)
|
|
|
|
1,634,084
|
|
Net (loss)
income
|
|
$
|
(10,179,789)
|
|
|
$
|
35,786,323
|
|
|
|
(45,966,112)
|
|
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 digital assets 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 three months ended March 31,
2022, we received 194.48 bitcoins and 189.26 ETHs from
one mining pool operator. As of March 31,
2022, our maximum hash rate was at an aggregate of 1.60 EH/s
and 0.3 TH/s for our bitcoin miners and ETH miners, respectively.
For the three months ended March 31,
2022, we recognized revenue of $8,031,627 and $542,120 from bitcoin mining services and ETH
mining services, respectively.
For the three months ended March 31,
2021, we received 1,013.40 bitcoins from two mining
pool operators. As of March 31, 2021,
our maximum hash rate was 2,264.5 Ph/s. For the three months ended
March 31, 2021, we recognized revenue
of $43,953,050 from bitcoin mining
services.
Our revenues from bitcoin mining services decreased by
$35,921,423, or 82%, to $8,031,627 for the three months ended
March 31, 2022 from $43,953,050 for the three months ended
March 31, 2021. The decrease was
primarily due to our migrated miners awaiting installation as part
of our ongoing miner redeployment program.
We expect to continue to invest in miners to increase the hash
rate capacity of both bitcoin miners and ETH miners. As a result,
we expect an increase in revenue during fiscal year 2022, subject
to the price of bitcoin and ETH, network difficulty and other
factors.
Cost of revenues
Cost of revenues 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 March 31,
2022, our cost of revenues was $4,268,251, representing a decrease of
$8,199,477 from $12,467,728 for the three months ended
March 31, 2021. The decrease was
primarily attributable to decreased utility costs as a result of
our fleet being partially offline awaiting redeployment.
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 March 31,
2022 and 2021, depreciation and amortization expenses were
$3,799,629 and $3,650,374, respectively, based on an estimated
useful miner life of 3 years.
General and administrative expenses
For the three months ended March 31,
2022, our general and administrative expenses, totaling
$4,272,695, were primarily comprised
of professional and consulting expenses of $1,919,894, salary and bonus expenses of
$601,021, shared-based compensation
expenses of $463,900 related to RSUs
and share options issued to our employees, transportation expenses
of $396,693 incurred to deliver
miners to our hosting partners, and employee travel expenses of
$130,532.
For the three months ended March 31,
2021, our general and administrative expenses were primarily
comprised of professional and consulting expenses of $1,025,785, transportation expenses of
$667,231 to relocate certain miners
from China to the US, payroll
expenses of $351,362 and office
expenses of $77,362.
Realized gain on exchange of digital assets
Digital assets are recorded at cost less impairment. 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 March 31, 2022, we recorded a gain of
$1,637,023 from the exchange of
170.57 bitcoins and 29.38 ETH. For the three
months ended March 31, 2021, we
recorded a gain of $10,456,497 from
the exchange of 656.58 bitcoins.
Impairment of digital assets
Impairment of digital assets was $10,045,603 and $nil for the three months ended
March 31, 2022 and 2021,
respectively, which was recorded to reflect our digital assets at
the lower of carrying value or fair value as of March 31, 2022 and 2021.
Gain from sale of investment security
During the three months ended March 31,
2022, we sold a portion of our investment in one privately
held company with cost of $666,666
for consideration of $1,706,665. We
recognized a gain of $1,039,999 from
the sale which was recorded in the account of "gain from sale of
investment security".
Gain from disposal of property and equipment
For the three months ended March 31,
2022, we sold 100 bitcoin miners to one third party
purchaser for total consideration of $212,800. On the date of the transaction, the
original cost and accumulated depreciation of these miners were
$51,384 and $13,152, respectively. The Company recognized a
gain of $174,568 from the sale of
miners which was recorded in the account of "gain from disposal of
property and equipment".
Income tax benefits (expenses)
Income tax benefits were $1,351,942 for the three months ended
March 31, 2022, which was comprised
of income tax benefits of $1,345,143
from our US operations, unrecognized tax benefit of $(69,182) from our Hong
Kong operations, a tax benefit of $12,138 from our Hong
Kong operations, and a tax benefit of $63,843 from other jurisdictions. The
unrecognized tax benefit is related to uncertain Hong Kong profits tax positions due to
offshore non-taxable claim lodged on the business profits and tax
deduction claim on share-based compensation which is however
subject to review and approval by the Hong Kong tax authority.
Income tax expense was $(282,142)
for the three months ended March 31,
2021, which was comprised of income tax expenses of
$(282,142) from our US operations. We
did not have assessable profits in Hong
Kong that is due to an offshore non-taxable claim lodged on
the business profits, which is however subject to review and
approval by the Hong Kong tax
authority. In case the offshore non-taxable claim is disallowed,
Bit Digital Hong Kong Limited ("BT HK") might be in a tax loss
position provided that the amount of expenditure on the computer
equipment would be fully allowed by the Hong Kong tax authority as tax deduction.
Net (loss) income and (loss) earnings per share
For the three months ended March 31,
2022, our net loss was $10,179,789, representing a change of
$45,966,112 from a net income of
$35,786,323 for the same period ended
March 31, 2021.
