NEW YORK, May 6, 2021 /PRNewswire/ -- Bit Digital, Inc.
(Nasdaq: BTBT) (the "Company"), a bitcoin mining company
headquartered in New York, today
announced its unaudited financial results for the first quarter
ended March 31, 2021.
Financial Highlights for the First Quarter 2021
- Revenue from bitcoin mining was $43.95
million.
- The number of bitcoins earned was 1,013.40.
- The Company owned 40,965 miners, with 100 miners acquired in
the first quarter of 2021.
- Net income was $35.79 million and
earnings per share was $0.74 for the
first quarter 2021, compared with a net loss of $3.85 million and a loss per share of
$0.25 for the same period last
year.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial
condition and results of operations should be read in conjunction
with our financial statements and the related notes included
elsewhere in this prospectus. This discussion contains
forward-looking statements reflecting our current expectations that
involve risks and uncertainties. See "Disclosure Regarding
Forward-Looking Statements" for a discussion of the uncertainties,
risks, and assumptions associated with these statements. Actual
results and the timing of events could differ materially from those
discussed in our forward-looking statements as a result of many
factors, including those set forth under "Risk Factors" and
elsewhere in our Annual Report on Form 20-F for the year ended
December 31,
2020.
Overview
Bitcoin Mining Business
We are a bitcoin mining company with operations in the United States, Canada and China. We commenced our bitcoin mining
business in February 2020. Our
bitcoin mining operations, hosted by third party hosting providers,
use specialized computers, known as miners, to generate bitcoins, a
cryptocurrency. The miners use application specific integrated
circuit ("ASIC") chips. These chips enable the miners to apply
greater computational power, or "hash rate", to provide transaction
verification services (known as "solving a block") which helps
support the bitcoin blockchain. For every block added, the bitcoin
blockchain awards a bitcoin award equal to a set number of bitcoins
per block. Miners with a greater hash rate have a higher chance of
solving a block and receiving a bitcoin award.
Our mining facilities and mining platform operate with the
primary intent of accumulating bitcoin which we may sell for fiat
currency from time to time depending on market conditions and
management's determination of our cash flow needs. Our mining
strategy has been to mine bitcoins as quickly and as many as
possible given the fixed supply of bitcoins. In view of the long
delivery time to purchase miners from manufacturers like Bitmain
and MicroBT, we generally choose to acquire miners on the spot
market which can typically be delivered within a few weeks. We have
not signed leases for bitcoin mining facilities. In order to
achieve lower utility costs, the mining facilities are maintained
by third-party hosts. The bitcoin mining facilities in China are maintained by Hong Kong suppliers. These hosts install the
miners and provide IT consulting, maintenance and repair work on
site for us. Our mining facilities in Texas and Nebraska are maintained by Compute North, an
established miner hosting company in North America. Our facility in Alberta Canada is maintained by Link
Global.
As is a common practice in the mining industry, we may migrate
our miners within our locations on a seasonal basis depending on
electricity availability and cost.
As of March 31, 2021, the Company
owned a total of 40,965 miners, with a total maximum hash rate of
2,264.5 Ph/s, including 7,025 Antminer S17+, 195 Antminer S17E, 32
Antminer S17Pro, 205 Antminer S19Pro, 800 Antminer T3, 9,110
Antminer T17, 256 Antminer T17+, 2,200 Whatsminer M10, 4,125
Whatsminer M20S, 16,917 Whatsminer M21S and 100 Whatsminer
M31S.
As of April 30, 2021, the Company
owned a total of 43,606 miners with a total maximum hash rate of
2,423.15 Ph/s, with an additional 2,130 miners in transit to or
awaiting installation in North
America. In Sichuan
Province we had 19,060 miners; in Xinjiang, we had 12,830
miners; in Nebraska we had 6,890
miners; in Yunnan Province we had
3,200 miners; in Canada we had
1,426 miners; in Texas we had 100
miners and in Georgia we had 100
miners.
During the quarter ended March 31,
2021, we purchased 100 Antminer S19 Pro miners on the spot
market. Subsequent to March 31, 2021,
we purchased an additional 4,871 miners on the spot market, for a
total purchase price of $14,721,857.
These purchases will increase the Company's maximum hash rate to
2,574 Ph/s. The newly purchased miners comprised 1,426 Antminer
S17, 1,800 Antminer S17+, 280 Avalon A1246 and 50 VM V1 miners. All
of the newly purchased miners are expected to be deployed in
North America by the end of
May 2021. The Company is currently
evaluating plans to make more miner purchases to increase our total
mining hash, conditioned upon our raising required funds.
From the inception of our bitcoin mining business in
February 2020 to March 31, 2021, we earned an aggregation of
2,523.60 bitcoins.
As of March 31, 2021, we had
581.23 bitcoins on hand. The following table presents our bitcoin
mining activities in coins as of March 31,
2021.
|
|
Number
of
bitcoins
|
|
|
Amounts*
|
|
Balance at January
1, 2021
|
|
|
262.62
|
|
|
$
|
6,237,917
|
|
Receipt of
cryptocurrencies from mining services
|
|
|
1,013.40
|
|
|
|
43,953,050
|
|
Sales of
cryptocurrencies
|
|
|
(656.58)
|
|
|
|
(30,354,276)
|
|
Lending of
cryptocurrencies to a third party, net
|
|
|
(38.21)
|
|
|
|
(1,148,593)
|
|
Realized gain on sale
of cryptocurrencies
|
|
|
-
|
|
|
|
10,456,497
|
|
Balance at March
31, 2021
|
|
|
581.23
|
|
|
$
|
29,144,595
|
|
* Amounts – 1) the
amounts of receipt of cryptocurrencies from mining services are the
aggregation of the number of bitcoins received multiplying by the
bitcoin price published on
https://coinmarketcap.com/currencies/bitcoin/historical-data/, on a
daily basis; and 2) the amounts of sales of cryptocurrencies are
the actual amount we received from sales.
|
COVID-19
In March 2020, the World Health
Organization declared the COVID-19 outbreak (COVID-19) a global
pandemic. We operate in locations that have been impacted by
COVID-19, and the pandemic has impacted and could further impact
our operations and the operations of our customers as a result of
quarantines, various local, state and federal government public
health orders, facility and business closures, and travel and
logistics restrictions. Conditions may improve or worsen as
governments and businesses continue to take actions to respond to
the risks of the COVID-19 pandemic. While the COVID-19 pandemic
continues to cause uncertainty in the global economy and
restrictive measures by governments and businesses remain in place,
we expect our business and results of operations to be materially
and adversely affected. Company is actively monitoring this
situation and the possible effects on its financial condition,
liquidity, operations, suppliers, and industry.
