UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
6-K
REPORT
OF FOREIGN PRIVATE ISSUER
PURSUANT
TO RULE 13a-16 OR 15d-16 UNDER
THE
SECURITIES EXCHANGE ACT OF 1934
For
the month of August 2023
Commission
File Number: 001-38421
BIT
DIGITAL, INC.
(Translation
of registrant’s name into English)
33
Irving Place, New York, NY 10003
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F
Form
20-F ☒ Form 40-F ☐
Exhibit
Index
A
copy of the Bit Digital, Inc. press release dated August 15, 2023, titled “Bit Digital, Inc. Announces Second Quarter of Fiscal
Year 2023 Financial Results,” is being furnished as Exhibit 99.1 with this Report on Form 6-K.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
| |
Bit Digital, Inc. |
| |
(Registrant) |
| |
|
| |
By: |
/s/
Samir Tabar |
| |
Name: |
Samir Tabar |
| |
Title: |
Chief Executive Officer |
Date:
August 15, 2023
2
Exhibit 99.1
Bit Digital, Inc. Announces Second Quarter of
Fiscal Year 2023 Financial Results
NEW YORK, August 15, 2023 /PRNewswire/ -- Bit
Digital, Inc. (Nasdaq: BTBT) (the “Company”), a digital asset mining company headquartered in New York City, today announced
its unaudited financial results for the second quarter ended June 30, 2023.
Financial Highlights for the Second Quarter 2023
| ● | Total revenue was $9.0 million for the second quarter of 2023. The majority
of revenue was earned from our bitcoin mining business. |
| ● | The Company had cash, cash equivalents and restricted cash of $19.8 million,
and total liquidity (defined as cash equivalents and restricted cash, USDC, and the fair market value of digital assets) of approximately
$64.8 million, as of June 30, 2023. |
| ● | Total assets were $100.4 million as of June 30, 2023. Shareholders’
equity amounted to $91.7 million as of June 30, 2023. |
| ● | Adjusted
EBITDA1 was $1.9 million for the three-month period ended June 30, 2023. |
| ● | Adjusted earnings per share2 was $0.02 for the three-month period
ended June 30, 2023. |
Operational Highlights for the Second Quarter
2023
| ● | The Company earned 318.4 bitcoins during the
quarter. Factors impacting production included the relocation of certain miners, curtailment activities, and growth in the overall bitcoin
network hash rate. |
| ● | The Company paid approximately $0.049 per kilowatt
hour to its hosting partners for electricity consumed during the quarter. |
| ● | For the three months ended June 30, 2023, we
earned 36.3 ETH in native staking and 31.6 ETH in liquid staking, respectively. |
| ● | Treasury holdings of BTC and ETH were 613.2 and
11,738.8, with a fair market value of approximately $18.7 million and $22.7 million on June 30, 2023, respectively. |
| 1 | Adjusted EBITDA refers to earnings before interest expense,
income tax expense and depreciation expense (“EBITDA”) adjusted to eliminate the effects of certain non-cash and / or non-recurring
items. |
| 2 | Adjusted EPS is a financial measure defined as our EBITDA divided
by our diluted weighted-average shares outstanding, adjusted with the EPS impact related to the adjustments made to EBITDA to derive
Adjusted EBITDA. |
| ● | The BTC equivalent3 of our digital
asset holdings as of June 30, 2023 was approximately 1,573.4 BTC, or approximately $48.0 million. |
| ● | As of June 30, 2023, the Company had 44,886 bitcoin
miners owned or operating (in Iceland) and 730 ETH miners, with an estimated maximum total hash rate of 3.4 EH/s and 0.3 TH/s, respectively. |
| ● | The Company’s active hash rate of its bitcoin
mining fleet was approximately 1.78 EH/s as of June 30, 2023. |
| ● | Approximately 99% of our fleet’s run-rate
electricity consumption was generated from carbon-free energy sources as of June 30, 2023. These figures are 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. |
| ● | The Company had approximately 11,716 ETH actively
staked in native and liquid staking protocols as of June 30, 2023. Approximately 9,312 were natively staked and 2,404 ETH were deployed
in liquid staking protocols as of that date. |
| ● | On April 5, 2023, the Company entered into an
amended hosting agreement, pursuant to which Coinmint agreed to provide to the Company an additional 10 megawatts (“MW”) of
mining capacity at Coinmint’s hosting facility in Plattsburgh, New York. |
| ● | Additionally, the Company entered into an amended
hosting agreement with Coinmint on April 27, 2023, pursuant to which Coinmint agreed to provide the Company with up to 10 MW of additional
mining capacity at Coinmint’s hosting facility in Massena, New York. |
| ● | On May 8, 2023, the Company
entered into a Master Mining Services Agreement Amendment with Blockbreakers, pursuant to which Blockbreakers, Inc. agreed to provide
the Company with four MW of additional mining capacity at its hosting facility in Canada. The Company previously advanced a $400,000 Senior
secured Term Loan to Blockbreakers for the purposes of building out this site |
| ● | On May 9, 2023, the Company entered into a Computation
Capacity Services Agreement Amendment with GreenBlocks ehf (“GreenBlocks”) pursuant to which GreenBlocks. agreed to provide
the Company with 8.25 MW of incremental hosting capacity at a facility in Iceland. On June 1, 2023, Bit Digital revised its agreement
with Greenblocks to expand the Company’s mining capacity in Iceland to approximately 10.7 MW. As of the date of this report, advances
of $6.4 million have been financed by the Company to GreenBlocks, and approximately 3,300 miners are operational at the GreenBlocks site. |
| ● | In May 2023, the Company transferred a total
of 129 BTC to Auros Global Limited (“Auros”), as collateral to support yield optimization strategies which Auros is undertaking
on the Company’s behalf. By June 30, 2023, 84 BTC remained collateralized with Auros. We received 45 BTC back on July 28, 2023,
and anticipate the release of the remaining 39 BTC on or about August 28, 2023. |
| ● | During the quarter, the Company entered into
agreements to purchase 3,600 S19 miners and 3,300 S19J Pro+ miners. |
| 3 | “BTC equivalent” is a hypothetical illustration
of the value of our digital asset portfolio in bitcoin terms. BTC equivalent is defined as if all non-BTC digital assets, comprised of
ETH, sETH-H, LsETH, rETH-h, and USDC, were converted into BTC as of June 30, 2023, and added to our existing BTC balance. Conversion
values are found using the closing price on coinmarketcap.com. |
Management
Commentary
“The second quarter of 2023 was a transitional
quarter for Bit Digital as we exited certain legacy hosting relationships, forged new strategic partnerships, and began to execute on
our growth initiatives. As of June 30, 2023, our mining operations were approximately 99% carbon-free, a significant improvement from
the prior quarter and nearly achieving our goal for our mining operations to become entirely carbon-free. We continue to believe that
our industry can only reach its full potential if we remain leaders in environmental sustainability, and Bit Digital intends to lead by
example.
We expanded existing hosting relationships and
forged new partnerships during the quarter, which represented approximately 35 MW of additional mining capacity. We concurrently announced
the purchase of new miners to fill this capacity and continue to canvas the market for attractive opportunities to deploy capital and
expand our fleet. We expect to reach our 2.6 EH/s goal for our active fleet by the end of October 2023, and we now expect to reach 3.5
EH/s by the end of December 2023. Our balance sheet remains debt-free, and we maintain a healthy liquidity position. We will continue
to balance future growth aspirations with our goal of remaining financially flexible into the ‘halving’ in 2024.
We are proud to have expanded into the Icelandic
market during the second quarter, and now have operations across three countries: the U.S., Canada, and Iceland. Diversifying our operations
across geographies and regulatory jurisdictions is a strategic priority as we seek to mitigate existential risk. Diversification will
remain a key tenet of our growth strategy alongside securing the most economic and ecofriendly hosting arrangements.
Revenue from our ETH staking business more than
doubled sequentially during the quarter, albeit from a low base. Although ETH staking revenue currently represents a modest source of
revenue, our goal is for this business to grow into a more meaningful driver of total revenue in the longer term. We aim to establish
diversified, non-correlated revenue streams that will help make us more resilient to market cycles and enable us to pursue counter-cyclical
growth opportunities. We will continue to evaluate new avenues to help achieve our goal of creating a more durable return profile and
ultimately maximizing value for all stakeholders.”
About
Bit Digital
Bit
Digital, Inc. is a sustainability focused generator of digital assets headquartered in New York City. Our mining operations are located
in the US, Canada, and Iceland. 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 Annual Report on Form 20-F for the fiscal
year ended December 31, 2022. 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. 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, Canada and Iceland. We commenced our bitcoin mining business
in February 2020. We initiated limited Ethereum mining operations in January 2022 and discontinued the operations by September 2022 due
to Ethereum blockchain switching from proof-of-work (“PoW”) consensus mechanism to proof-of-stake (“PoS”) validation.
Our mining operations, hosted by third-party providers, use specialized computers, known as miners, to generate digital assets. Our miners
use application specific integrated circuit (“ASIC”) chips. These chips enable the miners to apply high computational power,
expressed as “hash rate”, to provide transaction verification services (generally 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 generally 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, exchange for other digital assets. Our mining
strategy has been to mine bitcoins as quickly and as many as possible given the fixed supply of bitcoins. In view of historically long
delivery lead times to purchase miners from manufacturers like Bitmain Technologies Limited (“Bitmain”) and MicroBT Electronics
Technology Co., Ltd (“MicroBT”), and other considerations, we may choose to acquire miners on the spot market, which can
typically result in delivery within a few weeks.
We
have signed service agreements with third-party hosting partners in North America and Iceland. These partners operate specialized mining
data centers, where they install and operate the miners and provide IT consulting, maintenance, and repair work on site for us. Our mining
facilities in Texas and Nebraska were previously maintained by Compute North LLC prior to being transferred to a third party before Compute
North’s bankruptcy filing in 2022. We have relocated some of those miners to facilities operated by Coinmint and Blockfusion in
New York State. Our mining facility in Georgia was previously maintained by Core Scientific, Inc. We have relocated those miners to one
of Coinmint’s facilities. Our
mining facilities in New York are maintained by Blockfusion USA, Inc. (“Blockfusion”), Coinmint LLC (“Coinmint”)
and Digihost Technologies Inc. (“Digihost”). Our mining facility in Canada is maintained by Blockbreakers Inc. Our mining
facility in Iceland is maintained by GreenBlocks ehf, an Icelandic private limited company (“GreenBlocks”).
We
are a sustainability-focused digital asset 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.
ETH
Staking Business
In
the fourth quarter of 2022, we formally commenced Ethereum staking operations. We intend to delegate or stake our ETH holdings to an
Ethereum validator node to help secure and strengthen the blockchain network. Stakers are compensated for this commitment in the form
of a reward of the native network token.
Our
native staking operations are enhanced by a partnership with Blockdaemon,
the leading institutional-grade blockchain infrastructure company for node management and staking. In the fourth quarter of 2022, following
a similar mechanism to native Ethereum staking, we also participated in liquid staking via Portara protocol (formerly known as Harbour),
the liquid staking protocol developed by Blockdaemon and StakeWise and the first of its kind tailored to institutions. In addition, since
the first quarter of 2023, we started native staking with Marsprotocol and participated in liquid staking via Liquid Collective protocol
on Coinbase platform. Liquid staking allows participants to achieve greater capital efficiency by utilizing their staked ETH as collateral
and trading their staked ETH tokens on the secondary market.
Miner
Deployments
During
the three and six months ended June 30, 2023, we continued to work with our hosting partners to deploy our miners in North America and
Iceland.
On May 9, 2023 (“Effective Date”), the
Company entered into a Term Loan Facility and Security Agreement (“Loan Agreement”) with GreenBlocks. Pursuant to the Loan
Agreement, GreenBlocks has requested the Company to extend one or more loans (“advances”) under a senior secured term loan
facility in an aggregate outstanding principal amount not to exceed $5 million. The interest rate of the Loan Agreement is 0% and advances
are to be repaid on the maturity date, which is the thirty-nine-month anniversary of the Effective Date. GreenBlocks will exclusively
use the advances to buy miners that will be operated for the benefit of the Company at a facility in Iceland, with an overall capacity
of 8.25 MW. To secure the prompt payment of advances, the Company has been granted a continuing first priority lien and security interest
in all of GreenBlocks’s rights, title and interest to the financed miners. The miners are the sole property of GreenBlocks, of which
they are responsible for the purchase, installation, operation, and maintenance.
On May 9, 2023, the Company entered into a Computation
Capacity Services Agreement (“Agreement”) with GreenBlocks. Pursuant to the Agreement, GreenBlocks will provide computational
capacity services and other necessary ancillary services, such as operation, management, and maintenance, at the facility in Iceland for
a term of two (2) years. GreenBlocks will own and operate the miners financed through the Loan Agreement for the purpose of providing
Computational Capacity of up to 8.25 MW. The Company will pay power costs of five cents ($0.05) per kilowatt hour, a Pod fee of $22,000
per pod per month, and a depreciation fee equal to 1/36 of the facility size per month. The performance fees under this agreement are
20%. The Company submitted to Greenblocks a deposit in the amount of $1,052,100, which was exclusively for the purpose of paying the landlord
of the facility for hosting space.
On
June 1, 2023, the Company and GreenBlocks entered the Omnibus Amendment to Loan Documents and Other Agreements (“Omnibus Amendment”).
This amendment revised both the Loan Agreement and the Computation Capacity Services Agreement previously entered on May 9, 2023. While
the core terms remained consistent, notable modifications pertained to the facility size and contracted capacity. Specifically, the facility
size was increased from $5 million to $6.7 million. Moreover, GreenBlocks agreed to expand the computation capacity to approximately
10.7 MW. As of the date of this report, advances of $6.4 million have been financed by the Company to GreenBlocks, and approximately
3,300 miners are operational at the GreenBlocks site.
During
the second quarter of 2023, the Company deployed approximately an additional 3,600 miners at one of Coinmint’s hosting facilities.
As
of June 30, 2023, the Company’s active hash rate totals approximately 1.8 EH/s, with operations in North America and Iceland.
