SOLAI Ltd 6-K, filed Sep 29, 2022
SOLAI Ltd (SLAIY)
About this 6-K
SOLAI Ltd filed this 6-K on September 29, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of September 2022
Commission File Number: 001-36206
Units 813 & 815, Level 8, Core F,
Cyberport 3, 100 Cyberport Road,
Hong Kong
(852) 059875938
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ⌧ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ☐ No ⌧
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BIT MINING LIMITED | |
| | |
| By: | /s/ Xianfeng Yang |
| Name: | Xianfeng Yang |
| Title: | Chief Executive Officer |
| | |
Date: September 29, 2022 | | |
Exhibit 99.1
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BIT MINING LIMITED
As of December 31, 2021 and June 30, 2022
and for the six months ended June 30, 2021 and 2022
BIT MINING LIMITED
CONTENTS
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UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | | |
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UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2021 AND JUNE 30, 2022 | | 1 – 2 |
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| 3 | |
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| 4 – 5 | |
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| 6 – 7 | |
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NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | | 8 - 42 |
BIT MINING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares)
| | | | As of December | | As of June |
| | Notes | | 31, 2021 | | 30, 2022 |
| | | | US$ | | US$ |
| | | | Audited | | Unaudited |
ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Restricted cash |
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Accounts receivable | | | | | | |
Prepayments and other current assets |
| 7 |
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Cryptocurrency assets | | 6 | | | | |
Assets held for sale | | 14 | | — | | |
Total current assets |
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Non-current assets: |
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Property and equipment, net |
| 8 |
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Intangible assets, net |
| 9 |
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Deposits |
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Long-term investments |
| 5 |
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Right-of-use assets | | 10 | | | | |
Amounts due from related party - non-current | | 16 | | | | — |
Goodwill | | | | | | |
Other non-current assets |
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Total non-current assets |
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TOTAL ASSETS |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable | | 11 | | | | |
Amounts due to related parties | | 16 | | | | — |
Accrued payroll and welfare payable | | | | | | |
Operating lease liabilities – current | | 10 | | | | |
Accrued expenses and other current liabilities | | 12 | | | | |
Income tax payable | | | | | | |
Liabilities held for sale | | 14 | | — | | |
Total current liabilities |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
1
BIT MINING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares)
| | | | As of December | | As of June |
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| Notes |
| 31, 2021 |
| 30, 2022 |
| | | | US$ | | US$ |
| | | | Audited | | Unaudited |
Non-current liabilities: |
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Operating lease liabilities - non-current | | 10 | | | | |
Total non-current liabilities |
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TOTAL LIABILITIES |
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Commitments and contingencies |
| 17 |
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Shareholders’ equity: |
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Class A ordinary shares, par value US$ |
| 19 |
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Class A preference shares, par value US$ | | 19 | | | ||
Class B ordinary shares, par value US$ |
| 19 |
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Additional paid-in capital |
| 19 |
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Treasury shares |
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| ( |
| ( |
Accumulated other comprehensive loss |
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| ( |
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Accumulated deficit and statutory reserve |
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| ( |
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Total BIT Mining Limited shareholders’ equity |
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Non-controlling interests |
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Total shareholders’ equity |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
2
BIT MINING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share (or ADS) data)
| | | | For the six months ended June 30, | ||
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| Notes |
| 2021* |
| 2022 |
| | | | US$ | | US$ |
| | | | Unaudited | | Unaudited |
Revenues |
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Operating costs and expenses: |
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Cost of revenue |
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| ( |
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Sales and marketing |
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General and administrative |
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Service development |
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Total operating costs and expenses |
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Other operating income |
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Government grant |
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| — |
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Other operating expenses |
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| ( |
| ( |
Net loss on disposal of cryptocurrencies | | | | ( | | ( |
Impairment of cryptocurrency assets | | | | ( | | ( |
Changes in fair value of derivative instrument | | | | | | — |
Changes in fair value of contingent considerations | | | | — | | |
Impairment of property and equipment | | | | — | | ( |
Operating loss from continuing operations |
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| ( |
| ( |
Other income, net |
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Interest income |
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Interest expense | | | | ( | | ( |
(Loss) gain from equity method investments |
| 5 |
| ( |
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Gain from previously held equity method investment | | | | | | — |
Gain from disposal of subsidiaries |
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| — |
Loss before income taxes from continuing operations |
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| ( |
| ( |
Income taxes benefits |
| 13 |
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Net loss from continuing operations |
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| ( |
| ( |
Loss from discontinued operations, net of applicable income taxes | | 22 | | ( | | — |
Net loss from discontinued operations, net of applicable income taxes | | | | ( | | — |
Net loss | | | | ( | | ( |
Net loss attributable to non-controlling interests from continuing operations | | | | ( | | ( |
Net loss attributable to non-controlling interests from discontinued operations | | | | ( | | — |
Less: Net loss attributable to non-controlling interests | | | | ( | | ( |
Net loss attributable to BIT Mining Limited |
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| ( |
| ( |
Other comprehensive income (loss): |
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Share of other comprehensive income of an equity method investee | | | | | | — |
Reclassification into loss from equity method investments | | | | | | — |
Foreign currency translation gain (loss) |
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| ( |
Other comprehensive income (loss), net of tax |
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Comprehensive loss |
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Less: Comprehensive loss attributable to non-controlling interests |
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Comprehensive loss attributable to BIT Mining Limited |
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Losses per share attributable to BIT Mining Limited-Basic and Diluted |
| 18 |
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Net loss from continuing operations | | | | ( | | ( |
Net loss from discontinued operations | | | | ( | | — |
Net loss |
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Losses per ADS** attributable to BIT Mining Limited-Basic and Diluted |
| 18 |
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Net loss from continuing operations | | | | ( | | ( |
Net loss from discontinued operations | | | | ( | | — |
Net loss |
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| ( |
| ( |
Weighted average number of Class A and Class B ordinary shares outstanding: |
| 18 |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
3
BIT MINING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of U.S. dollars (“US$”))
| | For the six months ended June 30, | ||
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| 2021* |
| 2022 |
| | US$ | | US$ |
| | Unaudited | | Unaudited |
Cash flow from operating activities | | | | |
Net loss |
| ( |
| ( |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization of right-of-use assets | | | | |
Depreciation of property and equipment |
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Amortization of intangible assets |
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Share-based compensation |
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Loss (gain) from equity method investments | | | | ( |
Impairment of property and equipment |
| — |
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Gain from previously held equity interest |
| ( |
| — |
Net loss on disposal of cryptocurrencies | | | | |
Impairment of cryptocurrency assets | | | | |
Changes in fair value of derivative instrument | | ( | | — |
Gain from disposal of subsidiaries | | ( | | — |
Changes in fair value of contingent considerations |
| — |
| ( |
Changes in operating assets and liabilities: | | | | |
Accounts receivable |
| ( |
| ( |
Prepayments and other current assets |
| ( |
| |
Cryptocurrency assets | | ( | | ( |
Other non-current assets | | | | — |
Accounts payable | | | | ( |
Operating lease liabilities | | ( | | ( |
Accrued expenses and other current liabilities |
| ( |
| ( |
Amounts due to related party | | — | | ( |
Accrued payroll and welfare payable |
| ( |
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Income tax payable |
| — |
| ( |
Deposits | | — | | ( |
Net cash used in operating activities |
| ( |
| ( |
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Cash flows from investing activities |
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Acquisition of property and equipment |
| ( |
| ( |
Cash received from return of long-term investments | | | | |
Cash received from disposal of cryptocurrency assets | | | | |
Proceeds from disposal of long-term investments |
| |
| — |
Cash paid for business combination, net of cash received | | ( | | — |
Cash paid for additional interest acquired for Loto Interactive | | ( | | — |
Cash received from asset acquisition | | — | | |
Net cash (used in) provided by investing activities |
| ( |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
4
BIT MINING LIMITED
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Amounts in thousands of U.S. dollars (“US$”))
| | For the six months ended June 30, | ||
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| 2021* |
| 2022 |
| | US$ | | US$ |
| | | | |
Cash flows from financing activities | | | | |
Proceeds from the exercise of share-based awards |
| |
| — |
Proceeds from short-term borrowings | | | | |
Repayment of short-term borrowings | | ( | | — |
Proceeds from issuance of ordinary shares for private placements | | | | |
Net cash provided by financing activities |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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| ( |
Net increase in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of the period |
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Cash, cash equivalents and restricted cash at end of the period |
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Balances included in the Unaudited Interim Condensed Consolidated Balance Sheets: | | | | |
Cash, cash equivalents and restricted cash | | | | |
Cash, cash equivalents and restricted cash included in current assets held for sale | | — | | |
Cash, cash equivalents and restricted cash at end of period | | | | |
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Supplemental disclosures of cash flow information: | | | | |
Income tax paid |
| — |
| — |
Interest received | | — | | |
Interest paid |
| ( |
| ( |
Supplemental disclosures of non-cash investing and financing activities: | | | | |
Payment of expense and non-current assets in the form of cryptocurrencies | | | | |
Proceeds from issuance of ordinary shares for private placement in the form of cryptocurrencies | | | | — |
Short-term loan settled by surrendering the cryptocurrencies collateral | | | | |
Cryptocurrencies borrowed from a third party | | | | — |
Cryptocurrencies acquired in connection with business combination | | | | — |
Cryptocurrencies to be distributed for promotion activities on behalf of a third party | | | | — |
Repayment of deposit in the form of cryptocurrencies | | | | — |
Issuance of ordinary shares in connection with business combination | | | | — |
Issuance of ordinary shares in connection with asset acquisition | | — | | |
Deposits received from customers of mining data center in the form of cryptocurrencies | | — | | |
Consideration paid to purchase the non-controlling interest in subsidiary | | — | | |
Property, plant and equipment transferred from long-term prepayment | | — | | |
* The Company has changed its reporting currency from Renminbi (“RMB”) to U.S dollars (“USD”) for the period commencing July 1, 2021. Prior periods’ comparative financial information has been recast as if the Company always used USD as its reporting currency.
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
5
BIT MINING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Amounts in thousands of U.S. dollars (“US$”) except for number of shares)
| | | | | | | | | | | | | | | | | | | | | | |
| | Number of | | Number of | | Number of | | | | | | | | | | Accumulated | | Accumulated | | | | |
| | Class A | | Class A | | Class B | | | | | | Additional | | | | other | | deficit and | | | | Total |
| | ordinary | | preference | | ordinary | | Ordinary | | Preference | | paid-in | | Treasury | | comprehensive (loss) | | statutory | | Non-controlling | | shareholders’ |
|
| shares |
| shares |
| shares |
| shares |
| shares |
| capital |
| shares |
| income |
| reserve |
| interests |
| equity |
| | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2020 |
| |
| — | | |
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| — | | |
| ( |
| ( |
| ( |
| ( |
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Acquisition of Loto Interactive | | — | | — | | — | | — | | — | | ( | | — | | — | | — | | | | |
Net loss |
| — |
| — | | — |
| — |
| — | | — |
| — |
| — |
| ( |
| ( |
| ( |
Foreign currency translation gain (loss) |
| — |
| — | | — |
| — |
| — | | — |
| — |
| |
| — |
| ( |
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Share of other comprehensive loss of an equity method investee | | — | | — | | — | | — | | — | | — | | — | | | | — | | — | | |
Reclassification into loss from equity method investments | | — | | — | | — | | — | | — | | — | | — | | | | — | | — | | |
Issuance of ordinary shares for private placement |
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| | | — |
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| — | | |
| — |
| — |
| — |
| — |
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Issuance of ordinary shares for business combinations | | | | — | | — | | | | — | | | | — | | — | | — | | — | | |
Issuance of ordinary shares from exercise of share-based awards | | | | — | | — | | | | — | | | | — | | — | | — | | — | | |
Share-based compensation |
| — |
| — | | — |
| — |
| — | | |
| — |
| — |
| — |
| — |
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Balance as of June 30, 2021* |
| |
| | | |
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| — | | |
| ( |
| ( |
| ( |
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* The Company has changed its reporting currency from Renminbi (“RMB”) to U.S dollars (“USD”) for the period commencing July 1, 2021. Prior periods’ comparative financial information has been recast as if the Company always used USD as its reporting currency.
