Bit Digital, Inc. Announces Second Quarter of Fiscal Year 2021 Financial Results

NEW YORK, Aug. 20, 2021 /PRNewswire/ — Bit Digital, Inc. (Nasdaq: BTBT) (the “Company”), a bitcoin mining company headquartered in New York, today announced its unaudited financial results for the second quarter ended June 30, 2021.

Financial Highlights for the Second Quarter 2021

  • Revenue from bitcoin mining was $28.3 million.
  • The number of bitcoins earned was 562.9.
  • 70.8% of our miner fleet was deployed, in transit to, or awaiting installation in North America at June 30, 2021.
  • We owned 32,500 miners, with 3,515 miners acquired in the second quarter of 2021.
  • Net loss was $1.3 million and loss per share was $0.03, compared with a net loss of $0.3 million and a loss per share of $0.01 for the same period last year.

Forward Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this news release. Except for the statements of historical fact, this news release contains “forward-looking information” and “forward-looking statements reflecting our current expectations that involve risks and uncertainties (collectively, “forward-looking information”) that is based on expectations, estimates and projections as at the date of this news release. Actual results and the timing of events in this news release includes information about hash rate expansion, diversification of operations, potential further improvements to profitability and efficiency across mining operations, potential for the Company’s long-term growth, and the business goals and objectives of the Company. Factors that could cause actual results, performance or achievements to differ materially from those discussed in our such forward-looking statements as a result of many factors, including, but not limited to: continued effects of the COVID19 pandemic may have a material adverse effect on the Company’s performance as supply chains are disrupted and may prevent the Company from operating its assets; the ability to establish new facilities for bitcoin mining in North America; a decrease in cryptocurrency migrating and then operating its assets; a decrease in cryptocurrency pricing; volume of transaction activity or generally, the profitability of cryptocurrency mining; further improvements to profitability and efficiency may not be realized; the digital currency market; the Company’s ability to successfully mine digital currency on the cloud; the Company may not be able to profitably liquidate its current digital currency inventory, or at all; a decline in digital currency prices may have a significant negative impact on the Company’s operations; the volatility of digital currency prices; and other related risks as more fully set forth under “Risk Factors” and elsewhere in our Annual Report on Form 20-F for the year ended December 31, 2020 and other documents disclosed under the Company’s filings at www.sec.gov. The forward-looking information in this news release reflects the current expectations, assumptions and/or beliefs of the Company based on information currently available to the Company. In connection with the forward-looking information contained in this news release, the Company has made assumptions about: the current profitability in mining cryptocurrency (including pricing and volume of current transaction activity); profitable use of the Company’s assets going forward; the Company’s ability to profitably liquidate its digital currency inventory as required; historical prices of digital currencies and the ability of the Company to mine digital currencies on the cloud will be consistent with historical prices; and there will be no regulation or law that will prevent the Company from operating its business. The Company has also assumed that no significant events occur outside of the Company’s normal course of business. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

Bitcoin Mining Business

We are a bitcoin mining company with mining operations in the United States and Canada. We commenced our bitcoin mining business in February 2020. Our bitcoin mining operations, hosted by third party hosting providers, use specialized computers, known as miners, to generate bitcoins, a cryptocurrency. The miners use application specific integrated circuit (“ASIC”) chips. These chips enable the miners to apply greater computational power, or “hash rate”, to provide transaction verification services (known as “solving a block”) which helps support the bitcoin blockchain. For every block added, the bitcoin blockchain awards a bitcoin award equal to a set number of bitcoins per block. Miners with a greater hash rate have a higher chance of solving a block and receiving a bitcoin award.

We operate our mining assets with the primary intent of accumulating bitcoin which we may sell for fiat currency from time to time depending on market conditions and management’s determination of our cash flow needs. Our mining strategy has been to mine bitcoins as quickly and as many as possible given the fixed supply of bitcoins. In view of the long delivery lead time to purchase miners from manufacturers like Bitmain and MicroBT, we generally choose to acquire miners on the spot market, which can typically result in delivery within a few weeks.

