SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
We believe that it is important to communicate our future expectations to our
security holders and to the public. This report, therefore, contains statements
about future events and expectations which are “forward-looking statements”
within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the
Securities Exchange Act of 1934, including the statements about our plans,
objectives, expectations and prospects under the heading “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” You
can expect to identify these statements by forward-looking words such as “may,”
“might,” “could,” “would,” “will,” “anticipate,” “believe,” “plan,” “estimate,”
“project,” “expect,” “intend,” “seek” and other similar expressions. Any
statement contained in this report that is not a statement of historical fact
may be deemed to be a forward-looking statement. Although we believe that the
plans, objectives, expectations and prospects reflected in or suggested by our
forward-looking statements are reasonable, those statements involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by these
forward-looking statements, and we can give no assurance that our plans,
objectives, expectations and prospects will be achieved.
Important factors that may cause our actual results to differ materially from
the results contemplated by the forward-looking statements are contained in the
“Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for
the year ended
and Exchange Commission
should be read together with our financial statements and related notes included
elsewhere in this report.
GENERAL
We were incorporated in the
in
discontinued our prior operations and changed our business focus from our prior
technologies relating to the EMS Find platform to acquiring, launching, and
operating companies in the cryptocurrency sector, mainly in digital currency
mining and sales of branded mining rigs. Our offices are located at
Road
On
and revenues commenced from cryptocurrency mining operations and from sales of
cryptocurrency mining equipment. As of
operated a total of approximately 1,267 miners in two locations that mine
Bitcoin, Litecoin, ZCash and Ethereum. In addition, as of
Company had approximately 1,979 miners with a delivered cost of
available for mining operations in a new
anticipates the
As of
of Wattum reimbursements and deliveries) for additional miners and two mobile
mining containers.
The Company’s forward looking business plan is focused on: (1) raising capital
to purchase new mining equipment; (2) rotating and upgrading mining equipment;
(3) expansion of power capacity; and (4) launching cryptocurrency mining
operations in new locations.
Financial
As of
hosted facilities located in
hosting and power purchase agreements for the two facilities require the Company
to pay monthly a contractual rate per kilowatt hour of electricity consumed in
the Company’s cryptocurrency mining operations.
Revenues from our cryptocurrency mining operations were
for the three months ended
respectively. Revenues from the sales of cryptocurrency mining equipment were
2021
31, 2021
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When funds are available and market conditions allow, we also invest in certain
denominations of cryptocurrencies to complement our mining operations. We
consider these investments similar to marketable securities where we purchase
and hold the cryptocurrencies for sale. We report realized gains and losses on
the sales of cryptocurrencies net of transaction costs. As of
our digital currencies at cost totaled
denominations, primarily Bitcoin (BTC), Ethereum (ETH), Quant (QNT) and
Avalanche (AVAX).
Historically, we have funded our operations primarily from cash generated from
our digital currency mining operations and proceeds from convertible notes
payable and preferred stock. During the six months ended
generated sufficient cash flow from operations and from the sale of digital
currencies, and did not incur additional debt or issue securities for cash.
The Digital Asset Market
The Company is focusing on the mining of digital assets, as well as blockchain
applications (“blockchain”) and related technologies. A blockchain is a shared
immutable ledger for recording the history of transactions of digital assets-a
business blockchain provides a permissioned network with known identities. A
Bitcoin is the most recognized type of a digital asset that is issued by, and
transmitted through, an open source, math-based protocol platform using
cryptographic security that is known as the “Bitcoin Network.” The Bitcoin
Network is an online, peer-to-peer user network that hosts the public
transaction ledger, known as the blockchain, and the source code that comprises
the basis for the cryptography and math-based protocols governing the Bitcoin
Network.