6
BIT MINING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)
(Amounts in U.S. dollars (“US$”) except for number of shares)
|
| Number of |
| Number of | | Number of |
| |
| | | |
| |
| Accumulated |
| Accumulated |
| |
| |
| | Class A | | Class A | | Class B | | | | | | Additional | | | | other | | deficit and | | | | Total |
| | ordinary | | preference | | ordinary | | Ordinary | | Preference | | paid-in | | Treasury | | comprehensive | | statutory | | Non-controlling | | shareholders’ |
|
| shares | | shares |
| shares |
| shares |
| shares |
| capital |
| shares |
| loss |
| reserve |
| interests |
| equity |
Balance as of December 31, 2021 |
| |
| | | |
| |
| — | | |
| ( |
| ( |
| ( |
| |
| |
Net loss | | — | | — | | — | | — | | — | | — | | — | | — | | ( | | ( | | ( |
Foreign currency translation loss |
| — |
| — | | — |
| — |
| — | | — |
| — |
| ( |
| — |
| ( |
| ( |
Issuance of Class A ordinary shares and pre-funded warrants in private placement, net of issuance costs | | | | — | | — | | | | — | | | | — | | — | | — | | — | | |
Issuance of ordinary shares for asset acquisition | | | | — | | — | | | | — | | | | — | | — | | — | | — | | |
Purchase of non-controlling interests |
| — |
| — | | — |
| — |
| — | | ( |
| — |
| — |
| — |
| ( |
| ( |
Share-based compensation |
| |
| — | | — |
| |
| — | | |
| — |
| — |
| — |
| — |
| |
Balance as of June 30, 2022 |
| |
| | | |
| |
| — | | |
| ( |
| ( |
| ( |
| |
| |
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
7
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) United States dollars (“US$”), Hong kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
1. ORGANIZATION
BIT Mining Limited (formerly, 500.com Limited, the “Company”) was incorporated under the laws of the Cayman Islands on April 20, 2007 under the original name of “Fine Success Limited”, which was changed to “500wan.com” on May 9, 2011, and changed to “500.com Limited” on October 9, 2013. The Company changed to the new name of “BIT Mining Limited” and the new ticker symbol “BTCM” effective April 20, 2021.
The Company has completed the transformation of its business and become an enterprise that primarily provides cryptocurrency mining, data center operation and mining pool services in 2021.
On May 31, 2022, the Company completed the first closing of its previously announced share exchange agreement dated April 5, 2021 (as amended and restated in April 2022, the “Amended and Restated Share Exchange Agreement”) entered into by the Company and the shareholders (the “Selling Shareholders”) of the acquisition of Bee Computing (HK) Limited (“Bee Computing”). At the first closing of the Amended and Restated Share Exchange Agreement, the Company issued
In September 2021, the Company entered into a Membership Interest Purchase Agreement and certain other auxiliary agreements with Viking Data Centers, LLC (“Viking Data Centers”) to acquire the
In June 2022, the Company entered into an agreement with Viking Data Centers that the Company agreed to purchase all remaining equity interest from Viking Data Centers by transferring certain assets that represent
As of June 30, 2022, the Company has subsidiaries incorporated in countries and jurisdictions including British Virgin Islands, Cayman Islands, Hong Kong, the United States of America (“USA”), Kazakhstan, Canada, mainland China, Malta, Cyprus and Curacao.
8
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
1. ORGANIZATION (continued)
As of June 30, 2022, the Company’s major subsidiaries are listed below:
| | | | | | Percentage of | | |
| | Date of | | Place of | | ownership by | | |
Entity |
| establishment |
| establishment |
| the Company |
| Principal activities |
| | | | | | | | |
Subsidiaries |
|
| |
| |
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|
|
Fine Brand Limited (“BVI”) | | | | | % | |||
BT Mining Limited (“BT Mining”) | | | | | % | |||
500wan HK Limited (“500wan HK”) | | | | | % | |||
Bee Computing (HK) Limited (“Bee Computing”) | | | | | % | |||
E-Sun Sky Computer (Shenzhen) Co., Ltd. (“E-Sun Sky Computer”) | | | | | % | |||
Star Light Inc. (“Star Light”) | | | | | % | |||
Skill Esport Limited (“ Skill Esport”) | | | | | % | |||
Summit Bend US Corporation (“Summit Bend”) | | | | | % | |||
Star Light Ohio I Corporation (“Ohio I”) | | | | | % | |||
Star Light Ohio II Corporation (“Ohio II”) | | | | | % | |||
Asgard Data Centers LLC (“Asgard”) | | | | | % | |||
Alliance International Technologies Limited (“Alliance International Technologies”) | | | | | % | |||
Hong Kong Sunstar Technology Co., Limited (“Sunstar Technology”) | | | | | % | |||
Beijing Guixinyanghang Technology Limited (“Guixinyanghang”) | | | | | % | |||
E-Sun Kazakhstan Limited | | | | | % | |||
1324492 B.C.Ltd | | | | | % | |||
The Multi Group Ltd (“The Multi Group” or “TMG”) | | | | | % | |||
Multi Warehouse Ltd* | | | | | % | |||
Multi Brand Gaming Ltd* | | | | | % | |||
Multilotto UK Ltd* | | | | | % | |||
Lotto Warehouse Ltd* | | | | | % | |||
Wasp Media Ltd* | | | | | % | |||
Round Spot Services Ltd* | | | | | % | |||
Multi Pay N.V.* | | | | | % | |||
Oddson Europe Ltd* | | | | | % | |||
Loto Interactive Limited (“Loto Interactive”) | | | | % | ||||
Brighten Express Limited** | | | | % | ||||
Rising Move International Limited** | | | | % | ||||
Interactive Lab Limited** | | | | % | ||||
Precious Success Holdings Limited** | | | | % | ||||
PAL Development Limited** | | | | % | ||||
Global Score Asia Limited** | | | | % | ||||
Trade Express Services Inc. ** | | | | % | ||||
Rise Accord Holdings Limited** | | | | % | ||||
China Excellent Net Technology Investment Limited** | | | | % | ||||
Hong Kong Interactive Lab Limited** | | | | % | ||||
Virtual Asset Ratings Limited** | | | | % | ||||
Loto Interactive Information Technology (Shenzhen) Limited (“Loto Interactive Information”) ** | | | | % | ||||
Shenzhen Lewanwuxian Information Technology Co., Ltd. ** | | | | % | ||||
Interactive Medical Lab Limited** | | | | % | ||||
Interactive Medical Lab Corporation** | | | | % | ||||
Might Winner Limited** | | | | % | ||||
H.K CB. Cute Technology Co., Limited** | | | | % | ||||
Shenzhen Quanjing Financial Leasing Co., Ltd ** | | | | % | ||||
Ganzi Changhe Hydropower Consumption Service Co., Ltd** | | | | % | ||||
Sichuan Lecaiyuntian Internet Technology Co., Ltd ** | | | | % | ||||
Chengdu Keying Interactive Information Technology Limited** | | | | % | ||||
Chengdu Yilaike Technology Co., Ltd. (“Chengdu Yilaike”) ** | | | | % | ||||
GreenTech Ltd** | | | | % |
* A subsidiary of the Multi Group
** A subsidiary of Loto Interactive
On June 21, 2022, the Company committed to a plan to sell its equity interest in Loto Interactive and its subsidiaries. The sale was subsequently closed on July 12, 2022 and after the sale, the Company no longer controls or exercises significant influence over Loto Interactive and its subsidiaries. Assets and liabilities related to Loto Interactive and its subsidiaries are reclassified to assets and liabilities held for sale as of June 30, 2022. Further see Note 14 and Note 23.
9
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
1. ORGANIZATION (continued)
The Company has previously conducted the lottery business in mainland China through a series of contractual arrangements with Shenzhen Youlanguang Science and Technology Co., Ltd., Shenzhen E-Sun Network Co., Ltd., and Shenzhen Guangtiandi Science and Technology Co., Ltd. (collectively, the “lottery business related variable interest entities (“VIEs”)”), and their respective shareholders. Since March 31, 2021, the Company also consolidated the financial results of Zhejiang Keying Huancai Information Technology Co., Ltd. (“Zhejiang Keying”), a VIE primarily engaged in the provision of data analysis and storage services, through its contractual arrangement with Loto Interactive Information Technology (Shenzhen) Co., Ltd., which is indirectly controlled by the Company after the completion of the acquisition of the majority interest of Loto Interactive Limited on March 31, 2021.
On July 23, 2021, the Company announced the decision to dispose of the VIE structures in mainland China, and on August 3, 2021, the Group has terminated all of the VIE structures with the lottery-related affiliated entities and Zhejiang Keying, and the Group has entered into agreement with Zhejiang Keying and Zhejiang Keying’s shareholders to transfer all of the equity interests of Zhejiang Keying’s subsidiaries to Loto Shenzhen. In February 2022, the Company has completed the transfer of the equity interests of Zhejiang Keying’s subsidiaries to Loto Shenzhen. From July 23, 2021, the Company no longer retained any financial interest over the lottery business related VIEs and accordingly deconsolidated the lottery business related VIEs’ financial statements from the Company’s consolidated financial statements. The disposal of lottery business related VIEs represented a strategic shift and has a major effect on the Company’s result of operations. Accordingly, results of operations related to lottery business related VIEs have been reported as discontinued operations for the six months ended June 30, 2021.
The Company, its subsidiaries are hereinafter collectively referred to as the “Group”.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and use of estimates
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) and the rules and regulations of the United States Securities and Exchange Commission, and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s most recent consolidated annual financial statements filed with the SEC on Form 20-F.
The accompanying unaudited interim condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for the consolidated financial statements. Certain information and note disclosures normally included in the Group’s annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted consistent with such rules and regulations. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments necessary for the fair statement of the Group’s financial position as of June 30, 2022 and results of operation and cash flows for the six months ended June 30, 2021 and 2022. Results for the six months ended June 30, 2022 are not necessarily indicative of the results expected for the full fiscal year or for any future period.
The preparation of unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in the Group’s unaudited interim condensed consolidated financial statements include, but are not limited to, allowance for credit losses, useful lives of property and equipment and intangible assets, impairment of long-lived assets, long-term investments and goodwill, the valuation of cryptocurrencies, realization of deferred tax assets, uncertain income tax positions, share-based compensation and valuation of contingent consideration from business combination and purchase price allocation for business combination and assets acquisition. Actual results could materially differ from those estimates.
10
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Principles of consolidation
The unaudited interim condensed consolidated financial statements of the Group include the financial statements of the Company and its subsidiaries. The results of the subsidiaries are consolidated from the date on which the Company obtains control and continue to be consolidated until the date that such control ceases. A controlling financial interest is typically determined when a company holds a majority of the voting equity interest in an entity. All significant intercompany balances and transactions among the Company and its subsidiaries have been eliminated on consolidation.
Foreign currency translation and change in reporting currency
The functional currency of the Company, BVI, 500wan HK, Bee Computing, Alliance Technologies, Sunstar Technology, Skill Esport, Summit Bend, Ohio I, Ohio II and Asgard is the US$. The functional currency of the Multi Group and its subsidiaries is EUR. The functional currency of Loto Interactive and its subsidiaries is HKD. E-Sun Sky Computer with its former VIEs and Beijing Guixinyanghang determined their functional currencies to be RMB. The Group uses the monthly average exchange rate for the period and the spot exchange rate at the balance sheet date to translate the operating results and financial position, respectively. Translation differences are recorded in accumulated other comprehensive loss as a component of shareholders’ equity.
Transactions denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing on the transaction dates. Exchange gains and losses resulting from foreign currency transactions are included in the unaudited interim condensed consolidated statements of comprehensive loss.
Foreign currency translation and change in reporting currency (continued)
Starting from the third quarter of 2021, the Group changed its reporting currency from RMB to US$, to reduce the impact of increased volatility of the US$ to RMB exchange rate on the Group’s reported operating results. The aligning of the reporting currency with the underlying operations will better depict the Group’s results of operations for each period. The related financial statements prior to July 1, 2021 have been recasted to US$ as if the financial statements originally had been presented in US$ since the earliest periods presented. The change in reporting currency resulted in cumulative foreign currency translation adjustment to the Group’s comprehensive loss of a loss of US$
Business combinations, asset acquisitions and non-controlling interests
The Group accounts for its business combinations using the purchase method of accounting in accordance with ASC 805 (“ASC 805”), “Business Combinations”. The purchase method of accounting requires that the consideration transferred to be allocated to the assets, including separately identifiable assets and liabilities the Group acquired, based on their estimated fair values. The consideration transferred in an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations and all contractual contingencies as of the acquisition date. Contingent consideration is recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is remeasured to fair value as of each reporting date until the contingency is resolved, and subsequent changes in fair value are recognized in earnings. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over, (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in earnings.
11
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
If investment involves the acquisition of an asset or group of assets that does not meet the definition of a business, the transaction is accounted for as an asset acquisition. An asset acquisition is recorded at cost, which includes capitalized transaction costs, and does not result in the recognition of goodwill. The cost of the acquisition is allocated to the assets acquired on the basis of relative fair values.
The determination and allocation of fair values to the identifiable assets acquired, liabilities assumed and non-controlling interests is based on various assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. The Group determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. Terminal values are based on the expected life of assets, forecasted life cycle and forecasted cash flows over that period.
In a business combination or asset acquisition, the Company may recognize identifiable intangibles that meet either or both the contractual legal criterion or the separability criterion. Identifiable intangible assets recognized in the Company’s acquisitions generally include brand name, strategic contract and unpatented technology.
For the Company’s majority-owned subsidiaries, non-controlling interests are recognized to reflect the portion of their equity which is not attributable, directly or indirectly, to the Group. “Net loss” on the unaudited interim condensed consolidated statements of comprehensive loss include the “net loss attributable to non-controlling interests”. The cumulative results of operations attributable to non-controlling interests are also recorded as non-controlling interests in the Company’s unaudited interim condensed consolidated balance sheets.
The Group recognized changes in fair value of contingent consideration in the amount of a gain of US$
Cryptocurrency assets
Cryptocurrency assets are included in current assets in the accompanying unaudited interim condensed consolidated balance sheets. Cryptocurrency assets generated from the cryptocurrency mining business and the mining pool business are accounted for in connection with the Group’s revenue recognition policy disclosed below.
Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is not amortized but assessed for impairment quarterly, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. For each unit of cryptocurrency, impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, the Group has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Group concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. For the six months ended June 30, 2021 and 2022, the Group recognized impairment loss of US$
12
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cryptocurrency assets (continued)
Cryptocurrencies generated from the cryptocurrency mining business and the mining pool business as well as the cryptocurrencies distributed to mining pool participants are included within operating activities in the accompanying unaudited interim condensed consolidated statements of cash flows. The sales of cryptocurrencies are included within investing activities in the accompanying unaudited interim condensed consolidated statements of cash flows and any realized gains or losses from such sales are included in gain or loss of disposal of cryptocurrencies in the unaudited interim condensed consolidated statements of comprehensive loss. The Group accounts for its gains or losses in accordance with the first-in-first-out (FIFO) method of accounting.
Nonmonetary transaction
The Group enters into nonmonetary transactions such as distributions of cryptocurrencies to pay for operating expense and acquire non-current asset. Such transactions are accounted for in accordance with ASC 845, “Nonmonetary Transactions”, which requires the transfer or distribution of a nonmonetary asset or liability to be based, generally, on the fair value of the asset or liability that is received or surrendered, whichever is more clearly evident. No gain or loss is recognized on the transaction.
Intangible assets
Intangible assets represent computer software, internet domain name, licensing agreement, and intangible assets arising from business combination and asset acquisitions. Computer software, internet domain name and licensing agreement purchased from third parties are initially recorded at cost and amortized on a straight-line basis over their estimated useful lives of the respective assets. The Group performs valuation of the intangible assets arising from business combination and asset acquisitions to determine the relative fair value to be assigned to each asset acquired. The acquired intangible assets are recognized and measured at fair value and are expensed or amortized using the straight-line approach over the estimated useful life of the assets. Estimated useful lives of the respective assets are set out as follows:
Category |
| Estimated Useful Life |
| | |
Computer software |
| |
Internet domain name |
| |
Licensing agreement |
| |
Intangible assets arising from business combination and asset acquisitions |
|
|
Licenses and brand name |
| |
Mobile applications and software | | |
Internet domain name and brand name |
| |
Strategic contract | | |
Unpatented technology | |
Goodwill
The Group assesses goodwill for impairment in accordance with ASC 350-20 (“ASC 350-20”), “Intangibles–Goodwill and Other: Goodwill”, which requires that goodwill to be tested for impairment at the reporting unit level at least annually and more frequently upon the occurrence of certain events, as defined by ASC 350-20.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04(“ASU 2017-04”), “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The Group early adopted the ASU 2017-04 on January 1, 2019.
During the six months ended June 30, 2021 and 2022,
13
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of long-lived assets other than goodwill
The Group evaluates its long-lived assets or asset group, including property and equipment, intangible assets and right-of-use assets, with finite lives for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount of a group of long-lived assets may not be fully recoverable. When these events occur, the Group evaluates the impairment by comparing the carrying amount of the assets to future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Group recognizes an impairment loss based on the excess of the carrying amount of the asset group over its fair value. For the six months ended June 30, 2022, the Group recorded an impairment loss of US$
Fair value measurements
Financial instruments primarily include cash and cash equivalents, restricted cash, accounts receivables, other receivables, equity investments without readily determinable fair values, equity method investments, accounts payable and accrued expenses and other current liabilities. The Group carries the investment under the measurement alternative basis and equity method investment on other-than-temporary basis. Contingent consideration related to the acquisition of Alliance International Technologies (formerly known as “Blockchain Alliance Technologies Limited”) is included in accrued expenses and other current liabilities in the consolidated balance sheets, the fair value of which was based on the number of shares of ordinary shares that were expected to be issued and the fair value of the ordinary shares of the Company. The carrying values of other financial instruments, approximate their fair values due to their short-term maturities.
The Group’s non-financial assets, including cryptocurrency assets, intangible assets, goodwill and property and equipment are measured at fair value when an impairment charge is recognized. Fair value of cryptocurrencies is based on quoted prices in active markets.
The Group applies ASC 820 (“ASC 820”), “Fair Value Measurements and Disclosures”. ASC 820 defines fair value, establishes a framework for measuring fair value and requires disclosures to be provided on fair value measurement.
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1— Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2— Include other inputs that are directly or indirectly observable in the marketplace.
Level 3— Unobservable inputs which are supported by little or no market activity.
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach, and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
As of June 30, 2022, there is no item of the Group’s assets or liabilities that is measured at fair value on a recurring basis in the period subsequent to its initial recognition.
14
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Related party transactions
A related party is generally defined as (i) any person holds 10% or more of the Company’s securities and their immediate families (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related parties may be individuals or corporate entities.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due from/to related parties due to their related party nature.
Revenue recognition
The Group’s revenues were derived principally from cryptocurrency mining, data center services and mining pool services. The Group also provided sports information service through its former lottery business related VIE subsidiaries and disposed of this business line together with the disposal of VIE structures on July 23, 2021. The Group accounts for revenues under ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”).
Revenue is recognized when control of promised goods or services is transferred to the Group’s customers in an amount of consideration to which the Group expects to be entitled to in exchange for those goods or services. The Group follows the five steps approach for revenue recognition under Topic 606: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the Group satisfies a performance obligation.
The primary sources of the Group’s revenues are as follows:
Cryptocurrency mining
The Group has entered into a cryptocurrency mining pool, BTC.com, by executing contracts with the mining pool operator to provide computing power to the mining pool. The contracts are terminable at any time by either party and the Group’s enforceable right to compensation only begins when the Group provides computing power to the mining pool operator. In exchange for providing computing power, the Group is entitled to considerations in the form of cryptocurrencies from the mining pool operator (less pool operator fees to the mining pool operator which are recorded net with revenues), which is calculated based on a predetermined formula agreed by the Group and the mining pool operator as a part of the contracts. The consideration also corresponds to the proportion of computing power the Group contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm. Providing computing power in cryptocurrency transaction verification services is an output of the Group’s ordinary activities. The provision of computing power is the only performance obligation in the Group’s contracts with the pool operator. The transaction consideration the Group receives is noncash consideration. The Group measures the cryptocurrencies at fair value using the quoted price of the related cryptocurrency at contract inception. All considerations are variable and revenue is recognized when the computing power is provided to the mining pool and there is no uncertainty associated with the variable consideration. There is no significant financing component in these transactions.
15
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Data center services
The Group provides data center services such as providing its customers with rack space, power and equipment, and cloud services such as virtual services, virtual storage, and data backup services, generally based on monthly services provided at a defined price included in the contracts. The performance obligations are the services provided to a customer for the month based on the contract. The transaction price is the price agreed with the customer for the monthly services provided and the revenues are recognized monthly based on the services rendered for the month.
Mining pool services
The Group operates its mining pool, BTC.com, to enable providers of computing power (“pool participants”) to participate in crypto-mining activities in an efficient manner in the blockchain network, in exchange for a fee (“pool operator fee”) for its coordination efforts as the pool operator. The Group receives all the mining rewards, and then allocates mining rewards to each pool participant net of the pool operator fees based on the sharing mechanism predetermined. The mining rewards the mining pool receives from the blockchain network include the block rewards and the transaction verification fees related to the transactions included in the block.
The Group considers itself the principal in transactions with the blockchain networks and recognizes the mining pool revenue on a gross basis. The performance obligation is to create or validate each block. Revenue is recognized at the point when the block creation or validation is complete and the Group has received the rewards. Revenue is measured at the fair value of rewards using the quoted price of the related cryptocurrency at contract inception. The Group considers itself the principal in transactions with the blockchain networks as it coordinates all the computing power within the mining pool, delivers such aggregated computing power to the blockchain network, collects centrally all mining rewards and distributes them in accordance with the predetermined sharing mechanisms. The Group has control over the pool participants’ computing power. Although the pool participants can enter and exit the pool at will and deploy the qualifying types of mining machines at the choices of the pool participants, during the mining process, the Group dictates the tasks and the participants’ mining machines merely follow the allocation prescribed by the Group. As a result, the Group is primarily responsible for fulfilling the promise to provide the specified service. Further, under existing sharing mechanisms, the Group is exposed to the risk that actual block rewards may differ from expected rewards, therefore, bears the inventory risk before the specified service has been transferred to the blockchain network.
Contract balances
The Group does not have any contract assets. The Group’s contract liabilities include advance from customers, which is recorded when consideration is received from a customer prior to providing services to the customer under the terms of a contract. As of December 31, 2021 and June 30, 2022, the Group recorded advance from customers balance of US$
Refer to Note 21 regarding the discussion of the Group’s disaggregate revenue data.
16
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cost of services
Cost of mining pool services
Cost of mining pool services which was offered under BTC.com consists primarily of the mining rewards allocated to each pool participant in exchange for their computing power contributed to the mining pool. The mining rewards allocated to the pool participants include both the block rewards as well as the transaction verification fees related to the transactions included in the block, depending on the sharing mechanism chosen by individual pool participants. Cost of mining pool services also consists of other direct costs related to providing the mining pool service such as server fees and labor for maintaining the mining pool service. Cost of mining pool services were US$
Cost of data center services
The cost of data center services consists primarily of direct production costs related to data center service, including the direct service charges for operations, were US$
Server leasing and maintenance expenses
Server leasing and maintenance expenses, which consist primarily of leasing expense of hosting servers and other equipment used in providing online services and cryptocurrency mining business, were US$
Depreciation fees
Depreciation fees, which consist primarily of depreciation of machinery and equipment related to cryptocurrency mining and data center services, were US$
Amortization fees
Amortization fees, which consist primarily of amortization of intangible assets arising from business combination and assets acquisitions, were US$
Cost of services also comprised lottery insurance expenses, regulatory and compliance fees, platform fees, employee costs, account handling expense, business tax and surcharges and other direct costs incurred in providing services. These costs are expensed as incurred.
17
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Sales and marketing expenses
Sales and marketing expenses consist primarily of employee costs, commission to certain internet companies and expenses related to promotional activities. These costs are expensed as incurred.
Service development expenses
Service development expenses consist primarily of personnel-related expenses incurred for the development of, enhancement to, and maintenance of the Group’s website that either (i) did not meet the capitalization criteria in accordance with ASC 350, “Intangibles - Goodwill and other”; or (ii) met the capitalization criteria but the costs cannot be separated on a reasonably cost-effective basis between maintenance and relatively minor upgrades and enhancements. Service development expenses are recognized as expenses when incurred.
Income taxes
The Group follows the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Group records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of comprehensive loss in the period that includes the enactment date.
Interest and penalties arising from underpayment of income taxes are computed in accordance with the applicable tax law and is classified in the consolidated statements of comprehensive loss as income tax expense. The amount of interest expense is computed by applying the applicable statutory rate of interest to difference between the tax position recognized and the amount previously taken or expected to be taken in a tax return.
In accordance with the provisions of ASC 740 (“ASC 740”), “Income taxes” the Group recognizes in its financial statements the impact of a
In conjunction with ASC 740, the Group also applied ASC 740-30 (“ASC 740-30”), “Income Taxes: Other Considerations or Special Areas”, to account for the temporary differences arising from the undistributed earnings of the foreign subsidiaries. According to ASC 740-30, all undistributed earnings of a subsidiary shall be presumed to be transferred to the parent entity. Accordingly, the undistributed earnings of a subsidiary included in consolidated income shall be accounted for as a temporary difference and affect deferred tax expense unless the tax law provides a means by which the investment in a domestic subsidiary can be recovered tax free.
18
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes (continued)
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”, which simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. The Group adopted the ASU on January 1, 2021. The adoption did not have a material impact on the Group’s consolidated financial statements.
Recent accounting pronouncements
The Group has considered all recent accounting pronouncements and has concluded that there are no recent accounting pronouncements that may have a material impact on its unaudited interim condensed consolidated financial statements, based on current information.
3. CONCENTRATION OF RISKS
Concentration of credit risk
Assets that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, restricted cash, and accounts receivable. As of June 30, 2022, substantially all of the Group’s cash and cash equivalents were deposited in financial institutions located in mainland China, Hong Kong, United States and Malta, which management believes are of high credit quality.
Concentration of suppliers
For the six months ended June 30, 2021 and 2022, the supplier accounted for 10% of more of the Group’s costs was as follows:
| | For the six months ended June 30, |
| ||
| | 2021 | | 2022 |
|
| | US$ | | US$ |
|
A |
| | % | | % |
Vulnerability due to change of regulations or policies
The blockchain and cryptocurrency mining business could be significantly affected by, among other things, the regulatory and policy developments in international markets where the Company operates, such as the United States and Kazakhstan. Governmental authorities are likely to continue to issue new laws, rules and regulations governing the blockchain and cryptocurrency industry in and enhance enforcement of existing laws, rules and regulations. For example, the People’s Bank of China (the “PBOC”), Ministry of Industry and Information Technology, State Administration for Industry and Commerce, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission issued “Announcement on Preventing Token Fundraising Risks” on September 4, 2017, prohibiting all organizations and individual from engaging in initial coin offering transactions. On May 21, 2021, the Financial Stability and Development Committee of the State Council in mainland China called for the need to resolutely control financial risks and crack down on cryptocurrency mining and trading activities. On June 18, 2021, the “Notice of the Sichuan Provincial Development and Reform Commission and the Sichuan Provincial Energy Administration on the Cleanup and Shutdown of Virtual Currency Mining Projects” required electricity companies within Sichuan Province to close down power supply to businesses involved in cryptocurrency mining. On June 21, 2021, the Company terminated the operations of the two data centers in Sichuan according to the written notice from the Local Power Supplier.