We have signed services agreements with third party hosting partners in North America. These partners operate specialized mining data centers, where they install and operate our miners and provide IT consulting, maintenance, and repair work on-site for us. Our mining facilities in Texas and Nebraska are maintained by Compute North LLC. Our mining facility in Georgia is maintained by Core Scientific, Inc. Our mining facility in Alberta, Canada is maintained by Link Global Technologies Inc.

Miner Migration and Geographic Distribution

In October 2020, we commenced our strategy of migrating our mining assets from China to North America. Following the recent announcement of the Chinese government’s decision to ban bitcoin mining, we immediately suspended our remaining mining operations in mainland China, effective June 21, 2021. Accordingly, we further accelerated our migration strategy that had been ongoing since October 2020. As a result, a greater proportion of our fleet was offline than in the prior quarter, due to more miners being in transit to or awaiting installation in North America. Prior to shipment, we generally refurbish our miners in a facility in Shenzhen, China, to ensure their resilience during transport and operability upon arrival. Miners are securely packaged and shipped by air or by sea, depending on market conditions.

During April through June 2021, we shipped 14,500 miners to the United States. We expect to complete the migration of all, or the majority, of our remaining China-based miners to North America in the third quarter of 2021, although we anticipate the possibility that certain miner shipments may arrive in US early in the fourth quarter of 2021.

The following table represents our miners’ geographic locations as of June 30, 2021:

LocationNumber of
Miners
Percentage of
Total Miners
In transit to or awaiting installation in US14,50044.6%
China9,48429.2%
United States7,09021.8%
Canada1,4264.4%
Total32,500100.0%

Power and Hosting Overview 

During the second quarter, we entered into two new hosting agreements in North America, representing 60 megawatts of additional power capacity. In July, we entered into an additional new hosting co-mining agreement with Digihost Technology Inc. (“Digihost”), representing a further 100 megawatts of capacity. Consequently, we believe we have secured the majority of power and hosting capacity required to complete the redeployment of our remaining China-based fleet in North America. We will continue to evaluate additional hosting arrangements with existing and new partners in North America, to secure additional capacity and in anticipation of an expected increase in our spot market miner purchase activity and growth of our miner fleet in the coming months.

Miner Fleet Overview

During the second quarter, we purchased 3,515 miners on the Chinse spot market, including 1,259 Bitmain S17Pro, 954 MicroBT M20S, 930 Bitmain S17+, 261 MicroBT M30S, 101 Bitmain S17 and 10 Bitmain S17E models. As of August 5, 2021, 1,678 of the newly purchased miners had already been deployed in North America and 878 were in transit to North America.

During the second quarter, we also sold 11,608 miners to three un-affiliated third parties in anticipation of purchase opportunities for newer, more efficient machines. Additionally, we disposed of 372 miners, at $nil consideration, that were deemed to have reached the end of their useful lives, were no longer operational and/or would have been uneconomical or impossible to repair. As a result, we recognized a $43,436 net gain, comprised of a $269,280 gain from sales and a $225,844 loss from disposals.

As of June 30, 2021, we had 32,500 miners, with a total maximum hash rate of 1.92 EH/S, a decrease from 40,965 miners and 2.26 EH/s as of March 31, 2021. The reduction was due to the aforementioned sales and disposals of certain miners, partially offset by miner purchases. Our fleet of owned miners comprised the following models:

ModelOwned as of
June 30,
2021
MicroBT Whatsminer M21S15,072
Bitmain Antminer S17+7,955
MicroBT Whatsminer M20S3,691
MicroBT Whatsminer M102,190
Bitmain Antminer S17 Pro1,259
Bitmain Antminer T3800
Bitmain Antminer T17700
MicroBT Whatsminer M30S261
Bitmain Antminer T17+256
Bitmain Antminer S19 Pro205
Bitmain Antminer S17101
Bitmain Antminer S17E10
Total32,500

Bitcoin Production

From the inception of our bitcoin mining business in February 2020 to June 30, 2021, we earned an aggregate of 3,086.53 bitcoins. The following table presents the number of bitcoins mined on a quarterly basis:

The Company earned 562.9 bitcoins in the second quarter of 2021. The reduction from the first quarter was due to the aforementioned accelerated migration program, in which more miners were offline while in transit to or awaiting installation in North America, as well as miner sales and disposals.  