Bitcoins, for example, can be used to pay for goods and services or can be
converted to fiat currencies, such as the US Dollar, at rates determined on
Bitcoin exchanges or in individual end-user-to-end-user transactions under a
barter system. The networks utilized by digital coins are designed to operate
without any company or government in charge, governed by a collaboration of
volunteer programmers and computers that maintain all the records. These
blockchains are typically maintained by a network of participants which run
servers while securing their blockchain. Third party service providers such as
Bitcoin exchanges and bitcoin third party payment processing services may charge
significant fees for processing transactions and for converting, or facilitating
the conversion of, bitcoins to or from fiat currency.
This market is rapidly evolving and there can be no assurances that we will
remain competitive with industry participants that have or may have greater
resources or experience in in this industry than us, nor that the unproven
digital assets that we mine will ever have any significant market value.
The Company, like many cryptocurrency mining operators, is currently operating
at a non-profitable status following record historic runs in market prices of
digital currencies. Market prices of digital currencies have not been high
enough to cover the operating costs of mining companies, including significant
power costs, escalating prices of mining equipment and high levels of equipment
depreciation. The Company is addressing these operational challenges through
considering alternative sources of power, further consolidation of facilities,
and potential hosting arrangements. There can be no assurance that the Company
will be successful in these efforts and attain profitable levels of operations.
Financial Operations Review
We are incurring increased costs because of being a publicly traded company. As
a public company, we incur significant legal, accounting, and other expenses
that we did not incur as a private company. We also have paid compensation
through the issuance of shares of our common stock and Series B preferred stock,
the valuation of which has resulted in significant stock-based compensation. In
addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently
implemented by the
corporate governance practices of public companies and will require us to comply
with these rules. These new rules and regulations have will increase our legal
and financial compliance costs and have made some activities more time-consuming
and costlier. In addition, these new rules and regulations have made it more
difficult and more expensive for us to obtain director and officer liability
insurance, which we currently cannot afford to do. As a result of the new rules,
it may become more difficult for us to attract and retain qualified persons to
serve on our Board of Directors or as executive officers. We cannot predict or
estimate the amount of additional costs we may incur as a result of being a
public company or the timing of such costs.
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To operate our digital currency mining facilities and to fund future operations,
we must raise additional capital. The amount and timing of future funding
requirements will depend on many factors, including the timing and results of
our ongoing development efforts, the potential expansion of our current
development programs, potential new development programs and related general and
administrative support. We anticipate that we will seek to fund our operations
through further liquidation of our marketable securities, public or private
equity or debt financings or other sources, such as potential collaboration
agreements. We cannot be certain that anticipated additional financing will be
available to us on favorable terms, or at all.
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED
AND SIX MONTHS ENDED
Revenues
Our cryptocurrency mining revenues increased to
ended
2020
resulted primarily from higher prices of BTC and the Company’s successful
efforts to raise capital to purchase more efficient and profitable mining
equipment. In addition, we expanded our cryptocurrency mining operations to a
second location in
We also have revenues from the sale of cryptocurrency mining equipment that have
been either newly purchased or refurbished for resale. Such sales totaled
respectively, and totaled
the current year was due primarily to three sales of miners to non-related
customers. Sales of equipment will fluctuate from period to period depending on
equipment available to us to sell and the current retail demand for our model of
cryptocurrency mining units.
Cost of Revenues
Cost of revenues was
31, 2021
ended
in the current fiscal year is due primarily to: increased cryptocurrency mining
revenues, expansion to two operating locations and increased depreciation and
amortization expense. Expenses associated with running our cryptocurrency mining
operations, such as equipment depreciation and amortization, operating supplies,
utilities, and consulting services are recorded as cost of revenues. Also
included in cost of revenues are the costs of purchasing or assembling the
cryptocurrency mining units sold. We reported a gross profit on revenues of
respectively. For the six months ended
profit of
ended
revenues primarily due to lower revenues, high utility costs and a conservative,
short useful life for mining equipment depreciation and amortization. Higher
cryptocurrency mining revenues in the current year resulting from higher BTC
market pricing, the implementation of more efficient mining equipment and the
increase in the number of miners purchased also contributed to the gross profit
on revenues.
