Bit Digital, Inc. Announces the Third Quarter of Fiscal Year 2020 Financial Results

NEW YORK, Dec. 18, 2020 /PRNewswire/ -- Bit Digital, Inc. (Nasdaq: BTBT) (the "Company"), an emerging bitcoin mining company headquartered in New York, U.S. today announced its unaudited financial results for the third quarter ended September 30, 2020.

Financial Highlights for the Third Quarter 2020

• Revenue from bitcoin mining business was $7.91 million.
• The number of bitcoins earned from bitcoin mining business was 739.51.
• The number of miners was 22,869, with 16,964 miners acquired in the third quarter 2020.
• The net income from continuing operations of $0.10 million was all from bitcoin mining business, compared to $nil for the third quarter 2019.
• The net loss from discontinued operations was $0.10 million for the third quarter 2020, as we disposed of peer-to-peer and car rental business in the PRC, compared with the net loss from discontinued operations of $1.22 million for the third quarter 2019.
• The net income was $54 and the earnings per share was $0.00 for the third quarter 2020, compared with $3.0 million and $0.20 for the same period last year.

Financial Highlights for the Nine Months 2020

• Revenue from bitcoin mining business was $8.60 million.
• The number of bitcoins earned from bitcoin mining business was 814.23.
• The number of miners was 22,869, all miners acquired in the nine months 2020.
• The net loss from continuing operations of $0.73 million was all from bitcoin mining business, compared to $1.79 million for the nine months 2019.
• The net loss from discontinued operations was $3.83 million for the nine months 2020, as we provided full impairment on assets for our discontinued peer-to-peer and car rental business in the PRC, compared with the net loss from discontinued operations of $7.68 million for the nine months 2019.
• The net loss was $4.56 million and the loss per share was $0.18 for the nine months 2020, compared with $9.47 million and $0.63 for the same period last year.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 this prospectus. 

Overview

We commenced our bitcoin mining business from February 2020. On September 14, 2020, the Company officially changed its name from "Golden Bull Limited" to "Bit Digital, Inc.", which the management believes more closely reflects the Company's bitcoin mining business. We had already changed our Nasdaq trading symbol to "BTBT".

On April 8, 2020, we acquired the XMAX Chain Limited, a wholly owned subsidiary based in Hong Kong.

On September 1, 2020, we established Bit Digital USA, Inc. ("BT USA"), a wholly owned subsidiary incorporated in Delaware, United States, through which we intend to operate bitcoin mining business with our miners in the United States. In September, we commenced trial operation with 100 units of M21s miners under operation in Texas, United States.

On September 17, 2020, BT USA entered into a certain agreement with Compute North LLC, an industry leader in large-scale computing infrastructure, headquartered in Minnesota, U.S. Pursuant to the service agreement, Compute North would provide bitcoin mining colocation services in their Nebraska data center facility as well as handle the management of the mining equipment for the Company's bitcoin mining business, which is expected to save the Company operating utilities and rent cost. Going forward, we expect to have more miners operating in the United States. The first batch of 2,000 M21s miners purchased in the third quarter has been shipped to the United States in November and is expected to be installed to the hosting facility by Compute North by the end of December 2020.

As of September 30, 2020, our hash rate reached 1,250 Ph/s. In December 2020, we closed an asset acquisition of 17,996 bitcoin miners with total hash rate of 1,003.5 Ph/s, worth of $13,902,742, at a consideration of issuance of an aggregate of 4,344,711 common shares, par value $0.01 per share, at a per share price of $3.20. The closing of the acquisition increased the Company's total hash rate by approximately 1,003.5 Ph/s, from 1,250 Ph/s to 2,253.5 Ph/s. The average energy efficiency of these miners is 47.45 (+/-5%) joules per terahash (J/TH). With these miners being fully deployed, the total energy efficiency is expected to be decreased from 61.88 (+/-5%) J/TH to 55.33 (+/-5%) by 10.59%, consuming 124 megawatts of power. The total 17,996 miners acquired in December 2020 were comprised of 7,025 Antminer S17+, 9,110 Antminer T17, 195 Antminer S17E, 32 Antminer S17Pro, 105 Antminer S19Pro, 1,429 Whatsminer M20S and 100 Whatsminer M31S.

As of the date of this Report, we had a total of 40,865 miners, including 7,025 Antminer S17+, 195 Antminer S17E, 32 Antminer S17Pro, 105 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, spreading over Xinjiang, Inner Mongolia and Sichuan Provinces, PRC and Texas and Nebraska in the United States.

By the report date, we have earned an aggregation of 1,331.2 bitcoins and recognized unaudited revenues of approximately $16.50 million.

Number of Bitcoins Received

As of November 30, 2020, and September 30, 2020, we had 122 and 60 bitcoins on hand. The following table presents our bitcoin mining activities in coins as of November 30, 2020 and September 30, 2020.

Disposition of peer-to-peer lending business and the car rental business in the PRC

On September 8, 2020, the Board approved the disposal of Point Cattle Holdings Limited, 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. Upon the sale, we discontinued our peer-to-peer lending business and the car rental business in the PRC ("discontinued operations"). In addition to our bitcoin mining business, we expect to operate our car rental business through Golden Bull USA, Inc., a wholly owned subsidiary based in the United States once the Coronavirus pandemic is curtailed.

On the same date, 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 (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.

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, 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 plan to continue to invest in our bitcoin mining business. In December 2020, we closed an asset acquisition of bitcoin miners with total hash rate of 1,003.5 Ph/s, worth of $13,902,742 which increased the Company's total hash rate by approximately 1,003.5 Ph/s, from 1,250 Ph/s to 2,253.5 Ph/s. With miners transferred to the United Stated, the COVID situation continued to place travel difficulties. The US operations are heavily dependent on our partners.