As of June 30, 2021, we had 588.40 bitcoins on hand. The following table presents our bitcoin mining activities in coins for the six months ended June 30, 2021.  

Number
of
bitcoins
Amount (1)
Balance at January 1, 2021262.62$6,237,917
Receipt of BTC from mining services1,576.3472,295,744
Sales and payment of BTC(1,256.29)(55,994,314)
Lending of BTC to a third party, net5.7397,772
Realized gain on sale of BTC6,952,652
Impairment of BTC(8,985,662)
Balance at June 30, 2021588.40$20,604,109
(1)Receipt of cryptocurrencies from mining services are the product of the number of bitcoins received multiplied by the bitcoin price published on https://coinmarketcap.com/currencies/bitcoin/historical-data/, calculated on a daily basis. Sales of cryptocurrencies are the actual amount received from sales.

Environmental, Social and Governance 

Sustainability is a major strategic focus for us. Our mining locations in the US and Canada provide affordable access to carbon-free   energy and other sustainability-related solutions, in varying amounts depending on location, including hydroelectric, solar, wind and other carbon-free sources, which we believe help mitigate the environmental impact of our operations. We work with an independent ESG (Environmental, Social and Governance) consultant to self-monitor, set targets and help us to improve our percentage of green electricity and other sustainability initiatives. As we continue to align ourselves with the future of technology and business, we are dedicated to continuously enhancing the sustainability of our operations, and the larger bitcoin network, future-proofing for a world in flux.

We believe that the bitcoin network and the mining that powers it are important inventions in human progress, with over $1 trillion in bitcoin being held today and the currency being used by millions around the world. But the process of problem-solving and verifying bitcoin transactions using advanced computers is energy-intensive and much scrutiny has been applied to the industry for this reason. It follows that the environmental costs of mining bitcoin should be surveyed and mitigated by every company in our fast-growing sector. We aim to contribute to the acceleration of bitcoin’s decarbonization and act as role models in our industry, responsibly stewarding digital assets.

We are currently working with Apex Group Ltd, an independent ESG consultancy, to become one the first publicly-listed bitcoin miners to receive an independent ESG rating on our operations, which we anticipate will provide transparency on the environmental sustainability of our operations, as well as other metrics. Apex’s ESG Ratings & Advisory tools allow us to benchmark our ESG performance against international standards and our peers to identify opportunities for improvement and progress over time. We believe this is an integral approach to improving our sustainable practices and mitigating our environmental impact. By measuring the sustainability and footprint of Bit Digital’s mining, we are able to develop targets to continuously improve as we continuously shift towards our goal of 100% clean energy usage.

COVID-19 

In March 2020, the World Health Organization declared the COVID-19 outbreak (“COVID-19”) a global pandemic. We operate in locations that have been impacted by COVID-19, and the pandemic has impacted and could further impact our operations and the operations of our customers as a result of quarantines, various local, state and federal government public health orders, facility and business closures, and travel and logistics restrictions. Conditions may improve or worsen as governments and businesses continue to take actions to respond to the risks of the COVID-19 pandemic. While the COVID-19 pandemic continues to cause uncertainty in the global economy and restrictive measures by governments and businesses remain in place, we expect our business and results of operations may be materially and adversely affected. Company is actively monitoring this situation and the possible effects on its financial condition, liquidity, operations, suppliers, and industry.

