0001213900-22-015327
SEC filingDigihost Technology Inc. reported a net income of $289,345 for FY2021, a significant turnaround from a net loss of $5.19 million in FY2020, driven by a 602% surge in mining revenue to $24.95 million.
Digihost Technology Inc. reported a transformative fiscal year 2021, achieving a net income of $289,345 compared to a net loss of $5,190,713 in fiscal year 2020. This turnaround was primarily driven by a 602% increase in revenue from digital currency mining, which rose to $24,952,344 from $3,553,362. The revenue surge was fueled by a higher average Bitcoin price of $47,430 (versus $10,750 in 2020) and a significant increase in hashrate from approximately 143 Petahash (PH) to approximately 415 PH.
Gross profit swung from a loss of $3,996,688 in 2020 to a profit of $11,129,150 in 2021, representing a gross margin of 44.6%. Operating income was $2,922,778, compared to an operating loss of $5,568,099 in the prior year. The operating margin improved to 11.7% from -156.7%. Earnings per share (basic and diluted) were $0.01, compared to a loss of $0.44 per share in 2020.
As of December 31, 2021, total assets were $80,026,875, up from $16,519,601 at the end of 2020. This increase was largely due to a $31.6 million rise in property, plant and equipment (to $38.1 million) and a $29.0 million increase in digital currencies (to $33.5 million). The company held 632 Bitcoin and 1,001 Ethereum at year-end, compared to 154 Bitcoin at the end of 2020.
Total liabilities increased to $9,822,106 from $6,075,795, primarily due to a $2.5 million deferred tax liability and a $2.9 million amount owing for a Miner Lease Agreement. The company had no loans payable at year-end, having repaid all $2.54 million in outstanding loans during the year. Shareholders' equity grew to $70,204,769 from $10,443,806, driven by $49.6 million in net proceeds from private placements and $7.8 million in share-based compensation.
Cash used in operating activities was $8,859,594, compared to $2,249,857 in 2020. The increase was primarily due to the company's strategy of holding mined Bitcoin rather than converting it to fiat currency, resulting in a $24.95 million non-cash adjustment for digital currency mined. Cash used in investing activities was $34,724,780, largely for the purchase of mining and data centre equipment ($33.9 million). Cash provided by financing activities was $44,468,839, including $50.2 million in net proceeds from private placements, partially offset by $2.6 million in lease payments and $3.98 million in loan repayments.
Free cash flow (operating cash flow minus capex) was negative $43.58 million, reflecting the heavy investment in mining hardware. The company ended the year with $915,715 in cash, up from $31,250 at the end of 2020.
Management attributed the revenue growth to the ramp in mining operations and the increase in Bitcoin prices. The company's strategy is to hold mined Bitcoin and Ethereum in its digital currency inventory rather than monetizing them. Key developments during the year included the acquisition of approximately 9,900 high-performance Bitcoin miners from Northern Data AG, a co-mining agreement with Bit Digital USA, Inc., and the signing of a binding agreement to purchase a 60MW power plant (Digifactory1) in upstate New York.
The company also completed a Nasdaq listing in November 2021 and implemented a share consolidation to meet minimum share price requirements. Subsequent to year-end, the company closed a $10 million revolving credit facility and entered into an at-the-market equity offering program for up to $250 million.
The company operates a single reportable segment: cryptocurrency mining. All mining operations are conducted at the Buffalo Mining Facility in Buffalo, New York. The company's cost of sales was $13,823,194, consisting of $10,542,051 in operating and maintenance costs and $3,281,143 in depreciation and amortization.
Share-based compensation expense was $7,804,271, up from $1,247,551 in 2020, reflecting the vesting of stock options granted during the year. The company recognized a $1,552,295 gain on the sale of property, plant and equipment, and a $528,875 gain from the change in fair value of the amount owing for the Miner Lease Agreement.
Goodwill remained stable at $1.35 million, and no impairment was recognized. The company's effective tax rate was significantly impacted by non-deductible expenses and share-based compensation, resulting in a total income tax expense of $2.30 million despite pre-tax income of $2.59 million.