UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 6-K
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 2021
Commission File Number: 001-36206
BIT Mining Limited
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
EXPLANATORY NOTE
This report on Form 6-K is hereby incorporated by reference into the Registrant’s Registration Statement on Form F-3, as amended, initially filed with the U.S. Securities and Exchange Commission on July 30, 2021 (Registration No. 333-258329) and shall be a part thereof from the date on which this current report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.
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.
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BIT MINING LIMITED |
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By: |
/s/ Xianfeng Yang |
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Name: |
Xianfeng Yang |
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Title: |
Chief Executive Officer |
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Date: September 30, 2021 |
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Exhibit 99.1
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BIT MINING LIMITED
As of December 31, 2020 and June 30, 2021
and for the six months ended June 30, 2020 and 2021
BIT MINING LIMITED
CONTENTS
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Pages |
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UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
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UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2020 AND JUNE 30, 2021 |
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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 |
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8 - 50 |
BIT MINING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares)
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As of December |
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As of June |
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As of June |
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Notes |
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31,2020 |
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30,2021 |
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30,2021 |
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RMB |
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RMB |
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US$ |
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Audited |
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Unaudited |
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Unaudited |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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308,676 |
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65,396 |
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10,129 |
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Restricted cash |
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3,829 |
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284,656 |
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44,088 |
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Accounts receivables |
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— |
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20,943 |
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3,244 |
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Amounts due from related parties |
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16 |
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368 |
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808 |
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125 |
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Prepayments and other receivables, net |
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7 |
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22,980 |
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96,547 |
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14,953 |
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Cryptocurrency assets |
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6 |
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— |
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410,792 |
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63,624 |
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Total current assets |
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335,853 |
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879,142 |
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136,163 |
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Non-current assets: |
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Property and equipment, net |
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8 |
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19,779 |
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343,236 |
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53,160 |
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Intangible assets, net |
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9 |
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2,398 |
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377,367 |
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58,447 |
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Deposits |
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1,480 |
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26,018 |
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4,030 |
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Long-term investments |
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5 |
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99,972 |
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64,030 |
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9,917 |
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Right-of-use assets |
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10 |
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9,327 |
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11,329 |
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1,755 |
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Goodwill |
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4 |
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— |
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173,486 |
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26,870 |
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Other non-current assets |
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1,664 |
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144,958 |
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22,451 |
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Total non-current assets |
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134,620 |
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1,140,424 |
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176,630 |
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TOTAL ASSETS |
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470,473 |
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2,019,566 |
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312,793 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Short-term loans (including short-term loan of the consolidated VIEs without recourse to BIT Mining Limited of nil and RMB5,000 (US$774) as of December 31, 2020 and June 30, 2021, respectively) |
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11 |
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— |
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136,299 |
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21,110 |
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Accounts payable (including accounts payable of the consolidated VIEs without recourse to BIT Mining Limited of nil and RMB5,855 (US$907) as of December 31, 2020 and June 30, 2021, respectively) |
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— |
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384,349 |
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59,528 |
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Cryptocurrency assets borrowings (including cryptocurrency assets borrowings of the consolidated VIEs without recourse to BIT Mining Limited of nil and nil as of December 31, 2020 and June 30, 2021, respectively) |
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13 |
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— |
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38,508 |
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5,964 |
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Amounts due to related parties (including amounts due to related parties of the consolidated VIEs without recourse to BIT Mining Limited of nil and nil as of December 31, 2020 and June 30, 2021, respectively) |
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16 |
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— |
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2,491 |
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386 |
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Accrued payroll and welfare payable (including accrued payroll and welfare payable of the consolidated VIEs without recourse to BIT Mining Limited of RMB12,288 and RMB1,192 (US$185) as of December 31, 2020 and June 30, 2021, respectively) |
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13,401 |
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2,898 |
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449 |
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Operating lease liabilities – current (including operating lease liabilities – current of the consolidated VIEs without recourse to BIT Mining Limited of RMB3,710 and RMB4,006 (US$620) as of December 31, 2020 and June 30, 2021, respectively) |
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10 |
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3,710 |
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6,360 |
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985 |
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Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIEs without recourse to BIT Mining Limited of RMB 36,870 and RMB 70,190 (US$10,871) as of December 31, 2020 and June 30, 2021, respectively) |
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12 |
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55,960 |
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183,422 |
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28,410 |
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Income tax payable (including income tax payable of the consolidated VIEs without recourse to BIT Mining Limited of nil and RMB2,397 (US$371) as of December 31, 2020 and June 30, 2021, respectively) |
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549 |
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5,695 |
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882 |
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Total current liabilities |
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73,620 |
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760,022 |
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117,714 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
1
BIT MINING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares)
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As of December |
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As of June |
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As of June |
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Notes |
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31,2020 |
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30,2021 |
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30,2021 |
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RMB |
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RMB |
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US$ |
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Audited |
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Unaudited |
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Unaudited |
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Non-current liabilities: |
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Long-term payables (including long-term payables of the consolidated VIEs without recourse to BIT Mining Limited of RMB526 and RMB406 (US$63) as of December 31, 2020 and June 30, 2021, respectively) |
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526 |
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406 |
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63 |
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Operating lease liabilities - non-current (including operating lease liabilities - non-current of the consolidated VIEs without recourse to BIT Mining Limited of RMB5,807 and RMB4,374 (US$678) as of December 31, 2020 and June 30, 2021, respectively) |
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10 |
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5,807 |
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6,257 |
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969 |
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Total non-current liabilities |
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6,333 |
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6,663 |
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1,032 |
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TOTAL LIABILITIES |
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79,953 |
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766,685 |
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118,746 |
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Commitments and contingencies |
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17 |
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Shareholders’ equity: |
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Class A ordinary shares, par value US$0.00005 per share, 700,000,000 and 1,599,935,000 shares authorized as of December 31,2020 and June 30, 2021, respectively; 430,127,692 and 604,330,240 shares issued and outstanding as of December 31, 2020 and June 30, 2021, respectively |
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19 |
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151 |