Beginning in the middle of March
2020, the outbreak of COVID-19 led to adverse impacts on the
U.S. and global economies, bringing uncertainty to our operations
and customer demand. Various local governments issued orders
requiring the closure of non-essential businesses and to curtail
all unnecessary travel and requiring individuals to comply with
various shelter-in-place and social distancing orders. We, however,
experienced positive growth from our efforts in investment in
miners together with continuous increase in bitcoin market price as
investors presented increasing confidence in bitcoins.
Additionally, we have evaluated the potential impact of the
COVID-19 outbreak on our financial statements, including, but not
limited to, the impairment of long-lived assets and valuation of
cryptocurrencies. We have concluded that our long-lived assets are
not impaired. Where applicable, we have incorporated judgments and
estimates of the expected impact of COVID-19 in the preparation of
the financial statements based on information currently available.
These judgments and estimates may change, as new events develop and
additional information is obtained, and are recognized in the
consolidated financial statements as soon as they become known.
We continue to actively monitor the situation and may take
further actions that alter our operations and business practices as
may be required by federal, state or local authorities or that we
determine are in the best interests of our partners, customers,
suppliers, vendors, employees and shareholders. While the
disruption is currently expected to be temporary, the extent to
which the COVID-19 outbreak will further impact the Company's
financial results will depend on future developments, which are
unknown and cannot be predicted, including the duration and
ultimate scope of the pandemic, advances in testing, treatment and
prevention, as well as actions taken by governments and businesses.
With miners transferred to the United Stated and Canada, the COVID-19 situation continued to
create travel and transportation difficulties. The US operations
are heavily dependent on our partners, who may also be impacted by
COVID-19.
Results of Operations
Results of Operations for the Three Months Ended March 31, 2021 and 2020
The following table summarizes the results of our operations
during the three months ended March 31,
2021 and 2020, respectively, and provides information
regarding the dollar and percentage increase or (decrease) during
period.
|
|
For the Three
Months
Ended
March 31,
|
|
|
Variance
in
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
Revenue from
cryptocurrency mining
|
|
$
|
43,953,050
|
|
|
$
|
18,231
|
|
|
$
|
43,934,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and amortization shown
below)
|
|
|
(12,467,728)
|
|
|
|
(19,088)
|
|
|
|
(12,448,640)
|
|
Depreciation and
amortization expenses
|
|
|
(3,650,374)
|
|
|
|
-
|
|
|
|
(3,650,374)
|
|
General and
administrative expenses
|
|
|
(2,225,170)
|
|
|
|
(118,978)
|
|
|
|
(2,106,192)
|
|
Total operating
expenses
|
|
|
(18,343,272)
|
|
|
|
(138,066)
|
|
|
|
(18,205,206)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
operations
|
|
|
25,609,778
|
|
|
|
(119,835)
|
|
|
|
25,729,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on exchange of cryptocurrencies
|
|
|
10,456,497
|
|
|
|
(226)
|
|
|
|
10,456,723
|
|
Other
expenses
|
|
|
2,191
|
|
|
|
-
|
|
|
|
2,191
|
|
Total other
income, net
|
|
|
10,458,688
|
|
|
|
(226)
|
|
|
|
10,458,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss)
before income taxes
|
|
|
36,068,466
|
|
|
|
(120,061)
|
|
|
|
36,188,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expenses
|
|
|
(282,142)
|
|
|
|
-
|
|
|
|
(282,142)
|
|
Net income (loss)
from continuing operations
|
|
|
35,786,324
|
|
|
|
(120,061)
|
|
|
|
35,906,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations
|
|
|
-
|
|
|
|
(3,734,498)
|
|
|
|
3,734,498
|
|
Net income
(loss)
|
|
$
|
35,786,324
|
|
|
$
|
(3,854,559)
|
|
|
$
|
39,640,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per
share - Basic and diluted
|
|
$
|
0.74
|
|
|
$
|
(0.25)
|
|
|
|
0.99
|
|
Revenues
We generate revenues from provision of computing power to the
digital asset mining pool, and receive consideration in the form of
cryptocurrencies, the value of which is determined using the market
price of the related cryptocurrency at the time of receipt.
Providing computing power to successfully add a block to the
blockchain, the Company is entitled to a fractional share of the
fixed cryptocurrency award from the mining pool operator, which is
based on the proportion of computing power the Company contributed
to the mining pool operator to the total computing power
contributed by all mining pool participants in solving the current
algorithm.
For the three months ended March 31,
2021, we received 1,013.40 bitcoins from two mining pool
operators. As of March 31, 2021, our
maximum hash rate was 2,264.5 Ph/s. For the three months ended
March 31, 2021, we recognized revenue
of $43,953,050.
For the three months ended March 31,
2020, we received 2.48 bitcoins from two mining pool
operators by providing computing power in our 76 miners.
We expect to continue to invest in miners to increase the hash
rate capacity. As a result, we expect a continuous significant
increase in revenue for the fiscal year 2021. Also, with more
miners operating in the United
States and Canada, we
expect energy cost per hash to decrease on an overall basis.
Cost of revenues
Cost of revenues of $12,467,728
for the three months ended March 31,
2021 was primarily comprised of direct production cost of
the mining operations, including utilities and other service
charges, but excluding depreciation and amortization expenses which
are separately presented. Our fleet aggregated 125 megawatts of
maximum power consumption for the three months ended March 31, 2021.
For the three months ended March 31,
2020, we incurred cost of revenues of $19,088 from utilities and other service
charges.
We expect an increase in cost of revenues in fiscal year 2021 as
we continue to focus on expansion and upgrade of our miner
fleet.
Depreciation and amortization expenses
For the three months ended March 31,
2021, depreciation and amortization expenses represented
depreciation of 40,965 miners with an estimated useful life of 3
years.
For the three months ended March 31,
2020, we did not incur depreciation and amortization
expenses.
General and administrative expenses
For the three months ended March 31,
2021, our general and administrative expenses were primarily
comprised of professional and consulting expenses of $1,025,785, transportation expenses of
$667,231 to relocate certain miners
from China to the US, payroll
expenses of $351,362 and office
expenses of $77,362.
For the three months ended March 31,
2020, our general and administrative expenses were primarily
comprised of professional and consulting expenses of $114,527.
Realized gain (loss) on exchange of cryptocurrencies
We record cryptocurrencies at cost and any gains or losses from
sales of cryptocurrencies are recorded as "Realized gain/(loss) on
exchange of cryptocurrencies" in the consolidated statements of
operations. For the three months ended March
31, 2021, we recorded a gain of $10,456,497 from exchange of 656.58 bitcoins. For
the three months ended March 31,
2020, we recorded a loss of $226 from sales of 0.69 bitcoins.
Income tax expenses
Income tax expenses was $282,142
for the three months ended March 31,
2021, as we generated taxable profits derived from our U.S.
operations.