Basic and diluted loss per share was $0.15 for the three months ended March 31, 2022. Basic and diluted earnings per
share was $0.74 for the three months
ended March 31, 2021. Weighted
average number of shares was 69,627,314 and 48,291,310 for the
three months ended March 31, 2022 and
2021, 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 (loss) 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
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Reconciliation of
non-GAAP income from operations:
|
|
|
|
|
|
|
Income (Loss) from
Operations
|
|
$
|
(3,766,828)
|
|
|
$
|
25,609,778
|
|
Depreciation and
amortization expenses
|
|
|
3,799,629
|
|
|
|
3,650,374
|
|
Share based
compensation expenses
|
|
|
463,900
|
|
|
|
-
|
|
Non-GAAP Income from
Operations
|
|
$
|
496,701
|
|
|
$
|
29,260,152
|
|
The following is a reconciliation of non-GAAP net income (loss),
which excludes the impact of (i) depreciation of property and
equipment, (ii) share based compensation expenses, (iii) impairment
of digital assets, (iv) gain from disposal of property and
equipment, (v) gain from sale of investment security and (vi) gain
from sales of a subsidiary, to its most directly comparable GAAP
measures for the periods indicated:
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Reconciliation of
non-GAAP net income:
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(10,179,789)
|
|
|
$
|
35,786,323
|
|
Depreciation and
amortization expenses
|
|
|
3,799,629
|
|
|
|
3,650,374
|
|
Share based
compensation expenses
|
|
|
463,900
|
|
|
|
-
|
|
Impairment of digital
assets
|
|
|
10,045,603
|
|
|
|
-
|
|
Gain from disposal of
property and equipment
|
|
|
(174,568)
|
|
|
|
-
|
|
Gain from sale of
investment security
|
|
|
(1,039,999)
|
|
|
|
-
|
|
Gain from sales of a
subsidiary
|
|
|
(52,383)
|
|
|
|
-
|
|
Non-GAAP Net
Income
|
|
$
|
2,862,393
|
|
|
$
|
39,436,697
|
|
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Reconciliation of
non-GAAP Basic and Dilutive Earnings (Loss) Per
Share:
|
|
|
|
|
|
|
Basic and dilutive
(loss) earnings per share
|
|
$
|
(0.15)
|
|
|
$
|
0.74
|
|
Depreciation and
amortization expenses
|
|
|
0.05
|
|
|
|
0.08
|
|
Share based
compensation expenses
|
|
|
0.01
|
|
|
|
-
|
|
Impairment of digital
assets
|
|
|
0.14
|
|
|
|
-
|
|
Gain from disposal of
property and equipment
|
|
|
(0.00)
|
|
|
|
-
|
|
Gain from sale of
investment security
|
|
|
(0.01)
|
|
|
|
-
|
|
Gain from sales of a
subsidiary
|
|
|
(0.00)
|
|
|
|
-
|
|
Non-GAAP basic and
dilutive earnings per share
|
|
$
|
0.04
|
|
|
$
|
0.82
|
|
Liquidity and capital resources
To date, we have financed our operations primarily through cash
flows from operations, 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 March
31, 2022, we had working capital of $73,400,296. Working capital included digital
assets of $43,899,644 as of
March 31, 2022.
Revenue from Mining Operations
Funding our operations on a going-forward basis will rely
significantly on our ability to continue to mine digital assets and
the spot or market price of the digital assets we mine. We expect
to generate ongoing revenues from the production of digital assets,
primarily bitcoin, in our mining facilities. Our ability to
liquidate digital assets 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. Furthermore, regardless
of our ability to generate revenue from our digital 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 are 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
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Net Cash (Used in)
Operating Activities
|
|
$
|
(6,663,428)
|
|
|
$
|
(2,537,979)
|
|
Net Cash (Used in)
Provided by Investing Activities
|
|
|
(4,109,195)
|
|
|
|
1,080,412
|
|
Net Cash (Used in)
Provided by Financing Activities
|
|
|
(2,219,355)
|
|
|
|
1,280,000
|
|
Cash, cash equivalents
and restricted cash, beginning of period
|
|
|
42,398,528
|
|
|
|
405,133
|
|
Cash, cash equivalents
and restricted cash, end of period
|
|
$
|
29,406,550
|
|
|
$
|
227,566
|
|
Operating Activities
Net cash used in operating activities was $6,663,428 for the three months ended
March 31, 2022, derived mainly from
(i) net loss of $10,179,789 for the
three months ended March 31, 2022
adjusted for depreciation expenses of miners of $3,799,629, gain from exchange of digital assets
of $1,637,023, impairment of digital
assets of $10,045,603, and income
from sale of investment security of $1,039,999, and (ii) net changes in our operating
assets and liabilities, principally comprising of (a) an increase
in digital assets of $8,573,730 as rewards to us for the
provision of mining services, (b) an increase in accounts payable
of $1,420,280 primarily because we
paid maintenance service fees of $405,530 in digital assets and we delayed
payments of maintenance service fees to one hosting partner, and
(c) an increase in other payables and accrued expenses of
$856,218 as we incurred increasing
travel fees in March 2022.
Net cash used in operating activities was $2,537,979 for the three months ended
March 31, 2021, mainly derived from
(i) net income of $35,786,323 for the
three months ended March 31, 2021
adjusted for depreciation expenses of miners of $3,650,374 and gain from exchange of digital
assets of $10,456,497, and (ii) net
of changes in our operating assets and liabilities, principally
comprising of (a) an increase in digital assets of $43,190,371 as rewards to us for provision of
mining services, (b) an increase in other current assets of
$1,336,681, primarily attributable to
payment of deposits of $1,296,512 to
two service providers who paid utility charges in mining facilities
on behalf of us, and (c) an increase in accounts payable of
$12,757,378, primarily because we paid maintenance services fees of
$12,726,320 in cryptocurrencies.
Investing Activities
Net cash used in investing activities was $4,109,195 for the three months ended
March 31, 2022, primarily
attributable to deposits made for miner purchase of $11,052,500 and loss of cash of $59,695 from sales of an inactive subsidiary,
partially offset by cash proceeds of $7,003,000 from sales of digital assets.
Net cash provided by investing activities was $1,080,412 for the three months ended
March 31, 2021, primarily provided by
cash proceeds of $1,766,950 from
sales of digital assets, partially offset by the purchases of
miners of $686,538.
Financing Activities
Net cash used in financing activities was $2,219,355 for the three months ended
March 31, 2022, primarily
attributable to the payment of liquidated damage fees of
$2,219,355 as the registration
statement for resale of shares issued in one of our private
placements was not declared effective by the SEC until January 25, 2021.
Net cash provided by financing activities was $1,280,000 for the three months ended
March 31, 2021, primarily provided by
net proceeds of $1,280,000 from the
issuance of convertible notes to Ionic Ventures LLC.
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
March 31, 2022.
BIT DIGITAL,
INC.