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207 |
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32 |
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Class A preference shares, par value US$0.00005 per share; nil and 65,000 shares authorized as of December 31, 2020 and June 30, 2021; nil and 65,000 shares issued and outstanding as of December 31, 2020 and June 30, 2021, respectively |
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19 |
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— |
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— |
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— |
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Class B ordinary shares, par value US$0.00005 per share; 300,000,000 and 400,000,000 shares authorized as of December 31, 2020 and June 30, 2021, respectively; 99 shares issued and outstanding as of December 31, 2020 and June 30, 2021 |
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19 |
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— |
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— |
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— |
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Additional paid-in capital |
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19 |
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2,602,883 |
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3,428,963 |
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531,079 |
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Treasury shares |
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(143,780) |
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(143,780) |
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(22,269) |
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Accumulated other comprehensive income |
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128,441 |
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139,227 |
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21,564 |
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Accumulated deficit and statutory reserve |
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(2,183,918) |
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(2,268,676) |
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(351,373) |
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Total BIT Mining Limited shareholders’ equity |
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403,777 |
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1,155,941 |
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179,033 |
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Non-controlling interests |
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(13,257) |
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96,940 |
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15,014 |
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Total shareholders’ equity |
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390,520 |
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1,252,881 |
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194,047 |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
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470,473 |
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2,019,566 |
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312,793 |
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 Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share (or ADS) data)
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For the six months ended June 30, |
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Notes |
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2020 |
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2021 |
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2021 |
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RMB |
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RMB |
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US$ |
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Unaudited |
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Unaudited |
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Unaudited |
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Revenue |
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6,712 |
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2,893,478 |
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448,143 |
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Operating costs and expenses: |
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Cost of revenue |
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(8,600) |
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(2,818,901) |
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(436,592) |
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Sales and marketing |
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(8,040) |
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(5,909) |
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(915) |
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General and administrative |
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(65,249) |
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(68,501) |
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(10,609) |
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Service development |
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(17,216) |
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(9,164) |
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(1,419) |
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Total operating expenses |
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(99,105) |
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(2,902,475) |
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(449,535) |
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Other operating income |
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4,544 |
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1,140 |
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177 |
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Government grant |
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341 |
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121 |
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19 |
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Other operating expenses |
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(1,606) |
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(2,499) |
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(387) |
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Net loss on disposal of cryptocurrencies |
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— |
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(55,618) |
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(8,614) |
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Impairment of cryptocurrencies |
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— |
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(57,331) |
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(8,879) |
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Changes in fair value of derivative instrument |
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— |
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5,409 |
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838 |
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Operating loss from continuing operations |
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(89,114) |
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(117,775) |
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(18,238) |
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Other income, net |
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741 |
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2,921 |
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452 |
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Interest income |
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4,945 |
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636 |
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99 |
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Interest expense |
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— |
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(4,767) |
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(738) |
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Loss from equity method investments |
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5 |
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(7,980) |
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(8,772) |
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(1,359) |
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Gain on previously held equity interest |
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4 |
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— |
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36,142 |
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5,598 |
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Impairment of long-term investments |
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5 |
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(33,706) |
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— |
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— |
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Gain from disposal of subsidiaries |
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— |
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1,227 |
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190 |
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Loss before income taxes |
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(125,114) |
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(90,388) |
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(13,996) |
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Income taxes benefits |
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14 |
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3,653 |
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— |
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— |
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Net loss |
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(121,461) |
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(90,388) |
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(13,996) |
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Less: Net income (loss) attributable to the non-controlling interests |
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1,685 |
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(5,630) |
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(872) |
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Net loss attributable to BIT Mining Limited |
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(123,146) |
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(84,758) |
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(13,124) |
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Other comprehensive income (loss): |
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Share of other comprehensive income (loss) of an equity method investee |
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(1,973) |
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4,063 |
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630 |
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Reclassification into loss from equity method investments |
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— |
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846 |
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131 |
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Foreign currency translation gain |
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3,689 |
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5,839 |
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904 |
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Other comprehensive income, net of tax |
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1,716 |
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10,748 |
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1,665 |
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Comprehensive loss |
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(119,745) |
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(79,640) |
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(12,331) |
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Less: Comprehensive income (loss) attributable to non-controlling interests |
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1,685 |
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(5,668) |
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(878) |
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Comprehensive loss attributable to BIT Mining Limited |
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(121,430) |
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(73,972) |
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(11,453) |
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Losses per share for Class A and Class B ordinary shares outstanding-Basic and Diluted: |
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18 |
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Net loss |
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(0.29) |
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(0.16) |
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(0.02) |
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Losses per American Depositary Share (“ADS”) (1 ADS represents 10 Class A ordinary shares)-Basic and Diluted |
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18 |
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Net loss |
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(2.86) |
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(1.56) |
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(0.24) |
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Weighted average number of Class A and Class B ordinary shares outstanding: |
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18 |
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Basic |
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430,005,930 |
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542,881,582 |
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542,881,582 |