Income tax expenses was $nil for the three months ended
March 31, 2020, as we are not subject
to tax on income or capital gain in Cayman, and we did not generate
assessable profits arising in or derived from Hong Kong.
Net income (loss) and income (loss) per share
For the three months ended March 31,
2021, our net income was $35,786,324, representing a change of
$39,640,883 from a net loss of
$3,854,559 for the same period of
last year, derived from a net loss of $120,061 from our continuing business, and a net
loss of $3,734,498 from our
discontinued operations.
Income per share was $0.74 and
loss per share was $0.25 for the
three months ended March 31, 2021 and
2020, respectively. Weighted average number of shares was
48,291,310 and 15,399,185 for the three months ended March 31, 2021 and 2020, respectively.
Liquidity and Capital Resources
To date, we have financed our operations primarily through cash
flows from operations, working capital loans from our shareholders
and senior management, and equity financing through public and
private offerings of our securities. We plan to support our future
operations primarily from cash generated from our operations and
equity financing.
As of January 5, 2021, the Company
completed the sale of 262,082 Ordinary Shares at $4.50 per share for gross proceeds of
$1,179,369 to eleven non-U.S.
Persons.
On February 5 and March 12, 2021, the Company completed the sale of
subordinated convertible notes in the principal amounts of
$1,100,000 and $550,000, respectively, to an accredited
institutional investor pursuant to a Securities Purchase
Agreement.
Revenue from Mining Operations
Funding our operations on a go-forward basis will rely
significantly on our ability to continue to mine cryptocurrency and
the spot or market price of the cryptocurrency we mine. We expect
to generate ongoing revenues from the production of
cryptocurrencies, primarily bitcoin, in our mining facilities. Our
ability to liquidate bitcoin at future values will be evaluated
from time to time to generate cash for operations. Generating
bitcoin, for example, with spot market values which exceed our
production and other costs, will determine our ability to report
profit margins related to such mining operations, although
accounting for our reported profitability is significantly complex.
Furthermore, regardless of our ability to generate revenue from our
cryptocurrency assets, we may need to raise additional capital in
the form of equity or debt to fund our operations and pursue our
business strategy.
The ability to raise funds as equity, debt or conversion of
cryptocurrency to maintain our operations is subject to many risks
and uncertainties and, even if we were successful, future equity
issuances would result in dilution to our existing stockholders and
any future debt or debt securities may contain covenants that limit
our operations or ability to enter into certain transactions. Our
ability to realize revenue through bitcoin production and
successfully convert bitcoin into cash or fund overhead with
bitcoin is subject to a number of risks, including regulatory,
financial and business risks, many of which are beyond our control.
Additionally, the value of bitcoin currency rewards has been
extremely volatile historical. While such volatility has recently
decreased, future prices cannot be predicted.
If we are unable to generate sufficient revenue from our bitcoin
production when needed or secure additional sources of funding, it
may be necessary to significantly reduce our current rate of
spending or explore other strategic alternatives.
Cash flows
|
|
For the Three
Months
Ended March
31,
|
|
|
|
2021
|
|
|
2020
|
|
Net Cash Used in
Operating Activities
|
|
|
(2,537,979)
|
|
|
|
(122,258)
|
|
Net Cash Provided by
Investing Activities
|
|
|
1,080,412
|
|
|
|
5,946
|
|
Net Cash Provided by
Financing Activities
|
|
|
1,280,000
|
|
|
|
116,765
|
|
Net (decrease)
increase in cash, cash equivalents and restricted cash
|
|
|
(177,567)
|
|
|
|
454
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
|
|
405,133
|
|
|
|
615,988
|
|
Cash, cash
equivalents and restricted cash at end of period
|
|
$
|
227,566
|
|
|
$
|
616,442
|
|
Operating Activities
Net cash used in operating activities was $2,537,979 for the three months ended
March 31, 2021, mainly derived from
(i) net income of $35,786,324 from
continuing operations for the three months adjusted for
depreciation expenses of miners of $3,650,374, and (ii) net of changes in our
operating assets and liabilities, principally comprising of (a) an
increase in cryptocurrencies of $53,646,868 as rewards to us for provision of
mining services, (b) an increase in other current assets of
$1,336,681, primarily attributable to
payment of deposits of $1,296,512 to
two service providers who paid utility charges in mining facilities
on behalf of us, and (c) an increase in accounts payable of
$12,757,378, primarily because we paid maintenance services fees of
$12,726,320 in cryptocurrencies.
Net cash used in operating activities was $122,258 for the three months ended March 31, 2020, derived mainly from a net loss of
$120,061 from continuing operations
for the three months.
Investing Activities
Net cash provided by investing activities was $1,080,412 for the three months ended
March 31, 2021, primarily used in
purchases of miners of $686,538, and
netting off against cash proceeds of $1,766,950 from sales of cryptocurrencies.
Net cash provided by investing activities was $5,946 for the three months ended March 31, 2020, resulting from cash proceeds of
$5,964 from sales of
cryptocurrencies.
Financing Activities
Net cash provided by financing activities was $1,280,000 for the three months ended
March 31, 2021, primarily provided by
proceeds of $1,280,000 from the
issuance of convertible notes to one institutional investor through
a private placement.
Net cash provided by financing activities was $116,765 for the three months ended March 31, 2020, resulting from proceeds from
borrowings from a related party.
Off-balance sheet arrangements
We have not entered into any derivative contracts that are
indexed to our shares and classified as shareholders' equity or
that are not reflected in our consolidated financial statements.
Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity. We do not
have any variable interest in any unconsolidated entity that
provides financing, liquidity, market risk or credit support or
that engages in leasing, hedging or research and development
services with us.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial
statements. These financial statements are prepared in accordance
with 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 consolidated financial
statements, and to disclose the reported amounts of revenues and
expenses incurred during the financial reporting periods. The most
significant estimates and assumptions include the valuation of
cryptocurrencies and other current assets, useful lives of property
and equipment, the recoverability of long-lived assets, provision
necessary for contingent liabilities and realization of deferred
tax assets. We continue to evaluate these estimates and assumptions
that we believe to be reasonable under the circumstances. We rely
on these evaluations as the basis for making judgments about the
carrying values of assets and liabilities that are not readily
apparent from other sources. Since the use of estimates is an
integral component of the financial reporting process, actual
results could differ from those estimates as a result of changes in
our estimates. Some of our accounting policies require higher
degrees of judgment than others in their application. We believe
critical accounting policies as disclosed in this release reflect
the more significant judgments and estimates used in preparation of
our consolidated financial statements.
Recently issued and adopted accounting pronouncements
The Company has evaluated all other recently issued accounting
pronouncements and believes such pronouncements do not have a
material effect on the Company's financial statements. See Note 2
of the unaudited condensed consolidated financial statements as of
March 31, 2021.