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31,
2022 and December 31, 2021
(Expressed in US
dollars, except for the number of shares)
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
28,086,550
|
|
|
$
|
42,398,528
|
|
Restricted
cash
|
|
|
1,320,000
|
|
|
|
-
|
|
Digital
assets
|
|
|
43,899,644
|
|
|
|
51,112,146
|
|
Other current
assets
|
|
|
4,968,525
|
|
|
|
3,050,616
|
|
Total Current
Assets
|
|
|
78,274,719
|
|
|
|
96,561,290
|
|
|
|
|
|
|
|
|
|
|
Non-Current
Assets
|
|
|
|
|
|
|
|
|
Investment
security
|
|
|
333,334
|
|
|
|
1,000,000
|
|
Deposits for property
and equipment
|
|
|
54,147,381
|
|
|
|
43,094,881
|
|
Property and equipment,
net
|
|
|
28,651,298
|
|
|
|
32,489,158
|
|
Deferred tax
assets
|
|
|
849,944
|
|
|
|
58,081
|
|
Other non-current
assets
|
|
|
7,305,223
|
|
|
|
6,714,571
|
|
Total Non-Current
Assets
|
|
|
91,287,180
|
|
|
|
83,356,691
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
169,561,899
|
|
|
$
|
179,917,981
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payables
|
|
$
|
3,537,633
|
|
|
$
|
2,608,899
|
|
Income tax
payable
|
|
|
348,253
|
|
|
|
559,774
|
|
Other payables and
accrued liabilities
|
|
|
988,537
|
|
|
|
1,875,933
|
|
Total Current
Liabilities
|
|
|
4,874,423
|
|
|
|
5,044,606
|
|
|
|
|
|
|
|
|
|
|
Non-Current
Liabilities
|
|
|
|
|
|
|
|
|
Deferred tax
liabilities
|
|
|
-
|
|
|
|
462,372
|
|
Long-term income tax
payable
|
|
|
2,836,458
|
|
|
|
2,767,276
|
|
Total Non-Current
Liabilities
|
|
|
2,836,458
|
|
|
|
3,229,648
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
7,710,881
|
|
|
|
8,274,254
|
|
|
|
|
|
|
|
|
|
|
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 March 31,
2022 and December 31, 2021,
respectively
|
|
|
9,050,000
|
|
|
|
9,050,000
|
|
Ordinary shares, $0.01
par value, 340,000,000 and 50,000,000 shares authorized,
69,643,831 and 69,591,389 shares issued and
outstanding of March 31, 2022 and
December 31, 2021, respectively
|
|
|
696,438
|
|
|
|
695,914
|
|
Treasury stock, at
cost, 129,986 and 115,514 shares as of March 31, 2022 and
December 31, 2021, respectively
|
|
|
(1,171,679)
|
|
|
|
(1,094,859)
|
|
Additional paid-in
capital
|
|
|
183,332,535
|
|
|
|
182,869,159
|
|
Accumulated
deficit
|
|
|
(30,056,276)
|
|
|
|
(19,876,487)
|
|
Total Shareholders'
Equity
|
|
|
161,851,018
|
|
|
|
171,643,727
|
|
Total Liabilities
and Shareholders' Equity
|
|
$
|
169,561,899
|
|
|
$
|
179,917,981
|
|
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
(LOSS) INCOME
For the Three
Months Ended March 31, 2022 and 2021
(Expressed in US
dollars, except for the number of shares)
|
|
|
|
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Revenue from
digital asset mining
|
|
$
|
8,573,747
|
|
|
$
|
43,953,050
|
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
|
Cost of revenue
(exclusive of depreciation and amortization shown below)
|
|
|
(4,268,251)
|
|
|
|
(12,467,728)
|
|
Depreciation and
amortization expenses
|
|
|
(3,799,629)
|
|
|
|
(3,650,374)
|
|
General and
administrative expenses
|
|
|
(4,272,695)
|
|
|
|
(2,225,170)
|
|
Total operating
expenses
|
|
|
(12,340,575)
|
|
|
|
(18,343,272)
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income from
Operations
|
|
|
(3,766,828)
|
|
|
|
25,609,778
|
|
|
|
|
|
|
|
|
|
|
Realized gain on
exchange of digital assets
|
|
|
1,637,023
|
|
|
|
10,456,497
|
|
Impairment of digital
assets
|
|
|
(10,045,603)
|
|
|
|
-
|
|
Gain from disposal of
property and equipment
|
|
|
174,568
|
|
|
|
-
|
|
Gain from sale of
investment security
|
|
|
1,039,999
|
|
|
|
-
|
|
Other (expense) income,
net
|
|
|
(570,890)
|
|
|
|
2,190
|
|
Total other
(expenses) income, net
|
|
|
(7,764,903)
|
|
|
|
10,458,687
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income before
income taxes
|
|
|
(11,531,731)
|
|
|
|
36,068,465
|
|
|
|
|
|
|
|
|
|
|
Income tax benefits
(expenses)
|
|
|
1,351,942
|
|
|
|
(282,142)
|
|
Net (loss) income
and comprehensive (loss) income
|
|
$
|
(10,179,789)
|
|
|
$
|
35,786,323
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of ordinary share outstanding
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
|
|
69,627,314
|
|
|
|
48,291,310
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
per share
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
|
$
|
(0.15)
|
|
|
$
|
0.74
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
BIT DIGITAL,
INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF
EQUITY
For the Three
Months Ended March 31, 2022 and 2021
(Expressed in U.S.
dollars, except for the number of shares)
|
|
|
|
Preferred
Shares
|
|
|
Common
Shares
|
|
|
Treasury
|
|
|
Additional
paid-in
|
|
|
Retained
earnings
(Accumulated
|
|
|
Total
stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Par Value
|
|
|
Stocks
|
|
|
capital
|
|
|
deficits)
|
|
|
equity
|
|
Balance,
December 31,
2020
|
|
|
-
|
|
|
|
-
|
|
|
|
48,043,788
|
|
|
$
|
480,438
|
|
|
$
|
-
|
|
|
$
|
53,219,626
|
|
|
$
|
(15,700,489)
|
|
|
$
|
37,999,575
|
|
Issuance of
ordinary
shares
pursuant to
a private
placement
|
|
|
-
|
|
|
|
-
|
|
|
|
262,082
|
|
|
|
2,621
|
|
|
|
-
|
|
|
|
1,176,747
|
|
|
|
-
|
|
|
|
1,179,368
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,786,323
|
|
|
|
35,786,323
|
|
Balance,
March 31,
2021
|
|
|
-
|
|
|
|
-
|
|
|
|
48,305,870
|
|
|
$
|
483,059
|
|
|
$
|
-
|
|
|
$
|
54,396,373
|
|
|
$
|
20,085,834
|
|
|
$
|
74,965,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31,
2021
|
|
|
1,000,000
|
|
|
|
9,050,000
|
|
|
|
69,591,389
|
|
|
$
|
695,914
|
|
|
$
|
(1,094,859)
|
|
|
$
|
182,869,159
|
|
|
$
|
(19,876,487)
|
|
|
$
|
171,643,727
|
|
Withholding
of ordinary
shares for
payment of
employee
withholding
taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(76,820)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(76,820)
|
|
Issuance of
ordinary
shares in
connection
with share-
based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
52,442
|
|
|
|
524
|
|
|
|
-
|
|
|
|
450, 472
|
|
|
|
-
|
|
|
|
450,996
|
|
Issuance of
share
options in
connection
with share-
based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,904
|
|
|
|
-
|
|
|
|
12,904
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,179,789)
|
|
|
|
(10,179,789)
|
|
Balance,
March 31,
2022
|
|
|
1,000,000
|
|
|
|
9,050,000
|
|
|
|
69,643,831
|
|
|
$
|
696,438
|
|
|
$
|
(1,171,679)
|
|
|
$
|
183,332,535
|
|
|
$
|