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.

Results of operations 

Results of Operations for the Three Months Ended September 30, 2020 and 2019

The following table summarizes the results of our operations during the three months ended September 30, 2020 and 2019, respectively, and provides information regarding the dollar and percentage increase or (decrease) during period.

Revenues

We commenced our bitcoin mining business in February 2020. We generated revenues from provision of computing power to the digital asset mining pool, and the consideration was 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 powers to successfully add a block to the blockchain, the Company is entitled to a fractional share of the fixed cryptocurrency 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 September 30, 2020, we received 739.51 bitcoins from one mining pool operator by providing computing power in our 22,869 miners (including 800 units Innosilicon T3 miners, 256 Bitmain T17+ miners, 2,200 MicroBT M10 Miners, 2,696 MicroBT M20S miners and 16,817 MicroBT M21S miners) and as of September 30, 2020, our has rate was 1,250 Peta-has per second (Ph/s). For the three months ended September 30, 2020, we recognized revenue of $7,909,528. For the three months ended September 30, 2019, we did not generate revenues from continuing operations.

We will continue to invest in the miners to increase the hash rate capacity, as a percentage of total computing power contributed by all mining pool participants. Our mining operations are distributed in Xinjiang, Inner Mongolia and Sichuan Provinces PRC, and in Nebraska and Texas, United States which was newly launched in September 2020.

In December 2020, we closed an asset acquisition of 17,996 bitcoin miners with total hash rate of 1,003.5 Ph/s, worth of $13,902,742, at a consideration of issuance of an aggregate of 4,344,603 ordinary shares, par value $0.01 per share, at a per share price of $3.20. The closing of the acquisition increased the Company's total hash rate by approximately 1,003.5 Ph/s, from 1,250 Ph/s to 2,253.5 Ph/s. The acquired miners were comprised of 7,025 Antminer S17+, 9,110 Antminer T17, 195 Antminer S17E, 32 Antminer S17Pro, 105 Antminer S19Pro, 1,429 Whatsminer M20S, 100 Whatsminer M31S. The average energy efficiency of these miners is 47.45 (+/-5%) joules per terahash (J/TH). With these miners being deployed, the total energy efficiency will be decreased from 61.88 (+/-5%) J/TH to 55.33 (+/-5%) by 10.59%.

As a result, we expect a continued significant increase in revenue for the fourth quarter of fiscal 2020. Also, with more miners operating in the United States, we expect our energy cost to decrease on an overall basis.

Cost of revenues

Cost of revenues of $6,210,712 for the three months ended September 30, 2020 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. As of September 30, 2020, we had 22,769 miners under operation in Inner Mongolia, PRC and Sichuan Province, PRC and 100 miners in Texas, U.S., where provided utility access aggregating 76 megawatts to our miners for the three months ended September 30, 2020.

For the three months ended September 30, 2019, we did not incur cost of revenues from continuing operations.

We expect to have a sharp increase in cost of revenues in the fourth quarter of fiscal year 2020 as we would launch an additional 17,996 units of miners in the December 2020. In addition, we continue to focus on expansion and upgrade of our miners, and the increase in cost of revenues is expected to be in line with the increase of our revenues.

Depreciation and amortization expenses

For the three months ended September 30, 2020, the depreciation and amortization expenses represented depreciation of 22,869 miners with an estimated useful life of 3 years.

For the three months ended September 30, 2019, we did not incur depreciation and amortization expenses from continuing operations.

General and administrative expenses

For the three months ended September 30, 2020, our general and administrative expenses were primarily comprised of professional and consulting expenses of $246,518, office expenses of $34,436, payroll expenses of $56,405 and travel expenses of $50,490.

For the three months ended September 30, 2019, our general and administrative expenses were primarily comprised of amortization of stock compensation for consulting services of $1,760,000 and office expenses of $27,384.

Realized loss on exchange of cryptocurrencies

We recorded cryptocurrencies are recorded at cost and any gains or losses from sales of cryptocurrencies are recorded as "Realized gain/(loss) on exchange of cryptocurrencies" in the unaudited condensed consolidated statements of operations. For the three months ended September 30, 2020, we recorded a loss of $21,721 from sales of 695.72 bitcoins.

Net loss from discontinued operations

For the three months ended September 30, 2020, our net loss from discontinued operations was comprised of a net loss of $100,185 from classification of accumulated translation adjustments, compared to a net loss from discontinued operations of $1,220,441 for the same period ended September 30, 2019.

Income tax expenses

Income tax expenses was $nil and $nil for the three months ended September 30, 2020 and 2019, respectively, as we incurred net operating losses for the nine months ended September 30, 2020 and 2019, respectively.

Net loss and loss per share

For the three months ended September 30, 2020, our net loss was comprised of net income of $100,239 derived from our bitcoin mining business and net loss of $100,185 from our disposed peer-to-peer lending business and car rental business in China ("discontinued operations"); compared to a net loss of $3,007,825 for the same period of last year, derived from $1,787,384 from our continuing business, and $1,220,441 from our discontinued operations.

Income per share was $0.00 and loss per share was $0.20 for the three months ended September 30, 2020 and 2019, respectively. Weighted average number of shares was 42,297,011 and 15,399,185 for the three months ended September 30, 2020 and 2019, respectively.

Results of Operations for the Nine Months Ended September 30, 2020 and 2019

The following table summarizes the results of our operations during the nine months ended September 30, 2020 and 2019, respectively, and provides information regarding the dollar and percentage increase or (decrease) during period.