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Diluted |
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430,005,930 |
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542,881,582 |
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542,881,582 |
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 Renminbi (“RMB”) and U.S. dollars (“US$”))
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For the six months ended June 30, |
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2020 |
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2021 |
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2021 |
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RMB |
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RMB |
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US$ |
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Unaudited |
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Unaudited |
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Unaudited |
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Cash flow from operating activities |
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Net loss |
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(121,461) |
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(90,388) |
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(13,996) |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization of right-of-use assets |
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12,446 |
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2,690 |
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417 |
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Depreciation of property and equipment |
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14,146 |
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41,129 |
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6,370 |
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Amortization of intangible assets |
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1,160 |
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8,832 |
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1,368 |
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Deferred tax benefit |
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(3,657) |
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— |
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— |
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Share-based compensation |
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23,752 |
|
399 |
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62 |
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Loss from equity method investments |
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7,980 |
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8,772 |
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1,359 |
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Losses on disposal of property and equipment |
|
745 |
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— |
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— |
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Impairment of long-term investments |
|
33,706 |
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— |
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— |
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Gain on previously held equity interest |
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— |
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(36,142) |
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(5,598) |
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Net loss on disposal of cryptocurrencies |
|
— |
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55,618 |
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8,614 |
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Impairment of cryptocurrency assets |
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— |
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57,331 |
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8,879 |
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Changes in fair value of derivative instrument |
|
— |
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(5,409) |
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(838) |
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Gain from disposal of subsidiaries |
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— |
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(1,227) |
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(190) |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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— |
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(1,389) |
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(215) |
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Prepayments and other receivables |
|
3,332 |
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(11,293) |
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(1,749) |
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Cryptocurrency assets |
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— |
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(159,414) |
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(24,690) |
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Other non-current assets |
|
329 |
|
424 |
|
66 |
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Accounts payable |
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— |
|
70,377 |
|
10,900 |
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Operating lease liabilities |
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(10,446) |
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(1,696) |
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(263) |
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Accrued expenses and other current liabilities |
|
2,286 |
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(33,898) |
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(5,250) |
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Accrued payroll and welfare payable |
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(3,786) |
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(10,980) |
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(1,701) |
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Long-term payables |
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(293) |
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— |
|
— |
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Net cash used in operating activities |
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(39,761) |
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(106,264) |
|
(16,455) |
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Cash flows from investing activities |
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Acquisition of property and equipment |
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(566) |
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(163,936) |
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(25,390) |
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Acquisition of long-term investments |
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(14,849) |
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— |
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— |
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Cash paid for short-term investments |
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(80,000) |
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— |
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— |
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Cash received from return of time deposits |
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24,000 |
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— |
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— |
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Cash received from return of short-term investments |
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30,000 |
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— |
|
— |
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Cash received from return of long-term investments |
|
— |
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3,528 |
|
546 |
|
Cash received from disposal of cryptocurrency assets |
|
— |
|
10,435 |
|
1,616 |
|
Proceeds from disposal of long-term investments |
|
— |
|
2,726 |
|
422 |
|
Cash paid for business combination, net of cash received |
|
— |
|
(42,367) |
|
(6,562) |
|
Cash paid for additional interest acquired for Loto Interactive |
|
— |
|
(21,820) |
|
(3,379) |
|
Repayment of loans provided to a related party |
|
10,000 |
|
— |
|
— |
|
Repayment of loans provided to third parties |
|
2,309 |
|
— |
|
— |
|
Net cash used in investing activities |
|
(29,106) |
|
(211,434) |
|
(32,747) |
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 Renminbi (“RMB”) and U.S. dollars (“US$”))
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, |
||||
|
|
|
2020 |
|
2021 |
|
2021 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Proceeds from the exercise of share-based awards |
|
28 |
|
16,452 |
|
2,548 |
|
Proceeds from short-term bank borrowings |
|
— |
|
303,259 |
|
46,969 |
|
Repayment of short-term bank borrowings |
|
— |
|
(42,757) |
|
(6,622) |
|
Proceeds from issuance of ordinary shares for private placement |
|
— |
|
74,636 |
|
11,560 |
|
Net cash provided by financing activities |
|
28 |
|
351,590 |
|
54,455 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
3,188 |
|
3,655 |
|
570 |
|
Net decrease (increase) in cash, cash equivalents and restricted cash |
|
(65,651) |
|
37,547 |
|
5,823 |
|
Cash, cash equivalents and restricted cash at beginning of the period |
|
365,796 |
|
312,505 |
|
48,394 |
|
Cash, cash equivalents and restricted cash at end of the period |
|
300,145 |
|
350,052 |
|
54,217 |
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
Income tax paid |
|
— |
|
— |
|
— |
|
Interest paid |
|
— |
|
(1,617) |
|
(250) |
|
Supplemental disclosures of non-cash investing and financing activities: |
|
|
|
|
|
|
|
Payment of expense and non-current assets in the form of cryptocurrencies |
|
— |
|
4,440 |
|
688 |
|
Proceeds from issuance of ordinary shares for private placement in the form of cryptocurrencies |
|
— |
|
124,607 |
|
19,299 |
|
Collateral rendered to lender in the form of cryptocurrencies |
|
— |
|
122,412 |
|
18,959 |
|
Repayment of third party borrowings in the form of cryptocurrencies |
|
— |
|
121,152 |
|
18,764 |
|
Repayment of deposit in the form of cryptocurrencies |
|
— |
|
42,548 |
|
6,590 |
|
Issuance of ordinary shares in connection with business combination |
|
— |
|
615,860 |
|
95,385 |
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 Renminbi (“RMB”) and U.S. dollars (“US$”) except for number of shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
Accumulated |
|
Accumulated |
|
|
|
|
|
|
|
Class A |
|
Class A |
|
Class B |
|
|
|
|
|
Additional |
|
|
|
other |
|
deficit and |
|
|
|
Total |
|
|
|
ordinary |
|
preference |
|
ordinary |
|
Ordinary |
|
Preference |
|
paid-in |
|
Treasury |
|
comprehensive |
|
statutory |
|
Non-controlling |
|
shareholders’ |
|
|
|
shares |
|
shares |
|
shares |
|
shares |
|
shares |
|
capital |
|
shares |
|
income |
|
reserve |
|
interests |
|
equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019 |
|
420,001,792 |
|
— |
|
10,000,099 |
|
151 |
|
— |
|
2,547,293 |
|
(143,780) |
|
141,484 |
|
(1,960,692) |
|
(15,387) |
|
569,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(123,146) |
|
1,685 |
|
(121,461) |
|
Foreign currency translation loss |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
3,689 |
|
— |
|
— |
|
3,689 |
|
Share of other comprehensive loss of an equity method investee |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(1,973) |
|
— |
|
— |
|
(1,973) |
|
Conversion of Class B to Class A ordinary shares |
|
10,000,000 |
|
— |
|
(10,000,000) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Issuance of ordinary shares from exercise of share-based awards |
|
13,000 |
|
— |
|
— |
|
— |
|
— |
|
19 |
|
— |
|
— |
|
— |
|
— |
|
19 |
|
Share-based compensation |
|
— |
|
— |
|
— |
|
— |
|
— |
|
23,752 |
|
— |
|
— |
|
— |
|
— |
|
23,752 |
|
Balance as of June 30, 2020 |
|
430,014,792 |
|
— |
|
99 |
|
151 |
|
— |
|
2,571,064 |
|
(143,780) |
|
143,200 |
|
(2,083,838) |
|
(13,702) |
|
473,095 |
6
BIT MINING LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”) 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 |
|
income |
|
reserve |
|
interests |
|
equity |
|
Balance as of December 31, 2020 |
|
430,127,692 |
|
— |
|
99 |
|
151 |
|
— |
|
2,602,883 |
|
(143,780) |
|
128,441 |
|
(2,183,918) |
|
(13,257) |
|
390,520 |
|
Acquisition of Loto Interactive |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(6,075) |
|
— |
|
— |
|
— |
|
115,865 |
|
109,790 |
|
Net loss |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(84,758) |
|
(5,630) |
|
(90,388) |
|
Foreign currency translation loss |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
5,877 |
|
— |
|
(38) |
|
5,839 |
|
Share of other comprehensive loss of an equity method investee |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
4,063 |
|
— |
|
— |
|
4,063 |
|
Reclassification into loss from equity method investments |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
846 |
|
— |
|
— |
|
846 |
|
Issuance of ordinary shares for private placement |
|
85,572,963 |
|
65,000 |
|
— |
|
28 |
|
— |
|
199,636 |
|
— |
|
— |
|
— |
|
— |
|
199,664 |
|
Issuance of ordinary shares for business combinations |
|
56,236,295 |
|
— |
|
— |
|
17 |
|
— |
|
615,843 |
|
— |
|
— |
|
— |
|
— |
|
615,860 |
|
Issuance of ordinary shares from exercise of share-based awards |
|
32,393,290 |
|
— |
|
— |
|
11 |
|
— |
|
16,277 |
|
— |
|
— |
|
— |
|
— |
|
16,288 |
|
Share-based compensation |
|
— |
|
— |
|
— |
|
— |
|
— |
|
399 |
|
— |
|
— |
|
— |
|
— |
|
399 |
|
Balance as of June 30, 2021 |
|
604,330,240 |
|
65,000 |
|
99 |
|
207 |
|
— |
|
3,428,963 |
|
(143,780) |
|
139,227 |
|
(2,268,676) |
|
96,940 |
|
1,252,881 |
|
Balance as of June 30, 2021, in US$ |
|
|
|
|
|
|
|
32 |
|
— |
|
531,079 |
|
(22,269) |
|
21,564 |
|
(351,373) |
|
15,014 |
|
194,047 |
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”) and United States dollars (“US$”) 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, changed to “500.com Limited” on October 9, 2013. The Company changed to the new English name of “BIT Mining Limited” and the new ticker symbol “BTCM” effective April 20, 2021.