BIT DIGITAL,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
As of March 31,
2021 and December 31, 2020
(Expressed in U.S.
dollars, except for the number of shares)
|
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
ASSETS
|
|
(unaudited)
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
227,566
|
|
|
$
|
405,133
|
|
Cryptocurrencies
|
|
|
29,361,599
|
|
|
|
6,293,922
|
|
Other current
assets
|
|
|
4,908,935
|
|
|
|
2,020,374
|
|
Total Current
Assets
|
|
|
34,498,100
|
|
|
|
8,719,429
|
|
|
|
|
|
|
|
|
|
|
Investment
security
|
|
|
1,000,000
|
|
|
|
-
|
|
Deposits for
equipment
|
|
|
14,400,272
|
|
|
|
1,324,963
|
|
Property and
equipment, net
|
|
|
28,193,696
|
|
|
|
29,849,157
|
|
Total
Assets
|
|
$
|
78,092,068
|
|
|
$
|
39,893,549
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,396,773
|
|
|
$
|
1,365,716
|
|
Due to related
parties
|
|
|
7,000
|
|
|
|
336,722
|
|
Income tax
payable
|
|
|
251,919
|
|
|
|
|
|
Other payables and
accrued liabilities
|
|
|
160,887
|
|
|
|
191,536
|
|
Convertible
notes
|
|
|
1,280,000
|
|
|
|
-
|
|
Total Current
Liabilities
|
|
|
3,096,579
|
|
|
|
1,893,974
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
liabilities
|
|
|
30,223
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
3,126,802
|
|
|
|
1,893,974
|
|
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
|
|
Common shares, $0.01
par value, 150,000,000 and 50,000,000 shares authorized, 48,
305,870 and 48,043,788 shares issued and outstanding
of March 31, 2021 and
December 31, 2020, respectively
|
|
|
483,059
|
|
|
|
480,438
|
|
Additional paid-in
capital
|
|
|
54,396,373
|
|
|
|
53,219,626
|
|
Retained earnings
(Accumulated deficit)
|
|
|
20,085,834
|
|
|
|
(15,700,489)
|
|
Total
Shareholders' Equity
|
|
|
74,965,266
|
|
|
|
37,999,575
|
|
Total Liabilities
and Shareholders' Equity
|
|
$
|
78,092,068
|
|
|
$
|
39,893,549
|
|
|
|
The accompanying
notes are an integral part of these unaudited condensed
consolidated financial statements.
|
|
BIT DIGITAL,
INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
For the Three
Months Ended March 31, 2021 and 2020
(Expressed in U.S.
dollars, except for the number of shares)
|
|
|
|
For the Three
Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Revenue from
cryptocurrency mining
|
|
$
|
43,953,050
|
|
|
$
|
18,231
|
|
|
|
|
|
|
|
|
|
|
Cost and operating
expenses
|
|
|
|
|
|
|
|
|
Cost of revenues
(exclusive of depreciation and amortization shown below)
|
|
|
(12,467,728)
|
|
|
|
(19,088)
|
|
Depreciation and
amortization expenses
|
|
|
(3,650,374)
|
|
|
|
-
|
|
General and
administrative expenses
|
|
|
(2,225,170)
|
|
|
|
(118,978)
|
|
Total operating
expenses
|
|
|
(18,343,272)
|
|
|
|
(138,066)
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from
Operations
|
|
|
25,609,778
|
|
|
|
(119,835)
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on exchange of cryptocurrencies
|
|
|
10,456,497
|
|
|
|
(226)
|
|
Other
expenses
|
|
|
2,191
|
|
|
|
-
|
|
Total other
income, net
|
|
|
10,458,688
|
|
|
|
(226)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
from continuing operations before income taxes
|
|
|
36,068,466
|
|
|
|
(120,061)
|
|
|
|
|
|
|
|
|
|
|
Income tax
expenses
|
|
|
(282,142)
|
|
|
|
-
|
|
Net income (loss)
from continuing operations
|
|
|
35,786,324
|
|
|
|
(120,061)
|
|
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations
|
|
|
-
|
|
|
|
(3,734,498)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
and comprehensive income (loss)
|
|
$
|
35,786,324
|
|
|
$
|
(3,854,559)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of ordinary share outstanding
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
|
|
48,291,310
|
|
|
|
15,399,185
|
|
Income (Loss) per
share
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
|
$
|
0.74
|
|
|
$
|
(0.25)
|
|
|
|
The accompanying
notes are an integral part of these unaudited condensed
consolidated financial statements.
|
|
BIT DIGITAL,
INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three
Months Ended March 31, 2021 and 2020
(Expressed in U.S.
dollars)
|
|
|
|
|
|
For the Three
Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Net income
(loss)
|
|
$
|
35,786,324
|
|
|
$
|
(3,854,559)
|
|
Less: Net loss from
discontinued operations
|
|
|
-
|
|
|
|
3,734,498
|
|
Net income (loss)
from continuing operations
|
|
|
35,786,324
|
|
|
|
(120,061)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
|
3,650,374
|
|
|
|
3,056
|
|
Deferred tax
expenses
|
|
|
30,223
|
|
|
|
-
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Cryptocurrencies
|
|
|
(53,646,868)
|
|
|
|
(17,947)
|
|
Other current
assets
|
|
|
(1,336,681)
|
|
|
|
-
|
|
Accounts
payable
|
|
|
12,757,378
|
|
|
|
12,695
|
|
Income tax
payable
|
|
|
251,919
|
|
|
|
-
|
|
Other payables and
accrued liabilities
|
|
|
(30,648)
|
|
|
|
-
|
|
Net Cash Used in
Operating Activities
|
|
|
(2,537,979)
|
|
|
|
(122,258)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
|
|
(686,538)
|
|
|
|
-
|
|
Proceeds from sales
of cryptocurrencies
|
|
|
1,766,950
|
|
|
|
5,946
|
|
Net Cash Provided
by Investing Activities
|
|
|
1,080,412
|
|
|
|
5,946
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from
borrowings from related parties
|
|
|
-
|
|
|
|
116,765
|
|
Proceeds from
issuance of convertible notes, net of issuance costs
|
|
|
1,280,000
|
|
|
|
-
|
|
Net Cash Provided
by Financing Activities
|
|
|
1,280,000
|
|
|
|
116,765
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)
increase in cash, cash equivalents and restricted cash
|
|
|
(177,567)
|
|
|
|
454
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
|
|
405,133
|
|
|
|
615,988
|
|
Cash, cash
equivalents and restricted cash at end of period
|
|
$
|
227,566
|
|
|
$
|
616,442
|
|
Supplemental Cash
Flow Information
|
|
|
|
|
|
|
|
|
Cash paid for
interest expense
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income
tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
cash, cash equivalents and restricted cash
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
227,566
|
|
|
$
|
16,442
|
|
Restricted
cash
|
|
|
-
|
|
|
|
600,000
|
|
Cash, cash
equivalents and restricted cash
|
|
$
|
227,566
|
|
|
$
|
616,442
|
|
|
|
|
|
|
|
|
|
|
Non-cash
transactions of investing and financing activities
|
|
|
|
|
|
|
|
|
Collection of USDC
from private placement
|
|
$
|
1,179,368
|
|
|
$
|
-
|
|
Investment in an
investment security in USDC
|
|
$
|
(1,000,000)
|
|
|
$
|
-
|
|
Purchases of property
and equipment in USDT
|
|
$
|
(13,487,791)
|
|
|
$
|
-
|
|
Purchases of property
and equipment in USDC
|
|
$
|
(895,893)
|
|
|
$
|
-
|
|
Repayment of USDC to
a related party
|
|
$
|
(329,722)
|
|
|
$
|
-
|
|
|
The accompanying
notes are an integral part of these unaudited condensed
consolidated financial statements.