(30,056,276)
|
|
|
$
|
161,851,018
|
|
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
Three Months Ended March 31, 2022 and 2021
(Expressed in US
dollars)
|
|
|
|
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(10,179,789)
|
|
|
$
|
35,786,323
|
|
Adjustments to
reconcile net (loss) income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation of property and equipment
|
|
|
3,799,629
|
|
|
|
3,650,374
|
|
Gain from disposal of property and equipment
|
|
|
(174,568)
|
|
|
|
-
|
|
Realized gain on exchange of digital assets
|
|
|
(1,637,023)
|
|
|
|
(10,456,497)
|
|
Impairment of digital assets
|
|
|
10,045,603
|
|
|
|
-
|
|
Gain from sale of investment security
|
|
|
(1,039,999)
|
|
|
|
-
|
|
Share based compensation expenses in connection with issuance
of restricted shares
and share options
|
|
|
463,900
|
|
|
|
-
|
|
Liquidation damage expenses
|
|
|
619,355
|
|
|
|
-
|
|
Gain from divestiture of a subsidiary
|
|
|
(52,383)
|
|
|
|
-
|
|
Deferred tax (benefits) expenses
|
|
|
(1,254,235)
|
|
|
|
30,223
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Digital assets
|
|
|
(8,573,730)
|
|
|
|
(43,190,371)
|
|
Other current assets
|
|
|
(223,745)
|
|
|
|
(1,336,681)
|
|
Other noncurrent assets
|
|
|
(590,652)
|
|
|
|
-
|
|
Accounts payables
|
|
|
1,420,280
|
|
|
|
12,757,378
|
|
Income tax payable
|
|
|
(211,471)
|
|
|
|
251,919
|
|
Long-term income tax payable
|
|
|
69,182
|
|
|
|
-
|
|
Other payables and accrued liabilities
|
|
|
856,218
|
|
|
|
(30,647)
|
|
Net Cash Used in
Operating Activities
|
|
|
(6,663,428)
|
|
|
|
(2,537,979)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
|
|
-
|
|
|
|
(686,538)
|
|
Deposits for property
and equipment
|
|
|
(11,052,500)
|
|
|
|
-
|
|
Proceeds from sales of
digital assets
|
|
|
7,003,000
|
|
|
|
1,766,950
|
|
Loss of cash in
connection with divestiture of a subsidiary
|
|
|
(59,695)
|
|
|
|
-
|
|
Net Cash (Used in)
Provided by Investing Activities
|
|
|
(4,109,195)
|
|
|
|
1,080,412
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
Payment of liquidated
damages related to private placement transactions
|
|
|
(2,219,355)
|
|
|
|
-
|
|
Proceeds from issuance
of convertible notes, net of issuance costs
|
|
|
-
|
|
|
|
1,280,000
|
|
Net Cash (Used in)
Provided by Financing Activities
|
|
|
(2,219,355)
|
|
|
|
1,280,000
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash,
cash equivalents and restricted cash
|
|
|
(12,991,978)
|
|
|
|
(177,567)
|
|
Cash, cash equivalents
and restricted cash, beginning of period
|
|
|
42,398,528
|
|
|
|
405,133
|
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
29,406,550
|
|
|
$
|
227,566
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash
Flow Information
|
|
|
|
|
|
|
|
|
Cash paid for interest
expense
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income
tax
|
|
$
|
3,500
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash
Transactions of Investing and Financing Activities
|
|
|
|
|
|
|
|
|
Collection of USDC from
private placement
|
|
$
|
-
|
|
|
$
|
1,179,368
|
|
Investment in an
investment security in USDC
|
|
$
|
-
|
|
|
$
|
(1,000,000)
|
|
Purchases of property
and equipment in USDT
|
|
$
|
-
|
|
|
$
|
(13,487,791)
|
|
Purchases of property
and equipment in USDC
|
|
$
|
-
|
|
|
$
|
(895,893)
|
|
Repayment of USDC to a
related party
|
|
$
|
-
|
|
|
$
|
(329,722)
|
|
Receivable due from a
third party for sales of investment security
|
|
$
|
1,706,665
|
|
|
$
|
-
|
|
Collection of USDC from
sales of property and equipment
|
|
$
|
212,800
|
|
|
$
|
-
|
|
Reconciliation of
cash, cash equivalents and restricted cash
|
|
|
|
|
|
March
31,
|
|
|
December 31,
|
|
|
|
2022
|
|
|
2021
|
|
Cash and cash
equivalents
|
|
$
|
28,086,550
|
|
|
$
|
42,398,528
|
|
Restricted
cash
|
|
|
1,320,000
|
|
|
|
-
|
|
Cash, cash
equivalents and restricted cash
|
|
$
|
29,406,550
|
|
|
$
|
42,398,528
|
|
The accompanying notes are an integral part of these
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 unaudited condensed 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
Strategies")
|
|
● 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.
|
Disposition of Golden Bull USA
On June 3, 2019, Golden Bull
USA, Inc. was incorporated in the
State of New York as a
wholly-owned subsidiary of the Company. This entity was formed to
develop a car rental business in the
United States, which never commenced and was terminated. On
March 16, 2022, the Company entered
into a Share Purchase Agreement with Star Choice Investments
Limited ("Star Choice"), an
unrelated Hong Kong entity.
Pursuant to the agreement, Star
Choice agreed to purchase one hundred (100%) percent of the
outstanding shares of Golden Bull USA, Inc. for $10.00 and other good and valuable consideration.
The sale was completed on March 16,
2022.
On the same date, the parties completed all of the share
transfer registration procedures as required by the laws of
New York State and all other
closing conditions had been satisfied. As a result, the disposition
contemplated by the agreement was completed. Upon completion of the
disposition, the Purchaser became the sole shareholder of Golden
Bull USA and assumed all assets
and obligations of Golden Bull USA. Upon the closing of the transaction, the
Company does not bear any contractual commitment or obligation to
the business of Golden Bull USA,
nor to the Purchaser.
Management believes that the disposition of Golden Bull
USA does not represent a strategic
shift that has (or will have) a major effect on the Company's
operations and financial results. The disposition is not accounted
as discontinued operations in accordance with ASC 205-20 (see Note
14).
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of
consolidation
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
March 31, 2022 and for the three
months ended March 31, 2022 and 2021
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, 2021, which was filed
with the SEC on April 15, 2022.
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, 2021. The results of operations for
the three months ended March 31, 2022
and 2021 are not necessarily indicative of the results for the full
years.
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. Warrants were measured at fair value using
unobservable inputs and categorized in Level 3 of the fair value
hierarchy (Note 9).