The Company announced the entry into the cryptocurrency industry in December 2020. As of June 30, 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.
The Company 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. Due to the transformation into cryptocurrency industry, in the first quarter of 2021, the Company updated the reportable segments. Consequently, the segment disclosures in this filing have been recast to reflect these changes and therefore differ from prior filings. See Note 21 Segment Information for additional details.
On March 31, 2021, the Company completed the subscription for shares of Loto Interactive (as defined below), which primarily engages in the data center operation business. The Company’s ownership of Loto Interactive thereby increased to 54.2% and Loto Interactive became a subsidiary of the Company. As a result, the Company began to consolidate Loto Interactive on March 31, 2021. On June 18, 2021, the Company completed the unconditional mandatory cash offers and its ownership of Loto Interactive thereby increased to 59.79%.
On April 15, 2021, the Company 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.
As of June 30, 2021, the Company has subsidiaries incorporated in countries and jurisdictions including the People’s Republic of China (“PRC”), British Virgin Islands, Hong Kong, the United States of America (“USA”), Malta, Cyprus, Curacao and the Company also effectively controlled a number of variable interest entities (“VIEs”), through the Primary Beneficiaries, as defined below. The accompanying unaudited interim condensed consolidated financial statements include the financial statements of the Company, its subsidiaries, VIEs and VIEs’ subsidiaries.
The Company has previously conducted the lottery business in 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 VIEs”), and their respective shareholders. On July 23, 2021, the Company announced its decision to dispose of its Chinese lottery related business and the Company terminated all of its lottery business-related VIE contracts. The lottery business-related VIE subsidiaries will be deconsolidated and their financial results will no longer be included in the consolidated financial statements in the third quarter of 2021 as a result of eliminating the VIE structure.
8
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
1. ORGANIZATION (continued)
As of June 30, 2021, the Company’s major subsidiaries, VIEs and VIEs’ subsidiaries are listed below:
9
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
1. ORGANIZATION (continued)
* A subsidiary of E-Sun Network
** A subsidiary of E-Sun Sky Network
*** A subsidiary of Youlanguang Technology
**** A subsidiary of Guangtiandi Technology
****** A subsidiary of the Multi Group
******* A subsidiary of Loto Interactive
******** A subsidiary of Zhejiang Keyinghuancai
The Company, its subsidiaries, VIEs and VIEs’ subsidiaries are hereinafter collectively referred to as the “Group”.
Information on Variable Interest Entities (“VIEs”)
The Company has previously conducted its lottery business in 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 businessrelated 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 in connection with the Company’s pre-existing cryptocurrency mining operations in China, through its contractual arrangement with Loto Interactive Information Technology (Shenzhen) Co., Ltd. (“Loto Shenzhen”), 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 China, and on August 3, 2021 the Group has terminated all of the VIE structures with the lottery-related affiliated entities and Zhejiang Keying. The Group is in the process of completing the transfer of equity interests of Zhejiang Keying to Loto Shenzhen. The lottery-related affiliated entities have been deconsolidated and their financial results will no longer be included in the condensed consolidated financial statements for the third quarter of 2021 following the termination of the VIE structures.
10
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
1.ORGANIZATION (continued)
Information on Variable Interest Entities (“VIEs”) (continued)
The carrying amounts of the assets, liabilities, the results of operations and cash flows of all of these VIEs included in the accompanying unaudited interim condensed consolidated balance sheets, statements of comprehensive loss and statements of cash flows are as follows:
11
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
1.ORGANIZATION (continued)
Information on Variable Interest Entities (“VIEs”) (continued)
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, |
||||
|
|
|
2020 |
|
2021 |
|
2021 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
Unaudited |
|
Unaudited |
|
Unaudited |
|
Revenues |
|
693 |
|
79,176 |
|
12,263 |
|
Net loss |
|
(28,440) |
|
(15,457) |
|
(2,394) |
There was no pledge or collateralization of the VIEs’ assets. Creditors of the VIEs have no recourse to the general credit of the Company, which is the primary beneficiary of the VIEs. In addition, the Company has provided a loan of US$27,987 in financial support to its VIEs, E-Sun Sky Network, as of June 30, 2021.
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, 2021 and results of operation and cash flows for the six months ended June 30, 2020 and 2021. Results for the six months ended June 30, 2021 are not necessarily indicative of the results expected for the full fiscal year or for any future period.
The preparation of 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, revenue recognition, allowance for doubtful accounts, useful lives of property and equipment, impairment of long-lived assets, long-term investments and goodwill, the valuation of cryptocurrencies, realization of deferred tax assets, uncertain income tax positions and share-based compensation. Actual results could materially differ from those estimates.
12
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) 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, its subsidiaries, its VIEs and the VIEs’ subsidiaries in which it has a controlling financial interest. The results of the subsidiaries are consolidated from the date on which the Group obtained 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. Furthermore, if the Company demonstrates that it has ability to control the VIEs through its rights to all the residual benefits of the VIEs and its obligation to fund losses of the VIEs then the entity is consolidated. All significant intercompany balances and transactions among the Company, its subsidiaries, its VIEs and the VIEs’ subsidiaries have been eliminated on consolidation.
Convenience translation
Translations of amounts from RMB into US$ for the convenience of the reader were calculated at the noon buying rate of US$1.00 to RMB6.4566 on June 30, 2021 in the city of New York for wire transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.
Foreign currency translation
The functional currency of the Company, BVI, 500wan HK, 500.com USA, Blockchain Alliance Technologies, Blockchain Alliance HK, Start Light and Skill Esport is the US$. The functional currency of the Multi Group and its subsidiaries is EUR. The functional currency of Loto Interactive with its subsidiaries is HKD. E-Sun Sky Computer with its VIEs, Chongqingyusheng and Guixinyanghang determined their functional currency to be the RMB, which are their respective local currencies based on the criteria of ASC 830, “Foreign Currency Matters”. The Group uses the monthly average exchange rate for the year 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 income as a component of shareholders’ equity. The Group uses the RMB as its reporting currency.
