Bitmine Immersion Technologies, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended August 31, 2023, compared with fiscal 2022. This is an annual filing, not a standalone fourth-quarter report. The company is an early-stage Bitcoin miner, hosting provider and mining-equipment reseller developing immersion-cooled operations.
Financial results and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $645,278 | $427,669 |
| Gross profit (loss) | $222,469 | ($129,030) |
| Operating expenses | $2,635,470 | $1,585,154 |
| Operating loss | ($2,413,001) | ($1,714,184) |
| Net loss | ($2,464,801) | ($2,005,233) |
| Basic and diluted loss per share | ($0.05) | ($0.05) |
| Cash used in operating activities | $809,715 | $1,629,243 |
| Cash used in investing activities | $612,288 | $2,767,306 |
| Cash provided by financing activities | $1,300,000 | $4,570,363 |
FY2023 revenue comprised $389,222 from self-mining, $244,036 from equipment sales and approximately $12,020 from hosting. Gross margin was approximately 34.5%, versus a negative gross margin in FY2022; the company nevertheless remained substantially loss-making. Operating expenses included $1.31 million of related-party compensation, largely non-cash stock compensation, $470,705 depreciation and $122,950 fixed-asset impairment.
At August 31, 2023, cash was $270,547, current assets $749,991 and current liabilities $1,558,556. Total assets were $8.20 million, liabilities $1.95 million and stockholders’ equity $6.26 million. Assets included $4.45 million of fixed assets not yet in service, $1.76 million in notes receivable and a $987,429 joint-venture investment. Bitcoin holdings were approximately 4.99 BTC, valued at $129,469.
The company reported $1.30 million of related-party borrowing and $97,460 accrued related-party interest at year-end. The amended credit line with an affiliate of the chairman allowed borrowing up to $1.75 million, bears 12% interest and matures December 1, 2024; borrowings were reported as $1.625 million as of December 1, 2023. No cash dividends are planned.
Changes and operating developments
- Revenue rose about 51% year over year, driven mainly by self-mining revenue increasing from $9,325 to $389,222. Equipment-sale revenue fell from $394,700 to $244,036, while hosting revenue declined from $23,644 to about $12,020.
- Net loss widened by approximately $460,000, as increased operating expenses more than offset the improvement in gross profit. Cash used in operations fell, but investing outflows and financing inflows also declined substantially.
- Bitcoin network hash rate increased 67.8% and difficulty 79.5% between fiscal year-end dates; the reported Bitcoin price rose 29.3%. The company reported an average mining cost of $18,977 per BTC against average mining revenue of $24,626, with energy costs equal to 70.02% of mining revenue.
- Trinidad operations were delayed by a utility-rate dispute, resolved after year-end; the site began operating in October 2023 at a stated electricity rate of 3.5 cents/kWh. The Pecos, Texas joint-venture site became operational in June 2023.
- After year-end, the company bought 1,050 used miners for $488,775 and contracted to host them in Murray, Kentucky, with electricity at 2.5 cents/kWh and a hosting fee equal to 50% of net machine profit. It also reported later purchases of additional miners.
Outlook, risks and unusual items
No formal revenue, earnings or capital-spending guidance is provided. Management said existing cash, available credit, equipment-sale receipts and expected mining and hosting proceeds should fund operations for the next 12 months, but additional capital would be needed to expand. It is pursuing financing, including possible equity, convertible notes or preferred stock; availability and terms are uncertain and may dilute shareholders. Management expects operating expenses to rise as operations expand and compensation and staffing increase.
- Results are highly exposed to Bitcoin prices, network difficulty, reward halvings, power prices, equipment availability and the ability to bring facilities online. The filing anticipated the next Bitcoin halving in April 2024.
- Liquidity and repayment risk include reliance on a related-party lender, a $1.625 million reported balance as of December 1, 2023, and collection risk on notes receivable. The filing identifies potential material losses if either West Indian Mining Company or ROC Digital defaults on amounts owed.
- The company is small and early-stage, had six employees and independent contractors as of December 1, 2023, and said some officers were unpaid or below-market compensated. Insider ownership and voting control are concentrated.
- Digital-asset custody, exchange liquidity, cybersecurity, regulatory uncertainty, energy availability and environmental scrutiny present material risks. The company stated it had limited insurance; digital assets are not FDIC- or SIPC-insured.
- The independent auditor gave an unqualified opinion on the financial statements. Management reported disclosure controls and internal control over financial reporting effective as of August 31, 2023; the auditor did not attest to internal-control effectiveness.
Key facts for investors to verify
- Reconcile the filing’s differing operating-expense totals: the financial statements report $2,635,470, while MD&A narrative elsewhere gives $2,657,152. Also verify the mining-revenue figures: $389,222 in the statements versus $380,243.84 in the mining-cost analysis.
- Confirm collection status, payment schedules and collateral for the $731,472 West Indian Mining note and approximately $1.03 million ROC Digital note, as well as the performance and value of the ROC joint-venture investment.
- Check actual operating uptime, miner deployment, electricity costs and profitability at Trinidad, Pecos and Murray, including the effects of the post-year-end miner purchases and hosting terms.
- Verify the current related-party credit balance, accrued interest, maturity and any collateral or other lender rights; assess whether refinancing or new capital is required.
- Assess potential dilution and governance implications, including insider voting control, preferred-stock conversion rights and outstanding warrants.