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Digital assets
Digital assets (including bitcoin, ETH and USDC) are included in
current assets in the accompanying unaudited condensed 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 digital assets 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 unaudited
condensed consolidated statements of cash flows, while digital
assets awarded to the Company through its mining activities are
included within operating activities on the accompanying unaudited
condensed consolidated statements of cash flows. The sales of
digital assets are included within investing activities in the
accompanying unaudited condensed 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
unaudited condensed 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.
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.
Digital asset 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
digital assets award the mining pool operator receives, 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 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 digital assets award received is determined
using the quoted price of the related digital assets 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.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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 stock 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.
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 unaudited condensed consolidated
financial statements for the three months ended March 31, 2022 and 2021 were not retroactively
adjusted.
Reclassification
Certain items in the financial statements of comparative period
have been reclassified to conform to the financial statements for
the current period. The reclassification has no impact on the total
assets and total liabilities as of March 31,
2022 or on the statements of operations for the three months
ended March 31, 2022.
Recent accounting pronouncements
The Company continually assesses any new accounting
pronouncements to determine their applicability. When it is
determined that a new accounting pronouncement affects the
Company's financial reporting, the Company undertakes a study to
determine the consequences of the change to its consolidated
financial statements and assures that there are proper controls in
place to ascertain that the Company's consolidated financial
statements properly reflect the change.
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.
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. 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 2020-06 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:
|
|
March 31,
2022
|
|
|
December 31,
2021
|
|
|
|
|
|
|
|
|
BTC
|
|
$
|
27,553,170
|
|
|
$
|
35,025,158
|
|
USDC
|
|
|
15,768,934
|
|
|
|
15,829,464
|
|
ETH
|
|
|
577,540
|
|
|
|
257,524
|
|
Total
|
|
$
|
43,899,644
|
|
|
$
|
51,112,146
|
|
For the three months ended March 31,
2022, the Company recognized impairment loss of $10,045,603 on digital assets, consisting of
$9,887,087 on BTC and $158,516 on ETH, respectively. For the three
months ended March 31, 2021, the
Company did not recognize impairment on digital assets.
Additional information about digital assets
The following table presents additional information about BTC
for the three months ended March 31,
2022 and 2021, respectively:
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
35,025,158
|
|
|
$
|
6,237,917
|
|
Receipt of BTC from
mining services
|
|
|
8,031,627
|
|
|
|
43,953,050
|
|
Sales of BTC in
exchange of cash
|
|
|
(6,803,200)
|
|
|
|
(1,766,950)
|
|
Payment of BTC for
service charges in mining facilities
|
|
|
(405,530)
|
|
|
|
(12,726,320)
|
|
Payment of BTC for
other expenses
|
|
|
(22,337)
|
|
|
|
(17,461)
|
|
Exchange of BTC into
USDC and USDT
|
|
|
-
|
|
|
|
(15,843,545)
|
|
Lending of BTC to a
third party
|
|
|
-
|
|
|
|
(1,148,593)
|
|
Realized gain on
exchange of BTC
|
|
|
1,614,539
|
|
|
|
10,456,497
|
|
Impairment of
BTC
|
|
|
(9,887,087)
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
27,553,170
|
|
|
$
|
29,144,595
|
|
The following table presents additional information about ETH
for the three months ended March 31,
2022 and 2021, respectively:
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
257,524
|
|
|
$
|
-
|
|
Receipt of ETH from
mining services
|
|
|
542,120
|
|
|
|
-
|
|
Payment of ETH for
service charges in mining facilities
|
|
|
(86,017)
|
|
|
|
-
|
|
Payment of ETH for
other expenses
|
|
|
(55)
|
|
|
|
-
|
|
Realized gain on
exchange of ETH
|
|
|
22,484
|
|
|
|
-
|
|
Impairment of
ETH
|
|
|
(158,516)
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
577,540
|
|
|
$
|
-
|
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
3. DIGITAL ASSETS (CONTINUED)
The following table presents additional information about USDC
for the three months ended March 31,
2022 and 2021, respectively:
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
15,829,464
|
|
|
$
|
56,005
|
|
Receipt of USDC from
sales of property and equipment
|
|
|
212,800
|
|
|
|
-
|
|
Receipt of USDC from
exchange of BTC
|
|
|
-
|
|
|
|
1,430,305
|
|
Receipt of USDC from a
private placement
|
|
|
-
|
|
|
|
1,179,368
|
|
Sales of USDC in
exchange of cash
|
|
|
(199,800)
|
|
|
|
-
|
|
Payment of USDC for
other expenses
|
|
|
(73,530)
|
|
|
|
(433,919)
|
|
Investment in an
investment security
|
|
|
-
|
|
|
|
(1,000,000)
|
|
Purchases of
miners
|
|
|
-
|
|
|
|
(895,893)
|
|
Repayment of borrowings
from a related party
|
|
|
-
|
|
|
|
(329,722)
|
|
Ending
balance
|
|
$
|
15,768,934
|
|
|
$
|
6,144
|
|
The following table presents additional information about USDT
for the three months ended March 31,
2022 and 2021, respectively:
|
|
For the
Three Months Ended
March
31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
Opening
balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Receipt of USDT from
exchange of BTC
|
|
|
-
|
|
|
|
14,413,240
|
|
Payment of USDT for
other expenses
|
|
|
-
|
|
|
|
(714,589)
|
|
Purchases of
miners
|
|
|
-
|
|
|
|
(13,487,791)
|
|
Ending
balance
|
|
$
|
-
|
|
|
$
|
210,860
|
|
4. OTHER CURRENT ASSETS
Other current assets were comprised of the following:
|
|
March 31,
2022
|
|
|
December 31,
2021
|
|
|
|
|
|
|
|
|
Deposits (a)
|
|
$
|
2,981,684
|
|
|
$
|
2,981,684
|
|
Receivable from sales
of investment security (Note 6)
|
|
|
1,706,665
|
|
|
|
-
|
|
Office rental
deposit
|
|
|
41,493
|
|
|
|
41,793
|
|
Others
|
|
|
238,683
|
|
|
|
27,139
|
|
Other current
assets
|
|
$
|
4,968,525
|
|
|
$
|
3,050,616
|
|
|
|
(a)
|
As of March 31, 2022
and December 31, 2021, the balance of deposits represented the
deposits made to three 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.