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Bit Digital, Inc. ("BTBT" or the "Company"), formerly known as
Golden Bull Limited, is a holding company incorporated on
February 17, 2017, under the laws of
the Cayman Islands. The Company is
currently engaged in the bitcoin mining business through its wholly
owned subsidiaries in the United
States, Canada and
Hong Kong.
The accompanying consolidated financial statements reflect the
activities of the Company and each of the following entities:
Name
|
|
Background
|
|
Ownership
|
Golden Bull USA, Inc.
("Golden Bull
USA")
|
|
● A United States
company
● Incorporated on June 3, 2019
● Engaged in car rental business
|
|
100% owned by Bit
Digital, Inc.
|
BIT Digital Hong Kong
Limited ("BT
HK")
|
|
● A Hong Kong
company
● Acquired on April 8, 2020
● Engaged in bitcoin mining business
|
|
100% owned by Bit
Digital, Inc.
|
BIT Digital USA, Inc.
("BT USA")
|
|
● A United States
company
● Incorporated on September 1, 2020
● Engaged in bitcoin mining business
|
|
100% owned by Bit
Digital, Inc.
|
BIT Digital Canada,
Inc. ("BT C
anada")
|
|
● A Canadian
company
● Incorporated on February 23, 2021
● Engaged in bitcoin mining business
|
|
100% owned by Bit
Digital, Inc.
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The interim unaudited condensed consolidated financial
statements are prepared and presented in accordance with accounting
principles generally accepted in the
United States ("U.S. GAAP").
The unaudited condensed consolidated financial information as of
March 31, 2021 and for the three
months ended March 31, 2021 and 2020
has been prepared without audit, pursuant to the rules and
regulations of the SEC and pursuant to Regulation S-X. Certain
information and footnote disclosures, which are normally included
in annual financial statements prepared in accordance with U.S.
GAAP, have been omitted pursuant to those rules and regulations.
The unaudited interim financial information should be read in
conjunction with the audited financial statements and the notes
thereto, included in the Form 20-F for the fiscal year ended
December 31, 2020, which was filed
with the SEC on March 30, 2021.
In the opinion of the management, the accompanying unaudited
condensed consolidated financial statements reflect all normal
recurring adjustments, which are necessary for a fair presentation
of financial results for the interim periods presented. The Company
believes that the disclosures are adequate to make the information
presented not misleading. The accompanying unaudited condensed
consolidated financial statements have been prepared using the same
accounting policies as used in the preparation of the Company's
consolidated financial statements for the year ended December 31, 2020. The results of operations for
the three months ended March 31, 2021
and 2020 are not necessarily indicative of the results for the full
years.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Fair value of financial instruments
ASC 825-10 requires certain disclosures regarding the fair value
of financial instruments. Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date. A three-level fair value hierarchy prioritizes
the inputs used to measure fair value. The hierarchy requires
entities to maximize the use of observable inputs and minimize the
use of unobservable inputs. The three levels of inputs used to
measure fair value are as follows:
- Level 1 - inputs to the valuation methodology are quoted prices
(unadjusted) for identical assets or liabilities in active
markets.
- Level 2 - inputs to the valuation methodology include quoted
prices for similar assets and liabilities in active markets, quoted
market prices for identical or similar assets in markets that are
not active, inputs other than quoted prices that are observable and
inputs derived from or corroborated by observable market data.
- Level 3 - inputs to the valuation methodology are
unobservable.
Fair value of cryptocurrencies is based on quoted prices in
active markets. The fair value of the Company's other financial
instruments including cash and cash equivalents, restricted cash,
deposits, other receivables, accounts payable, due to related
parties, accounts payable and other payables, approximate their
fair values because of the short-term nature of these assets and
liabilities. The convertible note approximates its fair value,
because the bearing interest rate approximates market interest
rate, and market interest rates have not fluctuated significantly
since the commencement of contract signed.
Cryptocurrencies
Cryptocurrencies (including bitcoin and bitcoin cash) are
included in current assets in the accompanying consolidated balance
sheets. Cryptocurrencies purchased are recorded at cost and
cryptocurrencies awarded to the Company through its mining
activities are accounted for in connection with the Company's
revenue recognition policy disclosed below.
Cryptocurrencies held are accounted for as intangible assets
with indefinite useful lives. An intangible asset with an
indefinite useful life is not amortized but assessed for impairment
annually, or more frequently, when events or changes in
circumstances occur indicating that it is more likely than not that
the indefinite-lived asset is impaired. Impairment exists when the
carrying amount exceeds its fair value, which is measured using the
quoted price of the cryptocurrency at the time its fair value is
being measured. In testing for impairment, the Company has the
option to first perform a qualitative assessment to determine
whether it is more likely than not that an impairment exists. If it
is determined that it is not more likely than not that an
impairment exists, a quantitative impairment test is not necessary.
If the Company concludes otherwise, it is required to perform a
quantitative impairment test. To the extent an impairment loss is
recognized, the loss establishes the new cost basis of the asset.
Subsequent reversal of impairment losses is not permitted.
Purchases of cryptocurrencies by the Company are included within
investing activities in the accompanying consolidated statements of
cash flows, while cryptocurrencies awarded to the Company through
its mining activities are included within operating activities on
the accompanying consolidated statements of cash flows. The sales
of cryptocurrencies are included within investing activities in the
accompanying consolidated statements of cash flows and any realized
gains or losses from such sales are included in "realized gain
(loss) on exchange of cryptocurrencies" in the consolidated
statements of operations and other comprehensive loss. The Company
accounts for its gains or losses in accordance with the first-in
first-out method of accounting.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Investment security
As of March 31, 2021, investment
security represents the Company's investment in one privately held
company over which the Company neither has control nor significant
influence through investment in common stock.