Power
and Hosting Overview
During
the three and six months ended June 30, 2023, our hosting partners continued to prepare sites to deliver our contracted hosting capacity,
bringing additional power online for our miners.
The
Company’s subsidiary, Bit Digital Canada, Inc., entered into a Mining Services Agreement effective June 1, 2022, for Blockbreakers,
Inc. to provide five (5) MW of incremental hosting capacity at its facility in Canada. The facility utilizes an energy source that is
primarily hydroelectric.
On
May 8, 2023, the Company entered into a Master Mining Services Agreement with Blockbreakers, pursuant to which Blockbreakers, Inc. agreed
to provide the Company with four (4) MW of additional mining capacity at its hosting facility in Canada. The agreement is for two (2)
years automatically renewable for additional one (1) year terms unless either party gives at least sixty (60) days’ advance written
notice. The performance fee is 15%. Additionally, Bit Digital has secured a side letter agreement with Blockbreakers, granting the Company
the right of first refusal for any future mining hosting services offered by Blockbreakers in Canada.
This new agreement brings the Company’s total contracted hosting capacity with Blockbreakers to approximately 9 MW. As of June
30, 2023, the facility currently powers approximately 1,000 of the Company’s miners and is expected to accommodate up to 1,500
miners.
On June 7, 2022, we entered into a Master Mining
Services Agreement (the “MMSA”) with Coinmint LLC (“Coinmint”), pursuant to which Coinmint will provide the required
mining colocation services for a one-year period automatically renewing for three-month periods unless earlier terminated. The Company
will pay Coinmint electricity costs, plus operating costs required to operate the Company’s mining equipment, as well as a performance
fee equal to 27.5% of profit, subject to a ten percent (10%) reduction if Coinmint fails to provide Uptime of ninety-eight (98%) percent
or better for any period. We are not privy to the emissions rate at the Coinmint facility or at any other hosting facility. However,
the Coinmint facility operates in an upstate New York region that reportedly utilizes power that is 99% emissions-free, as determined
based on the 2023 Load & Capacity Data Report published by the New York Independent System Operator, Inc. (“NYISO”).
On
April 5, 2023, the Company entered into a letter agreement and MMSA Amendment with Coinmint pursuant to which Coinmint agreed to
provide the Company with up to ten (10) MW of additional mining capacity to energize the Company’s mining equipment at
Coinmint’s hosting facility in Plattsburgh, New York. The agreement is for two (2) years automatically renewable for three (3)
months unless not renewed by either party on ninety (90) days prior written notice. The performance fees under this letter agreement
range from 30% to 33% of profit. This new agreement brings the Company’s total contracted hosting capacity with Coinmint to
approximately 30 MW at this facility.
On
April 27, 2023, the Company entered into a letter agreement and MMSA Amendment with Coinmint pursuant to which Coinmint agreed to
provide the Company with up to ten (10) MW of additional mining capacity to energize the Company’s mining equipment at
Coinmint’s hosting facility in Massena, New York. The agreement is for one (1) year automatically renewable for three (3)
months unless not renewed by either party on ninety (90) days prior written notice. The performance fees under this letter agreement
are 33% of profit. This new agreement brings the Company’s total contracted hosting capacity with Coinmint to approximately 40 MW. As
of June 30, 2023, Coinmint provided approximately 32 MW of capacity for our miners at their facilities.
In May 2022, our hosting partner Blockfusion USA,
Inc. (“Blockfusion”) advised us that the substation at its Niagara Falls, NY facility was damaged by an explosion and 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 have entered into a common interest agreement to jointly pursue any claims evolving from the
explosion and fire. Prior to the incident, our facility with Blockfusion in Niagara Falls, provided approximately 9.4 MW to power our
miners. Power was restored to the facility in September 2022. However, we received a notice dated October 4, 2022, from the City of Niagara
Falls, which orders the cease and desist from any cryptocurrency mining or related operations at the facility until such time as
Blockfusion complies with Section 1303.2.8 of the City of Niagara Falls Zoning Ordinance (the “Ordinance”), in addition to
all other City ordinances and codes. Blockfusion has advised us that the Ordinance came into practical effect on October 1, 2022, following
the expiration of a related moratorium on September 30, 2022. Blockfusion has further advised that it has submitted applications
for new permits based on the Ordinance’s new standards and that the permits may take several months process. Our management continues
to monitor the situation.
Pursuant
to the Mining Services Agreement between Bit Digital and Blockfusion dated August 25, 2021, Blockfusion represents, warrants and covenants
that it “possesses, and will maintain, all licenses, registrations, authorizations and approvals required by any governmental agency,
regulatory authority or other party necessary for it to operate its business and engage in the business relating to its provision of
the Services.” On October 5, 2022, Bit Digital further advised Blockfusion that it expects it to comply with directives of the
Notice.
In June 2021, we entered into a strategic co-mining
agreement with Digihost Technologies (“Digihost”) in North America. Pursuant to the terms of the agreement, Digihost provides
certain premises to Bit Digital for the purpose of the operation and storage of a 20 MW bitcoin mining system to be delivered by Bit Digital.
Digihost also provides services to maintain the premises for a term of two years. Digihost shall also be entitled to 20% of the profit
generated by the miners.
In
April 2023, we renewed the co-mining agreement with Digihost, previously executed in June 2021. Pursuant to the terms of the new agreement,
Digihost provides certain premises to Bit Digital for the purpose of the operation and storage of an up to 20 MW bitcoin mining system
to be delivered by Bit Digital. Digihost also provides services to maintain the premises for a term of two years, automatically renewing
for a period of one (1) year. Digihost shall also be entitled to 30% of the profit generated by the miners. Currently, we have about 870
miners running at Digihost Buffalo site.
Miner
Fleet Update and Overview
As
of June 30, 2023, we had 44,886 miners owned or operating (in Iceland) for
bitcoin mining and 730 ETH miners, with a total maximum hash rate of 3.4 EH/s and 0.3 TH/s, respectively.
On
April 28, 2023, we entered into a purchase agreement with an unaffiliated seller of bitcoin mining computers, from whom we acquired 3,600
S19 miners. As of the date of this report, all miners have been delivered.
On
May 12, 2023, we entered into a purchase agreement with an unaffiliated seller of bitcoin mining computers, from whom we acquired 2,200
S19J Pro+ miners. As of the date of this report, all miners have been delivered.
On
June 21, 2023, we entered into a purchase agreement with an unaffiliated seller of bitcoin mining computers, from whom we acquired 1,100
S19 Pro+ miners. As of the date of this report, the miners have not been delivered.
Bitcoin
Production
From
the inception of our bitcoin mining business in February 2020 to June 30, 2023, we earned an aggregate of 5,503.3 bitcoins.
The
following table presents our bitcoin mining activities for the six months ended June 30, 2023:
| | |
Number of
bitcoins | | |
Amount (1) | |
| Balance at December 31, 2022 | |
| 946.3 | | |
$ | 15,796,147 | |
| Receipt of BTC from mining services | |
| 680.4 | | |
| 17,126,333 | |
| Exchange of BTC into ETH | |
| (434.8 | ) | |
| (7,096,795 | ) |
| Sales of and payments made in BTC | |
| (578.7 | ) | |
| (9,922,723 | ) |
| Impairment of BTC | |
| - | | |
| (2,597,507 | ) |
| Balance at June 30, 2023 | |
| 613.2 | | |
$ | 13,305,455 | |
| (1) | Receipt
of digital assets from mining services are the product of the number of bitcoins received multiplied by the bitcoin price obtained from
CoinMarketCap, 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 mining locations in the US and Canada provide 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
work with Apex Group Ltd, an independent ESG consultancy, with the goal of becoming 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. While all restrictions
have been lifted, we continue to monitor the situation and the possible effects on our financial condition, liquidity, operations, suppliers
and industry, 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.
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 digital assets. 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.
Results
of operations
The
following table summarizes the results of our operations during the three months ended June 30, 2023 and 2022, respectively, and provides
information regarding the dollar increase or (decrease) during the period.
| | |
For the Three Months
Ended June 30, | | |
Variance in | |
| | |
2023 | | |
2022 | | |
Amount | |
| | |
| | |
| | |
| |
| Revenues | |
$ | 9,037,602 | | |
$ | 6,815,000 | | |
$ | 2,222,602 | |
| | |
| | | |
| | | |
| | |
| Cost and operating expenses | |
| | | |
| | | |
| | |
| Cost of revenue (exclusive of depreciation and amortization shown below) | |
| (5,662,989 | ) | |
| (3,584,145 | ) | |
| (2,078,844 | ) |
| Depreciation and amortization expenses | |
| (3,725,152 | ) | |
| (5,322,120 | ) | |
| 1,596,968 | |
| General and administrative expenses | |
| (5,390,204 | ) | |
| (4,598,238 | ) | |
| (791,966 | ) |
| Realized gain on exchange of digital assets | |
| 4,443,689 | | |
| 2,201,636 | | |
| 2,242,053 | |
| Impairment of digital assets | |
| (1,351,331 | ) | |
| (13,364,406 | ) | |
| 12,013,075 | |
| Total operating expenses | |
| (11,685,987 | ) | |
| (24,667,273 | ) | |
| 12,981,286 | |
| | |
| | | |
| | | |
| | |
| Loss from operations | |
| (2,648,385 | ) | |
| (17,852,273 | ) | |
| 15,203,888 | |
| | |
| | | |
| | | |
| | |
| Net gain from disposal of property and equipment | |
| - | | |
| 1,280,328 | | |
| (1,280,328 | ) |
| Other income (expense), net | |
| 330,802 | | |
| (20,179 | ) | |
| 350,981 | |
| Total other income, net | |
| 330,802 | | |
| 1,260,149 | | |
| (929,347 | ) |
| | |
| | | |
| | | |
| | |
| Loss before income taxes | |
| (2,317,583 | ) | |
| (16,592,124 | ) | |
| 14,274,541 | |
| | |
| | | |
| | | |
| | |
| Income tax expenses | |
| (109,427 | ) | |
| (1,171,293 | ) | |
| 1,061,866 | |
| Net loss | |
$ | (2,427,010 | ) | |
$ | (17,763,417 | ) | |
$ | 15,336,407 | |
Revenues
We
generate revenues from digital asset mining and ETH staking business.
Revenues
from digital asset mining
We
provide computing power to digital asset mining pools, and receive consideration in the form of digital assets, the value of which is
determined by the daily quoted closing U.S. dollar spot rate of digital asset each day to determine the fair value of digital asset on
the date received. By providing computing power to successfully add a block to the blockchain, the Company is entitled to a fractional
share of the 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 June 30, 2023, we received 318.4 bitcoins from the Foundry USA Pool (“Foundry”) mining pool.
As of June 30, 2023, our maximum hash rate was at an aggregate of 3.4 EH/s and 0.3 TH/s for our bitcoin miners and ETH miners, respectively.
For the three months ended June 30, 2023, we recognized revenue of $8.9 million and $nil from bitcoin mining services and ETH mining
services, respectively.
For
the three months ended June 30, 2022, we received 197.3 bitcoins from the Foundry mining pool and 104.3 ETHs from Ethermine mining
pool (“Ethermine”) operated by Bitfly Gmbh. As of June 30, 2022, our maximum hash rate was at an aggregate of 2.7 EH/s and
0.3 TH/s for our bitcoin miners and ETH miners, respectively. We discontinued the ETH mining operations in September 2022 due to Ethereum
blockchain switching from proof-of-work (“PoW”) consensus mechanism to proof-of-stake (“PoS”) validation. For
the three months ended June 30, 2022, we recognized revenue of $6.5 million and $0.3 million from bitcoin mining services and ETH mining
services, respectively.
Our
revenues from digital asset mining services increased by $2.1 million, or 30.8%, to $8.9 million for the three months ended June 30,
2023 from $6.8 million for the three months ended June 30, 2022. The increase was primarily due to the net effect of an increase of 121.1
bitcoins generated from our mining business, partially offset by a lower average BTC price in the second quarter of 2023, compared to
the same period in 2022.
We
expect to continue to opportunistically invest in miners to increase our hash rate capacity.
Revenues
from ETH staking
During
the fourth quarter of 2022, we commenced ETH staking business, in both native staking and liquid staking.
For the ETH native staking business with Blockdaemon
and Marsprotocol, we stake ETH, through network-based smart contracts, on a node for the purpose of validating transactions and adding
blocks to the network. Through these contracts, the Company stakes ETH on nodes for the purpose of validating transactions and adding
blocks to the Ethereum blockchain network. The Company is able to withdraw staked ETH under contracted staking since April 12, 2023 when
the announced Shanghai upgrade was completed. In exchange for staking the ETH and validating transactions on blockchain networks, the
Company is entitled to block rewards and transaction fees for successfully validating or adding a block to the blockchain. These rewards
are received by the Company directly from the Ethereum network and are calculated approximately based on the proportion of the Company’s
stake to the total ETH staked by all validators.
For the liquid staking business, the Company has
deployed ETH into Portara protocol (formerly known as Harbour) and Liquid Collective protocol, supported by liquid staking solution provider
under the consortium of Blockdaemon and Stakewise, and Coinbase, respectively. By staking, we receive receipt tokens for the ETH staked
which could be redeemed to ETH or can be traded or collateralized elsewhere, at any time. In addition, we receive rETH-H for rewards earned
from Portara protocol.
For
the three months ended June 30, 2023, we earned 36.3 ETH in native staking and 31.6 ETH in liquid staking, respectively. For
the three months ended June 30, 2023, we recognized revenues of $66,649 and $59,010 from native staking and liquid staking,
respectively.
Cost
of revenues
The
Company’s cost of revenue consists primarily of i) direct production costs related to mining operations, including electricity
costs, profit-sharing fees and other relevant costs, but excluding depreciation and amortization, which are separately stated in the
Company’s consolidated statements of operations, and ii) direct cost related to ETH staking business including service fee and
profit-sharing fees to the service providers, which is immaterial during the three months ended June 30, 2023.
For
the three months ended June 30, 2023 and 2022, the cost of revenue was comprised of the following:
| | |
For the Three Months
Ended June 30, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Electricity costs | |
$ | 4,156,353 | | |
$ | 1,437,417 | |
| Profit-sharing fees | |
| 1,295,992 | | |
| 1,689,399 | |
| Other costs | |
| 210,644 | | |
| 457,329 | |
| Total | |
$ | 5,662,989 | | |
$ | 3,584,145 | |
Electricity
costs. These expenses were incurred by mining facilities for the miners in operation and were closely correlated with the number
of deployed miners.