Operating Expenses
Our general and administrative expenses increased to
months ended
31, 2020
six months ended
compensation, including non-cash related party stock based compensation expense
of
mining operations.
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We incurred non-cash, related party stock-based compensation expense of
convertible preferred stock valued on an “as converted to common” basis at
convertible into 100 shares of the Company’s common stock.
Other Income (Expense)
Our other income (expense) was comprised of the following:
Three Months Ended Six Months Ended
December 31 December 31, 2021
2021 2020 2021 2020
Interest expense $ (80 ) $ (89,742 ) $ (462 ) $ (190,614 )
Realized gain (loss) on sale of
digital currencies (189,240 ) (34,277 ) 527,833 51,577
Gain on forgiveness of debt 5,924 - 5,924 -
Loss on disposition of property and
equipment - - - (207,281 )
Change in fair value of derivative
liabilities - (3,110 ) - 36,912
Total other income (expense) $ (183,396 ) $ (127,129 ) $ 533,295 $ (309,406 )
During our fiscal year ended
conversion of our convertible notes payable, resulting in a substantial decrease
in interest expense in the current fiscal year. Our interest expense includes
the amortization of debt discount and original issue discount for our
convertible notes payable. These amounts vary from period to period depending on
the timing of new borrowings and the conversion of the debt to common stock by
the lenders.
When funds are available and market conditions allow, we also invest in certain
denominations of cryptocurrencies to complement our mining operations. In
addition to the currencies received as compensation for our mining services,
during the six months ended
currencies totaling
another based on our assessment of market conditions for each respective
currency. The market values of individual currency denominations continually
fluctuate, and the fluctuations may be material from day to day. During the six
months ended
the sale of digital currencies and incurred transactions fees totaling
which were deducted from the gain realized of
ended
of digital currencies and incurred transactions fees totaling
were deducted from the gain realized of
digital currencies of
31, 2021
currencies of
2020, respectively.
In
conditions of the Paycheck Protection Program (“PPP”). The loan was to mature 24
months from inception and bore interest at 1% per annum. In
Company made PPP loan principal payments totaling
remaining principal balance of
the Act, and the Company recorded a gain of forgiveness of debt for this amount
in the three months and six months ended
forgiveness of debt was reported for the three and six months ended
2020
During the six months ended
non-serviceable, defective mining equipment with a net book value of
The equipment disposed of was replaced with new, more efficient mining
equipment. We reported no loss on disposition of property and equipment during
the three months ended
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During the year ended
equity instruments with provisions identified as derivatives were extinguished
through conversion to common shares and all related derivative liabilities were
settled. As a result, we reported no gain or loss from change in fair value of
derivative liabilities in the three months and six months ended
2021
change in fair value of derivative liabilities of
from change in fair value of derivative liabilities of
ended
associated with our convertible debt, options, warrants and other contracts
using, as applicable, either the Black-Scholes pricing model or multinomial
lattice models that value the derivative liability based on a probability
weighted discounted cash flow model using future projections of the various
potential outcomes. We estimate the fair value of the derivative liabilities at
the inception of the financial instruments, and, in the case of our convertible
notes payable, at the date of conversions to equity and at each reporting date,
recording a derivative liability, debt discount, additional paid-in capital and
a gain or loss on change in derivative liabilities as applicable. These
estimates are based on multiple inputs, including the market price of our stock,
interest rates, our stock price volatility, variable conversion prices based on
market prices as defined in the respective agreements and probabilities of
certain outcomes based on management projections. Since these inputs are subject
to significant changes from period to period and to management’s judgment, the
estimated fair value of the derivative liabilities will fluctuate from period to
period, and the fluctuation may be material.