19
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
3. CONCENTRATION OF RISKS (continued)
Vulnerability due to change of regulations or policies (continued)
As of June 30, 2022, the mining pool subsidiary of the Company has completely exited the mainland China market, ceased registering new users from mainland China and retired accounts of existing users from mainland China. The Group has been working on solutions with its existing users in mainland China, such as migrating users’ mining machines to overseas markets so that they have access to the services in a compliant manner.
The Group had begun the development of the international operations before these regulatory and policy developments in mainland China. In the second half of 2021, the Group has finished the migration of the cryptocurrency operations to international markets.
4. ASSET ACQUISITION
On May 31, 2022, the Company completed the first closing of its previously announced share exchange agreement dated April 5, 2021 (as amended and restated in April 2022, the “Amended and Restated Share Exchange Agreement”) entered into by the Company and the shareholders (the “Selling Shareholders”) of the acquisition of Bee Computing (HK) Limited (“Bee Computing”). At the first closing of the Amended and Restated Share Exchange Agreement, the Company issued
The following table presents the calculation of the purchase consideration of the acquisition date.
|
| Amount |
|
| US$ |
Fair value of |
| |
Effective settlement of preexisting loans |
| |
Total purchase consideration |
| |
The following is a summary of the estimated fair value of the assets acquired as of the acquisition date.
|
| Amount |
| Amortization Years |
| | US$ | | |
Cash |
| | | |
Prepayments and other receivables |
| | | |
Acquired intangible asset |
| | | |
Total identifiable assets acquired |
| | | |
Total purchase consideration |
| | | |
The acquired intangible asset was the unpatented technology for the Litecoin ASIC mining machines, which has estimated useful life of
20
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
5. INVESTMENTS
Long-term Investments
|
| As of |
| As of |
| | December 31, | | June 30, |
| | 2021 | | 2022 |
| | US$ | | US$ |
Carrying amount of equity investments without readily determinable fair value |
| |
| |
Carrying amount of equity method investments |
| |
| |
Carrying amount of long-term investments |
| |
| |
Equity investments without readily determinable fair value
In accordance with ASC 321, the Group elected to use the measurement alternative to measure such investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any. The carrying amount of the Group’s equity investments measured using the measurement alternative was US$
Equity method investments
Investments were classified as equity method investments as the Group have significant influence over the entities. The net operating income (loss) from equity method investments from continuing operations for the six months ended June 30, 2021 and 2022 were US$(
21
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
6. CRYPTOCURRENCY ASSETS
The movement of cryptocurrency assets is as follows:
|
| For the year ended | | For the six months |
| | December 31, 2021 | | ended June 30, 2022 |
| | US$ | | US$ |
Beginning balance |
| — |
| |
Receipts from issuance of ordinary shares for private placement |
| |
| |
Cryptocurrencies acquired in connection with business combination |
| |
| |
Cryptocurrencies borrowing | | | | |
Cryptocurrencies mined from mining pool business |
| |
| |
Cryptocurrencies mined from mining business |
| |
| |
Cryptocurrency to be distributed for promotion activities on behalf of a third party |
| |
| |
Deposits received from customers of mining data center | | | | |
Distribution to pool participants |
| ( |
| ( |
Repayment of deposit in the form of cryptocurrencies |
| ( |
| |
Repayment of cryptocurrencies borrowings | | ( | | |
Payment of service expense and long-lived assets |
| ( |
| ( |
Cryptocurrencies paid in connection with asset acquisition | | ( | | |
Disposal of cryptocurrencies* |
| ( |
| ( |
Others |
| ( |
| |
Impairment of cryptocurrency assets | | ( | | ( |
Ending balance of cryptocurrency assets, net |
| |
| |
* In January 2022, the Company entered into a loan agreement and a pledge agreement for
7. PREPAYMENTS AND OTHER CURRENT ASSETS
Prepayments and other current assets consist of the following:
|
| As of |
| As of |
| | December 31, | | June 30, |
| | 2021 | | 2022 |
| | US$ | | US$ |
| | | | |
Receivables from third party payment service providers |
| |
| |
Utility deposits | | | | |
Deferred expense* |
| |
| |
Loans to the third parties** | | | | |
Deductible value-added input tax |
| |
| |
Prepayments for long-term assets*** | | — | | |
Others |
| |
| |
Prepayments and other current assets |
| |
| |
* Deferred expense represents cash paid in advance to vendors, such as technology service expense, consultant expense and compliance expense, which would be amortized according to their respective service periods.
22
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
7. PREPAYMENTS AND OTHER CURRENT ASSETS (continued)
** Loans to the third parties as of December 31, 2021 mainly consist of the free interest and due on demand loans of US$
*** Prepayments for long-term assets mainly consist of the prepayments to vendors in connection with the research and development of cryptocurrency mining chips and mining machines.
8. PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
| | | | |
|
| As of |
| As of |
| | December 31, | | June 30, |
| | 2021 | | 2022 |
| | US$ | | US$ |
| | | | |
Machinery and equipment | | | | |
Electronics and office equipment | | |
| |
Motor vehicles | | |
| |
Leasehold improvements | | |
| |
Construction in progress | | | ||
| | | | |
Property and equipment, cost | | |
| |
Less: Accumulated depreciation | | ( |
| ( |
Less: Provision for impairment | | ( | | — |
| | | | |
Property and equipment, net | | |
| |
Depreciation expenses from continuing operations for the six months ended June 30, 2021 and 2022 were approximately US$
Provision for impairment as of December 31, 2021 was approximately US$
23
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
9. INTANGIBLE ASSETS, NET
Intangible assets consist of the following:
|
| As of |
| As of |
| | December 31, | | June 30, |
| | 2021 | | 2022 |
| | US$ | | US$ |
Cost: |
|
|
|
|
Computer software |
| |
| |
License agreement |
| |
| |
Internet domain name |
| |
| |
Brand name |
| |
| |
Strategic contract | | | | |
Unpatented technology | | — | | |
|
| |
| |
Accumulated amortization: |
| |
| |
Computer software |
| ( |
| ( |
License agreement |
| ( |
| ( |
Internet domain name |
| ( |
| ( |
Brand name |
| ( |
| ( |
Strategic contract | | ( | | ( |
|
| ( |
| ( |
| | | | |
Impairment *: | | | | |
Computer software | | ( | | ( |
License agreement | | ( | | ( |
Brand name | | ( | | ( |
| ( | | ( | |
Intangible assets, net |
| |
| |
* The impairment of US$
Amortization expenses from continuing operations for the six months ended June 30, 2021 and 2022 were approximately US$
|
| US$ |
| | |
2022 remaining |
| |
2023 |
| |
2024 |
| |
2025 |
| |
2026 | | |
2027 and thereafter |
| |
| | |
Total |
| |
24
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
10. OPERATING LEASES
The Group entered into various operating lease agreements for offices space. The remaining lease terms ranges from
The following table presents the operating lease related assets and liabilities recorded on the Group’s unaudited interim condensed consolidated balance sheet.
| | As of |
| As of |
| | December 31, | | June 30, |
|
| 2021 |
| 2022 |
| | US$ |
| US$ |
Right-of-use assets | | |
| |
Impairment of right-of-use assets | | ( | | — |
Right-of-use assets, net | | | | |
| | | | |
Operating lease liabilities - current | | |
| |
Operating lease liabilities – non-current | | |
| |
Total operating lease liabilities | | |
| |
For the six months ended June 30, 2021, the Group had operating lease costs from continuing operations of approximately US$
As of December 31, 2021, the impairment of right-of-use assets of US$
The following table summarizes the maturity of operating lease liabilities as of June 30, 2022:
| | Operating leases |
| | US$ |
2022 remaining |
| |
2023 |
| |
2024 |
| |
2025 | | |
2026 | | |
Total |
| |
Less: imputed interest |
| ( |
Present value of lease liabilities |
| |
25
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
11. ACCOUNTS PAYABLES
Accounts payables consist of the following:
|
| As of |
| As of |
| | December 31, | | June 30, |
| | 2021 | | 2022 |
| | US$ | | US$ |
Pool participants payable* | | | | |
Utility cost payable | | | | |
Others | | | | |
|
| |
| |
* Pool participants payable represents payments to pool participants in the mining pool business which are settled in cryptocurrencies.
12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
|
| As of |
| As of |
| | December 31, | | June 30, |
| | 2021 | | 2022 |
| | US$ | | US$ |
| | | | |
Advance from end users* |
| |
| |
Deposit from customer** | | | | |
Business tax and other taxes payable |
| |
| |
Professional fees and services payable |
| |
| |
Promotional events payables |
| |
| |
Decoration and construction cost payable |
|
| | |
Contingent consideration |
| |
| |
Others |
| |
| |
| | | | |
Total |
| |
| |
* Advance from end users represents payments received by the Group in advance from the end users prior to the services to be provided.
** Deposit from customers represents payments received by the Group in advance from customers in the data center business.
13. INCOME TAXES
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.
USA
Summit Bend, Ohio I, Ohio II and Asgard are incorporated in the USA. Under the current laws, profits tax in USA is generally assessed at the rate
26
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
13. INCOME TAXES (continued)
British Virgin Islands
Under the current laws of the British Virgin Islands, subsidiaries incorporated in British Virgin Islands are not subject to tax on income or capital gains.
Curacao
Multi Pay N.V. is incorporated in the Curacao, Under the current laws, profits tax in Curacao is generally assessed at the rate of
Malta
Under the current laws, profits tax in Malta is generally assessed at the rate of
Cyprus
Round Spot Services Ltd is incorporated in Cyprus and does not conduct any substantive operations of its own.
Hong Kong
500wan HK, Sunstar Technology, Skill Esport and the Hong Kong subsidiaries of Loto Interactive are incorporated in Hong Kong, under the current laws, profits tax in Hong Kong is generally assessed at the rate of
Mainland China
A new enterprise income tax law (the “EIT Law”) in mainland China was enacted and became effective on January 1, 2008. The EIT Law applies a uniform
The Group records a valuation allowance on its deferred tax assets that is sufficient to reduce the deferred tax assets to an amount that is more likely than not to be realized. Future reversal of the valuation allowance will be recognized either when the benefit is realized or when it has been determined that it is more likely than not that the benefit in future earnings will be realized.
As of June 30, 2022, the Group had net operating losses (“NOLs”) of approximately US$
The Group accounted for uncertainties in income taxes in accordance with ASC 740. The management evaluated the Group’s tax positions and concluded that no provision for uncertainty in income taxes was necessary as of June 30, 2021 and 2022.
27
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
14. ASSETS AND LIABILITIES HELD FOR SALE
On March 31, 2021, the Company completed the subscription for shares of Loto Interactive and Loto Interactive became a subsidiary of the Company. On June 21, 2022, the Company committed to a plan to sell its equity interest in Loto Interactive and its subsidiaries. The sale was subsequently closed on July 12, 2022. See Note 22 for more information regarding this transaction. The Company does not believe that the sale of Loto Interactive constitutes a strategic shift that will have a major effect on its operations or financial results and as such, Loto Interactive has not been reclassified as discontinued operations in the Group’s financial statements, but instead has been presented as assets and liabilities held for sale as of June 30, 2022.