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
5. PROPERTY AND EQUIPMENT, NET
Property and equipment, net was comprised of the following:
|
|
March 31,
2022
|
|
|
December 31,
2021
|
|
|
|
|
|
|
|
|
Miners for
Bitcoin
|
|
$
|
33,217,475
|
|
|
$
|
33,268,859
|
|
Miners for
ETH
|
|
|
5,829,019
|
|
|
|
5,829,019
|
|
Less: accumulated
depreciation
|
|
|
(10,395,196)
|
|
|
|
(6,608,720)
|
|
Property and
equipment, net
|
|
$
|
28,651,298
|
|
|
$
|
32,489,158
|
|
For the three months ended March 31,
2022, the Company sold 100 miners for bitcoins to one third
party customer for a total consideration of $212,800. On the date of the transaction, the
original cost and accumulated depreciation of these miners were
$51,384 and $13,152, respectively. The Company recognized a
gain of $174,568 from the sale of
miners which was recorded in the account of "gain from disposal of
property and equipment". As of the date of this report, the Company
has collected the consideration in the form of USDC.
For the three months ended March 31,
2022 and 2021, depreciation expenses were $3,799,629 and $3,650,374, respectively.
6. INVESTMENT SECURITY
During the three months ended March 31,
2021, the Company made an investment of $1,000,000, in the form of USDC, in one privately
held company, over which the Company neither has control nor
significant influence through investment in ordinary shares.
During the three months ended March 31,
2022, the Company sold two-thirds (2/3) of the investment
for consideration of $1,706,665. The
Company recognized a gain of $1,039,999 from the sale of investment security
which was recorded in the account of "gain from sale of investment
security".
For the three months ended March 31,
2022 and 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 March 31, 2022 and
December 31, 2021, the Company did
not recognize impairment against the investment security.
7. OTHER NON-CURRENT ASSETS
Other noncurrent assets were comprised of the following:
|
|
March 31,
2022
|
|
|
December 31,
2021
|
|
|
|
|
|
|
|
|
Deposits (a)
|
|
$
|
7,242,571
|
|
|
$
|
6,714,571
|
|
Others
|
|
|
62,652
|
|
|
|
-
|
|
Other non-current
assets
|
|
$
|
7,305,223
|
|
|
$
|
6,714,571
|
|
|
|
(a)
|
As of March 31, 2022
and December 31, 2021, the balance of deposits represented the
deposits made to three 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 over 12
months from the effective date of the agreement.
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
8. SHARE-BASED COMPENSATION
Share-based compensation such as RSUs, incentive and
non-statutory stock options, restricted shares, 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 RSUs 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, under which 11,000 RSUs and 225,000
share options have been granted to employees as of March 31, 2022.
Restricted Stock Units ("RSUs")
As of December 31, 2021, the
Company had 178,676 awarded and unvested RSUs. For the three months
ended March 31, 2021, the Company did
not grant RSUs to employees or non-employees.
A summary of the changes in the RSUs relating to ordinary shares
granted by the Company during the three months ended March 31, 2022 is as follows:
|
|
Number of
RSUs
|
|
|
Weighted
average
grant date
fair
value
|
|
|
|
|
|
|
|
|
Awarded and unvested as
of January 1, 2022
|
|
|
178,676
|
|
|
$
|
13.68
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
Vested
|
|
|
(56,642)
|
|
|
$
|
12.09
|
|
Awarded and unvested as
of March 31, 2022
|
|
|
122,034
|
|
|
$
|
14.54
|
|
Expected to vest as of
March 31, 2022
|
|
|
122,034
|
|
|
$
|
14.54
|
|
As of March 31, 2022, there were
$1,365,237 of unrecognized
compensation costs related to all outstanding RSUs. These amounts
are expected to be recognized over a weighted average period
of 0.83 years.
For the three months ended March 31,
2022, the Company recognized share-based compensation
expense of $453,484 in
connection with the above RSU awards.
Share options
On March 16, 2022, the Company
granted 225,000 share options to three employees under 2021 Second
Plan. All of these share options are subject to a 24-month service
vesting schedule, and vest 1/24 for each month at an exercise price
of $3.17. The fair value of the share
option was determined at $3.17 per
share option, by reference to the closing price on grant date. The
Company recognizes compensation expenses related to those option on
a straight-line basis over the vesting periods. For the three
months ended March 31, 2022, the
Company recognized share-based compensation expenses of
$10,416.
The following table summarized the share option activities for
the three months ended March 31,
2022:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contract
Life (in
years)
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding
on December 31, 2021
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Granted
|
|
|
225,000
|
|
|
$
|
3.17
|
|
|
|
2.00
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Options outstanding
on March 31, 2022
|
|
|
225,000
|
|
|
$
|
3.17
|
|
|
|
1.92
|
|
Vested and exercisable
on March 31, 2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Vested and expected to
vest on March 31, 2022
|
|
|
225,000
|
|
|
$
|
3.17
|
|
|
|
1.92
|
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
9. SHARE CAPITAL
Ordinary shares
As of December 31, 2021, there
were 69,591,389 ordinary shares issued and outstanding.
During the three months ended March 31,
2022, 52,442 ordinary shares were issued to the Company's
officers employees and consultants in settlement of an equal number
of fully vested restricted stock units awarded to such individuals
by the Company pursuant to grants made under the Company's 2021
Plan.
As of March 31, 2022, there were
69,643,831 ordinary shares issued and outstanding.
Preferred shares
As of March 31, 2022 and
December 31, 2021, there were
1,000,000 preferred shares issued and outstanding.
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.
Treasury stock
The Company treats shares withheld for tax purposes on behalf of
employees in connection with the vesting of restricted share grants
as ordinary share repurchases because they reduce the number of
shares that would have been issued upon vesting. For the three
months ended March 31, 2022, the
Company withheld 14,472 shares of its ordinary shares that were
surrendered to the Company for withholding taxes related to
restricted stock vesting valued at $76,820, based on fair value of the withheld
shares on the vesting date. As of March 31,
2022 and December 31, 2021,
the Company had treasury stock of $1,171,679 and $1,094,859, respectively.
Warrants
As of March 31, 2022 and
December 31, 2021, the Company had
outstanding 10,118,046 private placement warrants to purchase an
aggregate of 10,118,046 ordinary shares at an exercise price of
$7.91 per whole share.
In accordance with ASC 815, the Company determined that the
warrants meet the conditions necessary to be classified as equity
because the consideration is indexed to the Company's own equity,
there are no exercise contingencies based on an observable market
not based on its stock or operations, settlement is consistent with
a fixed-for-fixed equity instrument, the agreement contains an
explicit number of shares and there are no cash payment
provisions.
The fair value of the warrants was estimated at $33.3 million using the Black-Scholes model.