Equity securities not accounted for using the equity method are
carried at fair value with unrealized gains and losses recorded in
the consolidated income statements, according to ASC 321
"Investments — Equity Securities". The Company elected to record
the equity investments in privately held companies using the
measurement alternative at cost, less impairment, with subsequent
adjustments for observable price changes resulting from orderly
transactions for identical or similar investments of the same
issuer.
Equity investments in privately held companies accounted for
using the measurement alternative are subject to periodic
impairment reviews. The Company's impairment analysis considers
both qualitative and quantitative factors that may have a
significant effect on the fair value of these equity securities,
including consideration of the impact of the COVID-19 pandemic. In
computing realized gains and losses on equity securities, the
Company determines cost based on amounts paid using the average
cost method. Dividend income is recognized when the right to
receive the payment is established.
Impairment of long-lived assets
Long-lived assets, including plant and equipment are reviewed
for impairment whenever events or changes in circumstances (such as
a significant adverse change to market conditions that will impact
the future use of the assets) indicate that the carrying value of
an asset may not be recoverable. The Company assesses the
recoverability of the assets based on the undiscounted future cash
flows the assets are expected to generate and recognize an
impairment loss when estimated undiscounted future cash flows
expected to result from the use of the asset plus net proceeds
expected from disposition of the asset, if any, are less than the
carrying value of the asset. If an impairment is identified, the
Company would reduce the carrying amount of the asset to its
estimated fair value based on a discounted cash flows approach or,
when available and appropriate, to comparable market values.
Revenue recognition
The Company recognizes revenue in accordance with ASC 606
Revenue from Contracts with Customers ("ASC 606").
To determine revenue recognition for contracts with customers,
the Company performs the following five steps: (i) identify the
contract with the customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price,
including variable consideration to the extent that it is probable
that a significant future reversal will not occur, (iv)
allocate the transaction price to the respective performance
obligations in the contract, and (v) recognize revenue when (or as)
the Company satisfies the performance obligation.
The Company recognizes revenue when it transfers its goods and
services to customers in an amount that reflects the consideration
to which the Company expects to be entitled in such exchange.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Revenue recognition (continued)
Cryptocurrency mining
The Company has entered into digital asset mining pools by
executing contracts with the mining pool operators to provide
computing power to the mining pool. The contracts are
terminable at any time by either party and the Company's
enforceable right to compensation only begins when the Company
provides computing power to the mining pool operator. In exchange
for providing computing power, the Company is entitled to a
fractional share of the fixed cryptocurrency award the mining pool
operator receives (less digital asset transaction fees to the
mining pool operator which are recorded as a component of cost of
revenues), for successfully adding a block to the blockchain. The
Company's fractional share is based on the proportion of computing
power the Company contributed to the mining pool operator to the
total computing power contributed by all mining pool participants
in solving the current algorithm.
Providing computing power in digital asset transaction
verification services is an output of the Company's ordinary
activities. The provision of providing such computing power is the
only performance obligation in the Company's contracts with mining
pool operators. The transaction consideration the Company receives,
if any, is noncash consideration, which the Company measures at
fair value on the date received, which is not materially different
than the fair value at contract inception or the time the Company
has earned the award from the pools. The consideration is all
variable. Because it is not probable that a significant reversal of
cumulative revenue will not occur, the consideration is constrained
until the mining pool operator successfully places a block (by
being the first to solve an algorithm) and the Company receives
confirmation of the consideration it will receive, at which time
revenue is recognized. There is no significant financing component
in these transactions.
Fair value of the cryptocurrency award received is determined
using the quoted price of the related cryptocurrency at the time of
receipt.
There is currently no specific definitive guidance under GAAP or
alternative accounting framework for the accounting for
cryptocurrencies recognized as revenue or held, and management has
exercised significant judgment in determining the appropriate
accounting treatment. In the event authoritative guidance is
enacted by the FASB, the Company may be required to change its
policies, which could have an effect on the Company's consolidated
financial position and results from operations.
Reclassification
The Company reclassified USDC to cryptocurrencies in the 2020
financial statements to conform to the presentation as of
March 31, 2021. The reclassification
has no impact on the total assets and total liabilities as of
March 31, 2021.
Recent accounting pronouncements
In June 2016, the FASB issued ASU
2016-13, Financial Instruments-Credit Losses (Topic 326), which
requires entities to measure all expected credit losses for
financial assets held at the reporting date based on historical
experience, current conditions, and reasonable and supportable
forecasts. This replaces the existing incurred loss model and is
applicable to the measurement of credit losses on financial assets
measured at amortized cost. ASU 2016-13 was subsequently amended by
Accounting Standards Update 2018-19, Codification Improvements to
Topic 326, Financial Instruments—Credit Losses, Accounting
Standards Update 2019-04 Codification Improvements to Topic 326,
Financial Instruments—Credit Losses, Topic 815, Derivatives and
Hedging, and Topic 825, Financial Instruments, and Accounting
Standards Update 2019-05, Targeted Transition Relief. For public
entities, ASU 2016-13 and its amendments are effective for fiscal
years, and interim periods within those fiscal years, beginning
after December 15, 2019. For all
other entities, this guidance and its amendments will be effective
for fiscal years beginning after December
15, 2022, including interim periods within those fiscal
years. Early application will be permitted for all entities for
fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2018. As
an emerging growth company, the Company plans to adopt this
guidance effective August 1, 2023.
The Company is currently evaluating the impact of its pending
adoption of ASU 2016-13 on its consolidated financial
statements.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
3. CRYPTOCURRENCIES
The cryptocurrencies were comprised of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
USDC
|
|
$
|
6,144
|
|
|
$
|
56,005
|
|
USDT
|
|
|
210,860
|
|
|
|
-
|
|
Bitcoins
|
|
|
29,144,595
|
|
|
|
6,237,917
|
|
Total
|
|
$
|
29,361,599
|
|
|
$
|
6,293,922
|
|
The following table presents additional information about
bitcoins:
|
|
Amounts
|
|
Balance at
December 31, 2020
|
|
$
|
6,237,917
|
|
Receipt of
cryptocurrencies from mining services
|
|
|
43,953,050
|
|
Sales of
cryptocurrencies
|
|
|
(30,354,276)
|
|
Lending of
cryptocurrencies to a third party (Note 4)
|
|
|
(1,148,593)
|
|
Realized gain on sale
of cryptocurrencies
|
|
|
10,456,497
|
|
Balance at March
31, 2021
|
|
$
|
29,144,595
|
|
4. OTHER CURRENT ASSETS
The other current assets were comprised of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Deposits
(a)
|
|
$
|
3,609,600
|
|
|
$
|
1,909,800
|
|
Due from a third
party (b)
|
|
|
1,246,364
|
|
|
|
97,771
|
|
Office rental
deposit
|
|
|
21,643
|
|
|
|
-
|
|
Others
|
|
|
31,328
|
|
|
|
12,803
|
|
Total
|
|
$
|
4,908,935
|
|
|
$
|
2,020,374
|
|
(a)
|
As of March 31, 2021
and December 31, 2020, the balance of deposits represented the
deposits made to three and two service providers who paid utility
charges in mining facilities on behalf of the Company. The deposits
are refundable upon expiration of the agreement between the Company
and the service provider, which was due within 12 months from the
effective date of the agreement.