Net Income (Loss)
As a result, we reported net losses of
ended
the six months ended
LIQUIDITY AND CAPITAL RESOURCES
Overview
As of
of
accrued preferred stock dividends of
of
Sources and Uses of Cash
We used net cash of
currencies of
expenses of
net income of
prepaid expenses and other current assets of
We used net cash in operations of
2020
increases in digital currencies of
expenses totaling
During the six months ended
activities of
property and equipment of
of digital currencies of
total cost of
during the six months ended
During the six months ended
activities of
offset by proceeds from the sale of digital currencies of
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During the six months ended
activities of
During the six months ended
financing activities of
payable of
We must raise additional funds to successfully operate our digital currency
mining operations, purchase equipment and expand our operations to multiple
facilities. The Company may need to: (1) borrow money from shareholders; (2)
issue debt or equity or (3) or enter a strategic financial arrangement with a
third party. There can be no assurance that additional capital will be available
to us.
Going Concern
Prior to the six months ended
recurring net losses from operations and used net cash in operating activities.
As of
These conditions raise substantial doubt about the Company’s ability to continue
as a going concern.
The accompanying financial statements have been prepared in conformity with
GAAP, which contemplate continuation of the Company as a going concern and the
realization of assets and satisfaction of liabilities in the normal course of
business. The ability of the Company to reach and maintain a successful level of
operations is dependent on the execution of management’s plans, which include
the raising of capital through the debt and/or equity markets, until such time
that funds provided by operations are sufficient to fund working capital
requirements. If the Company were not to continue as a going concern, it would
likely not be able to realize its assets at values comparable to the carrying
value or the fair value estimates reflected in the balances set out in the
preparation of the financial statements.
There can be no assurances that the Company will be successful in attaining a
profitable level of operations or in generating additional cash from the
equity/debt markets or other sources fund its operations. The financial
statements do not include any adjustments relating to the recoverability of
assets and classification of assets and liabilities that might be necessary.
Should the Company not be successful in its business plan or in obtaining the
necessary financing to fund its operations, the Company would need to curtail
certain or all operational activities and/or contemplate the sale of its assets,
if necessary.
Current and Future Impact of COVID-19
The COVID-19 pandemic continues to have a material negative impact on capital
markets. While we continue to incur operating losses, we are currently dependent
on debt or equity financing to fund our operations and execute our business
plan. We believe that the impact on capital markets of COVID-19 may make it more
costly and more difficult for us to access these sources of funding.
SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are disclosed in Note 2 to the accompanying
condensed financial statements and in the notes to our audited financial
statements included in our Annual Report on Form 10-K for the year ended
30, 2021
significant estimates and judgment of management.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Because of the use of estimates inherent in the financial reporting process,
actual results could differ significantly from those estimates.
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Digital Currencies
Digital currencies consist mainly of Bitcoin, Litecoin, ZCash and Ethereum,
generally received for the Company’s own account as compensation for
cryptocurrency mining services, and other digital currencies purchased for
short-term investment and trading purposes. Given that there is limited
precedent regarding the classification and measurement of cryptocurrencies under
current Generally Accepted Accounting Principles (“GAAP”), the Company has
determined to account for these digital currencies as indefinite-lived
intangible assets in accordance with Accounting Standards Update (“ASU”) No.
350, Intangibles –
in future reports unless and until further guidance is issued by the
Accounting Standards Board
useful life is not amortized but assessed for impairment annually, 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. Impairment
exists when the carrying amount exceeds its fair value. In testing for
impairment, the Company has the option to first perform a qualitative assessment
to determine whether it is more likely than not than an impairment exists. If it
is determined that it is more likely than not that an impairment exists, a
quantitative impairment test is not necessary. If the Company 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.
Realized gains or losses on the sale of digital currencies, net of transaction
costs, are included in other income (expense) in the statements of operations.
The Company had realized losses on sale of digital currencies of
realized gains on sale of digital currencies of
months ended
revenues were
2021
Property and Equipment
Property and equipment, consisting primarily of computer and other
cryptocurrency mining equipment (digital transaction verification servers), is
stated at the lower of cost or estimated realizable value and is depreciated
when placed into service using the straight-line method over estimated useful
lives. The Company operates in an emerging industry for which limited data is
available to make estimates of the useful economic lives of specialized
equipment. Management has assessed the basis of depreciation of these assets and
believes they should be depreciated over a three-year period due to
technological obsolescence reflecting rapid development of hardware that has
faster processing capacity and other factors. Maintenance and repairs are
expensed as incurred and improvements are capitalized. Gains or losses on the
disposition of property and equipment are recorded upon disposal.