For
the three months ended June 30, 2023, electricity costs increased by $2.7 million, or 189%, compared to the electricity costs incurred
for the three months ended June 30, 2022. The increase primarily resulted from an increase in the number of deployed miners.
Profit-sharing
fees. In 2021, we entered into hosting agreements with certain mining facilities, which included performance fees calculated
as a fixed percentage of net profit generated by the miners. We refer to these fees as profit-sharing fees.
In
the three months ended June 30, 2023, profit-sharing fees decreased by $0.4 million, or 23%, compared to profit-sharing fees incurred
in the three months ended June 30, 2022. The net decrease in profit-sharing fees for the second quarter of 2023 stemmed from several
factors: One hosting facility increased its profit-sharing payments due to an expansion in capacity, resulting in higher bitcoin production.
On the other hand, a different facility saw a reduction in these payments following service termination during the quarter. Additionally,
payments to two different facilities were decreased due to a capacity decrease, which led to a drop in bitcoin production.
We
expect a proportionate increase in cost of revenue as we continue to focus on the expansion and upgrade of our miner fleet.
Depreciation
and amortization expenses
For
the three months ended June 30, 2023 and 2022, depreciation and amortization expenses were $3.7 million and $5.3 million, respectively,
based on an estimated useful miner life of three years.
General
and administrative expenses
For
the three months ended June 30, 2023, our general and administrative expenses, totaling $5.4 million, were primarily comprised
of professional and consulting expenses of $1.4 million, salary and bonus expenses of $0.7 million, shared-based compensation
expenses of $0.5 million related to share options granted to our management and employees, directors and officers insurance expenses
of $0.2 million, and marketing expenses of $0.4 million.
For
the three months ended June 30, 2022, our general and administrative expenses, totaling $4.6 million, were primarily comprised of professional
and consulting expenses of $1.1 million, salary and bonus expenses of $0.6 million, shared-based compensation expenses of $0.6 million
related to RSUs and share options granted to our employees, consultants, and director, directors and officers liability insurance expenses
of $1.1 million, employee travel expenses of $0.3 million, and marketing expenses of $0.1 million.
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 on
exchange of digital assets” in the consolidated statements of operations. For the three months ended June 30, 2023, we recorded
a gain of $4.4 million from the exchange of 429.8 bitcoins and 2.2 ETH. For the three months ended June 30, 2022, we recorded a
gain of $2.2 million from the exchange of 168.9 bitcoins and 57.4 ETH.
Impairment
of digital assets
Impairment
of digital assets was $1.4 million and $13.4 million for the three months ended June 30, 2023 and 2022, respectively. We utilized the
intraday low price of digital assets in the calculation of impairment of digital assets.
For
the three months ended June 30, 2023, the impairment of $1.4 million was comprised of impairment of $0.9 million and $0.5 million on
bitcoins and ETH, respectively. For the three months ended June 30, 2022, the impairment of $13.4 million was comprised of impairment
of $12.9 million and $0.5 million on bitcoins and ETH, respectively.
Income
tax expenses
Income tax expenses were $0.1 million for the
three months ended June 30, 2023, which was comprised of income tax expenses of $347 from our U.S. operations, income tax expenses of
$0.1 million from our Hong Kong operations. The tax expense from Hong Kong is driven by the additional accrued penalty 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 are both, however, subject to review and approval by the Hong Kong tax authority.
Income
tax expenses were $1.2 million for the three months ended June 30, 2022, which was comprised of income tax expenses of $1.0 million from
our US operations, a tax expense of $13,002 from our Hong Kong operations, a tax expense of $0.1 million from Canada, and an unrecognized
tax benefit of $69,182 from our Hong Kong operations. The income tax expense from US operations and Canada operations are primarily driven
by of the valuation allowance that the Company applied on its entire balance of deferred tax assets in the quarter ended June 30, 2022,
resulting in an income tax expense of $0.8 million. 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.
Net
loss and loss per share
For
the three months ended June 30, 2023, our net loss was $2.4 million, representing a change of $15.4 million from a net loss of $17.8
million for the three months ended June 30, 2022.
Basic
and diluted loss per share was $0.03 and $0.22 for the three months ended June 30, 2023 and 2022, respectively. Weighted average number
of shares was 83,062,519 and 79,598,964 for the three months ended June 30, 2023 and 2022, respectively.
The
following table summarizes the results of our operations during the six months ended June 30, 2023 and 2022, respectively, and provides
information regarding the dollar increase or (decrease) during period.
| | |
For the Six Months
Ended June 30, | | |
Variance in | |
| | |
2023 | | |
2022 | | |
Amount | |
| | |
| | |
| | |
| |
| Revenues | |
$ | 17,302,601 | | |
$ | 15,388,747 | | |
$ | 1,913,854 | |
| | |
| | | |
| | | |
| | |
| Cost and operating expenses | |
| | | |
| | | |
| | |
| Cost of revenue (exclusive of depreciation and amortization shown below) | |
| (10,829,283 | ) | |
| (7,852,396 | ) | |
| (2,976,887 | ) |
| Depreciation and amortization expenses | |
| (7,371,200 | ) | |
| (9,121,749 | ) | |
| 1,750,549 | |
| General and administrative expenses | |
| (10,547,659 | ) | |
| (8,870,933 | ) | |
| (1,676,726 | ) |
| Realized gain on exchange of digital assets | |
| 9,325,626 | | |
| 4,265,916 | | |
| 5,059,710 | |
| Impairment of digital assets | |
| (3,584,996 | ) | |
| (17,990,104 | ) | |
| 14,405,108 | |
| Total operating expenses | |
| (23,007,512 | ) | |
| (39,569,266 | ) | |
| 16,561,754 | |
| | |
| | | |
| | | |
| | |
| Loss from operations | |
| (5,704,911 | ) | |
| (24,180,519 | ) | |
| 18,475,608 | |
| | |
| | | |
| | | |
| | |
| Net gain from disposal of property and equipment | |
| - | | |
| 1,454,896 | | |
| (1,454,896 | ) |
| Gain from sale of investment security | |
| - | | |
| 1,039,999 | | |
| (1,039,999 | ) |
| Other income (expense), net | |
| 1,180,666 | | |
| (591,069 | ) | |
| 1,771,735 | |
| Total other income, net | |
| 1,180,666 | | |
| 1,903,826 | | |
| (723,160 | ) |
| | |
| | | |
| | | |
| | |
| Loss before income taxes | |
| (4,524,245 | ) | |
| (22,276,693 | ) | |
| 17,752,448 | |
| | |
| | | |
| | | |
| | |
| Income tax (expenses) benefits | |
| (163,070 | ) | |
| 180,649 | | |
| (343,719 | ) |
| Net loss | |
$ | (4,687,315 | ) | |
$ | (22,096,044 | ) | |
$ | 17,408,729 | |
Revenues
We
generate revenues from digital asset mining and ETH staking business.
Revenues
from digital asset mining
We
provide computing power to digital asset mining pools, and receive consideration in the form of digital assets, the value of which is
determined by the daily quoted closing U.S. dollar spot rate of digital asset each day to determine the fair value of digital asset on
the date received. By providing computing power to successfully add a block to the blockchain, the Company is entitled to a fractional
share of the 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 six months ended June 30, 2023, we received 680.4 bitcoins from the Foundry USA Pool (“Foundry”) mining pool. As
of June 30, 2023, our maximum hash rate was at an aggregate of 3.4 EH/s and 0.3 TH/s for our bitcoin miners and ETH miners, respectively.
For the six months ended June 30, 2023, we recognized revenue of $17.1 million and $nil from bitcoin mining services and ETH mining services,
respectively.
For
the six months ended June 30, 2022, we received 391.8 bitcoins from the Foundry mining pool and 293.6 ETHs from Ethermine mining
pool (“Ethermine”) operated by Bitfly Gmbh. As of June 30, 2022, our maximum hash rate was at an aggregate of 2.7 EH/s and
0.3 TH/s for our bitcoin miners and ETH miners, respectively. We discontinued the ETH mining operations in September 2022 due to Ethereum
blockchain switching from proof-of-work (“PoW”) consensus mechanism to proof-of-stake (“PoS”) validation. For
the six months ended June 30, 2022, we recognized revenue of $14.5 million and $0.9 million from bitcoin mining services and ETH mining
services, respectively.
Our
revenues from digital asset mining services increased by $1.7 million, or 11.3%, to $17.1 million for the six months ended June 30, 2023
from $15.4 million for the six months ended June 30, 2022. The increase was primarily due to the net effect of an increase of 288.6 bitcoins
generated from our mining business, partially offset by a lower average BTC price in the second quarter of 2023, compared to the same
period in 2022.
We
expect to continue to opportunistically invest in miners to increase our hash rate capacity.
Revenues
from ETH staking
During
the fourth quarter of 2022, we commenced ETH staking business, in both native staking and liquid staking.
For the ETH native staking business with Blockdaemon
and Marsprotocol, we stake ETH, through network-based smart contracts, on a node for the purpose of validating transactions and adding
blocks to the network. Through these contracts, the Company stakes ETH on nodes for the purpose of validating transactions and adding
blocks to the Ethereum blockchain network. The Company is able to withdraw staked ETH under contracted staking since April 12, 2023 when
the announced Shanghai upgrade was completed. In exchange for staking the ETH and validating transactions on blockchain networks, the
Company is entitled to the block rewards and transaction fees for successfully validating or adding a block to the blockchain. These rewards
are received by the Company directly from the Ethereum network and are calculated approximately based on the proportion of the Company’s
stake to the total ETH staked by all validators.
For the liquid staking business, the Company has
deployed ETH into Portara protocol (formerly known as Harbour) and Liquid Collective protocol, supported by liquid staking solution provider
under the consortium of Blockdaemon and Stakewise, and Coinbase, respectively. By staking, we receive receipt tokens for the ETH staked
which could be redeemed to ETH or can be traded or collateralized elsewhere, at any time. In addition, we receive rETH-H for rewards earned
from Portara protocol.
For
the six months ended June 30, 2023, we earned 45.0 ETH in native staking and 54.6 ETH in liquid staking, respectively. For
the six months ended June 30, 2023, we recognized revenues of $80,881 and $95,387 from native staking and liquid staking, respectively.
Cost
of revenues
The
Company’s cost of revenue consists primarily of i) direct production costs related to mining operations, including electricity
costs, profit-sharing fees and other relevant costs, but excludes depreciation and amortization, which are separately stated in the
Company’s consolidated statements of operations, and ii) direct cost related to ETH staking business including service fee and
profit-sharing fees to the service providers, which is immaterial during the six months ended June 30, 2023.
For
the six months ended June 30, 2023 and 2022, the cost of revenue was comprised of the following:
| | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Electricity costs | |
$ | 8,229,998 | | |
$ | 4,646,232 | |
| Profit-sharing fees | |
| 2,241,835 | | |
| 2,598,720 | |
| Other costs | |
| 357,450 | | |
| 607,444 | |
| Total | |
$ | 10,829,283 | | |
$ | 7,852,396 | |
Electricity
costs. These expenses were incurred by mining facilities for the miners in operation and were closely correlated with the number
of deployed miners.
For
the six months ended June 30, 2023, electricity costs increased by $3.6 million, or 77%, compared to the electricity costs incurred for
the six months ended June 30, 2022. The increase primarily resulted from an increase in the number of deployed miners.
Profit-sharing
fees. In 2021, we entered into hosting agreements with certain mining facilities, which included performance fees calculated
as a fixed percentage of net profit generated by the miners. We refer to these fees as profit-sharing fees.
In
the six months ended June 30, 2023, profit-sharing fees decreased by $0.4 million, or 14%, compared to profit-sharing fees incurred in
the six months ended June 30, 2022. The net decrease in profit-sharing fees for the six months ended June 30, 2023 stemmed from several
factors: One hosting facility increased its profit-sharing payments due to an expansion in capacity, resulting in higher bitcoin production.
On the other hand, a different facility saw a reduction in these payments following service termination in the second quarter of 2023.
Additionally, payments to two different facilities were decreased due to a capacity decrease, which led to a drop in bitcoin production.
We
expect a proportionate increase in cost of revenue as we continue to focus on the expansion and upgrade of our miner fleet.
Depreciation
and amortization expenses
For
the six months ended June 30, 2023 and 2022, depreciation and amortization expenses were $7.4 million and $9.1 million, respectively,
based on an estimated useful miner life of three years.
General
and administrative expenses
For the six months ended June 30, 2023, our general
and administrative expenses, totaling $10.5 million, were primarily comprised of professional and consulting expenses of $2.4 million,
salary and bonus expenses of $2.7 million, shared-based compensation expenses of $0.6 million related to RSUs and share options granted
to our management and employees, directors and officers insurance expenses of $1.3 million, and marketing expenses of $0.7 million.
For the six months ended June 30, 2022, our general
and administrative expenses, totaling $8.9 million, were primarily comprised of professional and consulting expenses of $3.1 million,
salary and bonus expenses of $1.2 million, shared-based compensation expenses of $1.1 million related to RSUs and share options granted
to our employees and consultants, director and officer insurance expenses of $1.1 million, employee travel expenses of $0.4 million, and
marketing expenses of $0.4 million.
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 on
exchange of digital assets” in the consolidated statements of operations. For the six months ended June 30, 2023, we recorded a
gain of $9.3 million from the exchange of 1,013.5 bitcoins and 3,002.3 ETH. For the six months ended June 30, 2022, we recorded
a gain of $4.3 million from the exchange of 339.4 bitcoins and 86.8 ETH.
Impairment
of digital assets
Impairment
of digital assets was $3.6 million and $18.0 million for the six months ended June 30, 2023 and 2022, respectively. We utilized the intraday
low price of digital assets in calculation of impairment of digital assets.
For
the six months ended June 30, 2023, the impairment of $3.6 million was comprised of impairment of $2.6 million and $1.0 million on bitcoins
and ETH, respectively. For the six months ended June 30, 2022, the impairment of $18.0 million was comprised of impairment of $17.4 million
and $0.6 million on bitcoins and ETH, respectively.