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.
Business combinations 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. 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.
13
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Business combinations and non-controlling interests (continued)
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.
For the Company’s majority-owned subsidiaries and VIEs, 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 Group’s unaudited interim condensed consolidated balance sheets.
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. 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, RMB57,331 (US$8,879) of impairment loss was recorded.
Cryptocurrencies generated from the cryptocurrency mining business and the mining pool business as well as the cryptocurrencies distributed to mining pool participants are included within operating activities in the accompanying unaudited interim condensed consolidated statements of cash flows. The sales of cryptocurrencies are included within investing activities in the accompanying unaudited interim condensed consolidated statements of cash flows and any realized gains or losses from such sales are included in gain or loss of disposal of cryptocurrencies in the unaudited interim condensed consolidated statements of comprehensive loss. The Group accounts for its gains or losses in accordance with the first-in-first-out (FIFO) method of accounting.
14
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible assets
Intangible assets represent computer software, internet domain name, licensing agreement, and intangible assets arising from business combination. 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 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:
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.
Prior to the early adoption of ASU 2017-04, “Simplifying the Test for Goodwill Impairment”, on January 1, 2019, the Group has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step test in accordance with ASC 350-20. If the Group believes, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the two-step quantitative impairment test described above is required. Otherwise, no further testing is required. In the qualitative assessment, the Group considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations. In performing the two-step quantitative impairment test, the first step compares the carrying amount of the reporting unit to the fair value of the reporting unit based on either quoted market prices of the ordinary shares or estimated fair value using a combination of the income approach and the market approach. If the fair value of the reporting unit exceeds the carrying value of the reporting unit, goodwill is not impaired and the Group is not required to perform further testing. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, then the Group must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. If the carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss.
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.
As of June 30, 2021, no impairment of goodwill was recognized.
15
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) 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. As of June 30, 2021, no impairment of long-lived assets other than goodwill was recognized.
Cryptocurrency asset borrowings
In April 2021, the Group borrows cryptocurrency assets from a third party on an unsecured basis in connection with acquisition of the entire mining pool business of Blockchain Technologies Holding Company operated under BTC.com. The borrowing is interest-free and due in three months. Balance of the borrowing is recorded in cryptocurrency asset borrowings in the accompanying unaudited interim condensed consolidated balance sheets.
The borrowings are accounted for as hybrid instruments, with a liability host contract that contains an embedded derivative based on the changes in the fair value of the underlying cryptocurrency asset. The host contract is not accounted for as a debt instrument because it is not a financial liability, is carried at the fair value of the assets acquired and reported in cryptocurrency asset borrowings in the unaudited interim condensed consolidated balance sheets. The embedded derivative is accounted for at fair value, with changes in fair value recognized as changes in fair value of derivative instrument in the unaudited interim condensed consolidated statements of comprehensive loss. The embedded derivatives are included in crypto asset borrowings in the unaudited interim condensed consolidated balance sheets.
Derivative contracts
As a result of the Group entering into transactions to borrow cryptocurrencies, an embedded derivative is recognized relating to the differences between the cost of the cryptocurrencies borrowed on the contract effective date and the fair value of the cryptocurrencies that will ultimately be repaid, based on changes in the spot price of the cryptocurrencies over the term of the borrowing.
The Group measures the fair value of the cryptocurrencies by taking the quoted prices from price aggregator websites, which the Group considers to be a Level 2 fair value input under ASC 820 “Fair Value Measurements and Disclosures”.
16
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair value measurements
Financial instruments primarily include cash and cash equivalents, restricted cash, accounts receivables, other receivables, equity security without readily determinable fair values, equity method investments, short-term loans, accounts payable, cryptocurrency assets borrowings and accrued expense and other current liabilities. The Group carries the investment under the measurement alternative method and equity method on other-than-temporary basis. The Group measures the fair value of its crypro asset borrowings by taking the quoted prices from price aggregator websites, which the Group considers to be a Level 2 fair value input under ASC 820 “Fair Value Measurements and disclosures”. Contingent consideration related to the acquisition of Blockchain Alliance Technologies is included in accrued expenses and other current liabilities in the unaudited interim condensed 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.
Revenue recognition
The Group’s revenues were derived principally from cryptocurrency mining, data center services, mining pool services, online gaming services, sports information services, and online spot commodity trading services. The Group adopted ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”), from January 1, 2018, using the modified retrospective method.
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.
17
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue recognition (continued)
The primary sources of the Group’s revenues are as follows:
Cryptocurrency mining
The Group has entered into a cryptocurrency mining pool by executing contracts with the mining pool operators 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 a fractional share of the cryptocurrency award the mining pool operator receives (less cryptocurrency transaction fees to the mining pool operator which are recorded net with revenues), for successfully adding a block to the blockchain. The Group’s fractional share is based on 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 third party pool operators. The transaction consideration the Group receives, if any, is noncash consideration, which the Group measures at fair value when earned, which is not materially different than the fair value at contract inception. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the Group successfully places a block (by being the first to solve an algorithm) and the Group receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.
Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency when earned.
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.
In May and June 2021, the Group has announced that it has entered into several term sheets to invest in cryptocurrency mining data centers internationally. On June 21, 2021, the Group announced that two big data centers held by Loto Interactive have suspended their operations according to the written notice from State Grid Sichuan Ganzi Electric Power Co., Ltd.
18
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 include the block rewards and the transaction verification fees related to the transactions included in the block.
The Group recognizes the mining pool revenue on a gross basis. 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 whatever qualifying types of mining machines, 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 a customer. The Group provides mining pool services under BTC.com which the Group started to consolidate on April 15, 2021.
There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Group may be required to change its policies, which could have an effect on the Group’s unaudited interim condensed consolidated financial position and results from operations.
Sports information services
The Group offers a comprehensive sports information portal via a designated mobile application, which covers (i) real time soccer match information; and (ii) data-driven soccer match predictions generated by proprietary analysis engine. Users can also post free or pay-per-view contents such as proprietary observations and analyses on the sports information portal. The users pay for each information and data subscription at a fixed price, and the Group pays the original information providers a fixed percentage of total purchase amount if the information is produced by third parties. Revenue is recognized when users have access to the pay-per-view contents or on an average amortization basis according to subscription terms. The Group records the revenue on a net basis for information provided by third parties, because the Group is not the primary obligor to provide the information, but acts as an agent in providing such purchase services. For information provided by the Group itself, the Group records the revenue on a gross basis.
The Group provides sports information service through the Group’s service offering named “Cai Xun Hao,” which was ceased in March 2019, and “Smart Big Data”, which was started in June 2020.