During the six months ended
of damaged or non-serviceable mining equipment and wrote off its net book value
of
Management has determined that the three-year diminishing value best reflects
the current expected useful life of transaction verification servers. This
assessment takes into consideration the availability of historical data and
management’s expectations regarding the direction of the industry including
potential changes in technology. Management will review this estimate annually
and will revise such estimates as and when data becomes available.
To the extent that any of the assumptions underlying management’s estimate of
useful life of its transaction verification servers are subject to revision in a
future reporting period, either because of changes in circumstances or through
the availability of greater quantities of data, then the estimated useful life
could change and have a prospective impact on depreciation expense and the
carrying amounts of these assets.
Payments to equipment suppliers prior to shipment of the equipment are recorded
as equipment deposits.
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Derivatives
As of
liabilities.
The Company evaluates its convertible debt, options, warrants or other contracts
to determine if those contracts or embedded components of those contracts
qualify as derivatives to be separately accounted for. The result of this
accounting treatment is that under certain circumstances the fair value of the
derivative is marked-to-market each balance sheet date and recorded as a
liability. In the event that the fair value is recorded as a liability, the
change in fair value is recorded in the statement of operations as other income
or expense. Upon conversion or exercise of a derivative instrument, the
instrument is marked to fair value at the conversion date and then that fair
value is reclassified to equity. Equity instruments that are initially
classified as equity that become subject to reclassification under this
accounting standard are reclassified to liability at the fair value of the
instrument on the reclassification date.
Where the number of warrants or common shares to be issued under these
agreements is indeterminate, the Company has concluded that the equity
environment is tainted, and all additional warrants and convertible debt are
included in the value of the derivatives.
We estimate the fair value of the derivatives associated with our convertible
notes payable, common stock issuable pursuant to a Series B preferred stock
Exchange Agreement and a stock subscription payable using, as applicable, either
the Black-Scholes pricing model or multinomial lattice models that value the
derivative liability based on a probability weighted discounted cash flow model
using future projections of the various potential outcomes. We estimate the fair
value of the derivative liabilities at the inception of the financial
instruments, and, in the case of our convertible notes payable, at the date of
conversions to equity and at each reporting date, recording a derivative
liability, debt discount, additional paid-in capital and a gain or loss on
change in derivative liabilities as applicable. These estimates are based on
multiple inputs, including the market price of our stock, interest rates, our
stock price volatility, variable conversion prices based on market prices as
defined in the respective agreements and probabilities of certain outcomes based
on management projections. These inputs are subject to significant changes from
period to period and to management’s judgment; therefore, the estimated fair
value of the derivative liabilities will fluctuate from period to period, and
the fluctuation may be material.
Impairment of Long-Lived Assets
All assets, including intangible assets subject to amortization, are reviewed
for impairment when changes in circumstances indicate that the carrying amount
of the asset may not be recoverable in accordance with ASC 350 and ASC 360. If
the carrying amount of the asset exceeds the expected undiscounted cash flows of
the asset, an impairment charge is recognized equal to the amount by which the
carrying amount exceeds fair value or net realizable value. The testing of these
intangibles under established guidelines for impairment requires significant use
of judgment and assumptions. Changes in forecasted operations and other
assumptions could materially affect the estimated fair values. Changes in
business conditions could potentially require adjustments to these asset
valuations. We reported no impairment expense for the periods ended
2021
Stock-Based Compensation
The Company accounts for all equity-based payments in accordance with ASC Topic
718, Compensation – Stock Compensation. ASC Topic 718 requires companies to
recognize in the statement of operations the grant-date fair value of stock
awards, stock options, warrants and other equity-based compensation issued to
employees. The value of the portion of an award that is ultimately expected to
vest is recognized as an expense over the requisite service periods using the
straight-line attribution method. The fair value of a stock award is recorded at
the fair market value of a share of the Company’s stock on the grant date. The
Company estimates the fair value of stock options and warrants at the grant date
by using an appropriate fair value model such as the Black-Scholes option
pricing model or multinomial lattice models.
