Bitmine Immersion Technologies, Inc. — Form 10-Q
Reporting period: Three and nine months ended May 31, 2023; filed July 14, 2023. The company operates in cryptocurrency mining, mining-equipment sales, and hosting, with a strategic focus on self-mining and immersion-cooled facilities. Financial statements are unaudited.
Financial results and position
| Metric | Three months ended May 31, 2023 | Nine months ended May 31, 2023 |
|---|---|---|
| Revenue | $142,126 | $399,932 |
| Gross profit | $69,734 (49.1% margin) | $113,608 (28.4% margin) |
| Operating expenses | $584,908 | $1,422,385 |
| Net loss | $523,704 | $1,301,775 |
| Basic and diluted loss per share | $0.01 | $0.03 |
- Nine-month revenue increased 9% year over year. Equipment sales fell to $138,011 from $344,700, while self-mining revenue rose to $261,921 from $4,574. Hosting revenue was zero, compared with $16,567.
- For the quarter, revenue was primarily self-mining ($128,479); equipment sales contributed $13,647. The company reported a quarterly net loss of $523,704 versus $486,912 a year earlier.
- At May 31, cash was $518,425; current assets were $997,868 and current liabilities $1,473,015, implying a working-capital deficit of approximately $475,000. Total assets were $8.43 million and total liabilities $1.91 million.
- Related-party borrowings were $1.3 million, plus $55,641 accrued interest. The amended credit line bears 12% annual interest, compounded monthly; outstanding principal and interest are due December 1, 2024. The facility permits borrowing up to $1.75 million through December 1, 2023, subject to lender approval.
- Nine-month operating cash use was $1.43 million; investing activities provided $253,757 and financing activities provided $1.3 million. Cash increased by $125,875 to $518,425.
- Notes receivable totaled $1.89 million, including $374,444 due within one year. Fixed assets not yet in service were $3.94 million. Stockholders’ equity was $6.52 million.
Changes, outlook, and risks
- Operating expenses rose 17% year over year for the nine-month period, including higher depreciation and related-party compensation, partly offset by lower professional fees. The company recorded a $122,950 fixed-asset impairment and $3,523 cryptocurrency impairment.
- Management attributed constrained mining revenue to delayed facility openings and said only 209 of 506 owned miners were deployed for self-mining at May 31. It expected revenue to improve as miners were deployed, but cautioned that costs may exceed revenue until operations reach scale; electricity is expected to be the largest mining cost.
- The Pecos, Texas site became fully electrified in June 2023; 96 miners had been deployed by June 30, of which 75 were operational. The company reported that its Trinidad site was expected to be operational by August 1, 2023 after an electricity-rate dispute. These are post-period developments, not May 31 results.
- Management said cash, potential remaining credit-line draws, equipment-sale receipts, and mining revenue should fund operations for 12 months. It also said additional capital would be needed for expansion and was pursuing equity or debt financing; no assurance was given that financing would be available or non-dilutive.
- Key risks include Bitcoin price volatility, rising network hash rate and mining difficulty, power availability and cost, facility deployment delays, equipment delivery and operating performance, regulation, and potential dilution or difficulty obtaining financing. Management expects operating expenses to rise as facilities and staffing expand.
- Subsequent to quarter-end, the company reported sales of 34 miners in two buy/host transactions. It disclosed no contractual commitments as of May 31 and no known threatened or pending litigation. Management concluded disclosure controls were effective; no material change in internal controls was reported.
Important facts to verify
- Reconcile filing inconsistencies: the statements report quarterly revenue of $142,126, while MD&A says $142,146; nine-month net loss is $1,301,775 in the statements but $1,301,755 in one MD&A passage.
- Confirm operating status, miner deployment, and realized power costs at Trinidad and Pecos, and whether the expected ramp translated into revenue.
- Assess collectability and repayment terms for the $1.89 million notes receivable, including the amended interest-only note and balloon payment due August 2024.
- Review liquidity and runway against the company’s operating cash use, related-party credit dependence, and stated need for expansion capital.
- Track actual mining margins and cash generation against Bitcoin price, network difficulty, electricity rates, and the company’s estimate that scale is needed to cover costs.