Bit Digital, Inc annual report, Q4 FY2023

Bit Digital, Inc. — FY2023 Form 20-F

Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing; the text does not provide a clear Q4-only income statement. Financial statements are prepared under U.S. GAAP. The company operates bitcoin mining, ETH staking, and AI-computing infrastructure businesses.

Financial performance and position

Metric	FY2023 / Dec. 31, 2023	FY2022 / Dec. 31, 2022
Revenue	$44.9 million	$32.3 million
Operating loss	$16.6 million	$107.2 million
Net loss	$13.9 million; $0.16 loss per share	$105.3 million; $1.34 loss per share
Operating cash flow	$1.1 million provided	$8.5 million used
Cash and cash equivalents	$16.9 million	$32.7 million
Total assets	$189.3 million	$100.4 million
Total liabilities	$36.6 million	$10.5 million

• Mining generated $44.2 million of revenue; ETH staking contributed $0.7 million. Bitcoin production rose to 1,507.3 BTC from 1,247.5 BTC in 2022. Year-end mining fleet: 46,548 bitcoin miners, maximum hash rate 3.9 EH/s; active hash rate was reported at approximately 2.5 EH/s.
• Cost of revenue was $29.6 million, including $22.3 million of electricity and $5.9 million of profit-sharing fees. Revenue less cost of revenue was approximately $15.4 million, a 34% margin before depreciation; after $14.4 million of depreciation and amortization, approximately $0.9 million remained before other operating items.
• Operating expenses included $27.7 million of general and administrative expense, $18.8 million gain on exchange of digital assets, and $6.6 million of digital-asset impairment. No property-and-equipment impairment was recorded in 2023, versus $50.0 million in 2022.
• Management-reported non-GAAP Adjusted EBITDA was $12.4 million, compared with negative $26.9 million in 2022; GAAP EBITDA was $0.8 million. Adjusted EBITDA is not a substitute for GAAP results or operating cash flow.
• Working capital was $56.3 million. The company reported zero debt and no outstanding miner-purchase obligations. It had $1.32 million of restricted cash and $6.2 million of operating lease liabilities. Cash flow from investing activities was negative $69.2 million, principally reflecting $66.7 million of property and equipment purchases and deposits.

Changes versus the prior year

• Revenue increased 39%, primarily due to more bitcoin mined and a higher average bitcoin price. Cost of revenue increased 45%, including a 47% increase in electricity costs as more miners were deployed.
• Net loss narrowed by $91.4 million. The improvement reflects higher revenue and exchange gains, lower depreciation and impairment charges, and the absence of the prior-year $50.0 million equipment impairment; the company nevertheless remained loss-making.
• Assets rose $88.9 million, mainly reflecting mining and AI-related property and equipment. Cash declined $15.8 million as investing outflows exceeded operating cash generation and were partly funded by equity issuance.
• The company raised approximately $45.3 million net through its at-the-market offering and approximately $21.0 million net from Ionic in 2023. It issued 14.7 million ATM shares; year-end ordinary shares outstanding were 107.3 million, versus 82.5 million a year earlier.
• The company reported 93% of run-rate electricity consumption from carbon-free sources, compared with approximately 85% at year-end 2022. It exited its Blockfusion hosting arrangement in September 2023 and moved miners to other providers.

Outlook, commentary, risks and unusual items

• No formal numerical earnings or revenue guidance is provided. Management expects to continue opportunistic miner investment, grow ETH staking and develop AI-computing services. It stated that cash on hand, available financing capacity and anticipated operating cash flows were expected to meet ordinary working-capital and capital-expenditure needs for the next 12 months, while noting that future investment or expansion may require additional capital.
• The AI business signed a three-year contract to supply computing power from 2,048 GPUs. A customer prepaid $13.1 million, recorded as deferred revenue at year-end. The filing says service began in January 2024; subsequent-event disclosure reports 1,536 GPUs generating revenue from January 22 and a further 512 from February 2, 2024.
• Bitcoin and ETH price volatility, mining costs and power availability are central risks. The filing highlighted the anticipated April 2024 bitcoin reward halving, hosting-provider dependence, facility disruptions, and the risk that some miners may not be economical to operate. Mining equipment and digital assets are not generally insured by the company.
• Other material exposures include evolving digital-asset and AI regulation, potential limits on electricity use, Iceland energy-supply risks, New York mining restrictions, and possible liabilities relating to historical China operations. The company cautions that regulatory determinations about whether digital assets are securities could affect custody, trading and operations.
• The 2021 securities class action was settled for $2.1 million; final judgment was entered and payment made in 2023. The company reported no material contingencies as of year-end. A $2.0 million hosting-deposit write-off was recorded in 2023.
• Management and the auditor concluded internal control over financial reporting was effective at December 31, 2023; prior-year material weaknesses were reported as remediated. The auditor issued unqualified opinions on the financial statements and internal controls. No cybersecurity threat was identified as materially affecting the business in 2023.
• The company paid $1.6 million of preferred-share dividends to an entity beneficially owned by its CFO and chairman. The preferred shares carry an 8% dividend when declared, a $10 million aggregate liquidation preference, and 50 votes per share; the holders therefore have significant voting influence. Ordinary-share dividends are not anticipated in the foreseeable future.

Investor verification priorities

• Reconcile the reported ETH position and valuation: the filing cites 15,108 ETH valued at approximately $34.5 million, while the balance sheet lists $20.6 million of ETH and $6.1 million of digital assets held in a fund.
• Confirm deployment and utilization of the stated 3.9 EH/s maximum fleet capacity versus approximately 2.5 EH/s active hash rate, and assess post-halving mining economics and power costs.
• Track collection and recognition of the $13.1 million AI customer prepayment, GPU service performance, and the economics and obligations of the AI equipment lease and sale-leaseback arrangements.
• Assess cash availability and quality of working capital, including the $13.9 million receivable from third parties, digital-asset exposures, restricted cash, and planned capital spending.
• Review dilution from equity financing, outstanding warrants and equity awards, and the control and economic rights attached to preferred shares and related-party dividends.