Business context and reporting period
This is Digihost Technology Inc.’s audited annual Form 20-F for the fiscal year ended December 31, 2022, prepared under IFRS in U.S. dollars—not a standalone fourth-quarter report. The request identifies the company as Digi Power X Inc.; the filing itself is for Digihost Technology Inc. and that identity should be confirmed.
Digihost operates cryptocurrency-mining facilities in New York and Alabama. Bitcoin mining is its principal business. The filing also describes a 60 MW power plant acquisition completed in February 2023, after year-end.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Mining revenue | $24.19 million | $24.95 million |
| Gross profit (loss) | ($6.80 million) | $11.13 million |
| Operating income (loss) | ($28.29 million) | $2.92 million |
| Net income (loss) | $4.33 million | ($3.13 million; restated) |
| Basic and diluted earnings (loss) per share | $0.16 | ($0.14; restated) |
| EBITDA, company-defined non-GAAP measure | $13.74 million | $2.78 million |
The gross margin was approximately negative 28% in 2022, compared with approximately 45% in 2021, calculated from reported revenue and gross profit. The reported 2022 net profit was substantially affected by a $32.01 million gain from revaluing warrant liabilities; it followed a $28.29 million operating loss. Other notable 2022 charges included a $11.57 million loss on sale of digital currencies, $3.26 million loss on revaluation of digital currencies, $1.56 million miner impairment, and $1.26 million goodwill impairment.
The company mined 832 Bitcoin in 2022, up 60% from 519 in 2021, while revenue declined about 3%. Management attributed the relative revenue resilience to increased mining capacity and hosting revenue, which partly offset lower Bitcoin prices. At year-end, the company held 111 Bitcoin and 801 ETH, with total digital currencies reported at $2.80 million.
Cash at year-end was $1.85 million; working capital was $2.87 million, down from $30.70 million in 2021. Total assets were $52.60 million, versus $80.03 million; total liabilities were $5.42 million and shareholders’ equity was $47.17 million. Year-end debt included a $877,000 mortgage; lease liabilities were $547,000. The $10 million Bitcoin-collateralized revolving facility, bearing 7.5% interest, was repaid during 2022.
Audited cash flow statements report cash used in operations of $3.41 million, cash used in investing of $14.51 million, and cash provided by financing of $18.86 million. Capital expenditures were $15.75 million. The filing’s MD&A gives different operating and investing cash-use figures ($2.34 million and $15.58 million, respectively); investors should reconcile these with the audited statements.
Changes, outlook and material matters
- Hashrate rose from approximately 400 PH/s at year-end 2021 to approximately 650 PH/s at year-end 2022. The company reported that Alabama mining capacity of 100 PH came online in December 2022; Phase 1 was expected to add capacity, with further Alabama development planned.
- Management said lower natural-gas prices could reduce operating costs, but energy prices, Bitcoin prices and network difficulty remain important drivers. The company anticipated possible additional financing to expand power access and acquire miners; it gave no firm earnings or revenue guidance.
- The auditor issued an unmodified opinion but included a going-concern section: working capital was insufficient for the company’s requirements and growth plans, and continued operations depended on positive cash flow and additional financing. Management likewise identified material uncertainty about the company’s ability to continue as a going concern.
- The 2021 comparative statements were restated to record certain warrants as fair-value liabilities. The 2022 warrant revaluation gain materially affected reported profit.
- After year-end, the company completed the $4.55 million cash acquisition of the North Tonawanda power plant. A legal proceeding challenging PSC approval of the acquisition was disclosed in January 2023; the company said it did not believe the proceeding was material to closing. Nasdaq bid-price compliance was regained in February 2023.
- A February 2023 related-party loan from an entity controlled by the CEO and President provided 30 Bitcoin and requires repayment of 36 Bitcoin over 12 months. The filing also identifies volatile crypto prices, electricity costs, regulatory and environmental changes, equipment supply, cybersecurity and access to financing as significant risks. No cash dividends were expected in the foreseeable future.
Important facts for investors to verify
- Confirm the issuer identity and reporting period: the supplied filing is Digihost Technology Inc.’s FY2022 20-F, not a quarterly filing for Digi Power X Inc.
- Reconcile the cash-flow differences between MD&A and the audited cash flow statement, and assess cash needs against the going-concern disclosure.
- Review the warrant-liability restatement and the extent to which the 2022 net income depends on the non-cash revaluation gain.
- Check the status and terms of the Alabama and North Tonawanda projects, the PSC-related legal proceeding, and the related-party 30-Bitcoin loan.
- Assess mining economics under current Bitcoin prices, network difficulty and electricity costs, alongside potential dilution from equity and warrant financing.