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The Company accounts for non-employee share-based awards based upon ASC 505-50,
Equity-Based Payments to Non-Employees. ASC 505-50 requires the costs of goods
and services received in exchange for an award of equity instruments to be
recognized using the fair value of the goods and services or the fair value of
the equity award, whichever is more reliably measurable. The fair value of the
equity award is determined on the measurement date, which is the earlier of the
date that a performance commitment is reached or the date that performance is
complete. Generally, our awards do not entail performance commitments. When an
award vests over time such that performance occurs over multiple reporting
periods, we estimate the fair value of the award as of the end of each reporting
period and recognize an appropriate portion of the cost based on the fair value
on that date. When the award vests, we adjust the cost previously recognized so
that the cost ultimately recognized is equivalent to the fair value on the date
the performance is complete.
Revenue Recognition
We recognize revenue in accordance with ASC 606, Revenue from Contracts with
Customers. This standard provides a single comprehensive model to be used in the
accounting for revenue arising from contracts with customers and supersedes
current revenue recognition guidance, including industry-specific guidance. The
standard’s stated core principle is that an entity should recognize revenue to
depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. To achieve this core principle, ASC 606
includes provisions within a five-step model that includes identifying the
contract with a customer, identifying the performance obligations in the
contract, determining the transaction price, allocating the transaction price to
the performance obligations, and recognizing revenue when, or as, an entity
satisfies a performance obligation.
Our revenues currently consist of cryptocurrency mining revenues and revenues
from the sale of cryptocurrency mining equipment recognized in accordance with
ASC 606 as discussed above. Amounts collected from customers prior to shipment
of products are recorded as deferred revenue.
The Company earns its cryptocurrency mining revenues by providing transaction
verification services within the digital currency networks of cryptocurrencies,
such as Bitcoin, Litecoin, ZCash and Ethereum. The Company satisfies its
performance obligation at the point in time that the Company is awarded a unit
of digital currency through its participation in the applicable network and
network participants benefit from the Company’s verification service. In
consideration for these services, the Company receives digital currencies, net
of applicable network fees, which are recorded as revenue using the closing
dollar price of the related cryptocurrency on the date of receipt. Expenses
associated with running the cryptocurrency mining operations, such as equipment
depreciation, rent, operating supplies, rent, utilities and monitoring services
are recorded as cost of revenues.
There is currently no specific definitive guidance in GAAP or alternative
accounting frameworks for the accounting for the production and mining of
digital currencies and management has exercised significant judgment in
determining appropriate accounting treatment for the recognition of revenue for
mining of digital currencies. Management has examined various factors
surrounding the substance of the Company’s operations and the guidance in ASC
606, including identifying the transaction price, when performance obligations
are satisfied, and collectability is reasonably assured being the completion and
addition of a block to a blockchain and the award of a unit of digital currency
to the Company. In the event authoritative guidance is enacted by the FASB, the
Company may be required to change its policies which could result in a change in
the Company’s financial statements.
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Other Agreements
On
entered into a confidential Services Agreement for the Company’s
Pennsylvania
of deliveries of mining equipment; receive and install mining equipment; install
mining software, as needed, and maintain the mining equipment after
installation. The agreement shall remain in effect for an indefinite period
until terminated by either party in accordance with terms of the agreement. The
Company is to pay monthly a contractual rate per kilowatt hour of electricity
consumed in the Company’s cryptocurrency mining operations. Other costs of
repairs and maintenance incurred by Bitkern, including materials and
subcontractors, will be reimbursed by the Company.
OFF BALANCE SHEET ARRANGEMENTS
Operating Leases
As of
under non-cancelable operating leases. However, the Company has entered into two
agreements described below related to its crypto currency mining operations
pursuant to which the Company’s sole obligation is to pay monthly a contractual
rate per kilowatt hour of electricity consumed.