19
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Online spot commodity trading services
The Group provides online spot commodity trading services through the designated website and mobile application in Shenzhen Kaisheng. The Group provides customers with reliable online spot commodity trading for gold trade and delay products across PC and mobile devices. The Group processes customer orders through a commercial bank, and later formed a joint venture with Shenzhen Gold Exchange on May 11, 2018 to provide online spot commodity trading services. Trading commissions are received from the commercial bank based on the pre-determined commission fee rate and the total amount of the processed orders. The Group recognizes revenue at a point in time when an order has been successfully processed and began to generate an immaterial amount of revenue each year from trading commissions on the online spot commodity trading services since 2017.
Online gaming services
The Group also provides online lottery betting and online casino platforms through the Group’s designated website after the acquisition of TMG in July 2017. The Group earns difference between betting and winning for online lottery betting services and online casino platforms as revenues that are generated from the registered users. The registered users enter into certain terms and conditions when they first open their accounts with the Group. Lottery and Casino purchase orders are placed by users through the Group’s online platforms view website. Then the Group processes these orders. Prior to processing orders, users prepay all purchase amounts. The Group pays users prizes when there are any winnings attributable to users. The Group records revenues on a net basis by deducting the winning amounts from betting amounts. Revenue comprises the fair value of the consideration received for the provision of internet gaming in the ordinary course of the Group’s activities, which is recognized when the outcome of an event is known.
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, 2020 and June 30, 2021, the Group recorded advance from customers balance of RMB4,734 and RMB16,660 (US$2,580) respectively, which was included in “Accrued expenses and other current liabilities” in the accompanying unaudited interim condensed consolidated balance sheets. RMB4,873 and RMB4,340 (U$672) of deferred revenue included in the opening balances of advance from customers was recognized during the six months ended June 30, 2020 and June 30, 2021, respectively. The amounts were included in revenues on the accompanying unaudited interim consolidated statements of comprehensive loss.
Refer to Note 21 regarding the discussion of the Group’s disaggregate revenue data.
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 RMB2,675.9 million (US$414.44 million) from April 15, 2021 to June 30, 2021. These costs are expensed as incurred.
20
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cost of data center services
The cost of data center services which was offered under Loto Interactive consists primarily of direct production costs related to data center service, including the direct service charges for operations, were RMB55.3 million (US$8.6 million) from March 31, 2021 to June 30, 2021. These costs are expensed as incurred.
Server leasing and maintenance expenses
Server leasing and maintenance expenses, which consist primarily of leasing expense of servers hosing and other equipment used in providing online services and cryptocurrency mining business, were RMB1.8 million and RMB26.7 million (US$4.1 million) for the six months ended June 30, 2020 and 2021, respectively. These costs are expensed as incurred.
Account handling expenses
Account handling expenses, which consist primarily of transaction fees charged by banks and third-party payment processors for cash transfers between the users’ accounts on the online platforms including websites and mobile applications and their accounts with banks or third-party payment processors, were RMB0.3 million and RMB0.6 million (US$0.1 million) for the six months ended June 30, 2020 and 2021, respectively. These costs are expensed as incurred.
Lottery insurance expenses
Lottery insurance expenses, which consist of insurance premiums payable to insurers for covering the first two categories of winnings in online gaming services for betting on the outcome of lotteries after the acquisition of TMG in July 2017, were RMB2.5 million and RMB3.1 million (US$0.5 million) for the six months ended June 30, 2020 and 2021, respectively. These costs are expensed as incurred.
Regulatory and compliance fees
Regulatory and compliance fees, which consist of fees payable to regulatory bodies such as Gambling Commission, HM Revenue & Customs, Malta Gaming Authority and Certria EOOD after the acquisition of TMG in July 2017, were RMB1.0 million and RMB1.2 million (US$0.2 million) for the six months ended June 30, 2020 and 2021, respectively. These costs are expensed as incurred.
Depreciation fees
Depreciation fees, which consist primarily of depreciation of machinery and equipment related to cryptocurrency mining and data center services, were RMB0.4 million and RMB 35.7 million (US$5.5 million) for the six months ended June 30, 2020 and 2021, respectively. These costs are recorded in unaudited interim condensed consolidated statements of comprehensive loss on a straight-line basis over the useful life of the machinery and equipment.
Amortization fees
Amortization fees, which consist primarily of amortization of intangible assets arising from business combinations, were RMB0.4 million and RMB 8.5 million (US$1.3 million) for the six months ended June 30, 2020 and 2021, respectively. These costs are recorded in unaudited interim condensed consolidated statements of comprehensive loss on a straight-line basis over the useful life of the intangible assets.
21
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) 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 services also comprises platform fees, employee costs, business tax and surcharges and other direct costs incurred in providing services. These costs are expensed as 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 tax position if a tax return position or future tax position is “more likely than not” to be sustained upon examination based solely on the technical merits of the position. Tax positions that meet the “more likely than not” recognition threshold are measured at the largest amount of tax benefit, determined on a cumulative probability basis, that has a greater than fifty percent likelihood of being realized upon settlement. The Group’s estimated liability for unrecognized tax position which is included in the “long-term payables” account is periodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. The outcome for a particular audit cannot be determined with certainty prior to the conclusion of the audit and, in some cases, appeal or litigation process. The actual benefits or liability ultimately realized may differ from the Group’s estimates. As each audit is concluded, adjustments, if any, are recorded in the Group’s financial statements. Additionally, in future periods, changes in facts, circumstances, and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur.
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.
22
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent accounting pronouncements
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 ASU is effective for fiscal years beginning after December 15, 2020, and will be applied either retrospectively or prospectively based upon the applicable amendments. The adoption of ASU 2019-12 had no material impact on the Group’s consolidated financial statements and related disclosures.
In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815” which clarifies the interaction of the accounting for equity investments under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The guidance is effective for all entities for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years. The adoption of ASU 2020-01 had no material impact on the Group’s consolidated financial statements and related disclosures.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Group does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.
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, 2021, substantially all of the Group’s cash and cash equivalents were deposited in financial institutions located in the PRC, Hong Kong and Malta, which management believes are of high credit quality.
4. BUSINESS COMBINATION
Acquisition of Loto Interactive
On June 6, 2017, the Company acquired from Melco LottVentures Holdings Limited an aggregate of 1,278,714,329 shares (the “Sale Shares”) of Loto Interactive (formerly known as MelcoLot Limited), a company listed on the Hong Kong Stock Exchange (Stock Code: 8198), representing approximately 40.65% of Loto Interactive’s existing issued share capital as of the acquisition date. The total consideration paid for the Sale Shares is approximately HK$322.2 million, equivalent to approximately HK$0.252 per Sale Share. The Company’s investment in equity shares of Loto Interactive decreased to 40.48% at the end of 2019 due to exercise of share options granted to directors and employees of Loto Interactive and was further diluted to 33.74% due to private placement of Loto Interactive in October 2020.