The following table summarizes the major classes of asset and liabilities reclassified as held for sale as of June 30, 2022.
| | As of |
| | June 30, |
|
| 2022 |
| | US$ |
Current assets: |
|
|
Cash and cash equivalents |
| |
Accounts receivable |
| |
Prepayments and other current assets | | |
Total current assets | | |
| | |
Non-current assets: | | |
Property and equipment, net |
| |
Long-term investments | | |
Other current assets |
| |
Total non-current assets |
| |
Total assets held for sale |
| |
| | |
Current liabilities: | | |
Accounts payable |
| |
Amounts due to related parties | | |
Accrued payroll and welfare payable | | |
Accrued expenses and other current liabilities |
| |
Income tax payable | | |
Operating lease liabilities - current | | |
Total current liabilities |
| |
| | |
Non-current liabilities: | | |
Operating lease liabilities - non-current | | |
Total non-current liabilities | | |
Total liabilities held for sale |
| |
28
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
15. SHARE-BASED PAYMENT
On March 28, 2011, the shareholders and board of directors of the Company approved the 2011 Share Incentive Plan (the “Plan”). The Plan provides for the grant of options, restricted shares and other share-based awards. These options were granted with exercise prices denominated in US$, which is the functional currency of the Company. The board of directors has authorized under the Plan the issuance of up to
On March 28, 2021, the shareholders and board of directors of the Company approved the 2021 Share Incentive Plan (the “Plan”). The Plan provides for the grant of options, restricted shares and other share-based awards. These options were granted with exercise prices denominated in US$, which is the functional currency of the Company. The board of directors has authorized under the Plan the issuance of up to
A summary of share option and restricted shares activity and related information for the year ended December 31, 2021 and for the six months ended June 30, 2022 are as follows:
Share options granted to employees and directors
|
| |
| |
| Weighted |
| Weighted |
| |
| | | | Weighted | | average | | average | | |
| | | | average | | grant date | | remaining | | Aggregated |
| | Number of | | exercise | | fair value per | | contractual | | intrinsic |
| | options | | price | | share | | year | | value |
| | | | US$ | | US$ | | (Years) | | US$ |
| | | | | | | | | | |
Outstanding, January 1, 2021 | | | | | | | | | ||
Granted | | | | | | | | — | | |
Forfeited | | ( | | | | | | — | | |
Exercised | | ( | | | | | | — | | |
Outstanding, December 31, 2021 | | | | | | | | | | |
Granted | | | | | | | | — | | |
Forfeited | | | | | | | | — | | |
Exercised | | | | | | | | — | | |
Outstanding, June 30, 2022 (unaudited) | | | | | | | | | | |
Vested and expected to vest at June 30, 2022 (unaudited) | | | | | | | | | | |
Exercisable at June 30, 2022 (unaudited) | | | | | | | | | |
29
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
15. SHARE-BASED PAYMENT (continued)
Restricted shares granted to employees and directors
|
| |
| Weighted |
| Weighted |
| |
| | | | average | | average | | |
| | | | grant date | | remaining | | Aggregated |
| | Number of | | fair value per | | contractual | | intrinsic |
| | options | | share | | year | | value |
| | | | US$ | | (Years) | | US$ |
| | | | | | | | |
Outstanding, January 1, 2021 | | |
| |
|
| | |
Granted | | |
| |
|
| | |
Forfeited | | — |
| — |
| — |
| — |
Exercised | | ( |
| |
| — |
| |
Outstanding, December 31, 2021 |
| |
| |
|
| | |
Granted |
| |
| |
| — |
| |
Forfeited |
| |
| |
| |
| |
Exercised |
| ( |
| |
| — |
| |
Outstanding, June 30, 2022 (unaudited) | | | | | | | | |
Vested and expected to vest at June 30, 2022 (unaudited) |
| |
| |
|
| | |
Exercisable at June 30, 2022 (unaudited) |
| |
| |
|
| |
The aggregate intrinsic value in the table above represents the difference between the fair value of Company’s ordinary share and the exercise price.
As of June 30, 2022, there was
30
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
15. SHARE-BASED PAYMENT (continued)
Total share-based compensation expenses relating to options and restricted shares granted to employees and directors for the six months ended June 30, 2021 and 2022 are included in:
| | For the six months ended June 30, 2021 | ||||
| | Employees | | Directors | | Total |
|
| US$ |
| US$ |
| US$ |
| | | | | | |
Sales and marketing |
| |
| |
| |
General and administrative |
| |
| |
| |
Service development |
| |
| |
| |
| | | | | | |
|
| |
| |
| |
| | For the six months ended June 30, 2022 | ||||
| | Employees | | Directors | | Total |
|
| US$ |
| US$ |
| US$ |
| | | | | | |
Cost of revenue |
| |
| — |
| |
General and administrative |
| |
| |
| |
Service development |
| |
| — |
| |
| | | | | | |
|
| |
| |
| |
On June 27, 2022, the Company completed a private placement, in which it issued certain pre-funded warrants to purchase
A summary of warrants (excluding pre-funded warrants) activity and related information for the year ended December 31, 2021 and for the six months ended June 30, 2022 are as follows:
| | | | | | Weighted | | |
| | | | | | Average | | |
| | Class A | | Weighted Average | | Remaining | | Aggregate |
| | Ordinary Shares | | Exercise Price | | Contractual Life | | Intrinsic Value |
|
| |
| US$ |
| (Years) |
| US$ |
Outstanding, January 1, 2021 |
| — |
|
|
| — | ||
Granted |
| |
| |
|
| — | |
Forfeited |
| — |
|
| — |
| — | |
Exercised |
| — |
|
| — |
| — | |
Outstanding, December 31, 2021 |
| |
| |
|
| — | |
Granted |
| |
| |
|
| — | |
Forfeited |
| — |
| — |
| — |
| — |
Exercised |
| — |
| — |
| — |
| — |
Outstanding, June 30, 2022 (unaudited) |
| |
| |
|
| — | |
Vested and expected to vest at June 30, 2022 (unaudited) |
| |
| |
|
| — | |
Exercisable at June 30, 2022 (unaudited) |
| |
| |
|
| — |
31
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
16. RELATED PARTY TRANSACTIONS
Amounts due from related party – non-current
As of December 31, 2021, the balance of prepayments to related party was in the amount of US$
Amounts due to related parties
As of December 31, 2021, the balance of due to related parties was in the amount of US$
Equity transaction with a related party
Good luck Information is controlled by Mr. Man San Vincent Law, a founder of the Company. In December 2020, the Company entered into a definitive share subscription agreement with Good Luck Information for the issuance and sale of
Related Party transaction
| | For the six months ended June 30, | ||
|
| 2021 |
| 2022 |
|
| US$ |
| US$ |
Data center operation costs for services provided by Viking Data Centers before ceased to be related party | | | | |
|
| |
| |
32
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
17. COMMITMENTS AND CONTINGENCIES
Contractual arrangements among the Company and the former VIEs
Under applicable tax laws and regulations in mainland China, arrangements and transactions among related parties may be subject to audit or scrutiny by the tax authorities in mainland China within ten years after the taxable year when the arrangements or transactions are conducted. The Company could face material and adverse tax consequences if the tax authorities in mainland China were to determine that the Contractual Arrangements among the Company and the respective VIEs were not entered into on an arm’s-length basis and therefore constituted unfavorable transfer pricing arrangements. Unfavorable transfer pricing arrangements could, among other things, result in an upward adjustment on taxation. In addition, the tax authorities in mainland China may impose interest on late payments on the Company and the respective VIEs for the adjusted but unpaid taxes. In the opinion of management, the likelihood of such an upward adjustment on taxation and related interest is remote based on current facts and circumstances.
Guarantees
The Group accounts for guarantees in accordance with ASC topic 460 (“ASC 460”), “Guarantees”. Accordingly, the Group evaluates its guarantees to determine whether (a) the guarantee is specifically excluded from the scope of ASC 460, (b) the guarantee is subject to ASC 460 disclosure requirements only, but not subject to the initial recognition and measurement provisions, or (c) the guarantee is required to be recorded in the financial statements at fair value.
Guarantees (continued)
The memorandum and articles of association of the Company require that the Company indemnify its officers and directors, as well as those who act as directors and officers of other entities at the Company’s request, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceedings arising out of their services to the Company. The indemnification obligations are more fully described in the memorandum and articles of association. The Company purchases standard directors and officers’ insurance to cover claims or a portion of the claims made against its directors and officers. Since a maximum obligation is not explicitly stated in the Company’s memorandum and articles of association and will depend on the facts and circumstances that arise out of any future claims, the overall maximum amount of the obligations cannot be reasonably estimated.
Historically, the Group has not been required to make payments related to these obligations, and the fair value for these obligations is zero as of December 31, 2021 and June 30, 2022.
Indemnity cost
There was
Legal proceedings
From time to time, the Group is subject to legal proceedings and claims in the ordinary course of business. The Group records a liability when it is both probable that a liability will be incurred and the amount of the loss can be reasonably estimated. The Group reviews the need for any such liability on a regular basis and has not recorded any material liabilities in this regard during 2021 and for the six months ended June 30, 2022.
Operating lease commitments
The information of lease commitments is provided in Note 10.
33
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
18. LOSSES PER SHARE
Basic and diluted losses per share for each of the six months ended June 30, 2021 and 2022 presented is calculated as follows:
| | For the six months ended June 30, | ||||||
| | 2021 | | 2022 | ||||
|
| US$ |
| US$ |
| US$ |
| US$ |
|
| Class A |
| Class B |
| Class A |
| Class B |
| | | | | | | | |
Losses per share from continuing operations—basic: |
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
Allocation of net loss from continuing operations attributable to BIT Mining Limited’s ordinary shareholders used in calculating loss per ordinary share—basic |
| ( |
| — |
| ( |
| |
| | | | | | | | |
Denominator: |
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding used in calculating basic losses per share |
| |
| |
| |
| |
Denominator used for losses per share |
| |
| |
| |
| |
Losses per share from continuing operations — basic |
| ( |
| — |
| ( |
| |
| | | | | | | | |
Losses per share from continuing operations—diluted: |
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
Allocation of net loss from continuing operations attributable to BIT Mining Limited’s ordinary shareholders used in calculating loss per ordinary share— diluted |
| ( |
| — |
| ( |
| |
Reallocation of net loss from discontinued operations attributable to BIT Mining Limited’s ordinary shareholders as a result of conversion of Class B to Class A shares |
| — |
| — |
| |
| |
Net loss from continuing operations attributable to ordinary shareholders |
| ( |
| — |
| ( |
| |
| | | | | | | | |
Denominator: |
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding used in calculating basic losses per share |
| |
| |
| |
| |
Conversion of Class B to Class A ordinary shares |
| |
| — |
| |
| |
Denominator used for losses per share |
| |
| |
| |
| |
Losses per share from continuing operations—diluted |
| ( |
| — |
| ( |
| |
| | | | | | | | |
Losses from continuing operations per ADS: |
|
|
|
|
|
|
|
|
Denominator used for losses per ADS - basic |
| |
| — |
| |
| |
Denominator used for losses per ADS - diluted |
| |
| — |
| |
| |
Losses from continuing operations per ADS – basic |
| ( |
| — |
| ( |
| |
Losses from continuing operations per ADS – diluted |
| ( |
| — |
| ( |
| |
34
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
18. LOSSES PER SHARE (continued)
| | For the six months ended June 30, | ||||||
| | 2021 | | 2022 | ||||
|
| US$ |
| US$ |
| US$ |
| US$ |
|
| Class A |
| Class B |
| Class A |
| Class A |
| | | | | | | | |
Losses per share from discontinued operations—basic: |
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
Allocation of net loss from discontinued operations attributable to BIT Mining Limited’s ordinary shareholders used in calculating loss per ordinary share—basic |
| ( |
| — |
| — |
| — |
| | | | | | | | |
Denominator: |
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding used in calculating basic losses per share |
| |
| |
| |
| |
Denominator used for losses per share |
| |
| |
| |
| |
Losses per share from discontinued operations — basic |
| ( |
| — |
| — |
| — |
| | | | | | | | |
Losses per share from discontinued operations—diluted: |
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
Allocation of net loss from discontinued operations attributable to BIT Mining Limited’s ordinary shareholders used in calculating loss per ordinary share— diluted |
| ( |
| — |
| — |
| — |
Reallocation of net loss from discontinued operations attributable to BIT Mining Limited’s ordinary shareholders as a result of conversion of Class B to Class A shares |
| — |
| — |
| — |
| — |
Net loss from discontinued operations attributable to ordinary shareholders |
| ( |
| — |
| — |
| — |
| | | | | | | | |
Denominator: |
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding used in calculating basic losses per share |
| |
| |
| |
| |
Conversion of Class B to Class A ordinary shares |
| |
| — |
| |
| — |
Denominator used for losses per share |
| |
| |
| |
| |
Losses per share from discontinued operations—diluted |
| ( |
| — |
| — |
| — |
| | | | | | | | |
Losses from discontinued operations per ADS: |
|
|
|
|
|
|
|
|
Denominator used for losses per ADS - basic |
| |
| — |
| |
| — |
Denominator used for losses per ADS - diluted |
| |
| — |
| |
| — |
Losses from discontinued operations per ADS – basic |
| ( |
| — |
| — |
| — |
Losses from discontinued operations per ADS – diluted |
| ( |
| — |
| — |
| — |
19. EQUITY TRANSACTIONS
The authorized share capital consisted of
35
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
19. EQUITY TRANSACTIONS (continued)
The Company’s Board of Directors has appointed Mr. Man San Vincent Law as its Executive Director, effective as of April 5, 2021, and authorized the Company to issue
(1) The voting power of each Preference Share is equal to that of
(2) The Preference Shares cannot be converted into Class A ordinary shares, Class B ordinary shares, or ADRs;
(3) The Preference Shares are not entitled to receive dividends;
(4) If Good Luck transfers the Preference Shares to a third party which is not an affiliate of Good Luck, or when Good Luck ceases to be controlled by any person holding executive office in or being a member of the board of director of the Company, Class A Preference Shares shall cease to have any voting right and
(5) If Mr. Law ceases to serve as a director of the Company, the Company shall be entitled to redeem the Class A Preference Shares at the original subscription price.
