Digihost Technology Inc. (Nasdaq/TSXV: DGHI) — FY2023 Form 20-F
Period and issuer: This is an annual report for the fiscal year ended December 31, 2023, filed September 16, 2024—not a standalone fourth-quarter report. The filing names the issuer as Digihost Technology Inc.; the request metadata names Digi Power X Inc. Confirm the intended issuer. Financial amounts below are in U.S. dollars unless noted. Financial statements are prepared under IFRS as issued by the IASB.
Financial results and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $26.11 million | $24.19 million |
| Net income (loss) | $(21.89) million | $4.33 million |
| Operating income (loss) | $(17.32) million | $(28.23) million |
| Gross profit (loss) | $(9.67) million | $(6.80) million |
| Adjusted EBITDA (non-GAAP) | $1.59 million | $(0.35) million |
| Cash provided by (used in) operating activities | $5.69 million | $(3.41) million |
| Cash used in investing activities | $7.26 million | $14.51 million |
| Cash provided by financing activities | $0.06 million | $18.86 million |
| Cash at year-end | $0.34 million | $1.85 million |
| Total assets | $42.15 million | $52.60 million |
| Total liabilities | $12.90 million | $5.42 million |
- Revenue comprised Bitcoin mining of $18.13 million, colocation services of $1.68 million, electricity sales of $3.04 million, and power-plant energy sales of $3.27 million. Mining revenue fell from $24.19 million in 2022 as the company shifted capacity to colocation and other activities; the new revenue streams lifted total revenue.
- Cost of sales, including depreciation and miner hosting costs, was $35.78 million. The resulting gross loss was approximately 37% of revenue. Depreciation and amortization was $14.92 million.
- The net loss included a $4.52 million loss from revaluing warrant liabilities, compared with a $32.01 million gain in 2022. Other notable non-cash and unusual items included a $1.36 million write-off of property, plant and equipment and a $1.38 million foreign-exchange loss.
- At year-end, working capital was negative $3.06 million, including $0.82 million of digital currencies. Current liabilities were $5.26 million versus current assets of $2.20 million. Cash was $0.34 million.
- Year-end liabilities included $0.61 million of loans payable, $0.39 million of mortgage payable, $0.45 million of lease liabilities, $1.49 million of deposits payable, and $5.46 million of warrant liabilities. The company reported no credit facilities other than the disclosed loans and mortgage.
- The company mined approximately 640 BTC in 2023, down 23% from 832 BTC in 2022. It held approximately 19 BTC valued at $0.82 million at year-end; ETH holdings were nil after conversion to cash in Q1 2023.
Material changes and business developments
- The company acquired a 60 MW natural-gas power plant in North Tonawanda, New York, in February 2023 for total consideration of approximately $4.75 million. It generated $3.27 million of energy revenue and incurred a $0.67 million net loss in 2023.
- Reported operating capacity across the company’s three sites was approximately 90 MW. At the report date, the filing described North Tonawanda as operating at 1.2 EH/s, Buffalo at 350 PH/s, and Alabama at 500 PH/s. The company announced in January 2024 that its hashrate had reached 2 EH/s.
- Investing cash outflow declined year over year, largely because 2023 equipment purchases and the power-plant acquisition were lower than prior-year capital spending. Financing cash inflow also dropped sharply, from $18.86 million to $0.06 million.
- Total assets declined by $10.45 million, while total liabilities increased by $7.48 million. Shareholders’ equity fell to $29.25 million from $47.17 million.
Outlook, risks and other significant matters
- Going concern: The auditor included a going-concern section stating that material uncertainties cast significant doubt on the company’s ability to continue as a going concern. Management cited the working-capital deficiency, funding needs, and dependence on generating cash flow and obtaining financing. The statements were prepared on a going-concern basis and include no adjustments that might be required if that assumption proves inappropriate. The auditor’s opinion on the financial statements was unqualified.
- Growth plans and funding: Management said additional financing might be needed for future power-generation acquisitions and next-generation miners, and described a goal of reaching 6 EH/s by the end of 2024. The filing states there were no binding commitments or readily available sources of additional financing. The stated target is a plan, not a reported result.
- Bitcoin and operating exposure: Results remain sensitive to Bitcoin prices, network difficulty, hashrate competition, power costs, equipment availability and the April 2024 block-reward halving. The company does not hedge Bitcoin price exposure and may need to sell digital assets to fund expenses. Mining uses one pool operator, and all digital assets were held in Gemini wallets at the reporting date; management disclosed custody, cybersecurity and insurance risks.
- Power and regulation: Electricity is a major operating cost. The company highlighted the risk of rising power costs, grid restrictions, environmental rules and changing crypto regulation. A proposed U.S. excise tax of up to 30% on mining power costs was discussed in the filing; it was a proposal, not an enacted tax as described there.
- Internal controls and filing timeliness: Management concluded internal control over financial reporting and disclosure controls were ineffective due to a material weakness related to failure to timely coordinate a PCAOB audit. The 2022 and 2023 Form 20-F filings were late. Management planned enhanced auditor communication and expected remediation to be completed during 2025; the weakness was not yet remediated.
- Restatement and metrics: The filing reports a restatement of 2021 comparative financial statements. It also contains inconsistent FY2023 loss figures: the audited statements report a net loss of $21.89 million, while parts of the management discussion refer to $21.73 million. The selected financial information and audited statements support $21.89 million. Adjusted EBITDA is a company-defined non-GAAP measure.
- Contingencies: A 2023 legal challenge by environmental groups to the New York Public Service Commission’s approval of the power-plant sale was described in the business history. The filing later states the company was not party to material pending proceedings. Management reported no material legal proceeding as of the report date.
- Subsequent events: After year-end, the company announced hosting and profit-sharing arrangements and a private placement that closed in August 2024 for gross proceeds of up to $4 million. These are subsequent developments, not FY2023 operating results.
Most important facts for investors to verify
- Confirm issuer identity and whether this annual filing, rather than a quarterly filing, is the intended document.
- Reconcile the $21.89 million audited net loss with the $21.73 million figure appearing in parts of management’s discussion.
- Review the auditor’s going-concern disclosure, near-term cash needs, working-capital deficit, and actual availability and terms of financing.
- Assess the economics of mining versus colocation and energy sales, including whether reported positive operating cash flow is repeatable given the net loss and gross loss.
- Confirm progress against the 6 EH/s end-2024 target, subsequent hosting agreements, associated capital requirements and dilution.
- Track remediation of the material weakness, timely SEC filings, and the effects of the 2021 restatement.
- Verify current Bitcoin holdings and custody concentration, warrant-liability changes, debt repayment status, and any material regulatory or power-market developments.