On March 31, 2021, the Company completed the subscription for 169,354,839 shares of Loto Interactive, at a price of HK$0.62 per share for a total consideration of HK$105 million (US$13.5 million) in cash (the "Share Subscription"). The Company’s ownership of Loto Interactive thereby increased to 54.2%, and Loto Interactive became a subsidiary of the Company. The Company recorded a gain on previously-held equity interest of RMB36,142 (US$5,598) for the re-measurement of the previously-held equity interest in Loto Interactive at the acquisition date fair value.
23
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
4. BUSINESS COMBINATION (continued)
Acquisition of Loto Interactive (continued)
Concurrently with the completion of the Share Subscription, Loto Interactive has completed its acquisition of the remaining equity interests in its indirectly held subsidiary, Ganzi Changhe Hydropower Consumption Service Co., Ltd. (“Ganzi Changhe Data Center”), for a total consideration of approximately RMB88.2 million (approximately US$13.6 million) in cash.
The following table presents the preliminary calculation of the purchase consideration. The calculation of RMB amount was based on the exchange rate of 1.00 HKD to 0.8452 RMB of the acquisition date on March 31, 2021.
The following table presents the purchase price allocation of the assets acquired and the liabilities assumed at the acquisition date.
On June 18, 2021, the Company completed its unconditional mandatory cash offer, all the shares in issue of Loto Interactive other than those already owned or agreed to be acquired by the Company and its parties acting in concert, pursuant to Rule 26.1 of the Hong Kong Code on Takeovers and Mergers (the “Share Offer”) and its cash offer for the cancellation of all options of Loto Interactive in accordance with Rule 13.5 of the Hong Kong Code on Takeovers and Mergers (the “Option Offer”). Upon closing of such cash offer, the Company acquired a total of 30,642,534 shares with a total consideration of approximately HK$26.2 million (US$3.4 million) under the Share Offer, and a total of 6,800,000 options under the Option Offer, which will be cancelled. The Company’s ownership in Loto Interactive increased to 59.8% accordingly.
Total acquisition costs of RMB5,148 (US$797) were incurred related to the acquisition, which were recognized as an expense and included in general and administrative expenses in the unaudited interim condensed consolidated statements of comprehensive loss.
Since the acquisition date, Loto Interactive contributed revenues of RMB74,466 (HKD89,363) to the Group for the six months ended June 30, 2021 and contributed net loss of RMB9,776 (HKD 11,731) to the Group for the six months ended June 30,2021.
24
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
4. BUSINESS COMBINATION (continued)
Acquisition of Blockchain Alliance Technologies
On April 15, 2021, the Company announced the first closing of its previously announced transactions contemplated by the share exchange agreement, as amended (the “Share Exchange Agreement”), dated February 16, 2021, with Blockchain Alliance Technologies Holding Company (“Blockchain Alliance Holding”). Pursuant to the Share Exchange Agreement, the Company has issued an aggregate of 44,353,435 Class A ordinary shares of par value US$0.00005 per share of the Company to Blockchain Alliance Holding in exchange for the entire outstanding share capital of Blockchain Alliance Technologies held by Blockchain Alliance Holding. In accordance with the Share Exchange Agreement, the entire mining pool business of Bitdeer Technologies Holding Company (“Bitdeer”) operated under BTC.com, including the domain name BTC.com and the cryptocurrency wallet of BTC.com (collectively, the “BTC.com Pool Businesses”) have now been transferred to the Company.
The Company and Blockchain Alliance Holding also agreed that, in the twelve month period from April 1, 2021 to March 31, 2022, if the BTC.com Pool Businesses records net operating profit, the Company shall issue additional Class A ordinary shares to Blockchain Alliance Holding at par value and a maximum of 22,176,718 additional Class A ordinary shares shall be issuable. If the BTC.com Pool Businesses records net operating loss, the Company shall be entitled to repurchase certain Class A ordinary shares held by Blockchain Alliance Holding at par value and a maximum of 4,435,344 Class A ordinary shares shall be subject to such repurchase arrangement.
The following table presents the preliminary calculation of the purchase consideration. The calculation of RMB amount was based on the exchange rate of 1.00 USD to 6.5297 RMB of the acquisition date on April 15, 2021.
As of June 30, 2021 the Group recognized RMB99,137 estimate of post-closing adjustments in accrued expenses and other current liabilities.
The following table presents the preliminary purchase price allocation of the assets acquired and the liabilities assumed at the acquisition date.
25
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
4. BUSINESS COMBINATION (continued)
Acquisition of Blockchain Alliance Technologies (continued)
Goodwill, which is not tax deductible, is primarily attributable to the excess of the consideration over the fair value of the net identifiable assets of the acquiree and is related to synergies expected to be achieved from the acquisition.
Acquired intangible assets consist primarily of brand name, which have estimated weighted average economic lives of 10 years from the date of purchase.
Total acquisition costs of RMB4,957 (US$768) were incurred related to the acquisition, which were recognized as an expense and included in general and administrative expenses in the unaudited interim condensed consolidated statements of comprehensive loss.
Since the acquisition date, BTC.com Pool Businesses contributed revenues of RMB2,729,901 (US$422,808) to the Group for the six months ended June 30, 2021 and contributed net profit of RMB3,396 (US$ 526) to the Group for the six months ended 2021, including the amortization expense of acquired intangible assets of RMB7,966 (US$1,234).
The following unaudited pro forma information summarizes the results of operations of the Group for the year ended December 31, 2020, as if the acquisitions of Loto Interactive and Blockchain Alliance Technologies had been completed on January 1, 2020. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the acquisition actually taken place on the date indicated and may not be indicative of future operating results. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable.
These amounts have been calculated after applying the Group’s accounting policies.
5. INVESTMENTS
Long-term Investments
|
|
|
|
|
|
|
|
|
|
|
As of |
|
As of |
|
As of |
|
|
|
December 31, |
|
June 30, |
|
June 30, |
|
|
|
2020 |
|
2021 |
|
2021 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Carrying amount of equity investments without readily determinable fair value |
|
44,044 |
|
43,181 |
|
6,688 |
|
Carrying amount of equity method investments |
|
55,928 |
|
20,849 |
|
3,229 |
|
Carrying amount of long-term investments |
|
99,972 |
|
64,030 |
|
9,917 |
26
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
5. INVESTMENTS (continued)
Equity investments - without readily determinable fair value
Equity investments - without readily determinable fair value consisted of the following:
Private companies
In March 2015, the Group acquired 10% of the share capital of Hzone Holding Company, a non-listed company, for a cash consideration of US$2,000. In March 2016, the Group transferred 10% of the share capital of Hzone Holding Company, to its VIE Beijing Huizhong Wealth Investment Management Co., Ltd.