For the six months ended June 30, 2021,
For the six months ended June 30, 2022,
On May 31, 2022,
On June 27, 2022, the Company completed a private placement, in which it have offered (1)
As of June 30, 2022,
36
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
20. PURCHASE OF NON-CONTROLLING INTEREST
In September 2021, the Company entered into a Membership Interest Purchase Agreement and certain other auxiliary agreements with Viking Data Centers, LLC (“Viking Data Centers”) to acquire the
In June 2022, the Company entered into an agreement with Viking Data Centers that the Company agreed to purchase all remaining equity interest from Viking Data Centers for approximately US$
The following table summarizes the assets transferred:
|
| Amount |
| | US$ |
Construction in progress | | |
Other non-current assets |
| |
Intangible assets, net |
| |
Total |
| |
Net book value of the non-controlling interest purchased was approximately US$
37
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
21. SEGMENT REPORTING
The Group continually monitors the reportable segments for changes in facts and circumstances to determine whether changes in the identification or aggregation of operating segments are necessary. In December 2020, the Group announced the entrance into the cryptocurrency industry. As of June 30, 2021, the Group have completed the transformation of its business to become a cryptocurrency mining enterprise. In accordance with ASC topic 280, “Segment Reporting”, the Group’s chief operating decision maker has been identified as the Board of Directors and the chief executive officer, who makes resource allocation decisions and assesses performance based on the different business operating results. As a result, the Group has
38
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
The following table presents summary information by segment for the six months ended June 30, 2021 and 2022, respectively.
| | For the six months ended June 30, | ||
| | 2021 | | 2022 |
| | US$ | | US$ |
Reportable segment revenue: |
|
|
|
|
Mining pool |
| |
| |
Data center |
| |
| |
Cryptocurrency mining |
| |
| |
Others |
| |
| |
Total segment and consolidated revenue |
| |
| |
Reportable segment cost of revenue-exclusive depreciation and amortization: |
|
|
|
|
Mining pool |
| ( |
| ( |
Data center |
| ( |
| ( |
Cryptocurrency mining |
| ( |
| ( |
Others |
| ( |
| ( |
Total segment and consolidated cost of revenue-exclusive depreciation and amortization |
| ( |
| ( |
Reportable segment cost of revenue-depreciation and amortization: |
|
|
|
|
Mining pool |
| ( |
| ( |
Data center |
| ( |
| ( |
Cryptocurrency mining |
| ( |
| ( |
Others |
| ( |
| — |
Total segment and consolidated cost of revenue-depreciation and amortization |
| ( |
| ( |
Total segment and consolidated cost |
| ( |
| ( |
Reconciling items: |
|
|
|
|
Operating expenses |
| ( |
| ( |
Other operating income |
| |
| |
Government grant |
| — |
| |
Other operating expenses |
| ( |
| ( |
Net loss on disposal of cryptocurrencies |
| ( |
| ( |
Impairment of cryptocurrency assets |
| ( |
| ( |
Changes in fair value of derivative instrument |
| |
| — |
Impairment of property and equipment | | — | | ( |
Changes in fair value of contingent considerations | | — | | |
Operating loss from continuing operations |
| ( |
| ( |
Other income, net |
| |
| |
Interest income |
| |
| |
Interest expense |
| ( |
| ( |
(Loss) gain from equity method investments |
| ( |
| |
Gain on previously held equity method investment |
| |
| — |
Gain from disposal of a subsidiary |
| |
| — |
Net loss from continuing operations |
| ( |
| ( |
39
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
21. SEGMENT REPORTING (continued)
The following table presents the revenue from continuing operations by geographical locations for the six months ended June 30, 2021 and 2022, respectively.
| | For the six months ended June 30, | ||
Revenues |
| 2021 |
| 2022 |
| | US$ | | US$ |
Hong Kong |
| |
| |
USA |
| — |
| |
Kazakhstan |
| — |
| |
Europe |
| |
| |
Mainland China |
| |
| — |
Blockchain |
| |
| |
|
| |
| |
The following table presents the long-lived assets (including property and equipment, net and right-of-use assets) by geographical locations as of December 31, 2021 and June 30, 2022, respectively.
Long-lived assets |
| As of December 31, 2021 |
| As of June 30, 2022 |
| | US$ | | US$ |
USA |
| |
| |
Hong Kong |
| |
| |
Mainland China |
| |
| |
Kazakhstan |
| |
| |
Europe |
| |
| |
|
| |
| |
40
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
22. DISCONTINUED OPERATIONS
Disposition of VIEs and VIE subsidiaries
On July 23, 2021, the Group terminated all of its lottery business-related VIE contracts for
From July 23, 2021, the Group no longer retained any financial interest over lottery business related VIEs and accordingly deconsolidated lottery business related VIEs’ financial statements from the Group’s consolidated financial statements. The disposal of lottery business related VIEs represented a strategic shift and has a major effect on the Group’s result of operations. Accordingly, revenues, expenses and cash flows related to lottery business related VIEs have been reclassified in the consolidated financial statements as discontinued operations for the six months ended June 30, 2021.
The condensed cash flows of lottery business related VIEs were as follows for the six months ended June 30, 2021:
|
| For the six months ended June 30, |
| | 2021 |
| | US$ |
Net cash used in operating activities |
| ( |
Net cash provided by investing activities |
| |
Net cash used in financing activities |
| ( |
| | |
Effect of foreign exchange on cash |
| ( |
The operating results from discontinued operations included in the Group’s unaudited interim condensed consolidated statements of comprehensive loss were as follows for the six months ended June 30, 2021:
|
| For the six months ended June 30, |
| | 2021 |
| US$ | |
Major classes of line items constituting pre-tax profit of discontinued operations |
|
|
| | |
Revenues |
| |
Cost of revenue |
| ( |
Sales and marketing |
| ( |
General and administrative |
| ( |
Service development expenses |
| ( |
Other income that are not major |
| |
Loss from discontinued operations, before income tax |
| ( |
Income tax expense |
| |
Loss from discontinued operations, net of income tax |
| ( |
23. SUBSEQUENT EVENTS
Sale of Shares of Loto Interactive Limited
On July 12, 2022, the Company entered into a share sale and purchase agreement (the “Sale and Purchase Agreement”) with an unaffiliated third party (the “Buyer”), pursuant to which the Company agreed to sell, and the Buyer agreed to purchase, approximately
41
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”), United States dollars (“US$”), Hong Kong dollars (“HKD”) and EUR, except for number of shares and per share (or ADS) data)
Private Placement
In August 2022, the Company have completed the registered direct offering of
Exercise of Pre-Funded Warrants
In June 2022, the Company have offered (1)
42
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This management’s discussion and analysis is designed to provide you with a narrative explanation of our financial condition and results of operations for the six months ended June 30, 2021 and 2022. This section should be read in conjunction with our unaudited interim condensed consolidated financial statements and the related notes included elsewhere in this interim report. See “Exhibit 99.1— Unaudited Interim Condensed Consolidated Financial Statements of BIT Mining Limited as of December 31, 2021 and June 30, 2022 and for the six months ended June 30, 2021 and 2022.” We also recommend that you read our management’s discussion and analysis and our audited consolidated financial statements for fiscal year 2021, and the notes thereto, which appear in our annual report on Form 20-F for the year ended December 31, 2021, or the Annual Report, filed with the U.S. Securities and Exchange Commission, or the SEC, on April 7, 2022.
Unless otherwise indicated or the context otherwise requires, all references to “our company,” “we,” “our,” “ours,” “us” or similar terms refer to BIT Mining Limited, its predecessor entities, its subsidiaries and consolidated affiliated subsidiaries. “VIE” refers to variable interest entity.
All such financial statements were prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. We have made rounding adjustments to some of the figures included in this management’s discussion and analysis. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors.
Overview
We have four primary business segments covering self-mining, mining pool, data center operation and miner manufacturing and we are pursuing a development strategy to focus on cryptocurrency mining operations globally.
Cryptocurrency mining business
We operated cryptocurrency mining machines for the sole purpose of mining cryptocurrencies (primarily Bitcoin and Ethereum) since February 2021, which we may sell for fiat currency for our own account from time to time depending on market condition and management's determination of our cash flow needs. As of the date of this report, the total hash rate capacity of our online Ethereum Classic mining machines and Bitcoin mining machines are approximately 4,296.2GH/s and 65.6PH/s. For the six months ended June 30, 2022, we produced 10,318 Ethereum from our Ethereum cryptocurrency mining operations and recognized revenue of approximately US$27.2 million (from February 2021 to June 30, 2021: nil) and produced 263 Bitcoins from our Bitcoin cryptocurrency mining operations and recognized revenue of approximately US$10.4 million (from February 2021 to June 30, 2021: US$11.4 million).
Data center business
We formerly conducted our data center business in mainland China through Loto Interactive Limited (“Loto Interactive”) and its subsidiaries. After suspending the operations of two data centers in Sichuan province, China, we have migrated our data center operations overseas and are currently in the process of investing in or constructing cryptocurrency mining data centers in overseas jurisdictions outside of mainland China. On July 12, 2022, we entered into a share sale and purchase agreement (the “Sale and Purchase Agreement”) with an unaffiliated third party (the “Buyer”), pursuant to which we agreed to sell, and the Buyer agreed to purchase, approximately 51% of the total issued share capital of Loto Interactive, representing 279,673,200 shares of Loto Interactive at the price of HK$0.28 per share for a total consideration of HK$78,308,496 (the “Transaction”). After the Transaction, our Company’s share ownership in Loto Interactive decreased to 8.79%.
In September 2021, we entered into a Membership Interest Purchase Agreement and certain other auxiliary agreements with Viking Data Centers, LLC (“Viking Data Centers”) to acquire the 51% equity interest in Asgard Data Centers LLC (“Asgard”), which intended to operate a cryptocurrency mining data center in Ohio (the “Ohio Mining Site”). In October 2021, we increased our equity interest ownership in the Ohio Mining Site to 55%. The Ohio mining site has a total planned power capacity up to 150 megawatts (“MW”). In June 2022, we entered into an agreement with Viking Data Centers that we agreed to purchase all remaining equity interest from Viking Data Centers for approximately US$17.8 million, by transferring certain assets that represent 67.5MW, or 45%, of total planned power capacity at the Ohio Mining Site. After completion of the transaction, we have exclusive access to 82.5MW of planned electrical power and Viking Data Centers has exclusive access to the remaining 67.5MW, in accordance to their respective equity ownership immediately prior to the transaction. As of the date of this report, 82.5 megawatts have been completed and in operation in the Ohio Mining Site. Revenues of US$3.4 million were generated from Ohio Mining data center business for the six months ended June 30, 2022 (From March 31, 2021 to June 30, 2021, data centers in Sichuan recognized revenues of approximately US$11.4 million).
Mining pool business
On April 15, 2021, we completed the acquisition of the entire mining pool business of Blockchain Technologies Holding Company operated under BTC.com, including the domain name BTC.com and the cryptocurrency wallet of BTC.com. Since October 2021, due to regulatory changes in the mainland China, we ceased registering new mining pool customers from mainland China and retired accounts of existing mining pool customers from mainland China. Our mining pool business generated a significant majority of our total revenue of US$413.7 million and US$450.8 million from April 15, 2021 to June 30, 2021 and for the six months ended June 30, 2022, respectively.
Miner manufacturing
On May 31, 2022, we completed the first closing of its previously announced share exchange agreement dated April 5, 2021 (as amended and restated in April 2022, the “Amended and Restated Share Exchange Agreement”) entered into by us and the shareholders (the “Selling Shareholders”) of the acquisition of Bee Computing (HK) Limited (“Bee Computing”). At the first closing of the Amended and Restated Share Exchange Agreement, we issued 16,038,930 of its Class A ordinary shares to the Selling Shareholders. Bee Computing has completed the design of a new generation of highly efficient BTC and DOGE/LTC mining machines utilizing the latest technology. With our partners, we have successfully taped out a 12-nanometer chip and have completed mass production of more than 1,000 Litecoin mining wafers.
Gaming and other services
We are in the process of terminating our online lottery licenses in Europe which belong to The Multi Group (“TMG”), a subsidiary that the Company acquired in July 2017. As of today, TMG has ceased all of its business operations.
In July 2021, we announced our decision to dispose of our lottery related business in mainland China, and terminated all of our lottery business-related VIE contracts. The lottery business-related VIE subsidiaries were deconsolidated and their financial results were no longer included in our consolidated financial statements from the third quarter of 2021 as a result of eliminating the VIE structure.
Our total revenues were US$492.2 million for the six months ended June 30, 2022, representing an increase of US$54.2 million from US$438.0 million for the six months ended June 30, 2021. The increases were mainly due to the acquisition of the mining pool business on April 15, 2021.
Net loss attributable to BIT Mining Limited was US$24.0 million and US$13.1 million for the six months ended June 30, 2022 and June 30, 2021, respectively. Net loss attributable to BIT Mining Limited for the six months ended June 30, 2021 was mainly due to an impairment provision of US$8.9 million provided for cryptocurrency assets and net loss on disposal of cryptocurrencies of US$8.6 million related to the decreasing market prices for cryptocurrencies during the six months ended June 30, 2021. Net loss attributable to BIT Mining Limited for the six months ended June 30, 2022 was mainly due to the decrease of US$7.9 million in gross profit of the cryptocurrency business related to the declines in prices of cryptocurrencies.