Beginning in the middle of March 2020, the outbreak of COVID-19 led to adverse impacts on the US and global economies, bringing uncertainty to our operations and customer demand. Various local governments issued orders requiring the closure of non-essential businesses and to curtail all unnecessary travel and requiring individuals to comply with various shelter-in-place and social distancing orders. We, however, experienced positive growth from our efforts in investment in miners together with continuous increase in bitcoin market price as investors presented increasing confidence in bitcoins.

Additionally, we have evaluated the potential impact of the COVID-19 outbreak on our financial statements, including, but not limited to, the impairment of long-lived assets and valuation of cryptocurrencies. Where applicable, we have incorporated judgments and estimates of the expected impact of COVID-19 in the preparation of the financial statements based on information currently available. These judgments and estimates may change, as new events develop and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known.

We continue to actively monitor the situation and may take further actions that alter our operations and business practices as may be required by federal, state or local authorities or that we determine are in the best interests of our partners, customers, suppliers, vendors, employees and shareholders. The extent to which the COVID-19 outbreak will further impact the Company’s financial results will depend on future developments, which are unknown and cannot be predicted, including the duration and ultimate scope of the pandemic, advances in testing, treatment and prevention, as well as actions taken by governments and businesses. With miners transferred to the United Stated and Canada, the COVID-19 situation continued to create travel and transportation difficulties. The US operations are heavily dependent on our partners, who may also be impacted by COVID-19.

Results of operations 

Results of Operations for the Three Months Ended June 30, 2021 and 2020

The following table summarizes the results of our operations during the three months ended June 30, 2021 and 2020, respectively, and provides information regarding the dollar increase or (decrease) during period.

For the Three Months Ended
June 30,
Variance in
20212020Amount
Revenue from cryptocurrency mining$28,342,694$674,467$27,668,227
Cost and operating expenses
Cost of revenues (exclusive of depreciation and amortization
shown below)
(10,883,650)(636,926)(10,246,724)
Depreciation and amortization expenses(2,348,657)(70,501)(2,278,156)
General and administrative expenses(4,335,983)(221,591)(4,114,392)
Total operating expenses(17,568,290)(929,018)(16,639,272)
Income (Loss) from operations10,774,404(254,551)11,028,955
Other income (expenses)
Realized gain (loss) on exchange of cryptocurrencies(3,503,845)6,194(3,510,039)
Impairment of cryptocurrencies(9,045,007)(9,045,007)
Interest income40(40)
Gain from disposal of property and equipment43,43643,436
Other income493,519(1,964)495,483
Total other (expenses) income, net(12,011,897)4,270(12,016,167)
Loss before income taxes(1,237,493)(250,281)(987,212)
Income tax expenses(101,907)(101,907)
Net loss$(1,339,400)(250,281)$(1,089,119)

Revenues

We generate revenues from provision of computing power to digital asset mining pools, and receive consideration in the form of cryptocurrencies, the value of which is determined using the market price of the related cryptocurrency at the time of receipt. By providing computing power to successfully add a block to the blockchain, the Company is entitled to a fractional share of the fixed cryptocurrency award from the mining pool, which is based on the proportion of computing power the Company contributed to the mining pool to the total computing power contributed by all mining pool participants in solving the current algorithm.

For the three months ended June 30, 2021, we received 562.94 bitcoins from three mining pool operators. As of June 30, 2021, our maximum hash rate was 1.92 EH/s. For the three months ended June 30, 2021, we recognized revenue of $28,342,694.

For the three months ended June 30, 2020, we received 72.24 bitcoins from two mining pool operators by providing computing power.

During the three months ended June 30, 2021, we sold or disposed of certain miner models, in anticipation of purchase opportunities for newer, more efficient machines, resulting in a net reduction of 0.34 EH/s in hash rate from the three months ended March 31, 2021. However, we expect to continue to invest in miners to increase the hash rate capacity.

Cost of revenues

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