PetaWatt Power Purchase Agreement
Power Supply and Purchase Agreement
In
facility in
with
an initial term of 90 days, with an option to continue the agreement for a
subsequent 36 months, which option the Company has exercised. The Company’s sole
obligation under the agreement is to pay monthly a contractual rate per kilowatt
hour of electricity consumed in the Company’s cryptocurrency mining operations.
This agreement was superseded on
Energy Services Agreement with PetaWatt.
Lease, Hosting, and Energy Services Agreement
On
Energy Services Agreement for the
months. The Company’s sole obligation under the agreement is to pay monthly a
contractual rate per kilowatt hour of electricity consumed in the Company’s
cryptocurrency mining operations. The agreement may also be expanded to include
up to 7 mobile mining containers. The Company made a prepayment of
signing the agreement, to be drawn down with monthly invoices submitted to the
Company by PetaWatt. As of
prepayment balance was
included in prepaid expenses and other current assets in the accompanying
balance sheet.
Compute North Purchase and Hosting Agreement
On
into a Master Agreement for the colocation and management of the Company’s
cryptocurrency mining operations. The Company submits Order Forms to Compute
North to determine the location of the hosted facilities, the number of
cryptocurrency miners, the term of the services provided and the contractual
rate per kilowatt hour of electricity consumed in the Company’s cryptocurrency
mining operations. The agreement also provides the Company the option to
purchase cryptocurrency mining equipment from Compute North. The initial Order
form was for 425 miners in
miners in
consolidated the cryptocurrency mining operations in the
facility. The Company’s ongoing obligation under the agreement to pay monthly a
contractual rate per kilowatt hour of electricity consumed in the Company’s
cryptocurrency mining operations.
2021
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Tioga Property Lease and Power Purchase Agreement
On
a Property Lease and Power Purchase Agreement. Under the agreement, the Company
will lease 12,134 square feet of aa building in
(“Premises”). The term of the agreement is 36 months ending on
2024
circumstances, and may assign or sublet the Premises if
written consent. The Company is to pay a base rent of
contractual rate per kilowatt hour of electricity consumed in the Company’s
cryptocurrency mining operations. Mining operations commenced in
This agreement is qualified in its entirety by the agreement attached as an
exhibit hereto and is incorporated herein by reference.
Equipment Purchase Agreements
Bitmain Agreement
On
Agreement with
Agreement”) to purchase from Bitmain cryptocurrency mining hardware and other
equipment in accordance with the terms and conditions of the Bitmain Agreement.
Bitmain is scheduled to manufacture and ship miners on monthly basis, in 12
equal batches of 400 units, starting in
Purchase Agreement remains in effect until the delivery of the last batch of
products. The total purchase price was approximately
price adjustments and related offsets. The total purchase price is payable as
follows: (i) 25% of the total purchase price is due upon the execution of the
Agreement or no later than
is due by
is payable monthly starting in
The Company entered into a separate agreement with
{“Wattum”), a non-related party, whereby Wattum agreed to share 50% of the
purchase obligation under the Bitmain Agreement, including reimbursing the
Company for 50% of the equipment deposits paid by the Company to Bitmain.
As of
paid to Bitmain under the Bitmain Agreement (net of Wattum reimbursements and
deliveries of equipment). As of
totaling 1,979 miners had been delivered by Bitmain to the Company, Wattum and a
customer of the Company.
Canaan Convey Purchase
As of
(“Canaan Convey”) for the purchase of 250 cryptocurrency miners and freight and
custom charges. As of
the Company by Canaan Convey.
Mobile Storage Containers
As of
and shipping of two mobile storage containers, which were delivered to the
Company in
RECENTLY ISSUED ACCOUNTING POLICIES
There were no new accounting pronouncements issued or proposed by the FASB
during the six months ended
this report which the Company believes will have a material impact on its
financial statements.
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