2
Description of Key Statement of Operations Items from Continuing Operation
Revenues
The table below sets forth our net revenues by service types for the six months ended 2021 and 2022:
| | For the six months ended June 30, | ||
| | 2021 | | 2022 |
| | US$ | | US$ |
| | (in thousands) | ||
Cryptocurrency mining |
| 11,378 |
| 37,823 |
Data center |
| 11,424 |
| 3,394 |
Mining pool |
| 413,650 |
| 450,780 |
Online gaming services in Europe |
| 1,445 |
| 8 |
Others |
| 108 |
| 192 |
Total revenues |
| 438,005 |
| 492,197 |
Our total revenues increased from US$438.0 million in the six months ended June 30, 2021 to US$492.2 million in the six months ended June 30, 2022, primarily due to the revenues attributable to the mining pool business acquired on April 15, 2021. Our mining pool business was consolidated by us on April 15, 2021 and accounted for approximately 91.6% of the total revenues for the six months ended June 30, 2022. Our cryptocurrency mining business and data center business accounted for approximately 8.4% of our total revenues for the six months ended June 30, 2022.
Operating Costs and Expenses
The table below sets forth our operating costs and expenses from continuing operations for the six months ended June 30, 2021 and 2022:
| | For the six months ended June 30, | ||
| | 2021 | | 2022 |
| | US$ | | US$ |
| | (in thousands) | ||
Operating Costs and Expenses: |
| |
| |
Cost of revenue |
| 427,261 |
| 489,398 |
Sales and marketing |
| 454 |
| 339 |
General and administrative |
| 8,561 |
| 12,364 |
Service development |
| 891 |
| 2,184 |
Total operating costs and expenses |
| 437,167 |
| 504,285 |
Our operating costs and expenses consist primarily of cost of revenue, sales and marketing expenses, general and administrative expenses and service development expenses.
Cost of revenue
Our cost of revenue is directly related to the services we provide, and generally fluctuates in line with our revenues.
3
Our cost of revenue primarily consists of: (i) mining rewards allocated to each providers of computing power (“pool participant”) in exchange for their computing power contributed to the mining pool, (ii) other direct costs related to providing the mining pool service such as server fees and labor for maintaining the mining pool service, (iii) direct production costs related to data center service for operation, leasing expenses for servers hosing and other equipment used in providing online services and cryptocurrency mining business, (iv) depreciation of machinery and equipment related to cryptocurrency mining and data center services, (v) amortization fees, which consist primarily of amortization of intangible assets arising from business combination, (vi) lottery insurance expenses, which consist of insurance premiums charged by insurers for covering the first two categories of winnings in online gaming services for betting on the outcome of lotteries, (vii) platform fees, which consist of fees payable to online gaming software suppliers for providing various online casino games on TMG’s websites and apps, (viii) account handling expenses, which consist primarily of transaction fees charged by banks and third-party payment processors for cash transfers between our users’ accounts on our online platform including websites and mobile applications and their accounts with banks or third-party payment processors, (ix) server leasing and maintenance expenses, which consist primarily of leasing expenses for servers and other equipment used in providing online services, and (x) regulatory and compliance fees, which consist of fees payable to regulatory bodies such as Gambling Commission, HM Revenue and Customs, Malta Gaming Authority and Certria EOOD.
Sales and marketing expenses
Our sales and marketing expenses consist primarily of (i) promotional and marketing expenses, which primarily consist of expenses associated with various promotional events, (ii) salary and benefit expenses for sales and marketing employees, (iii) share-based compensation expenses, (iv) advertising expenses, and (v) commissions to third-party Internet companies, which are service fees we pay to third-party Internet companies for purchase orders placed on our websites by users redirected from their websites. The amount of such commissions paid to third-party Internet companies for each redirected order depends on an agreed-upon allocation ratio.
General and administrative expenses
Our general and administrative expenses consist primarily of (i) share-based compensation expenses, (ii) salary and benefit expenses for our management and general administrative employees, (iii) third-party professional service fees, which consist primarily of professional service fees paid to third-party professionals, (iv) depreciation expenses mainly for improvement of leasehold, (v) office expenses, which consist primarily of office rental and other office administrative expenses, (vi) travel, communication and other business expenses, which consist primarily of expenses associated with business travels, and (vii) credit loss provisions of other receivables, which consist primarily of credit loss of other receivables aging more than three years.
Service development expenses
Our service development expenses consist primarily of salary and benefit expenses for our research and development employees, share-based compensation expenses and rental expenses.
Other operating income
Our other operating income consists primarily of technical services fees received from third parties.
Government grant
For the six months ended June 30, 2021 and 2022, we recognized grants from the local government of Shenzhen. We might recognize similar grants from time to time in the future, but there is no assurance that we will continue to obtain such grants on a regular basis.
Net loss on disposal of cryptocurrencies
Net loss on disposal of cryptocurrencies was attributable to the decreasing market prices for cryptocurrencies by using first-in-first-out (FIFO) to calculate the cost of disposition.
Impairment of cryptocurrency assets
Impairment provided for cryptocurrency assets held in mining pool business, including cryptocurrencies payable to pool participants as a result of the price fluctuation of cryptocurrencies.
4
Changes in fair value of derivative instrument
Changes in fair value of derivative instrument was related to the changes in fair value of the cryptocurrency assets borrowings from the third-party as derivative instrument.
Changes in fair value of contingent considerations
Changes in fair value of contingent considerations was due to the re-measurement on the fair value of the contingent considerations related to the combination of BTC.com.
Impairment of property and equipment
Impairment of property and equipment was due to a provision for impairment of mining machines of Loto Interactive in Kazakhstan.
Results of Operations
The following summary of the unaudited consolidated financial data for the periods and as of the dates indicated is qualified by reference to, and should be read in conjunction with, our unaudited consolidated financial statements and related notes.
5
Our historical results do not necessarily indicate our results to be expected for any future period.
| | For the six months ended June 30, | ||
| | 2021* | | 2022 |
| | US$ | | US$ |
| | (in thousands, except for per share data) | ||
Consolidated Statement of Comprehensive Loss Data: |
|
|
|
|
Revenues |
| 438,005 |
| 492,197 |
Operating costs and expenses: |
|
|
|
|
Cost of revenue |
| (427,261) |
| (489,398) |
Sales and marketing |
| (454) |
| (339) |
General and administrative |
| (8,561) |
| (12,364) |
Service development |
| (891) |
| (2,184) |
Total operating costs and expenses |
| (437,167) |
| (504,285) |
Other operating income |
| 46 |
| 276 |
Government grant |
| — |
| 9 |
Other operating expenses |
| (434) |
| (1,515) |
Net loss on disposal of cryptocurrencies |
| (8,634) |
| (2,057) |
Impairment of cryptocurrency assets |
| (8,863) |
| (12,620) |
Changes in fair value of derivative instrument |
| 836 |
| — |
Changes in fair value of contingent considerations |
| — |
| 1,247 |
Impairment of property and equipment |
| — |
| (836) |
Operating loss from continuing operations |
| (16,211) |
| (27,584) |
Other income, net |
| 280 |
| 554 |
Interest income |
| 37 |
| 106 |
Interest expense |
| (709) |
| (218) |
(Loss) gain from equity method investments |
| (859) |
| 151 |
Gain on previously held equity method investment |
| 5,500 |
| — |
Gain from disposal of subsidiaries |
| 126 |
| — |
Loss before income taxes |
| (11,836) |
| (26,991) |
Income taxes expense |
| — |
| — |
Net loss from continuing operations |
| (11,836) |
| (26,991) |
Loss from discontinued operations, net of applicable income taxes |
| (2,177) |
| — |
Net loss from discontinued operations, net of applicable income taxes |
| (2,177) |
| — |
Net loss |
| (14,013) |
| (26,991) |
Net loss attributable to non-controlling interests from continuing operations |
| (694) |
| (2,955) |
Net loss attributable to non-controlling interests from discontinued operations |
| (179) |
| — |
Less: Net loss attributable to non-controlling interests |
| (873) |
| (2,955) |
|
|
|
|
|
Net loss attributable to BIT Mining Limited |
| (13,140) |
| (24,036) |
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
Share of other comprehensive income of an equity method investee |
| 631 |
| — |
Reclassification into loss from equity method investments |
| 131 |
| — |
Foreign currency translation gain (loss) |
| 864 |
| (902) |
Other comprehensive income (loss), net of tax |
| 1,626 |
| (902) |
Comprehensive loss |
| (12,387) |
| (27,893) |
Less: Comprehensive loss attributable to non-controlling interests |
| (879) |
| (3,056) |
Comprehensive loss attributable to BIT Mining Limited |
| (11,508) |
| (24,837) |
Losses per share attributable to BIT Mining Limited – Basic and Diluted: |
|
|
|
|
Net loss from continuing operations |
| (0.020) |
| (0.033) |
Net loss from discontinued operations |
| (0.004) |
| — |
Net loss |
| (0.024) |
| (0.033) |
Weighted average number of Class A and Class B ordinary shares outstanding: |
|
|
|
|
Basic |
| 542,881,582 |
| 717,955,865 |
Diluted |
| 542,881,582 |
| 717,955,865 |
* The Company has changed its reporting currency from Renminbi (“RMB”) to U.S dollars (“USD”) for the period commencing July 1, 2021. Prior periods’ comparative financial information has been recast as if the Company always used USD as its reporting currency.
6
About Non-GAAP Financial Measures
As a supplement to net income, we use the non-GAAP financial measure of adjusted net loss which is U.S. GAAP net loss as adjusted to exclude share-based compensation expenses, impairment of acquired intangible assets and goodwill, impairment of long-term investments, deferred tax expenses relating to valuation allowance, gain on previously held equity interest, impairment of property and equipment, changes in fair value of contingent considerations and changes in fair value of derivative instrument. All adjustments are non-cash and we believe they are not reflective of our general business performance. This non-GAAP financial measure is provided as additional information to help our investors compare business trends among different reporting periods on a consistent basis and to enhance investors’ overall understanding of our current financial performance and prospects for the future. This non-GAAP financial measure should not be considered in addition to or as a substitute for or superior to U.S. GAAP net income. In addition, our definition of adjusted net income may be different from the definition of such term used by other companies, and therefore comparability may be limited.
Reconciliations of non-GAAP financial measures to U.S. GAAP financial measures are set forth in the following table：
| | For the six months ended June 30, | ||
| | 2021* | | 2022 |
| | US$ | | US$ |
Operating loss from continuing operations |
| (16,211) |
| (27,584) |
| | | | |
Adjustment for share-based compensation expenses |
| 62 |
| 4,474 |
Adjustment for impairment of property and equipment |
| — |
| 836 |
Adjustment for changes in fair value of derivative instrument |
| (836) |
| — |
Adjustment for changes in fair value of contingent considerations |
| — |
| (1,247) |
Adjusted operating loss from continuing operations (non-GAAP) |
| (16,985) |
| (23,521) |
| | | | |
Net loss attributable to BIT Mining Limited |
| (13,140) |
| (24,036) |
Net loss attributable to BIT Mining Limited from discontinued operations |
| (1,998) |
| — |
Net loss from continuing operations attributable to BIT Mining Limited |
| (11,142) |
| (24,036) |
Adjust for continuing operations: |
|
|
|
|
Adjustment for share-based compensation expenses |
| 62 |
| 4,474 |
Adjustment for gain on previously held equity interest |
| (5,500) |
| — |
Adjustment for impairment of property and equipment |
| — |
| 836 |
Adjustment for changes in fair value of derivative instrument |
| (836) |
| — |
Adjustment for changes in fair value of contingent considerations |
| — |
| (1,247) |
Adjusted net loss from continuing operations attributable to BIT Mining Limited (non-GAAP) |
| (17,416) |
| (19,973) |
| | | | |
Adjusted net loss from discontinued operations attributable to BIT Mining Limited (non-GAAP) |
| (1,998) |
| — |
Adjusted net loss attributable to BIT Mining Limited (non-GAAP) |
| (19,414) |
| (19,973) |
| | | | |
Weighted average number of Class A and Class B ordinary shares outstanding: |
|
|
|
|
Basic |
| 542,881,582 |
| 717,955,865 |
Diluted |
| 542,881,582 |
| 717,955,865 |
| | | | |
Losses per share attributable to BIT Mining Limited (non-GAAP)-Basic |
|
|
|
|
Net loss from continuing operations (non-GAAP) |
| (0.032) |
| (0.028) |
Net loss from discontinued operations (non-GAAP) |
| (0.004) |
| — |
Net loss (non-GAAP) |
| (0.036) |
| (0.028) |
Losses per share attributable to BIT Mining Limited (non-GAAP)-Diluted |
|
|
|
|
Net loss from continuing operations (non-GAAP) |
| (0.032) |
| (0.028) |
Net loss from discontinued operations (non-GAAP) |
| (0.004) |
| — |
Net loss (non-GAAP) |
| (0.036) |
| (0.028) |
7
The six months ended June 30, 2022 compared with the six months ended June 30, 2021 from continuing operations
Revenues
Our total revenues increased from US$438.0 million for the six months ended June 30, 2021 to US$492.2 million for the six months ended June 30, 2022, primarily attributable to our mining pool business.
Revenues generated from our mining pool business, which was consolidated from April 15, 2021, were US$450.8 million and accounted for approximately 91.6% of total revenues for the six months ended June 30, 2022. We recognize the mining pool revenues on a gross basis. The corresponding cost of revenue of the mining pool business was US$448.0 million, primarily attributable to the allocation to pool participants.