|
|
|
(b)
|
As of March 31, 2021
and December 31, 2020, the balance of due from a third party
represented lending of 22.88 bitcoins and 5.19 bitcoins,
respectively, at weighted average cost of $54,474 and $18,838 per
coin. The bitcoins are repayable on demand.
|
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
5. PROPERTY AND EQUIPMENT, NET
Property and equipment, net was comprised of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Miners
|
|
$
|
35,168,725
|
|
|
$
|
33,173,812
|
|
Less: accumulated
depreciation
|
|
|
(6,975,029)
|
|
|
|
(3,324,655)
|
|
Property and
equipment, net
|
|
$
|
28,193,696
|
|
|
$
|
29,849,157
|
|
Depreciation expenses were $3,650,374 and $3,056 for the three months ended March 31, 2021 and 2020, respectively.
6. INVESTMENT SECURITY
As of March 31, 2021, the balance
of investment security represents the Company's investment of
$1,000,000 in one privately held
company over which the Company neither has control nor significant
influence through investment in common stock. The investment
was made at the end of March 2021,
and the cost of investment approximated the fair value. During the
three months ended March 31, 2021,
the Company did not record upward adjustments or downward
adjustments on the investment.
The Company's impairment analysis considers both qualitative and
quantitative factors that may have a significant effect on the fair
value of the equity security. As of March
31, 2021, the Company did not provide impairment against the
investment security.
7. CONVERTIBLE NOTE
On December 31,2020, the Company
entered into a Securities Purchase Agreement (the "SPA") with an
institutional investor (the "Holder") to sell subordinated
convertible notes (the "Notes") up to an aggregate original
principal amount of $1,650,000 with
an original issue discount (OID) of 10% in a private placement.
On February 5 and March 12, 2021, the Company completed the sale of
Notes in the principal amounts of $1,100,000 and $550,000, respectively. The Company received net
proceeds of $1,280,000 after
deducting fees payable to broker-dealers and certain other
transaction expenses, including fees and expenses of legal counsels
in connection with the transactions.
The Notes are unsecured and are expressly junior to any existing
or future debt obligations of the Company. The Notes shall bear
interest at 8% per annum, increasing to 15% if not paid within
three (3) months of the initial closing ("Maturity Date") or
otherwise upon an Event of Default (as defined in the Notes).
The Company has the right to redeem the Notes in whole and not
in part at 110% of face value plus all accrued and unpaid interest
thereon (and late charges, if any) during the first 60 days from
issuance and at 120% of face value plus all accrued and unpaid
interest on (and late charges, if any) thereafter, payable in cash.
The Notes are also subject to redemption (at the election of the
Holder) at 120% upon an Event of Default or a Change of Control (as
such terms are defined in the Notes). The Notes include certain
customary Events of Default. Upon the occurrence of a Bankruptcy
Event of Default (as defined in the Notes), the Notes would
automatically become immediately due and payable in cash in an
amount equal to all outstanding principal, interest, and late
charges multiplied by a redemption premium of 120%.
If the Notes are not earlier redeemed, the Notes shall be
automatically converted into Ordinary Shares upon the effectiveness
of the Initial Registration Statement at the Conversion Price then
in effect (if no Event of Default has occurred, at the Standard
Conversion Price then in effect, and if an Event of Default has
occurred, at the Event of Default Conversion Price). The Standard
Conversion Price is equal to the lower of $6.00 per share and 80% of the average of the
three lowest VWAPs during the 15 trading days ending and including
the date of conversion. The Event of Default Conversion Price is
equal to 85% of the Standard Conversion Price.
On May 5, 2021, the Holder
converted the Notes plus accrued interest into 279,662 ordinary
shares at a conversion price of $6.00
per share.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
8. ORDINARY SHARES
As of December 31, 2020, there
were 48,043,788 ordinary shares issued and outstanding.
On January 5, 2021, the
Company completed the sale of 262,082 Ordinary Shares at
$4.50 per share for gross proceeds of
$1,179,368 to eleven (11) non-U.S.
Persons. The exemption from registration was claimed under
Regulation S under the Securities Act based on the representations
and warranties contained in securities purchase agreements signed
by all investors. The proceeds from the private placements were in
the form of USDC.
As of March 31, 2021, there were
48,305,870 ordinary shares issued and outstanding.
9. INCOME TAXES
Cayman Islands
Under the current and applicable laws of the Cayman Islands, the Company is not subject to
tax on income or capital gain. Additionally, upon payments of
dividends by the Company to its shareholders, no Cayman Islands withholding tax will be
imposed.
Hong Kong
Hong Kong profits tax at a rate
of 16.5%. However, the Group has the grounds to claim and is
claiming its revenue and profit from Hong
Kong subsidiary as offshore sourced and non-taxable in
Hong Kong for the three months
ended March 31, 2021 and 2020, and
accordingly no provision for Hong
Kong profits tax has been made in these periods.
United States of America
On December 22, 2017, the Tax Cuts
and Jobs Act of 2017 (the "Tax Act") was signed into law, which has
made significant changes to the Internal Revenue Code. Those
changes include, but are not limited to, a U.S. corporate tax rate
decrease from 35% to 21% effective for tax years beginning after
December 31, 2017, the transition of
U.S international taxation from a worldwide tax system to a
territorial system, and a one-time transition tax on the deemed
repatriation of cumulative foreign earnings as of December 31, 2017. Accordingly, Golden Bull
USA and BT USA reevaluated its deferred tax assets on net
operating loss carryforward in the U.S and concluded there was no
effect on the Company's income tax expenses as Golden Bull
USA and BT USA have no deferred tax assets generated
since inception.
For the three months ended March 31,
2021 and 2020, the Company incurred U.S. federal and state
income tax expenses as below:
|
|
For the Three
Months
Ended
March
31,
|
|
|
|
2021
|
|
|
2020
|
|
Current income tax
expenses
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
200,620
|
|
|
$
|
-
|
|
State
|
|
|
51,299
|
|
|
|
-
|
|
|
|
|
251,919
|
|
|
|
-
|
|
Deferred income
tax expenses
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
24,309
|
|
|
$
|
-
|
|
State
|
|
|
5,914
|
|
|
|
-
|
|
|
|
|
30,223
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
282,142
|
|
|
$
|
-
|
|
As of March 31, 2021 and
December 31, 2020, the Company had
deferred tax liabilities of $30,223
and $nil, arising from temporary difference of depreciation of
miners in accounting book and IRS requirement.