Inherent in these valuations are assumptions related to expected
stock-price volatility, expected life, risk-free interest rate and
dividend yield. The Company estimates the volatility of its
ordinary shares based on historical and implied volatilities of
selected peer companies as well as its own that match the expected
remaining life of the warrants. The risk-free interest rate is
based on the U.S. Treasury zero-coupon yield curve on the grant
date for a maturity similar to the expected remaining life of the
warrants. The expected life of the warrants is assumed to be
equivalent to their remaining contractual term. The dividend rate
is based on the historical rate, which the Company anticipates it
to remain at zero.
The following table provides quantitative information regarding
Level 3 fair value measurements inputs for the Company's warrants
at their measurement dates:
|
|
As of
October 4,
2021
|
|
|
|
|
|
Volatility
|
|
|
192.85
|
%
|
Stock price
|
|
|
7.59
|
|
Expected life of the
warrants to convert
|
|
|
3.81
|
|
Risk free
rate
|
|
|
0.97
|
%
|
Dividend
yield
|
|
|
0.0
|
%
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
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
After all bitcoin miners were migrated to North America, BT HK operates under a
cost-plus model for its general and administration services
provided and is currently reimbursed by Bit Digital USA Inc. starting in fiscal year 2022. The
Company is currently engaging a third-party service provider to
perform a benchmark study for transfer pricing purpose. Currently
the mark-up percentage for the general and administration services
provided by BT HK is estimated to be 7% and the Company will update
the percentage, if necessary, once the benchmark study is
finalized. The Company does not expect any material impact as a
result of change on the mark-up.
Our subsidiaries in Hong Kong
are taxed at a reduced rate of 8.25% for assessable profits not
exceeding 2 million HKD and the
remaining assessable profits will be taxed at the standard tax rate
of 16.5% under Hong Kong profits
tax.
According to ASC Topic 740, Income Taxes, ("ASC 740"), the
uncertainty in income taxes shall be recognized in an enterprise's
financial statements and prescribes a recognition threshold and
measurement process for financial statement recognition and
measurement of a tax position taken or expected to be taken in a
tax return. For those benefits to be recognized, a tax position
must be more-likely-than-not to be sustained upon examination by
taxing authorities. Based on the Company's evaluation, the Company
believes that its income tax positions are more-likely-than-not to
be sustained upon audit.
By virtue of the territorial source system adopted in
Hong Kong, BT HK is in the process
of applying for the Offshore Non-taxable Claim on its bitcoin
mining income earned for the three months ended March 31, 2022 and 2021 under Hong Kong profits tax with the Hong Kong
Inland Revenue Department ("HKIRD") on the ground that the said
income is not arising in or derived from Hong Kong. Given the Offshore Non-taxable
Claim is still subject to review and agreement by the HKIRD and
there are uncertainties surrounding the claim as well as the
Company's stock-based compensation deduction tax position, the
Hong Kong subsidiary recorded an
unrecognized tax benefit of $69,182
and $nil as long-term income tax expenses for the three months
ended March 31, 2022 and 2021. The
$69,182 tax expense is for the
incremental interest accrued for the current quarter on the
existing unrecognized tax benefits.
For the three months ended March 31,
2022, BT HK recorded current income tax benefit of
$12,138 for its taxable loss. For BT
Strategies, the Company generated a pre-tax loss of $763,728 and $nil tax expense for the quarter
ended March 31, 2022.
United States of
America
For the US jurisdiction, the Company is subject to federal and
state income taxes on its business operations.
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 Build Back Better Act ("BBB Act"). No material
impact on the Company is expected based on our analysis. We will
continue to monitor the potential impact going forward.
For the three months ended March 31,
2022, the Company is subject to US federal income taxes and
withholding taxes, state income taxes and franchise taxes,
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 continues to expand
its business in the United States.
The Company has not been under any tax examination in the United States since inception.
For the three months ended March 31,
2022 and 2021, the Company incurred income tax and
withholding tax benefits (expenses) as below:
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
Federal income tax
benefits (expenses)
|
|
$
|
239,545
|
|
|
$
|
(251,919)
|
|
State income tax
benefits (expenses)
|
|
|
1,105,598
|
|
|
|
(30,223)
|
|
Total
|
|
$
|
1,345,143
|
|
|
$
|
(282,142)
|
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
10. INCOME TAXES (CONTINUED)
Canada
The Company is subject to both federal and provincial income
taxes for its business operation in Canada for the three months ended March 31, 2022.
For three months ended March 31,
2022 and 2021, the Company incurred Canada federal and state income tax benefits
as below:
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
Federal income tax
benefits
|
|
$
|
41,637
|
|
|
$
|
-
|
|
State income tax
benefits
|
|
|
22,206
|
|
|
|
-
|
|
Total
|
|
$
|
63,843
|
|
|
$
|
-
|
|
Singapore
The Company is subject to corporate income tax for its business
operation in Singapore. The
Company generated a pre-tax loss of $3,051 and $nil tax expense for the quarter ended
March 31, 2022.
Deferred Tax Assets/Liabilities
The Company reviews deferred tax assets for a valuation
allowance based upon whether it is more likely than not that the
deferred tax asset will be fully realized. The Company evaluates
its valuation allowance requirements at end of each reporting
period by reviewing all available evidence, both positive and
negative, and considering whether, based on the weight of that
evidence, a valuation allowance is needed. When circumstances cause
a change in management's judgement about the recoverability of
deferred tax assets, the impact of the change on the valuation
allowance is generally reflected in income from operations. The
future realization of the tax benefit of an existing deductible
temporary difference ultimately depends on the existence of
sufficient taxable income of the appropriate character within the
carryforward period available under applicable tax law. As of
March 31, 2022, the Company applies a
full valuation allowance on the deferred tax assets of Bit Digital
Strategies Limited and Bit Digital Singapore Ptd Ltd.
Unrecognized Tax Benefits
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. For the three months ended March 31, 2022 and 2021, the Company recorded an
unrecognized tax benefit of $69,128
and $nil related to its HK operations and the Company will continue
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. (LOSS) EARNINGS PER SHARE
|
|
For the
Three Months Ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Net (loss)
income
|
|
$
|
(10,179,789)
|
|
|
$
|
35,786,323
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of ordinary share outstanding
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
|
|
69,627,314
|
|
|
|
48,291,310
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings per
share
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
|
$
|
(0.15)
|
|
|
$
|
0.74
|
|
Basic earnings (loss) per share is computed by dividing net
income (loss) attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the period.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue ordinary share were
exercised or converted into ordinary shares or resulted in the
issuance of ordinary shares that then shared in the earnings of the
entity.
For the three months ended March 31,
2022, the unvested RSUs, warrants and preferred shares were
excluded from the calculation of diluted earnings per share because
they were anti-dilutive. For the three months ended March 31, 2021, the Company had no dilutive
shares.
12. RELATED PARTIES
During the Company's normal business operations in the three
months ended March 31, 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.