Revenues generated from our cryptocurrency mining business, which we started in February 2021, were US$37.8 million and accounted for approximately 7.7% of total revenues for the six months ended June 30, 2022.
Revenues generated from our data center business were US$3.4 million, which was attributable to the Ohio mining site and accounted for approximately 0.7% of total revenues for the six months ended June 30, 2022.
Operating costs and expenses
Our operating costs and expenses increased significantly from US$437.2 million for the six months ended June 30, 2021 to US$504.3 million for the six months ended June 30, 2022, primarily due to the following:
Cost of revenue. Our cost of revenue increased from US$427.3 million for the six months ended June 30, 2021 to US$489.4 million for the six months ended June 30, 2022. The increase was primarily due to an increase of US$42.7 million in cost for the allocation to pool participants associated with the mining pool business, an increase of US$13.6 million in depreciation and amortization expenses related to new acquisition data centers and intangible assets and an increase of US$4.4 million in service expenses associated with our cryptocurrency mining business.
Sales and marketing expenses. Sales and marketing expenses decreased by 40.0% from US$0.5 million for the six months ended June 30, 2021 to US$0.3 million for the six months ended June 30, 2022. The decrease was mainly due to including a decrease of US$0.2 million in marketing and promotion expenses.
General and administrative expenses. General and administrative expenses increased by 44.2% from US$8.6 million for the six months ended June 30, 2021 to US$12.4 million for the six months ended June 30, 2022. The increase was mainly due to (i) an increase of US$3.0 million in share-based compensation expenses associated with share options granted to our directors and employees mainly expensed in 2022, (ii) an increase of US$0.8 million in salary and benefit expenses for employees, which was primarily caused by an increase in employee headcount from acquired companies since March 2021, (iii) an increase of US$0.7 million in travel, communication and other business expenses, and (iv) an increase of US$0.5 million in depreciation expenses mainly associated with mining machines of Loto Interactive in Kazakhstan, which was partially offset by a decrease of US$1.3 million in third-party professional service fees mainly associated with our acquisition activities.
Service development expenses. Service development expenses increased by 144.4% from US$0.9 million for the six months ended June 30, 2021 to US$2.2 million for the six months ended June 30, 2022. The increase was primarily due to an increase of US$1.3 million in salary and benefit expenses for employees primarily due to the increase in the number of employees from acquired companies since March 2021.
Other operating income
Other operating income increased from US$46,000 for the six months ended June 30, 2021 to US$0.3 million for the six months ended June 30, 2022.
Net loss on disposal of cryptocurrencies
Net loss on disposal of cryptocurrencies decreased from US$8.6 million for the six months ended June 30, 2021 to US$2.1 million for the six months ended June 30, 2022, which was related to decreasing market prices for cryptocurrencies by using first-in-first-out (“FIFO”) to calculate the cost of disposition.
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Impairment of cryptocurrency assets
Impairment of cryptocurrency assets increased from US$8.9 million for the six months ended June 30, 2021 to US$12.6 million for the six months ended June 30, 2022, mainly due to the provisions for impairment of cryptocurrency assets held as a result of fluctuations in cryptocurrency prices.
Changes in fair value of contingent considerations
Changes in fair value of contingent consideration was US$1.2 million for the six months ended June 30, 2022, which was mainly due to re-measurement of the fair value of the contingent considerations related to the combination with BTC.com in April 2021.
Impairment of property and equipment
Impairment of property and equipment was US$0.8 million for the six months ended June 30, 2022, which was mainly due to a provision for impairment of mining machines of Loto Interactive in Kazakhstan.
Operating loss
As a result of the foregoing factors, we recorded operating loss of US$27.6 million for six months ended June 30, 2022, representing an increase of US$11.4 million, compared with operating loss of US$16.2 million for the six months ended June 30, 2021.
Gain on previously held equity interest
Gain on previously held equity interest was nil for the six months ended June 30, 2022 as compared to US$5.5 million for the six months ended June 30, 2021, which was related to the re-measurement of the previously-held equity interest in Loto Interactive at the acquisition date fair value on March 31, 2021.
Loss before income taxes
Loss before income taxes was US$27.0 million for the six months ended June 30, 2022, an increase of US$15.2 million compared with loss before income taxes of US$11.8 million for the six months ended June 30, 2021.
Income tax expense
We recorded income tax expense of nil for the six months ended June 30, 2021 and 2022.
Net loss
As a result of the foregoing factors, we recorded net loss of US$ US$27.0 million for the six months ended June 30, 2022, as compared to net loss of US$11.8 million for the six months ended June 30, 2021.
Net loss attributable to BIT Mining Limited
We recorded net loss attributable to BIT Mining Limited of US$24.0 million for the six months ended June 30, 2022, as compared to net loss attributable to BIT Mining Limited of US$11.1 million for the six months ended June 30, 2021. We also recorded non-GAAP net loss attributable to BIT Mining Limited of US$20.0 million for the six months ended June 30, 2022, as compared to non-GAAP net loss attributable to BIT Mining Limited of US$17.4 million for the six months ended June 30, 2021.
Liquidity and Capital Resources
Our principal sources of liquidity have been cash provided by our operating activities and proceeds from the issuances of preferred shares and ordinary shares. As of June 30, 2022, we had US$26.5 million in cash and cash equivalents.
As a holding company with no material operations of our own, we conduct our operations primarily through our wholly- and majority-owned subsidiaries outside mainland China.
9
We believe that our current cash on hand, along with the net proceeds we have received from our private placements, will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for at least the next 12 months from the date of this interim report, after taking into consideration our disposal in July 2022 of the equity interest of Loto Interactive, which generated little revenues from daily operations. We also have reduced our expenditures, such as overhead or administrative expenditures and marketing expenses since 2019 and started to mine bitcoins from our cryptocurrency mining business in February 2021. Cumulatively, all of these factors will have a positive impact on our cash flows for at least the next 12 months. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash is insufficient to meet our requirements, we may seek to sell additional equity securities or debt securities or borrow from lending institutions. Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. The sale of additional equity securities, including convertible debt securities, would dilute our earnings per share. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer.
The following table sets forth a summary of our cash flows for the six months ended June 30, 2021 and 2022 indicated.
| | Periods ended June 30, | ||
| | 2021* | | 2022 |
| | US$ | | US$ |
Net cash used in operating activities |
| (16,804) |
| (46,756) |
Net cash (used in) provided by investing activities |
| (32,746) |
| 35,058 |
Net cash provided by financing activities |
| 54,455 |
| 20,785 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
| 1,418 |
| (394) |
Cash, cash equivalents and restricted cash at the beginning of the period |
| 47,894 |
| 17,804 |
Cash, cash equivalents and restricted cash at the end of the period |
| 54,217 |
| 26,497 |
* The Company has changed its reporting currency from Renminbi (“RMB”) to U.S dollars (“USD”) for the period commencing July 1, 2021. Prior periods’ comparative financial information has been recast as if the Company always used USD as its reporting currency.
Net cash used in operating activities
Net cash used in operating activities for the six months ended June 30, 2022 was US$46.8 million, which was primarily attributable to (i) net loss of US$27.0 million adjusted by subtracting depreciation of property and equipment of US$17.4 million, (ii) impairment of cryptocurrency assets of US$12.6 million, (iii) amortization of intangible assets of US$4.8 million, (iv) share-based compensation of US$4.5 million, (v) net loss on disposal of cryptocurrencies of US$2.1 million, (vi) amortization of right-of-use assets of US$1.2 million, (vii) impairment of property and equipment of US$0.8 million, and (viii) a decrease in prepayments and other current assets of US$8.6 million. Net cash used in operating activities for the six months ended June 30, 2022 was partially offset by (i) gain from equity method investments of US$0.2 million, (ii) changes in fair value of contingent considerations of US$1.2 million, (iii) a decrease in accounts payable of US$4.8 million, (iv) an increase in cryptocurrency assets of US$38.5 million, (v) a decrease in amounts due to related parties of US$7.6 million, (vi) a decrease in operating lease labilities of US$1.7 million, (vii) a decrease in accrued expenses and other current liabilities of US$14.9 million, and (viii) an increase in deposits of US$2.3 million.
Net cash used in operating activities for the six months ended June 30, 2021 was US$16.8 million, which was primarily attributable to (i) net loss of US$14.0 million adjusted by subtracting depreciation of property and equipment of US$6.4 million, (ii) impairment of cryptocurrency assets of US$8.9 million, (iii) net loss on disposal of cryptocurrencies of US$8.6 million, (iv) loss from equity method investments of US$0.9 million, (v) an increase in accounts payable of US$10.9 million, and (vi) amortization of intangible assets of US$1.4 million. Net cash used in operating activities for the six months ended June 30, 2021 was partially offset by (i) gain on previously held equity interest of US$5.5 million, (ii) changes in fair value of derivative instrument of US$0.8 million, (iii) gain on disposal of subsidiary of US$0.1 million, (iv) an increase in cryptocurrency assets of US$24.7 million, (v) a decrease in accrued expenses and other current liabilities of US$5.3 million, (vi) a decrease in accrued payroll and welfare payables of US$1.7 million, and (vii) an increase in prepayments and other current assets of US$1.7 million.
Net cash (used in) provided by investing activities
Net cash provided by investing activities for the six months ended June 30, 2022 was US$35.1 million, which was primarily attributable to (i) cash received from disposal of cryptocurrency assets of US$34.4 million, and (ii) cash received from return on long-term investments of US$1.5 million. Net cash provided by investing activities for the six months ended June 30, 2022 was partially offset by cash paid for acquisition of property and equipment of US$0.8 million.
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Net cash used in investing activities for the six months ended June 30, 2021 was US$32.7 million, which was primarily attributable to (i) cash paid for acquisition of property and equipment of US$25.4 million, (ii) cash paid for business combination, net of cash received of US$6.6 million, and (iii) cash paid for additional interest acquired for Loto Interactive of US$3.4 million. Net cash used in investing activities for the six months ended June 30, 2021 was partially offset by (i) cash received from disposal of cryptocurrency assets of US$1.6 million, (ii) cash received from return on long-term investments of US$0.5 million, and (iii) cash proceeds from disposal of long-term investments of US$0.4 million.
Net cash provided by financing activities
Net cash provided by financing activities for the six months ended June 30, 2022 was US$20.8 million, which was primarily attributable to (i) proceeds from issuance of ordinary shares for private placement of US$14.5 million, and (ii) proceeds from short-term borrowings of US$6.3 million.
Net cash provided by financing activities for the six months ended June 30, 2021 was US$54.5 million, which was primarily attributable to (i) proceeds from the exercise of share-based awards of US$2.5 million, (ii) proceeds from short-term borrowings of US$47.0 million, and (iii) Proceeds from issuance of ordinary shares for private placements of US$11.6 million. Net cash provided by financing activities for the six months ended June 30, 2021 was partially offset by repayment on short-term borrowings of US$6.6 million.
The six months ended June 30, 2021 from discontinued operations
Net Loss from Discontinued Operations, Net of Taxes
Net loss from discontinued operations, net of taxes was US$2.2 million for the six months ended June 30, 2021. It was mainly due to the disposal of the Company’s Chinese lottery-related business and termination of its lottery business-related VIE contracts in July 2021. The comparative financial information for the six months ended June 30, 2021 have been reclassified to reflect the Chinese lottery-related business as a discontinued operation.
Cash and Cash Equivalents and Restricted Cash
As of June 30, 2022, the Company had cash and cash equivalents of US$26.4 million and restricted cash of US$0.1 million, compared with cash and cash equivalents of US$17.7 million and restricted cash of US$0.1 million as of December 31, 2021.
Cryptocurrency Assets
As of June 30, 2022, the Company had cryptocurrency assets of US$15.4 million in aggregate, which are the equivalent of 349 Bitcoins, 3,325 Ethereum, 53.6 million Dogecoins and various other cryptocurrency assets, including those generated from its mining pool and cryptocurrency mining businesses.
Capital Expenditures
We made capital expenditures, including for property and equipment and intangible assets, of US$25.4 million and US$0.8 million for the six months ended June 30, 2021 and 2022, respectively. We expect that our capital expenditures will increase in the future, as we plan to expand our cryptocurrency mining operation and data center business internationally.
Off-balance Sheet Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Cautionary Statement Regarding Forward Looking Statements
We have made statements in this report that constitute forward-looking statements. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can
11
identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “could” and similar expressions. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.
These forward-looking statements include statements about:
· | our business and operating strategies and plans for the development of existing and new businesses, ability to implement such strategies and plans and expected time; |
· | developments in, or changes to, laws, regulations, governmental policies, incentives, taxation and regulatory and policy environment affecting our operations and the cryptocurrency and blockchain industry; |
· | our future business development, financial condition and results of operations; |
· | expected changes in our revenues, costs or expenditures; |
· | general business, political, social and economic conditions in mainland China and the international markets we have operations; and |
· | the length and severity of the recent COVID-19 outbreak and its impact on our business and industry. |
The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. Many factors could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Consequently, you should not place undue reliance on these forward-looking statements.
The forward-looking statements speak only as of the date on which they are made, and, except as required by law; we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update this forward-looking information. Nonetheless, we reserve the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this interim report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.
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