Gain
from sale of investment security
For
the six months ended June 30, 2022, we sold a portion of our investment in one privately held company with a cost of $0.7 million for
consideration of $1.7 million. We recognized a gain of $1.0 million from the sale which was recorded in the account of “gain from
sale of investment security”.
Income
tax (expenses) benefits
Income tax expenses were $0.2 million for
the six months ended June 30, 2023, which was comprised of income tax expenses of $5,347 from our U.S. operations and income tax
expenses of $0.2 million from our Hong Kong operations. The tax expense from Hong Kong is driven by the additional accrued penalty
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 are both, however, subject to review and approval by the Hong Kong tax
authority.
Income
tax benefits were $0.2 million for the six months ended June 30, 2022, which was comprised of income tax benefit of $0.4 million from
our US operations, unrecognized tax benefit of $0.1 million from our Hong Kong operations, tax expense of $864 from our Hong Kong operations,
and tax expense of $58,082 from Canada operations. 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.
Net
loss and loss per share
For
the six months ended June 30, 2023, our net loss was $4.7 million, representing a change of $17.4 million from a net loss of $22.1 million
for the six months ended June 30, 2022.
Basic
and diluted loss per share was $0.06 and $0.30 for the six months ended June 30, 2023 and 2022, respectively. Weighted average number
of shares was 82,781,060 and 74,695,686 for the six months ended June 30, 2023 and 2022, respectively.
Discussion
of Certain Balance Sheet Items
The
following table sets forth selected information from our consolidated balance sheets as of June 30, 2023 and December 31, 2022. This
information should be read together with our consolidated financial statements and related notes included elsewhere in this report.
| | |
June 30, | | |
December 31, | | |
Variance in | |
| | |
2023 | | |
2022 | | |
Amount | |
| ASSETS | |
| | |
| | |
| |
| Current Assets | |
| | |
| | |
| |
| Cash and cash equivalents | |
$ | 18,519,440 | | |
$ | 32,691,060 | | |
$ | (14,171,620 | ) |
| Restricted cash | |
| 1,320,000 | | |
| 1,320,000 | | |
| - | |
| USDC | |
| 1,786,374 | | |
| 626,441 | | |
| 1,159,933 | |
| Digital assets | |
| 31,624,348 | | |
| 27,587,328 | | |
| 4,037,020 | |
| Income tax receivable | |
| 660,923 | | |
| 736,445 | | |
| (75,522 | ) |
| Other current assets | |
| 2,090,397 | | |
| 1,433,999 | | |
| 656,398 | |
| Total Current Assets | |
| 56,001,482 | | |
| 64,395,273 | | |
| (8,393,791 | ) |
| | |
| | | |
| | | |
| | |
| Loans receivable | |
| 1,493,209 | | |
| - | | |
| 1,493,209 | |
| Investment securities | |
| 3,942,846 | | |
| 1,787,922 | | |
| 2,154,924 | |
| Deposits for property and equipment | |
| 5,565,607 | | |
| 2,594,881 | | |
| 2,970,726 | |
| Property and equipment, net | |
| 24,530,302 | | |
| 22,609,391 | | |
| 1,920,911 | |
| Other non-current assets | |
| 8,837,452 | | |
| 9,033,200 | | |
| (195,748 | ) |
| Total Assets | |
$ | 100,370,898 | | |
$ | 100,420,667 | | |
$ | (49,769 | ) |
| | |
| | | |
| | | |
| | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | | |
| | |
| Accounts payable | |
$ | 1,384,427 | | |
$ | 3,628,619 | | |
$ | (2,244,192 | ) |
| Accrued litigation settlement cost | |
| - | | |
| 2,100,000 | | |
| (2,100,000 | ) |
| Other payables and accrued liabilities | |
| 4,045,498 | | |
| 1,714,735 | | |
| 2,330,763 | |
| Total Current Liabilities | |
| 5,429,925 | | |
| 7,443,354 | | |
| (2,013,429 | ) |
| | |
| | | |
| | | |
| | |
| Long-term income tax payable | |
| 3,196,204 | | |
| 3,044,004 | | |
| 152,200 | |
| | |
| | | |
| | | |
| | |
| Total Liabilities | |
$ | 8,626,129 | | |
$ | 10,487,358 | | |
$ | (1,861,229 | ) |
Cash
and cash equivalents
Cash
and cash equivalents primarily consist of funds deposited with banks, which are highly liquid and are unrestricted as to withdrawal or
use. The total balance of cash and cash equivalents were $18.5 million and $32.7 million as of June 30, 2023 and December 31, 2022, respectively.
The decrease in the balance of cash and cash equivalents was a result of net cash of $9.3 million used in operating activities, and net
cash of $10.7 million used in investing activities, partially offset by net cash of $5.9 million provided by financing activities.
USDC
USD
Coin (“USDC”) is accounted for as a financial instrument; one USDC can be redeemed for one U.S. dollar on demand from the
issuer. The balance of USDC was $1.8 million and $0.6 million as of June 30, 2023 and December 31, 2022, respectively. The increase in
the balance of USDC was primarily due to collection of USDC of $6.9 million from exchange of BTC and collection of USDC of $0.7 million
from sales of Antminer coupons, partially offset by purchase of miners of $5.1 million and payment of other expenses of $1.3 million.
Digital
assets
Digital
assets primarily consist of bitcoin and ETH. For the six months ended June 30, 2023, we earned bitcoins from mining services and ETH
staking services. We exchanged bitcoins into ETH or USDC, exchanged bitcoins and ETH into cash, or used bitcoin and ETH to pay certain
operating costs and other expenses. Digital assets held are accounted for as intangible assets with indefinite useful lives and are subject
to impairment losses if the fair value of digital assets decreases below the carrying value at any time during the period. The fair value
is measured using the intraday low price of the digital assets.
As
compared with the balance as of December 31, 2022, the balance of digital assets as of June 30, 2023 increased by $4.0 million, which
was primarily attributable to generation of bitcoins of $17.1 million from our mining business, and exchange gain of $3.5 million arising
from exchanging bitcoins into ETH, partially offset by exchange of bitcoins and ETH for a total of $7.9 million into cash, exchange
of bitcoins of $4.4 million into USDC, and a combined impairment of $3.6 million on bitcoin and ETH.
Loans Receivable
Loans receivable consists of loans issued by the
Company to third parties. The total balance of loans receivable was $1.5 million and $nil as of June 30, 2023 and December 31, 2022, respectively.
The increase in the balance of loan receivables was due to the outstanding loan amounts of $1.1 million with Greenblocks and $0.4 million
with Blockbreakers as of June 30, 2023.
Investment Securities
Investment securities consists
of the Company’s investment in one equity method investee over which the Company has significant influence, investment in one fund
and in two privately held companies over which the Company neither has control nor significant influence through investments in ordinary
shares. The total balance of investment securities was $3.9 million and $1.8 million as of June 30, 2023 and December 31, 2022,
respectively. The increase of $2.1 million in the balance of investment securities was primarily due to the close of the investment in
Auros Global Limited of $2.0 million on February 24, 2023, the investment in Marsprotocol Technologies Pte. Ltd of $0.1 million on March
1, 2023, and adjustments of $0.1 million to the investment securities.
Deposits for property and equipment
The deposits for property and equipment consists of advance payments
for miner and vehicle purchases. The Company initially recognizes deposits for property and equipment when cash is advanced to suppliers
of property and equipment. Subsequently, the Company derecognizes and reclassifies deposits for property and equipment to property and
equipment when control over the property and equipment is transferred to and obtained by the Company. The total balance of deposits for
property and equipment was $5.6 million and $2.6 million as of June 30, 2023 and December 31, 2022, respectively. The increase in the
balance of deposits for property and equipment of $3.0 million was primarily due to prepayment of miners of $6.2 million, partially offset
by receipt of miners of $3.2 million.
Property
and equipment, net
Property
and equipment was primarily comprised of BTC miners and ETH miners, both with an estimated 3-year useful life.
As
of June 30, 2023, we had 44,886 bitcoin miners owned or operating (in Iceland) and 730 ETH miners with a net book value of $24.1 million
and $0.2 million, respectively. As of December 31, 2022, we had 37,676 bitcoin miners and 730 ETH miners with a net book value of $22.4
million and $0.2 million, respectively.
Accounts
payable
Accounts
payable represented the amount due to the maintenance service provided by our hosting partners. Compared with December 31, 2022, the
balance of accounts payable decreased by $2.2 million, largely due to the payments to our hosting partners in the first half of 2023.
Long-term
income tax payable
Compared
with December 31, 2022, the balance as of June 30, 2023 increased by $152,200, which was recognized for the incremental penalty accrued
on the existing unrecognized tax benefits for the six months ended June 30, 2023. Refer to Note 11. Income Taxes for further details.
Non-GAAP
Financial Measures
In
addition to consolidated U.S. GAAP financial measures, we consistently evaluate our use of and calculation of the non-GAAP financial
measures, “Adjusted EBITDA” and Adjusted earnings per share (“Adjusted EPS”).
Adjusted
EBITDA is a financial measure defined as our EBITDA, adjusted to eliminate the effects of certain non-cash and / or non-recurring items,
that do not reflect our ongoing strategic business operations. EBITDA is computed as net income before interest, taxes, depreciation,
and amortization. Adjusted EBITDA is EBITDA further adjusted for certain income and expenses, which management believes results in a
performance measurement that represents a key indicator of the Company’s core business operations of digital asset mining. The
adjustments currently include fair value adjustments such as investment securities value changes and non-cash share-based compensation
expense, in addition to other income and expense items.
Adjusted
EPS is a financial measure defined as our EBITDA divided by our diluted weighted-average shares outstanding, adjusted with the EPS impact
related to the adjustments made to EBITDA to derive Adjusted EBITDA.
We
believe Adjusted EBITDA and Adjusted EPS can be important financial measures because they allow management, investors, and our board
of directors to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period
by making such adjustments.
Adjusted
EBITDA and Adjusted EPS are provided in addition to and should not be considered to be a substitute for, or superior to net income, the
comparable measures under U.S. GAAP. Further, Adjusted EBITDA and Adjusted EPS should not be considered as an alternative to revenue
growth, net income, diluted earnings per share or any other performance measure derived in accordance with U.S. GAAP, or as an alternative
to cash flow from operating activities as a measure of our liquidity. Adjusted EBITDA and Adjusted EPS have limitations as analytical
tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under U.S.
GAAP.
Reconciliations
of Adjusted EBITDA and Adjusted EPS to the most comparable U.S. GAAP financial metric for historical periods are presented in the table
below:
| | |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| | |
| | |
| | |
| | |
| |
| Reconciliation of non-GAAP income from operations: | |
| | |
| | |
| | |
| |
| Net Loss | |
$ | (2,427,010 | ) | |
$ | (17,763,417 | ) | |
$ | (4,687,315 | ) | |
$ | (22,096,044 | ) |
| Depreciation and amortization expenses | |
| 3,725,152 | | |
| 5,322,120 | | |
| 7,371,200 | | |
| 9,121,749 | |
| Income tax expenses (benefits) | |
| 109,427 | | |
| 1,171,293 | | |
| 163,070 | | |
| (180,649 | ) |
| EBITDA | |
| 1,407,569 | | |
| (11,270,004 | ) | |
| 2,846,955 | | |
| (13,154,944 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Adjustments: | |
| | | |
| | | |
| | | |
| | |
| Share based compensation expenses | |
| 506,934 | | |
| 593,413 | | |
| 613,775 | | |
| 1,057,313 | |
| Gain from disposal of property and equipment | |
| - | | |
| (1,280,328 | ) | |
| - | | |
| (1,454,896 | ) |
| Gain from sale of investment security | |
| - | | |
| - | | |
| - | | |
| (1,039,999 | ) |
| Gain from disposal of a subsidiary | |
| - | | |
| - | | |
| - | | |
| (52,383 | ) |
| Liquidated damage expenses | |
| - | | |
| - | | |
| - | | |
| 619,355 | |
| Changes in fair value of long-term investments | |
| (24,835 | ) | |
| - | | |
| (67,726 | ) | |
| - | |
| Adjusted EBITDA | |
$ | 1,889,668 | | |
$ | (11,956,919 | ) | |
$ | 3,393,004 | | |
$ | (14,025,554 | ) |
| | |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| | |
| | |
| | |
| | |
| |
| Reconciliation of non-GAAP Basic and Dilutive (Loss) Earnings Per Share: | |
| | |
| | |
| | |
| |
| Basic and dilutive loss per share | |
$ | (0.03 | ) | |
$ | (0.22 | ) | |
$ | (0.06 | ) | |
$ | (0.30 | ) |
| Depreciation and amortization expenses | |
| 0.04 | | |
| 0.07 | | |
| 0.09 | | |
| 0.12 | |
| Income tax expenses (benefits) | |
| 0.00 | | |
| 0.01 | | |
| 0.00 | | |
| (0.00 | ) |
| EBITDA per share | |
| 0.01 | | |
| (0.14 | ) | |
| 0.03 | | |
| (0.18 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Adjustments: | |
| | | |
| | | |
| | | |
| | |
| Share based compensation expenses | |
| 0.01 | | |
| 0.01 | | |
| 0.01 | | |
| 0.01 | |
| Gain from disposal of property and equipment | |
| - | | |
| (0.02 | ) | |
| - | | |
| (0.02 | ) |
| Gain from sale of investment security | |
| - | | |
| - | | |
| - | | |
| (0.01 | ) |
| Gain from disposal of a subsidiary | |
| - | | |
| - | | |
| - | | |
| (0.00 | ) |
| Liquidated damage expenses | |
| - | | |
| - | | |
| - | | |
| 0.01 | |
| Changes in fair value of long-term investments | |
| (0.00 | ) | |
| - | | |
| (0.00 | ) | |
| - | |
| Adjusted basic and dilutive earnings (loss) per share | |
$ | 0.02 | | |
$ | (0.15 | ) | |
$ | 0.04 | | |
$ | (0.19 | ) |
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 June 30, 2023, we had working capital of $50.6 million which includes USDC of $1.8 million and digital assets of $31.6 million as
compared with working capital of $57.0 million as of December 31, 2022. Working capital is the difference between the Company’s
current assets and current liabilities.