During the three months ended March 31,
2022, the Company did not enter into any transactions with
related parties except as set forth below.
On March 21, 2022, the Company and
an officer of the Company entered into a Confidential Settlement,
General Release and Separation Agreement (the "Agreement") with a
former employee (the "Employee"). The Employee asserted various
disputes, which the Company settled for a sum of $500,000. The parties entered into a
non-disclosure agreement and agreed to mutual non-disparagement.
The Board of Directors of the Company has retained counsel to
review the matter and will make recommendations if necessary on
policies and procedures.
As of March 31, 2022 and
December 31, 2021, the Company had no
outstanding balances due from or due to related parties.
13. CONTINGENCIES
On January 20, 2021, a securities
class action lawsuit was filed against the Company and its former
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.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
14. DISPOSITION OF GOLDEN BULL USA
On March 16, 2022, the Company
into a share purchase agreement (the "Disposition SPA") with Star
Choice Investments Limited ("Star
Choice"), an unrelated Hong
Kong entity (the "Purchaser"). Pursuant to the Disposition
SPA, the Purchaser purchased Golden Bull USA in exchange for nominal consideration of
$10.00 and other good and valuable
consideration. Golden Bull USA has
been inactive since May 2021. The
disposition was closed on the same date.
On the same date, the parties completed all of the share
transfer registration procedures as required by the laws of
State of New York and all other
closing conditions had been satisfied. As a result, the disposition
contemplated by the Disposition SPA was completed. Upon completion
of the disposition, the Purchaser became the sole shareholder of
Golden Bull USA and assumed all
assets and obligations of Golden Bull USA. Upon the closing of the transaction, the
Company does not bear any contractual commitment or obligation to
the business of Golden Bull USA,
nor to the Purchaser.
Golden Bull USA has been
inactive since May 2020. It did not
generate revenues or incur any operating expenses for the three
months ended March 31, 2022 and 2021.
Golden Bull USA had total assets
of $72,196 and total liabilities of
$124,569, with negative net assets of
$52,373, the absolute value accounted
for 0.03% of the unaudited consolidated net assets of the Company
as of March 31, 2022. The Company
recorded a gain of $52,383 from the
termination in the account of "other income, net" in the
consolidated statements of operations and comprehensive (loss)
income.
Management believes that the disposition of Golden Bull
USA does not represent a strategic
shift that has (or will have) a major effect on the Company's
operations and financial results. The disposition is not accounted
as discontinued operations in accordance with ASC 205-20.
15. SUBSEQUENT EVENTS
On June 9, 2022, the Company and
Riot Blockchain, Inc. ("Riot") entered into a Hashrate Swap
Agreement (the "HSA"). The HSA provides for the exchange of
cryptocurrency mining power ("Hashrate") through the exchange of
bitcoin mining computers. Riot's miners are currently deployed at
the Coinmint LLC ("Coinmint") facility located in Massena, New York (the "Coinmint Facility").
Riot desired to acquire Bit Digital's factory-new miners for future
deployment and Bit Digital desired to acquire Riot's operating
miners for immediate deployment at the Coinmint Facility. As
additional consideration to Bit Digital to exchange its factory-new
miners for Riot's operating miners, Riot agreed to deliver
twenty-five (25%) percent more Hashrate to Bit Digital than Bit
Digital will deliver to Riot. As a result of the HSA, the Company
will receive an aggregate of 0.625 EH/s of Hashrate from Riot, in
exchange for 0.500 EH/s.
On the first delivery date of June 14,
2022, Bit Digital delivered 2,500 S19j Pro Miners. This was
followed by Riot's delivery of 2,841 S19 Pro Miners to Bit Digital
on June 17, 2022. The Company further
agreed to deliver an additional 2,500 S19j Pros to Riot in exchange
for 2,841 S19 Pros scheduled to occur during the first week of
July 2022.
Under the Coinmint Colocation Master Mining Services Agreement
(the "MMSA") dated as of June 7, 2022
by and between Coinmint and Bit Digital USA, Inc., Coinmint will provide the required
Mining Power (as defined) for a one-year period automatically
renewing for three-month periods unless earlier terminated. The
Company will pay Coinmint electric utility costs plus operating
costs required to protect the digital assets; as well as a
performance fee equal to 27.5% of profit, subject to a ten (10%)
percent reduction if Coinmint fails to provide Uptime of
ninety-eight (98%) percent or better for any period.
The Coinmint Facility operates in Upstate New York region that
utilizes power that is 90% emissions-free, as reported in Power
Trends 2021 report by the New York Independent System Operator
("NYISO").
In May 2022, the Company's hosting
partner Digihost Technology Inc. ("Digihost") advised the Company
that a cut in power to its North
Tonawanda, NY site resulted in approximately 1,580 of the
Company's miners going offline. As of the date of this report,
power had been restored to approximately 470 of the Company's
miners, and Digihost continues efforts to restore power in full.
Additionally, Digihost continues to await approval from the
applicable authorities to complete its acquisition of the site's
60MW power plant; at this time there can be no assurances as to
timing. The Company's management continues to monitor the
situation.
The Company's hosting partner Blockfusion USA, Inc. ("Blockfusion") advised the Company
that the substation at its Niagara Falls,
NY facility was damaged by an explosion and subsequent fire,
and power was cut off to approximately 2,515 of the Company's
bitcoin miners and approximately 710 ETH miners that had been
operating at the site immediately prior to the incident. The
explosion and fire are believed to have been caused by faulty
equipment owned by the power utility. Blockfusion and the Company
intend to pursue claims including seeking reimbursement for lost
revenue. Blockfusion is working with its insurer and the utility to
restore power as quickly as possible. Operations are hoped to
resume within a few weeks, but at this time there can be no
assurances as to timing. The Company's management continues to
monitor the situation and Blockfusion's pursuit of claims.
New York State Senate Bill
S6486D (the "Bill"), passed by the New
York State Senate on June 3,
2022, proposes a two-year moratorium on new or renewed
permits filed in the future for behind-the-meter proof-of-work
cryptocurrency mining operations at electric generating facilities
that utilize carbon-based fuel in New
York State. The Company's facilities in New York are either grid powered, and/or at
facilities for which renewal applications have been previously
filed. While the Bill could change prior to being signed by
Governor Hochul, it is not currently expected to have an adverse
effect on the Company's operations.
During April 4 through May 12,
2022, the Company issued an aggregate of 10,881,598 ordinary
shares to Ionic Ventures LLC for gross proceeds of $22 million. The Company received net proceeds of
$21 million after deducting
commissions payable to broker-dealers.
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, 2021 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.
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SOURCE Bit Digital, Inc.