Canada
The statutory tax rate for Canada entities is 25.5% for the three months
ended March 31, 2021. The Group
did not generate any revenue arising in or derived from
Canada for the three months ended
March 31, 2021 and 2020.
In assessing the realization of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will be realized. The Company's
policy is to recognize interest and penalties that would be
assessed in relation to the settlement value of unrecognized tax
benefits as a component of income tax expense. The Company did not
accrue either interest or penalties for the three months ended
March 31, 2021 and 2020,
respectively.
The Company is subject to U.S. federal income tax and primarily
Texas state income tax. The
Company has not been under tax examination in any jurisdiction for
the three months ended March 31, 2021
and 2020, respectively.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
10. RELATED PARTIES
As of December 31, 2020, the
balance of due to related parties was $336,722, comprised of balance of $329,722 due to Mr. Erke Huang, the Company's
interim Chief Executive Officer and Chief Financial Officer, and
balance of $7,000 due to one
shareholder.
During the Company's normal business operations in the three
months ended March 31, 2021, the
Company full repaid the borrowings of $329,722 due to Mr. Erke Huang, the Company's
Chief Financial Officer in the form of USDC.
As of March 31, 2021, the balance
of due to related parties was $7,000,
comprised of balance of $7,000 due to
one shareholder.
During the three months ended March 31,
2021, the Company did not incur any related party
transactions.
11. CONTINGENCIES
On January 20, 2021, a securities
class action lawsuit was filed against the Company and its Chief
Executive Officer and Chief Financial Officer titled Anthony Pauwels v. Bit Digital, Inc.,
Min Hu and Erke Huang (Case No.
1:21-cv-00515) (U.S.D.C. S.D.N.Y.). The class action is on behalf
of persons that purchased or acquired our Ordinary Shares between
December 21, 2020 and January 8, 2021, a period of volatility in our
stock, as well as volatility in the price of bitcoin. We believe
the complaints are based solely upon a research article issued on
January 11, 2021, which included
false claims and to which the Company responded in a press release
filed on Form 6-K on January 19,
2021. On April 29, 2021, the
Court consolidated several related cases under the caption In re
Bit Digital, Inc. Securities Litigation. Joseph Franklin Monkam Nitcheu was appointed as
legal plaintiff. We intend to seek dismissal of the lawsuits and
will vigorously defend the action.
From time to time, the Company is a party to various legal
actions arising in the ordinary course of business. The Company
accrues costs associated with these matters when they become
probable and the amount can be reasonably estimated. Legal costs
incurred in connection with loss contingencies are expensed as
incurred.
12. DISPOSITION OF POINT CATTLE
On September 8, 2020, the Company
entered into a certain share purchase agreement (the "Disposition
SPA") by and among a BVI company, Sharp Whale Limited (the
"Purchaser"), Point Cattle Holding Limited ("Point Cattle", or the
"Subsidiary") and the Company (the "Seller"). Pursuant to the
Disposition SPA, the Purchaser purchased the Subsidiary in exchange
for nominal consideration of $10.00
and other good and valuable consideration. Point Cattle Holdings
Limited was a former wholly owned subsidiary of the Company in the
British Virgin Islands, and its
subsidiaries and VIEs, through which the Company previously
operated its peer-to-peer lending business and the car rental
business in PRC.
On September 8, 2020, the parties
completed all the share transfer registration procedure as required
by the laws of British Virgin
Islands and all the other closing conditions have been
satisfied, as a result, the disposition contemplated by the
Disposition SPA is completed. Upon completion of the disposition,
the Purchaser became the sole shareholder of Point Cattle and as a
result, assumed all assets and obligations of all the subsidiaries
and VIE entities owned or controlled by Point Cattle. Upon the
closing of the transaction, the Company does not bear any
contractual commitment or obligation to the microcredit business or
the employees of Point Cattle and its subsidiaries and VIEs, nor to
the Purchaser.
BIT DIGITAL, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
On the same date, management was authorized to approve and
commit to a plan to sell Point Cattle, therefore the major assets
and liabilities relevant to the disposal are reported as components
of total assets and liabilities separate from those balances of the
continuing operations. At the same time, the results of all
discontinued operations, less applicable income taxes, are reported
as components of net income (loss) separate from the net loss of
continuing operations in accordance with ASC 205-20-45. Considering
the suspension of peer-to-peer lending business and the car rental
business in the PRC, the net assets relevant to the sale of Point
Cattle was fully impaired by the Company for three months ended
March 31, 2020.
In accordance with ASU No. 2014-08, Reporting Discontinued
Operations and Disclosures of Disposals of Components of an Entity,
a disposal of a component of an entity or a group of components of
an entity is required to be reported as discontinued operations if
the disposal represents a strategic shift that has (or will have) a
major effect on an entity's operations and financial results when
the components of an entity meets the criteria in paragraph
205-20-45-1E to be classified as held for sale. When all of the
criteria to be classified as held for sale are met, including
management, having the authority to approve the action, commits to
a plan to sell the entity, the major current assets, other assets,
current liabilities, and noncurrent liabilities shall be reported
as components of total assets and liabilities separate from those
balances of the continuing operations. At the same time, the
results of all discontinued operations, less applicable income
taxes (benefit), shall be reported as components of net income
(loss) separate from the net income (loss) of continuing operations
in accordance with ASC 205-20-45.
As the transaction was closed on September 8, 2020, the Company had no assets and
liabilities held for sale in the in the consolidated balance sheet
as of December 31, 2020.
The following is a reconciliation of the amounts of major
classes of income from operations classified as discontinued
operations in the consolidated statements of operations and
comprehensive loss for the three months ended December 31, 2021 and 2020:
|
|
For the Three
Months
Ended
March
31,
|
|
|
|
2021
|
|
|
2020
|
|
Discontinued
Operations
|
|
|
|
|
|
|
Impairment of net
assets
|
|
$
|
-
|
|
|
$
|
(3,734,498)
|
|
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations
|
|
$
|
-
|
|
|
$
|
(3,734,498)
|
|
13. SUBSEQUENT EVENTS
On May 5, 2021, the Company's Form
F-1 Registration Statement covering the resale of 6,412,500
ordinary shares was declared effective by the SEC. The 6,412,500
ordinary shares consisted of 412,500 shares issuable to Ionic
Ventures, LLC upon the conversion of $1,650,000 principal amount of senior convertible
notes, and 6,000,000 shares issuable to Ionic pursuant to the
Purchase Agreement dated as of January 11,
2021. The convertible notes issued as of March 31, 2021 were automatically converted into
ordinary shares, at $6 per share.
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SOURCE Bit Digital, Inc.