In May and June 2023, the Company issued an aggregate
of 2,401,776 ordinary shares to Ionic Ventures LLC for gross proceeds of $7.0 million. The Company received net proceeds of approximately
$6.7 million after deducting commissions payable to the placement agent.
The
Company may also offer and sell equity securities from time to time in one or more offerings at the market (ATM) at prices and on terms
which the Company will then determine for an initial aggregate offering price of $500 million pursuant to a registration statement on
Form F-3 declared effective by the SEC on May 4, 2022. To date, no securities have been sold under the registration statement.
Revenue
from 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, and our ability to earn ETH rewards from ETH staking business and the spot or market price of ETH.
We
expect to generate ongoing revenues primarily 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
digital assets, 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 digital asset production and successfully convert digital assets into cash or fund overhead with digital asset is
subject to a number of risks, including regulatory, financial and business risks, many of which are beyond our control. Additionally,
the value of digital asset rewards has been extremely volatile historically, and future prices cannot be predicted.
If
we are unable to generate sufficient revenue from our digital asset production when needed or secure additional funding, it may become
necessary to significantly reduce our current rate of expansion or to explore other strategic alternatives.
Cash
flows
| | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | |
| Net Cash (Used in) Provided by Operating Activities | |
$ | (9,321,512 | ) | |
$ | 1,988,151 | |
| Net Cash Used in Investing Activities | |
| (10,735,108 | ) | |
| (17,562,033 | ) |
| Net Cash Provided by Financing Activities | |
| 5,885,000 | | |
| 18,790,645 | |
| Net (decrease) increase in cash, cash equivalents and restricted cash | |
| (14,171,620 | ) | |
| 3,216,763 | |
| Cash, cash equivalents and restricted cash, beginning of period | |
| 34,011,060 | | |
| 42,398,528 | |
| Cash, cash equivalents and restricted cash, end of period | |
$ | 19,839,440 | | |
$ | 45,615,291 | |
Operating
Activities
Net
cash used in operating activities was $9.3 million for the six months ended June 30, 2023, derived mainly from (i) a net loss of
$4.7 million for the six months ended June 30, 2023 adjusted for digital assets of $17.1 million from our mining services,
depreciation expenses of miners of $7.4 million, gain from exchange of digital assets of $9.3 million, and impairment of digital
assets of $3.6 million, and (ii) net changes in our operating assets and liabilities, principally comprising of a decrease in
digital assets and stable coins of $10.9 million as net proceeds from sales of digital assets and stable coins.
Net
cash provided by operating activities was $2.0 million for the six months ended June 30, 2022, derived mainly from (i) a net loss of
$22.1 million for the six months ended June 30, 2022 adjusted for digital assets of $15.4 million from our mining services,
depreciation expenses of miners of $9.1 million, gain from exchange of digital assets of $4.3 million, impairment of digital assets
of $18.0 million, and income from sale of investment security of $1.0 million, and (ii) net changes in our operating assets and
liabilities, principally comprising of a decrease in digital assets and stable coins of $17.3 million as net proceeds from
sales of digital assets and stable coins
Investing
Activities
Net
cash used in investing activities was $10.7 million for the six months ended June 30, 2023, primarily attributable to purchases of and
deposits made for bitcoin miners of $7.1 million, investment of $2.1 million in two equity investees and loans of $1.5 million made to
two third parties.
Net
cash used in investing activities was $17.6 million for the six months ended June 30, 2022, primarily attributable to purchases of bitcoin
miners of $19.3 million, and loss of cash of $59,695 from sale of an inactive subsidiary, partially offset by proceeds of $1.0 million
from sales of bitcoin miners, and proceeds of $0.9 million from sale of a portion of long-term investment.
Financing
Activities
Net
cash provided by financing activities was $5.9 million for the six months ended June 30, 2023, primarily attributable net proceeds of
$6.7 million from private placements with Ionic Ventures, an institutional investor, partially offset by the payment of dividends of
$0.8 million to the preferred shareholder.
Net
cash provided by financing activities was $18.8 million for the six months ended June 30, 2022, primarily provided by net proceeds of
$21.0 million from direct offering with Ionic Ventures, an institutional investor, and partially offset by the payment of liquidated
damage fees of $2.2 million 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.
Critical
Accounting Policies and Estimates
Our
discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial
statements. These financial statements are prepared in accordance with U.S. 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 unaudited condensed 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 unaudited condensed consolidated financial statements.
BIT
DIGITAL, INC.
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
As
of June 30, 2023 and December 31, 2022
(Expressed
in US dollars, except for the number of shares)
| | |
June 30, | | |
December 31, | |
| | |
2023 | | |
2022 | |
| ASSETS | |
| | |
| |
| Current Assets | |
| | |
| |
| Cash and cash equivalents | |
$ | 18,519,440 | | |
$ | 32,691,060 | |
| Restricted cash | |
| 1,320,000 | | |
| 1,320,000 | |
| USDC | |
| 1,786,374 | | |
| 626,441 | |
| Digital assets | |
| 31,624,348 | | |
| 27,587,328 | |
| Income tax receivable | |
| 660,923 | | |
| 736,445 | |
| Other current assets | |
| 2,090,397 | | |
| 1,433,999 | |
| Total Current Assets | |
| 56,001,482 | | |
| 64,395,273 | |
| | |
| | | |
| | |
| Non-Current Assets | |
| | | |
| | |
| Loans receivable | |
| 1,493,209 | | |
| - | |
| Investment securities | |
| 3,942,846 | | |
| 1,787,922 | |
| Deposits for property and equipment | |
| 5,565,607 | | |
| 2,594,881 | |
| Property and equipment, net | |
| 24,530,302 | | |
| 22,609,391 | |
| Other non-current assets | |
| 8,837,452 | | |
| 9,033,200 | |
| Total Non-Current Assets | |
| 44,369,416 | | |
| 36,025,394 | |
| | |
| | | |
| | |
| Total Assets | |
$ | 100,370,898 | | |
$ | 100,420,667 | |
| | |
| | | |
| | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Accounts payable | |
$ | 1,384,427 | | |
$ | 3,628,619 | |
| Accrued litigation settlement cost | |
| - | | |
| 2,100,000 | |
| Other payables and accrued liabilities | |
| 4,045,498 | | |
| 1,714,735 | |
| Total Current Liabilities | |
| 5,429,925 | | |
| 7,443,354 | |
| | |
| | | |
| | |
| Non-Current Liabilities | |
| | | |
| | |
| Long-term income tax payable | |
| 3,196,204 | | |
| 3,044,004 | |
| Total Non-Current Liabilities | |
| 3,196,204 | | |
| 3,044,004 | |
| | |
| | | |
| | |
| Total Liabilities | |
| 8,626,129 | | |
| 10,487,358 | |
| | |
| | | |
| | |
| Commitments and Contingencies | |
| | | |
| | |
| | |
| | | |
| | |
| Shareholders’ Equity | |
| | | |
| | |
| Preferred shares, $0.01 par value, 10,000,000 and 10,000,000 shares authorized, 1,000,000 and 1,000,000 shares issued and outstanding of June 30, 2023 and December 31, 2022, respectively | |
| 9,050,000 | | |
| 9,050,000 | |
| Ordinary shares, $0.01 par value, 340,000,000 and 340,000,000 shares authorized, 85,028,667 and 82,485,583 shares issued and outstanding of June 30, 2023 and December 31, 2022, respectively | |
| 850,287 | | |
| 824,856 | |
| Treasury stock, at cost, 129,986 and 129,986 shares as of June 30, 2023 and December 31, 2022, respectively | |
| (1,171,679 | ) | |
| (1,171,679 | ) |
| Additional paid-in capital | |
| 219,919,487 | | |
| 212,646,143 | |
| Accumulated deficit | |
| (136,903,326 | ) | |
| (131,416,011 | ) |
| Total Shareholders’ Equity | |
| 91,744,769 | | |
| 89,933,309 | |
| Total Liabilities and Shareholders’ Equity | |
$ | 100,370,898 | | |
$ | 100,420,667 | |
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
For
the Three and Six Months Ended June 30, 2023 and 2022
(Expressed
in US dollars, except for the number of shares)
| | |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| | |
| | |
| | |
| | |
| |
| Revenues | |
$ | 9,037,602 | | |
$ | 6,815,000 | | |
$ | 17,302,601 | | |
$ | 15,388,747 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating costs and expenses | |
| | | |
| | | |
| | | |
| | |
| Cost of revenue (exclusive of depreciation and amortization shown below) | |
| (5,662,989 | ) | |
| (3,584,145 | ) | |
| (10,829,283 | ) | |
| (7,852,396 | ) |
| Depreciation and amortization expenses | |
| (3,725,152 | ) | |
| (5,322,120 | ) | |
| (7,371,200 | ) | |
| (9,121,749 | ) |
| General and administrative expenses | |
| (5,390,204 | ) | |
| (4,598,238 | ) | |
| (10,547,659 | ) | |
| (8,870,933 | ) |
| Realized gain on exchange of digital assets | |
| 4,443,689 | | |
| 2,201,636 | | |
| 9,325,626 | | |
| 4,265,916 | |
| Impairment of digital assets | |
| (1,351,331 | ) | |
| (13,364,406 | ) | |
| (3,584,996 | ) | |
| (17,990,104 | ) |
| Total operating expenses | |
| (11,685,987 | ) | |
| (24,667,273 | ) | |
| (23,007,512 | ) | |
| (39,569,266 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Loss from operations | |
| (2,648,385 | ) | |
| (17,852,273 | ) | |
| (5,704,911 | ) | |
| (24,180,519 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Net gain from disposal of property and equipment | |
| - | | |
| 1,280,328 | | |
| - | | |
| 1,454,896 | |
| Gain from sale of investment security | |
| - | | |
| - | | |
| - | | |
| 1,039,999 | |
| Other income (expense), net | |
| 330,802 | | |
| (20,179 | ) | |
| 1,180,666 | | |
| (591,069 | ) |
| Total other income, net | |
| 330,802 | | |
| 1,260,149 | | |
| 1,180,666 | | |
| 1,903,826 | |
| | |
| | | |
| | | |
| | | |
| | |
| Loss before income taxes | |
| (2,317,583 | ) | |
| (16,592,124 | ) | |
| (4,524,245 | ) | |
| (22,276,693 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Income tax (expenses) benefits | |
| (109,427 | ) | |
| (1,171,293 | ) | |
| (163,070 | ) | |
| 180,649 | |
| Net loss and comprehensive loss | |
$ | (2,427,010 | ) | |
$ | (17,763,417 | ) | |
$ | (4,687,315 | ) | |
$ | (22,096,044 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average number of ordinary share outstanding | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| 83,062,519 | | |
| 79,598,964 | | |
| 82,781,060 | | |
| 74,695,686 | |
| Diluted | |
| 83,062,519 | | |
| 79,598,964 | | |
| 82,781,060 | | |
| 74,695,686 | |
| | |
| | | |
| | | |
| | | |
| | |
| Loss per share | |
| | | |
| | | |
| | | |
| | |
| Basic | |
$ | (0.03 | ) | |
$ | (0.22 | ) | |
$ | (0.06 | ) | |
$ | (0.30 | ) |
| Diluted | |
$ | (0.03 | ) | |
$ | (0.22 | ) | |
$ | (0.06 | ) | |
$ | (0.30 | ) |
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 and Six Months Ended June 30, 2023 and 2022
(Expressed
in U.S. dollars, except for the number of shares)
| | |
Preferred Shares | | |
Common Shares | | |
Treasury | | |
Additional
paid-in | | |
Accumulated | | |
Total
stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Par Value | | |
Stocks | | |
capital | | |
Deficit | | |
equity | |
| Balance, December 31, 2021 | |
| 1,000,000 | | |
| 9,050,000 | | |
| 69,591,389 | | |
$ | 695,914 | | |
$ | (1,094,859 | ) | |
$ | 182,869,159 | | |
$ | (26,119,408 | ) | |
$ | 165,400,806 | |
| Withholding of ordinary shares for payment of employee withholding taxes | |
| - | | |
| - | | |
| (14,472 | ) | |
| (145 | ) | |
| (76,820 | ) | |
| 145 | | |
| - | | |
| (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 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,332,627 | ) | |
| (4,332,627 | ) |
| Balance, March 31, 2022 | |
| 1,000,000 | | |
$ | 9,050,000 | | |
| 69,629,359 | | |
$ | 696,293 | | |
$ | (1,171,679 | ) | |
$ | 183,332,680 | | |
$ | (30,452,035 | ) | |
$ | 161,455,259 | |
| Issuance of restricted shares in connection with share-based compensation | |
| - | | |
| - | | |
| 53,442 | | |
| 535 | | |
| - | | |
| 496,262 | | |
| - | | |
| 496,797 | |
| Issuance of ordinary shares in connection with share-based compensation | |
| - | | |
| - | | |
| 245,098 | | |
| 2,451 | | |
| - | | |
| 997,549 | | |
| - | | |
| 1,000,000 | |
| Share-based compensation in connection with share options to employees and consultant | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 92,605 | | |
| - | | |
| 92,605 | |
| Issuance of ordinary shares in connection with private placements with an institutional investor | |
| - | | |
| - | | |
| 10,990,327 | | |
| 109,903 | | |
| - | | |
| 20,900,097 | | |
| - | | |
| 21,010,000 | |
| Issuance of ordinary shares in exchange of bitcoin miners | |
| - | | |
| - | | |
| 1,487,473 | | |
| 14,875 | | |
| - | | |
| 5,622,657 | | |
| - | | |
| 5,637,532 | |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (17,763,417 | ) | |
| (17,763,417 | ) |
| Balance, June 30, 2022 | |
| 1,000,000 | | |
$ | 9,050,000 | | |
| 82,405,699 | | |
$ | 824,057 | | |
$ | (1,171,679 | ) | |
$ | 211,441,850 | | |
$ | (48,215,452 | ) | |
$ | 171,928,776 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, December 31, 2022 | |
| 1,000,000 | | |
| 9,050,000 | | |
| 82,485,583 | | |
$ | 824,856 | | |
$ | (1,171,679 | ) | |
$ | 212,646,143 | | |
$ | (131,416,011 | ) | |
$ | 89,933,309 | |
| Share-based compensation | |
| - | | |
| - | | |
| 11,308 | | |
| 113 | | |
| - | | |
| 106,728 | | |
| - | | |
| 106,841 | |
| Declaration of dividends to preferred shareholder | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (800,000 | ) | |
| (800,000 | ) |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,260,305 | ) | |
| (2,260,305 | ) |
| Balance, March 31, 2023 | |
| 1,000,000 | | |
| 9,050,000 | | |
| 82,496,891 | | |
$ | 824,969 | | |
$ | (1,171,679 | ) | |
$ | 212,752,871 | | |
$ | (134,476,316 | ) | |
$ | 86,979,845 | |
| Issuance of ordinary shares in connection with share-based compensation | |
| - | | |
| - | | |
| 130,000 | | |
| 1,300 | | |
| - | | |
| 404,700 | | |
| - | | |
| 406,000 | |
| Share-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 100,934 | | |
| - | | |
| 100,934 | |
| Issuance of ordinary shares in connection with private placements with an institutional investor | |
| - | | |
| - | | |
| 2,401,776 | | |
| 24,018 | | |
| - | | |
| 6,660,982 | | |
| - | | |
| 6,685,000 | |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,427,010 | ) | |
| (2,427,010 | ) |
