Bitmine Immersion Technologies, Inc. — Form 10-Q
Reporting period: Three months ended November 30, 2021 (the first quarter of fiscal 2022; fiscal year-end August 31). The financial statements are unaudited. The company had recently shifted from shell-company status toward Bitcoin mining and hosting using immersion cooling technology.
Financial performance and position
- Revenue: $0, compared with $0 in the prior-year quarter. The company had not yet begun revenue-generating operations.
- Operating expenses: $664,043, versus $17,210. This included $550,000 of noncash stock-based compensation for investment banking services, $12,000 of related-party officer compensation, and approximately $78,000 in legal, accounting, and other public-company fees.
- Net loss: $708,756, or $0.02 per share, versus a $20,976 loss, or $0.01 per share. Interest expense was $44,713, up from $3,766.
- Margins: Not meaningful because the company reported no revenue.
- Cash flow: Operating cash outflow was $69,518; investing cash outflow was $1,477,148, primarily for mining equipment; financing cash inflow was $1,470,000 from related-party borrowings. Cash declined to $142,071 from $218,737.
- Assets and liquidity: Total assets were $2,046,515, including $1,904,444 of fixed assets not in service. Current liabilities were $1,844,719, against current assets of $142,071, implying a working-capital deficit of $1,702,648.
- Debt: Related-party loan principal was $1,747,296, accruing interest at 15% annually; accrued interest was $49,218. Principal and accrued interest were due in full on April 1, 2022.
Changes, outlook, and risks
- Compared with the prior-year quarter, the company’s loss and expenses increased substantially as it prepared to enter the mining and hosting business. It acquired $1,477,148 of mining equipment during the quarter.
- Management expected revenue-generating operations to begin in the second quarter of fiscal 2022 and operating expenses to rise as staffing and operating activity increased.
- Management said access to the related-party credit line, anticipated business revenue, and cash on hand should fund operations for the next 12 months. It was also pursuing additional financing, including possible common stock, convertible notes, or preferred stock; there was no assurance financing would be available on acceptable terms.
- The credit line was capped at $2.5 million and matures April 1, 2022, creating near-term repayment and liquidity risk. The company also cited limited management, labor, and financial resources, financing uncertainty, and risks to developing a market for its securities.
- A September 2021 agreement involving 575,000 shares as a deposit for a company holding a webhosting-facility application was terminated on December 29, 2021, and the shares were returned.
- Management stated disclosure controls were effective at November 30, 2021, and said previously identified internal-control weaknesses had been remediated. The filing also disclosed that the company had not filed all required reports during the preceding 12 months.
Important facts for investors to verify
- Whether mining or hosting operations began as expected, and whether they generated revenue and positive cash flow.
- How the company planned to repay or refinance the related-party credit line at maturity, and whether additional financing was obtained and on what terms.
- The status, readiness for service, and recoverable value of the mining equipment reported as fixed assets not in service.
- The filing contains figures that warrant reconciliation: the balance sheet reports a retained deficit of $1,170,090, while the income-tax discussion gives an accumulated deficit of $358,381; the common-stock par value is also stated as $0.0001 on the balance sheet and $0.001 in a note.