| Balance, June 30, 2023 | |
| 1,000,000 | | |
| 9,050,000 | | |
| 85,028,667 | | |
$ | 850,287 | | |
$ | (1,171,679 | ) | |
$ | 219,919,487 | | |
$ | (136,903,326 | ) | |
$ | 91,744,769 | |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
BIT
DIGITAL, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For
the Six Months Ended June 30, 2023 and 2022
(Expressed
in US dollars)
| | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | |
| Cash Flows from Operating Activities: | |
| | |
| |
| Net loss | |
$ | (4,687,315 | ) | |
$ | (22,096,044 | ) |
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |
| | | |
| | |
| Depreciation of property and equipment | |
| 7,371,200 | | |
| 9,121,749 | |
| Gain from disposal of property and equipment | |
| - | | |
| (1,454,896 | ) |
| Realized gain on exchange of digital assets | |
| (9,325,626 | ) | |
| (4,265,916 | ) |
| Impairment of digital assets | |
| 3,584,996 | | |
| 17,990,104 | |
| Gain from sale of investment security | |
| - | | |
| (1,039,999 | ) |
| Share based compensation expenses | |
| 613,775 | | |
| 1,057,313 | |
| Liquidated damage expenses | |
| - | | |
| 619,355 | |
| Gain from divestiture of a subsidiary | |
| - | | |
| (52,383 | ) |
| Deferred tax benefits | |
| - | | |
| (404,291 | ) |
| Changes in fair value of investment security | |
| (67,726 | ) | |
| - | |
| Equity loss from one equity method investment | |
| 1,783 | | |
| - | |
| Digital assets mined | |
| (17,126,333 | ) | |
| (15,388,747 | ) |
| Digital assets earned from staking | |
| (176,268 | ) | |
| - | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Digital assets and stable coins | |
| 10,859,035 | | |
| 17,254,502 | |
| Other current assets | |
| (1,345,823 | ) | |
| (740,858 | ) |
| Other non-current assets | |
| 195,748 | | |
| 601,710 | |
| Accounts payable | |
| (1,167,445 | ) | |
| 697,185 | |
| Income tax recoverable/payable | |
| 43,585 | | |
| (731,092 | ) |
| Long-term income tax payable | |
| 152,200 | | |
| 138,364 | |
| Other payables and accrued liabilities | |
| 1,752,702 | | |
| 682,095 | |
| Net Cash (Used in) Provided by Operating Activities | |
| (9,321,512 | ) | |
| 1,988,151 | |
| | |
| | | |
| | |
| Cash Flows from Investing Activities: | |
| | | |
| | |
| Purchases of and deposits made for property and equipment | |
| (7,152,917 | ) | |
| (19,310,398 | ) |
| Proceeds from sales of property and equipment | |
| - | | |
| 958,060 | |
| Proceeds from disposal of long-term investment | |
| - | | |
| 850,000 | |
| Investment in equity securities | |
| (2,088,982 | ) | |
| - | |
| Loss of cash in connection with divestiture of a subsidiary | |
| - | | |
| (59,695 | ) |
| Loan made to third parties | |
| (1,493,209 | ) | |
| - | |
| Net Cash Used in Investing Activities | |
| (10,735,108 | ) | |
| (17,562,033 | ) |
| | |
| | | |
| | |
| Cash Flows from Financing Activities: | |
| | | |
| | |
| Net proceeds from issuance of ordinary shares in connection with private placements with an institutional investor | |
| 6,685,000 | | |
| 21,010,000 | |
| Payment of liquidated damages related to private placement transactions | |
| - | | |
| (2,219,355 | ) |
| Payment of dividends | |
| (800,000 | ) | |
| - | |
| Net Cash Provided by Financing Activities | |
| 5,885,000 | | |
| 18,790,645 | |
| | |
| | | |
| | |
| Net (decrease) increase in cash, cash equivalents and restricted cash | |
| (14,171,620 | ) | |
| 3,216,763 | |
| Cash, cash equivalents and restricted cash, beginning of period | |
| 34,011,060 | | |
| 42,398,528 | |
| Cash, cash equivalents and restricted cash, end of period | |
$ | 19,839,440 | | |
$ | 45,615,291 | |
| | |
| | | |
| | |
| Supplemental Cash Flow Information | |
| | | |
| | |
| Cash paid for interest expense | |
$ | - | | |
$ | - | |
| Cash paid for income tax | |
$ | 131,678 | | |
$ | 734,150 | |
| | |
| | | |
| | |
| Non-cash Transactions of Investing and Financing Activities | |
| | | |
| | |
| Purchases of property and equipment in USDC | |
$ | (5,109,920 | ) | |
$ | (1,658,980 | ) |
| Purchases of property and equipment by issuance of ordinary shares | |
$ | - | | |
$ | (5,637,532 | ) |
| Receipt of property and equipment which were prepaid | |
$ | 3,236,868 | | |
$ | 58,310,388 | |
| Payable for purchases of property and equipment | |
$ | - | | |
$ | (1,297,598 | ) |
| Receivable due from a third party for sales of investment security | |
$ | - | | |
$ | 856,665 | |
| Collection of USDC from sales of property and equipment | |
$ | - | | |
$ | 712,800 | |
Reconciliation
of cash, cash equivalents and restricted cash
| | |
June 30, | | |
December 31, | |
| | |
2023 | | |
2022 | |
| Cash and cash equivalents | |
$ | 18,519,440 | | |
$ | 32,691,060 | |
| Restricted cash | |
| 1,320,000 | | |
| 1,320,000 | |
| Cash, cash equivalents and restricted cash | |
$ | 19,839,440 | | |
$ | 34,011,060 | |
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 digital asset mining business and
Ethereum staking activities through its wholly owned subsidiaries.
On
April 17, 2023, Bit Digital Investment Management Limited
(“BT IM”) was established as the investment manager to oversee Bit Digital Innovation Master Fund SPC Limited (“BT SPC”),
a segregated portfolio company which incorporated in May 2023. Both entities are 100% owned by Bit Digital Strategies Limited.
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 digital asset mining business |
|
100%
owned by Bit Digital, Inc. |
| Bit
Digital Canada, Inc. (“BT Canada”) |
|
● A
Canadian company
● Incorporated
on February 23, 2021
● Engaged
in digital asset 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 digital asset mining related 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 digital asset staking activities |
|
100%
owned by Bit Digital, Inc. |
| Bit
Digital Investment Management Limited (“BT IM”) |
|
● A
British Virgin Islands company
● Incorporated
on April 17, 2023
●
Engaged in fund and investment management activities
|
|
100%
owned by Bit Digital Strategies Limited. |
Bit Digital Innovation Master Fund SPC Limited (“BT SPC”) |
|
● A British Virgin Islands company
● Incorporated on May 31, 2023
● A segregated portfolios company
|
|
100% owned by Bit Digital Strategies Limited. |
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 June 30, 2023 and for the three and six months ended June 30, 2023 and 2022
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, 2022, which was filed with the SEC
on April 28, 2023.
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, 2022. The results of operations for the three and six months ended June 30, 2023 and 2022 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, loans receivable, deposits, other receivables, 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 10).
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Digital
assets
Digital
assets (primarily include bitcoin and ETH) 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 and staking
activities are accounted for in accordance with the Company’s revenue recognition policy disclosed below.
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. Digital assets
held are accounted for as intangible assets with indefinite useful lives and are subject to impairment losses if the fair value of digital
assets decreases below the carrying value at any time during the period. The fair value 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 and digital assets awarded to the Company through its mining activities and staking activities are included
within operating activities on the accompanying unaudited condensed consolidated statements of cash flows. The changes of digital assets
are included within operating 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 on exchange of digital assets” in the unaudited condensed
consolidated statements of operations and comprehensive loss. The Company accounts for its gains or losses in accordance with the first-in
first-out method of accounting.
ASC
820 defines “principal market” as the market with the greatest volume and level of activity for the asset or liability. The
determination of the principal market (and, as a result, the market participants in the principal market) is made from the perspective
of the reporting entity. The digital assets held by the Company are traded on a number of active markets globally. The Company does not
use any exchanges to buy or sell digital assets. Instead, the Company uses Amber Group’s OTC desk for selling or exchanging bitcoins
for U.S. dollars or vice versa. The Company determines CoinMarketCap as its principal market, as it is one of the earliest and the most
trusted sources by users, institutions, and media for comparing thousands of crypto assets and selected by the U.S. government.
The
Company recognizes revenue by utilizing daily close prices obtained from CoinMarketCap, except for the year 2022. During that specific
year, the Company also used hourly close price from CryptoCompare to recognize revenue from our digital asset mining activities. The
Company believed the hourly close price can better reflect revenue recognized from our digital asset mining activities as compared to
daily close price from CoinMarketCap.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment
securities
As of June 30, 2023, investment
security represents the Company’s investment in one equity method investee over which the Company has significant influence, investment
in one fund and in two privately held companies over which the Company neither has control nor significant influence through investments
in ordinary shares. As of December 31, 2022, investment security represents the Company’s investment in one fund and one privately
held company, over which the Company neither has control nor significant influence through investment in ordinary shares.
Investment
in equity method investee
In
accordance with ASC 323, Investments - Equity Method and Joint Ventures, the Company accounts for the investment in
one privately held company using equity method, because the Company has significant influence but does not own a majority equity interest
or otherwise control over the equity investee.
Under
the equity method, the Company initially records its investment at cost and prospectively recognizes its proportionate share of each
equity investee’s net income or loss into its consolidated statements of operations. When the Company’s share of losses in
the equity investee equals or exceeds its interest in the equity investee, the Company does not recognize further losses, unless the
Company has incurred obligations or made payments or guarantees on behalf of the equity investee.
The
Company continually reviews its investment in the equity investee to determine whether a decline in fair value below the carrying value
is other-than-temporary. The primary factors the Company considers in its determination include the financial condition, operating performance
and the prospects of the equity investee; other company specific information such as recent financing rounds; the geographic region,
market and industry in which the equity investee operates; and the length of time that the fair value of the investment is below its
carrying value. If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written
down to fair value.
Investment
in the fund
Equity
securities not accounted for using the equity method are carried at fair value with unrealized gains and losses recorded in the consolidated
income statements, according to ASC 321, Investments - Equity Securities. As a practical expedient, the Company uses Net
Asset Value (“NAV”) or its equivalent to measure the fair value of the investment in the fund. NAV is primarily determined
based on information provided by the fund administrator.
Investment
in the privately held company
Equity
securities not accounted for using the equity method are carried at fair value with unrealized gains and losses recorded in the consolidated
income statements, according to ASC 321, Investments - Equity Securities. The Company elected to record the equity investments
in privately held companies using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price
changes resulting from orderly transactions for identical or similar investments of the same issuer.
Equity
investments in privately held companies accounted for using the measurement alternative are subject to periodic impairment reviews. The
Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair
value of these equity securities, including consideration of the impact of the COVID-19 pandemic. In computing realized gains and losses
on equity securities, the Company calculates cost based on amounts paid using the average cost method. Dividend income is recognized
when the right to receive the payment is established.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deposits
for property and equipment
The
deposits for property and equipment represented advance payments for miner and vehicle purchase. The Company initially recognizes deposits
for property and equipment when cash is advanced to suppliers of property and equipment. Subsequently, the Company derecognizes and reclassifies
deposits for property and equipment to property and equipment when control over the property and equipment is transferred to and obtained
by the Company.
Below
is the roll forward of the balance of deposits for property and equipment for the six months ended June 30, 2023 and 2022, respectively.
| | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Opening balance | |
$ | 2,594,881 | | |
$ | 43,094,881 | |
| Receipt of miners | |
| (3,236,868 | ) | |
| (58,310,388 | ) |
| Prepayment of miners | |
| 6,207,594 | | |
| 19,310,388 | |
| Receipt of a vehicle | |
| (14,825 | ) | |
| - | |
| Prepayment of a vehicle | |
| 14,825 | | |
| - | |
| Ending balance | |
$ | 5,565,607 | | |
$ | 4,094,881 | |
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 contract is terminable at any time by either party with no termination penalty. Our enforceable right to compensation
begins when, and lasts for as long as, we provide computing power to the mining pool operator; our performance obligation extends over
the contract term given our continuous provision of computing power. This period of time corresponds with the period of service for which
the mining pool operator determines compensation due to us. Given cancellation terms of the contract, and our customary business practice,
the contract effectively provides the option to renew for successive contract terms daily. 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.
The Company is entitled to its relative share of consideration even if a block is not successfully placed.
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. ASC 606-10-32-21 requires entities to measure the estimated fair
value of noncash consideration at contract inception. Because the consideration to which the Company expects to be entitled for providing
computing power is entirely variable, as well as being noncash consideration, the Company assesses the estimated amount of the variable
noncash consideration at contract inception and subsequently, to determine when and to what extent it is probable that a significant
reversal in the amount of cumulative revenue recognized will not occur once the uncertainty associated with the variable consideration
is subsequently resolved. Because it is probable that a significant reversal of cumulative revenue will not occur and the Company is
able to calculate the payout based on the contractual formula, this amount should be estimated and recognized in revenue upon inception,
which is when the hash rate is provided.
For
reasons of operational practicality, the Company applies an accounting convention to use the daily quoted closing U.S. dollar spot rate
of digital asset each day to determine the fair value of digital asset 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.
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)
Revenue
recognition (continued)
The
table below presents the Company’s revenues generated from digital asset mining business by countries:
| | |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| United States | |
$ | 8,318,427 | | |
$ | 6,709,715 | | |
$ | 16,032,940 | | |
$ | 15,283,462 | |
| Canada | |
| 593,516 | | |
| 105,285 | | |
| 1,093,393 | | |
| 105,285 | |
| | |
$ | 8,911,943 | | |
$ | 6,815,000 | | |
$ | 17,126,333 | | |
$ | 15,388,747 | |
The
table below presents the Company’s revenues by mining pool operators:
| | |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| Foundry USA Pool | |
$ | 8,911,943 | | |
$ | 6,501,590 | | |
$ | 17,126,333 | | |
$ | 14,533,217 | |
| Ethermine Mining Pool | |
| - | | |
| 313,410 | | |
| - | | |
| 855,530 | |
| | |
$ | 8,911,943 | | |
$ | 6,815,000 | | |
$ | 17,126,333 | | |
$ | 15,388,747 | |
ETH
staking business
The
Company also generates revenue through ETH staking rewards. The ETH staking business is comprised of native staking and liquid staking.
(a)
Native staking
The
Company has entered into network-based smart contracts by staking ETH on nodes run by third-party operators or nodes maintained by
us in 2022. Through these contracts, the Company stakes ETH on nodes for the purpose of validating transactions and adding blocks to
the Ethereum blockchain network. The Company is able to withdraw the staked ETH which was previously locked-up in staking contracts
since the Shanghai upgrade was successfully completed on April 12, 2023. In exchange for staking the ETH and validating transactions
on blockchain networks, the Company is entitled to the block rewards and transaction fees for successfully validating or adding a
block to the blockchain. These rewards are received by the Company directly from the Ethereum network and are calculated
approximately based on the proportion of the Company’s stake to the total ETH staked by all validators.
The
provision of validating blockchain transactions is an output of the Company’s ordinary activities. Each separate block creation
or validation under a smart contract with a network represents a performance obligation. The transaction consideration the Company receives,
the digital asset awards, is a non-cash consideration, which the Company measures at fair value on the date received. The fair value
of the ETH reward received is determined using the quoted price of the ETH at the time of receipt. The satisfaction of the performance
obligation for transaction verification services occurs at a point in time when confirmation is received from the network indicating
that the validation is complete, and the awards are deposited to our address. At that point, revenue is recognized.
The
Company commenced native staking business in the year ended December 31, 2022. For the three months ended June 30, 2023 and 2022, the
Company generated revenues of $66,649 and $nil, respectfully, from the native staking. For the six months ended June 30, 2023 and 2022,
the Company generated revenues of $80,881 and $nil, respectfully, from the native staking.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Liquid staking
The
liquid staking is similar to native staking in terms of performance obligations, determination of transaction price and revenue recognition. When
we participate in liquid staking via Portara protocol, the Company receives receipt tokens sETH-H to represent the staked ETH at 1:1
ratio. The liquid staking rewards are in the form of rETH-H which could be redeemed for ETH from the liquid staking provider or exchange
for ETH via OTC. When we participate in liquid staking via Liquid Collective protocol, the Company receives receipt tokens
Liquid Staked ETH (LsETH) to represent the staked ETH. LsETH uses a floating conversion rate, or protocol conversion rate, between the
receipt token and staked tokens, reflecting the value of accrued network rewards, penalties, and fees associated with the staked tokens.
The
Company commenced liquid staking business in the year ended December 31, 2022. For the three months ended June 30, 2023 and 2022, the
Company generated revenues of $59,010 and $nil, respectively, from the liquid staking. For the six months ended June 30, 2023 and 2022,
the Company generated revenues of $95,387 and $nil, respectively, from the liquid staking.
Disaggregation
of revenues
Below
table presents the disaggregation of Company’s revenues by revenue streams.
| | |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| Digital asset mining | |
$ | 8,911,943 | | |
$ | 6,815,000 | | |
$ | 17,126,333 | | |
$ | 15,388,747 | |
| ETH native staking | |
| 66,649 | | |
| - | | |
| 80,881 | | |
| - | |
| ETH liquid staking | |
| 59,010 | | |
| - | | |
| 95,387 | | |
| - | |
| | |
$ | 9,037,602 | | |
$ | 6,815,000 | | |
$ | 17,302,601 | | |
$ | 15,388,747 | |
Cost
of revenue
The
Company’s cost of revenue consists primarily of i) direct production costs related to mining operations, including electricity
costs, profit-sharing fees/variable performance fees and/or other relevant costs paid to our hosting facilities, but excluding depreciation
and amortization, which are separately stated in the Company’s consolidated statements of operations, and ii) direct cost related
to ETH staking business, including service fees payable
to the service provider.
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.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3.
USDC
| | |
June 30,
2023 | | |
December 31,
2022 | |
| USDC | |
$ | 1,786,374 | | |
$ | 626,441 | |
The
following table presents additional information about USDC for the six months ended June 30, 2023 and 2022, respectively:
| | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Opening balance | |
$ | 626,441 | | |
$ | 15,829,464 | |
| Receipt of USDC from sales of other digital assets | |
| 6,898,860 | | |
| 1,998,002 | |
| Receipt of USDC from sales of property and equipment | |
| - | | |
| 712,800 | |
| Receipt of USDC from sales of Antminer coupon | |
| 699,425 | | |
| - | |
| Receipt of USDC from customer deposits and other fees | |
| - | | |
| 232,337 | |
| Sales of USDC in exchange for cash | |
| - | | |
| (5,494,300 | ) |
| Payment of USDC for purchase of property and equipment | |
| (5,109,920 | ) | |
| - | |
| Payment of USDC for other expenses | |
| (1,328,432 | ) | |
| (1,923,243 | ) |
| Ending balance | |
$ | 1,786,374 | | |
$ | 11,355,060 | |
4.
DIGITAL ASSETS
Digital
asset holdings were comprised of the following:
| | |
June 30,
2023 | | |
December 31,
2022 | |
| BTC (a) | |
$ | 13,305,455 | | |
$ | 15,796,147 | |
| ETH (b) | |
| 18,318,893 | | |
| 11,791,181 | |
| | |
$ | 31,624,348 | | |
$ | 27,587,328 | |
| (a) |
In May
2023, the Company transferred a total of 129 BTC to Auros Global Limited (“Auros”), as collateral to support yield
optimization strategies which Auros is undertaking on the Company’s behalf. By June 30, 2023, 84 BTC remained collateralized
with Auros. We received 45 BTC back on July 28, 2023, and anticipate the release of the remaining 39 BTC on or about August 28,
2023. |
| (b) |
The ETH ending balance as of June 30, 2023 and December 31, 2022 includes 65.8 rETH-H and 16.3 rETH-H earned from the liquid staking activities described below. |
For
the three months ended June 30, 2023, the Company recognized impairment loss of $1,351,331 on digital assets, consisting of $888,023
on BTC and $463,308 on ETH, respectively. For the three months ended June 30, 2022, the Company recognized impairment loss of $13,364,406
on digital assets, consisting of $12,843,555 on BTC and $520,851 on ETH, respectively.
For
the six months ended June 30, 2023, the Company recognized impairment loss of $3,584,996 on digital assets, consisting of $2,597,507
on BTC and $987,489 on ETH, respectively. For the three months ended June 30, 2022, the Company recognized impairment loss of $17,990,104
on digital assets, consisting of $17,398,168 on BTC and $591,936 on ETH, respectively.
For
the six months ended June 30, 2023 and 2022, the Company has native staked 9,312 ETH and nil ETH, respectively, on the Ethereum
blockchain. The Company is able to withdraw the staked ETH which was previously locked-up in staking contracts since the Shanghai
upgrade was successfully completed on April 12, 2023. In addition, the Company staked 2,404 ETH in liquid staking protocols with
unaffiliated third parties and received receipt tokens which could be redeemed for ETH from the liquid staking provider or exchanged
for cash via OTC. For the three and six months ended June 30, 2023, the Company earned 67.8 and 99.5 ETH, respectively, from such
staking activities and recognized the ETH staking rewards as revenues. The Company did not earn ETH from such staking activities for
the three and six months ended June 30, 2022.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4.
DIGITAL ASSETS (CONTINUED)
Additional
information about digital assets
The
following table presents additional information about BTC for the six months ended June 30, 2023 and 2022, respectively:
| | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | |
| Opening balance | |
$ | 15,796,147 | | |
$ | 28,846,587 | |
| Receipt of BTC from mining services | |
| 17,126,333 | | |
| 14,533,220 | |
| Sales of BTC in exchange of cash | |
| (4,679,714 | ) | |
| (9,837,211 | ) |
| Sales of BTC in exchange of ETH | |
| (7,096,795 | ) | |
| - | |
| Sales of BTC in exchange of USDC | |
| (4,359,468 | ) | |
| - | |
| Payment of BTC for service charges from mining facilities | |
| (810,414 | ) | |
| (831,483 | ) |
| Payment of BTC for other expenses | |
| (73,127 | ) | |
| (37,528 | ) |
| Impairment of BTC | |
| (2,597,507 | ) | |
| (17,398,168 | ) |
| Ending balance | |
$ | 13,305,455 | | |
$ | 15,275,417 | |
The
following table presents additional information about ETH for the six months ended June 30, 2023 and 2022, respectively:
| | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | |
| Opening balance | |
$ | 11,791,181 | | |
$ | 193,175 | |
| Receipt of ETH from exchange of BTC | |
| 10,584,732 | | |
| - | |
| Receipt of ETH from mining services | |
| - | | |
| 855,548 | |
| Receipt of ETH from native staking business | |
| 80,881 | | |
| - | |
| Receipt of ETH from liquid staking business* | |
| 95,387 | | |
| - | |
| Receipt of ETH from other income | |
| 250 | | |
| - | |
| Payment of BTC for service charges from mining facilities | |
| - | | |
| (173,473 | ) |
| Sales of ETH in exchange of cash | |
| (3,243,415 | ) | |
| - | |
| Payment of ETH for other expenses | |
| (2,634 | ) | |
| (2,325 | ) |
| Impairment of ETH | |
| (987,489 | ) | |
| (591,936 | ) |
| Ending balance | |
$ | 18,318,893 | | |
$ | 280,989 | |
| * |
It represents 49.53 rETH-H and 5.03 ETH earned from the liquid staking
activities for the six months ended June 30, 2023. |
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5.
OTHER CURRENT ASSETS
Other
current assets were comprised of the following:
| | |
June 30,
2023 | | |
December 31,
2022 | |
| Deposit (a) | |
$ | 620,000 | | |
$ | 400,000 | |
| Prepayments to one mining facility (b) | |
| 342,299 | | |
| - | |
| Prepaid marketing expenses | |
| - | | |
| 307,004 | |
| Prepaid director and officer insurance expenses | |
| 505,781 | | |
| 365,350 | |
| Rental deposits | |
| 46,343 | | |
| 36,343 | |
| Others | |
| 575,974 | | |
| 325,302 | |
| Total | |
$ | 2,090,397 | | |
$ | 1,433,999 | |
| (a) |
As
of June 30, 2023 and December 31, 2022, the balance of deposit represented the deposit made to one service provider, who paid utility
charges in mining facilities on behalf of the Company. The deposit is 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. |
| (b) |
As
of June 30, 2023, the balance of prepayments to one mining facility represented the prepayments for service charges from the mining
facility. |
6.
PROPERTY AND EQUIPMENT, NET
Property
and equipment, net was comprised of the following:
| | |
June 30,
2023 | | |
December 31,
2022 | |
| Miners for Bitcoin | |
$ | 41,062,663 | | |
$ | 32,006,128 | |
| Miners for ETH | |
| 211,142 | | |
| 211,142 | |
| Vehicle | |
| 235,576 | | |
| - | |
| Less: Accumulated depreciation | |
| (16,979,079 | ) | |
| (9,607,879 | ) |
| Property and equipment, net | |
$ | 24,530,302 | | |
$ | 22,609,391 | |
For
the three months ended June 30, 2023 and 2022, depreciation expenses were $3,725,152 and $5,322,120, respectively. For the six months
ended June 30, 2023 and 2022, depreciation expenses were $7,371,200 and $9,121,749, respectively.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7.
INVESTMENT SECURITIES
Investment
securities were comprised of the following:
| | |
June 30,
2023 | | |
December 31,
2022 | |
| Investment in Digital Future Alliance Limited (a) | |
$ | 94,534 | | |
$ | 94,534 | |
| Investment in Nine Blocks Offshore Feeder Fund (b) | |
| 1,761,114 | | |
| 1,693,388 | |
| Investment in Auros Global Limited (c) | |
| 1,999,987 | | |
| - | |
| Investment in Marsprotocol Technologies Pte. Ltd. (d) | |
| 87,211 | | |
| - | |
| Total | |
$ | 3,942,846 | | |
$ | 1,787,922 | |
(a)
Investment in Digital Future Alliance Limited (“DFA”)
DFA
is a privately held company, over which the Company neither has control nor significant influence through investment in ordinary shares.
The Company accounted for the investment in DFA using the measurement alternative at cost, less
impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments
of the same issuer.
For
the three and six months ended June 30, 2023 and 2022, the Company did not record upward adjustments or downward adjustments on the investment.
The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the
fair value of the equity security. As of June 30, 2023 and December 31, 2022, the Company did not recognize impairment against the
investment security.
(b)
Investment in Nine Blocks Offshore Feeder Fund (“Nine Blocks”)
On
August 1, 2022, the Company entered into a subscription agreement with Nine Blocks for investment of $2.0 million. The investment includes
a direct investment into the Nine Blocks Master Fund, a digital assets market neutral fund using basis trading, relative value,
and special situations strategies.
As
a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of the
investment in the fund. For the three and six months ended June 30, 2023, the Company recorded upward adjustments of $42,891
and $67,726 on the investment, respectively.
(c)
Investment in Auros Global Limited (“Auros”)
On
February 24, 2023, the Company closed an investment of $1,999,987 in Auros, which is a leading crypto-native algorithmic trading and
market making firm that delivers best-in-class liquidity for exchanges and token projects. The Company neither has control nor significant
influence through investment in ordinary shares. The Company accounted for the investment in Auros using
the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly
transactions for identical or similar investments of the same issuer.
For
the three and six months ended June 30, 2023, the Company did not record upward adjustments or downward adjustments on the investment.
The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the
fair value of the equity security. As of June 30, 2023, the Company did not recognize impairment against the investment security.
(d)
Investment in Marsprotocol Technologies Pte. Ltd. (“MarsProtocol”)
On
March 1, 2023, Bit Digital Singapore Pte. Ltd. and Saving Digital Pte. Ltd. (“SDP”), a wholly owned subsidiary of Mega Matrix
Corp., entered into a shareholders’ agreement with Marsprotocol Technologies Pte. Ltd (“MarsProtocol”). MarsProtocol
provides staking technology tools in digital assets through the staking platform.
The Company invested $88,994 which represents 40%
of equity interest in Marsprotocol. The Company used the equity method to measure the investment in the MarsProtocol. For the three and
six months ended June 30, 2023, the Company recorded a loss of $2,222 and $1,783, respectively, for its share of the results of MarsProtocol. As of
June 30, 2023, the Company did not recognize impairment against the investment in MarsProtocol. On August 4, 2023, the Company divested
its stake in Marsprotocol.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8.
OTHER NON-CURRENT ASSETS
Other
non-current assets were comprised of the following:
| | |
June 30,
2023 | | |
December 31,
2022 | |
| Deposits (a) | |
$ | 8,771,364 | | |
$ | 8,965,160 | |
| Others | |
| 66,088 | | |
| 68,040 | |
| Total | |
$ | 8,837,452 | | |
$ | 9,033,200 | |
| (a) |
As
of June 30, 2023 and December 31, 2022, the balance of deposits represented the deposits made to service providers, who paid utility
charges in mining facilities on behalf of the Company. The deposits are refundable upon expiration of the agreement between the Company
and the service provider, which may be due over 12 months from the effective date of the agreement. |
9.
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 165,000 RSUs and 355,000 share options have been
granted as of June 30, 2023.
Restricted
Stock Units (“RSUs”)
As
of December 31, 2022, the Company had 11,308 awarded and unvested RSUs, which were fully vested during the three months ended March 31,
2023.
On
June 30, 2023, the Company granted 50,000 RSUs to each of the Company’s Chief Executive Officer (“CEO”) and Chief Financial
Officer (“CFO”) in accordance with their compensation arrangement. All of these RSUs were immediately vested. The Company
recorded share-based compensation expenses of $406,000 by reference to the closing market price of $4.06 on June 30, 2023.
For
the three months ended June 30, 2023 and 2022, the Company recognized share-based compensation expense of $406,000 and $498,321, respectively,
in connection with the above RSU awards. For the six months ended June 30, 2023 and 2022, the Company recognized share-based compensation
expense of $410,873 and $951,805, respectively, in connection with the above RSU awards.
As of June 30, 2023, the Company had no unrecognized
compensation costs related to unvested RSUs.
Share
Options
For
the three and six months ended June 30, 2023, the Company did not grant share of options to employees or non-employees.
On
March 16, 2022, the Company granted an aggregate of 225,000 share options to three employees. 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 $2.72 per share option, by reference to the closing price on grant date.
On
April 1, 2022, the Company granted an aggregate 100,000 share options to one non-employee. All of these share options are subject to
a 12-quarter service vesting schedule, and vest 1/12 for each quarter at an exercise price of $3.60. The fair value of the share option
was determined at $3.01 per share option, by reference to the closing price on grant date.
In
April 2023, one of the three employees resigned and the Company recorded forfeiture of share options of $674.
The
Company recognizes compensation expenses related to those option on a straight-line basis over the vesting periods. For the three months
ended June 30, 2023 and 2022, the Company recognized share-based compensation expenses of $100,934 and $95,093, respectively. For the
six months ended June 30, 2023 and 2022, the Company recognized share-based compensation expenses of $202,902 and $105,509, respectively.
As of June 30, 2023, there were $389,365 of unrecognized compensation costs related to all outstanding share options.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10.
SHARE CAPITAL
Ordinary
shares
As
of December 31, 2022, there were 82,485,583 ordinary shares issued and outstanding.
During
the six months ended June 30, 2023, 11,308 ordinary shares were issued to the Company’s employees 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.
On
April 4, 2023, 30,000 ordinary shares were issued to a non-executive director to settle her compensation of the year of 2022.
In
May and June 2023, the Company issued an aggregate of 2,401,776 ordinary shares to Ionic Ventures LLC for gross proceeds of $7.0 million.
The Company received net proceeds of approximately $6,685,000 after deducting commissions payable to the underwriter.
On June 30, 2023, 100,000 ordinary shares were issued to the Company’s
CEO and CFO in accordance with their compensation arrangement.
As
of June 30, 2023, there were 85,028,667 ordinary shares issued and outstanding.
Preferred
shares
As
of June 30, 2023 and December 31, 2022, 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 and if 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.
On
February 7, 2023, the Board of Directors declared an eight (8%) percent ($800,000) dividend on the preference shares to Geney Development
Ltd. (“Geney”). Erke Huang, our Chief Financial Officer, is the President of Geney and the beneficial owner of thirty (30%)
percent of the equity of Geney, with the remaining seventy (70%) percent held by Zhaohui Deng, the Company’s Chairman of the Board.
As of June 30, 2023, the Company fully paid the declared dividends.
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 six months ended June 30,
2023 and 2022, the Company withheld nil and 14,472 shares, respectively, of its ordinary shares that were surrendered to the Company
for withholding taxes related to restricted stock vesting valued at $nil and $76,820, based on fair value of the withheld shares on the
vesting date.
As
of June 30, 2023 and December 31, 2022, the Company had treasury stock of $1,171,679 and $1,171,679, respectively.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10.
SHARE CAPITAL (CONTINUED)
Warrants
As
of June 30, 2023 and December 31, 2022, 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
11.
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 to 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 purposes. Currently the mark-up percentage for the general and administration
services provided by BT HK is 4.84% per the latest benchmark study performed by our third-party consultants. 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.
For
the three months ended June 30, 2023, BT HK generated a pre-tax profit of $4,055,442 and recorded a current income tax benefits of $5,070.
For the six months ended June 30, 2023, BT HK generated a pre-tax profit of $6,474,570 and
recorded a current income tax expense of $43,573.
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 in 2020 and 2021 under Hong Kong profits tax with the Hong Kong Inland Revenue Department (“HKIRD”)
on the ground that the said income was 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 $114,150 and $152,200 as long-term income tax expenses for the three and six
months ended June 30, 2023, respectively, for its uncertain tax positions. The tax expense of $114,150 and $152,200 are recognized for
the incremental penalty accrued on the existing unrecognized tax benefits for the three and six months ended June 30, 2023, respectively.
For the three months ended June 30, 2023 and 2022,
BT Strategies generated a pre-tax loss of $434,445 and $2,527,549, and did not recognize any income tax expenses for the relevant periods
respectively. For the six months ended June 30, 2023 and 2022, BT Strategies generated a pre-tax loss of $934,714 and $3,291,277,
and did not recognize any income tax expenses for the relevant periods respectively.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11.
INCOME TAXES (CONTINUED)
United
States of America
For
the U.S. 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 Inflation Reduction 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 and six months ended June 30, 2023 and 2022, the Company is subject to U.S. federal income taxes and withholding taxes, state
income taxes and franchise taxes. 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 and six months ended June 30, 2023 and 2022, the Company incurred income tax and withholding tax (expenses) benefits as below:
| | |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| | |
| | |
| | |
| | |
| |
| Federal income tax (expenses) benefits | |
$ | (88 | ) | |
$ | 140,658 | | |
$ | (4,829 | ) | |
$ | 380,203 | |
| State income tax expenses | |
| (259 | ) | |
| (1,107,842 | ) | |
| (518 | ) | |
| (2,244 | ) |
| Total | |
$ | (347 | ) | |
$ | (967,184 | ) | |
$ | (5,347 | ) | |
$ | 377,959 | |
Canada
The Company is subject to both federal and provincial
income taxes for its business operation in Canada. Bit Digital Canada generated a pre-tax profit of $123,334 and $196,916 respectively
for the three and six months ended June 30, 2023. No income tax is recognized as the Company can utilize its net operating loss from prior
years and its entire deferred tax assets balance is still offset by a valuation allowance.
For
three and six months ended June 30, 2023 and 2022, the Company incurred Canada federal and state income tax benefits as below:
| | |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| | |
| | |
| | |
| | |
| |
| Federal income tax expenses | |
$ | - | | |
$ | 79,516 | | |
$ | - | | |
$ | 37,879 | |
| State income tax expenses | |
| - | | |
| 42,409 | | |
| - | | |
| 20,203 | |
| Total | |
$ | - | | |
$ | 121,925 | | |
$ | - | | |
$ | 58,082 | |
Singapore
The Company is subject to corporate income tax
for its business operation in Singapore. The Company generated a pre-tax loss of $1,546,421 and $1,896,697 for the three and six months
ended June 30, 2023, respectively, and did not recognize any tax expense for the relevant periods respectively. The Company generated
a pre-tax loss of $3,060 and $6,111 for the three and six months ended June 30, 2022, and did not recognize tax expense for the relevant
periods.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11.
INCOME TAXES (CONTINUED)
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 judgment 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 June 30, 2023, the Company applies a full valuation allowance on the
deferred tax assets of BT USA, BT Canada, BT Strategies, and BT Singapore.
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 June 30, 2023 and 2022,
the Company recorded an unrecognized tax benefit of $114,150 and $69,128, respectively, related to its HK operations. For the six months
ended June 30, 2023 and 2022, the Company recorded an unrecognized tax benefit of $152,200 and $138,364, respectively, related to its
HK operations. The Company will continue to review its tax positions and provide for unrecognized tax benefits as they arise.
12.
LOSS PER SHARE
| | |
For the Three Months
Ended June 30, | | |
For the Six Months
Ended June 30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| | |
| | |
| | |
| | |
| |
| Net loss | |
$ | (2,427,010 | ) | |
$ | (17,763,417 | ) | |
$ | (4,687,315 | ) | |
$ | (22,096,044 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average number of ordinary share outstanding | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| 83,062,519 | | |
| 79,598,964 | | |
| 82,781,060 | | |
| 74,695,686 | |
| Diluted | |
| 83,062,519 | | |
| 79,598,964 | | |
| 82,781,060 | | |
| 74,695,686 | |
| | |
| | | |
| | | |
| | | |
| | |
| Loss per share | |
| | | |
| | | |
| | | |
| | |
| Basic | |
$ | (0.03 | ) | |
$ | (0.22 | ) | |
$ | (0.06 | ) | |
$ | (0.30 | ) |
| Diluted | |
$ | (0.03 | ) | |
$ | (0.22 | ) | |
$ | (0.06 | ) | |
$ | (0.30 | ) |
Basic
loss per share is computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period. The computation of diluted net loss per share does not include dilutive ordinary shares equivalents in
the weighted average shares outstanding, as they would be anti-dilutive.
For
the three and six months ended June 30, 2023 and 2022, the unvested RSUs, warrants, options and convertible preferred shares were excluded
from the calculation of diluted earnings per share because they were anti-dilutive.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13.
RELATED PARTIES
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 retained counsel
to review the matter. The counsel completed their review and investigation and the Company has updated our policies and procedures based
on their recommendations.
On
February 7, 2023, the Board of Directors declared an eight (8%) percent ($800,000) dividend on the preference shares to Geney Development
Ltd. (“Geney”). Erke Huang, our Chief Financial Officer, is the President of Geney and the beneficial owner of thirty (30%)
percent of the equity of Geney, with the remaining seventy (70%) percent held by Zhaohui Deng, the Company’s Chairman of the Board.
As of June 30, 2023, the Company fully paid the dividend.
On
June 30, 2023, 100,000 ordinary shares were issued to the Company’s CEO and CFO as awards in accordance with their compensation
arrangement. The grant-date fair value of these ordinary shares were $406,000 by reference to the closing price of $4.06 on June 30,
2023.
As
of June 30, 2023 and December 31, 2022, the Company had no outstanding balances due from or due to related parties.
14.
CONTINGENCIES
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. As of June 30,
2023, we are not aware of any material contingencies.
15. SETTLEMENT OF CLASS ACTION LAWSUIT
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 11, 2021, a period of volatility in our
Ordinary Shares, 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 plaintiff. We filed a motion to dismiss the lawsuits and vigorously defended the action.
While that motion was pending, the Company agreed with the lead plaintiff selected in the case to settle the class action by paying $2,100,000.
The Company recorded the liabilities of $2,100,000 in the account of “accrued litigation settlement costs”. The Company chose
to do that to eliminate the burden, expense and uncertainties of further litigation. The Company continues to deny the allegations in
the Amended Complaint and nothing in the settlement is evidence of any liability on the Company’s behalf.
On
March 7, 2023, a final judgement in this matter was entered approving the settlement and certifying the class for purposes of enforcing
the settlement and payment was then made by the Company.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
16. 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
had been inactive since May 2020. 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 had been inactive since May 2020. It did not generate revenues or incur any operating expenses since then. On disposal date,
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.
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.
BIT
DIGITAL, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
17. SUBSEQUENT EVENTS
In July 2023, the Company issued 3,116,827 ordinary shares to Ionic
Ventures LLC for gross proceeds of $11.5 million. The Company received net proceeds of approximately $11.0 million after deducting commissions
payable to broker-dealers.
Forward
Looking Statements
The
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, 2022 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.
49
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