In August 2015, the Group acquired 1.29% of the share capital of Topgame Global Limited, a non-listed company, for a cash consideration of US$1,373. The Group also acquired 1.29% of the share capital of its VIEs, Caicaihudong (Beijing) Technology Co., Ltd. and Youwang Technology (Shanghai) Co., Ltd., for cash consideration of RMB13 and RMB477, respectively.
In June 2016, the Group acquired 0.84% of the share capital of Beijing Weisaishidai Sports Technology Co., Ltd, for a cash consideration of RMB10,000. The equity interest was subsequently diluted to 0.83% in 2018 due to increase in shareholder of Beijing Weisaishidai Sports Technology Co., Ltd.
In November 2016, the Group acquired 2% of the share capital of Techelix Co., Ltd, a non-listed company, for a cash consideration of US$600. In February 2018, the Group made an additional investment of US$300 in Techelix Co., Ltd. In June 2018, the Group transferred the equity investment of US$50 to a third party. The equity interest was diluted to 1.98% in 2018 and to 1.65% in 2019 due to increase in shareholder of Techelix Co., Ltd.
In March 2017, the Group acquired 5% of the share capital of Cheerful Interactive Limited, a non-listed company, for a cash consideration of US$1,250. The equity interest was subsequently diluted to 3.92% in 2018 due to increase in shareholder of Cheerful Interactive Limited.
Limited partnerships
In June 2014, the Group and Danhua Capital L.P (“Danhua”) entered into a subscription agreement, whereby the Group agreed to purchase limited partnership interest in Danhua’s fund (the “Fund”) in the amount of US$1,000, which entitles the Group an aggregate equity interest of approximately 1.1% in the Fund. As of June 30, 2021, the Group received US$48 in dividend and US$183 in return of principal from Danhua.
27
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
5. INVESTMENTS (continued)
Limited partnerships (continued)
The Fund’s investment strategy is primarily to invest in emerging companies operating in the USA and PRC. The Fund’s investments are focused in the technology, media and telecommunications sectors. The Fund is scheduled to be in existence until November 15, 2021, unless terminated sooner or extended in accordance with the amended and restated limited partnership agreement.
In June 2015, the Group and Beijing Heimatuoxin Venture Capital L.P. (“Heimatuoxin”) entered into a subscription agreement, whereby the Group agreed to purchase 3.49% limited partnership interest in Heimatuoxin for the total amount of RMB3,000. As of June 30, 2021, the Group received RMB679 in dividend and RMB858 in return of principal from Heimatuoxin.
Heimatuoxin’s investment strategy is primarily to invest in emerging companies operating in the PRC. Heimatuoxin’s investments are focused in the technology, media and telecommunications sectors. Heimatuoxin is scheduled to be in existence until April 16, 2021, unless terminated sooner or extended in accordance with the amended and restated limited partnership agreement, which was extended for two years to April 16, 2023 in July 2020.
In June 2016, the Group and Shanghai Jingyan Corporate Development Centre L.P. (“Jingyan”) entered into a subscription agreement, whereby the Group agreed to purchase 4.64% limited partnership interest in Jingyan for a total amount of RMB6,000. The limited partnership interest was diluted to 4.31% in 2018 because of the joining of additional limited partners. As of June 30, 2021, the Group received RMB2,203 in dividend and RMB60 in return of principal from Jingyan.
Jingyan’s investments are focused in the consulting services of corporate management, business information, exhibition, media and telecommunications sectors. Jingyan is scheduled to be in existence until the fifth anniversary of the Initial Contribution Date, unless terminated sooner or extended in accordance with the amended and restated limited partnership agreement.
In December 2016, the Group and zPark Capital II,L.P. (“zPark”) entered into a subscription agreement, whereby the Group agreed to purchase 2% limited partnership interest in Zpark for a total amount of US$1,000. The limited partnership interest was diluted to 1.64% in 2019 due to the joining of additional limited partners. As of June 30, 2021, the Group received US$270 in dividend and US$56 in return of principal from zPark.
zPark’s investment strategy is primarily to make venture capital investments, principally by investing in and holding equity and equity-oriented securities of privately held early-stage technology companies, with an emphasis on companies with a connection to China, Japan and other Asia markets. The general purposes of zPark are to buy, hold, sell and otherwise invest in Securities, whether readily marketable or not; to exercise all rights, powers, privileges and other incidents of ownership or possession with respect to Securities held or owned by zPark; to enter into, make and perform all contracts and other undertakings. zPark is scheduled to be in existence until the tenth anniversary of the Initial Contribution Date, unless terminated sooner or extended in accordance with the amended and restated limited partnership agreement.
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 RMB69,152, net of RMB25,108 in accumulated impairment and RMB68,168 (US$10,558), net of RMB24,987 (US$3,870) in accumulated impairment as of December 31, 2020 and June 30,2021, respectively. There was no impairment recognized for the six months ended June 30, 2020 and 2021.
28
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
5. INVESTMENTS (continued)
Equity method investments
Equity method investments consisted of the following:
Private company
In May 2018, the Group acquired 45% of the share capital of Shenzhen Jinyingzaixian Technology Service Co., Ltd. (“Jinyingzaixian”), a non-listed company, through Shenzhen KaishengJinfu Enterprise Management Co., Ltd., for a cash consideration of RMB9,000.
In June 2021, the Group disposed 20% of the share capital of Jinyingzaixian for a cash consideration of RMB2,726.
Jinyingzaixian is principally engaged in spot commodity trading services in China. The Group’s proportionate share of Jinyingzaixian’s net income (loss) recognized in the condensed consolidated statements of comprehensive loss were RMB4,008 and RMB(2,571) (US$398) during the six months ended June 30, 2020 and 2021, respectively.
In August 2018, Loto Interactive acquired 20% of the share capital of Guangzhou Sentai Information Technology Co., Ltd. (“Guangzhou Sentai”), a non-listed company, through Zhejiang Keying Ltd., for a cash consideration of RMB5,000.
Guangzhou Sentai is principally engaged in operating a self-media called www.shilian.com providing updated blockchain information. The proportionate share of Guangzhou Sentai’s net income recognized in the unaudited interim condensed consolidated statements of comprehensive loss were RMB179 (US$28) from March 31, 2021, the acquisition date of Loto Interactive, to June 30, 2021.
Publicly listed company
On June 6, 2017, the Company acquired from Melco Lott Ventures Holdings Limited an aggregate of 1,278,714,329 shares (the “Sale Shares”) of Loto Interactive Limited (“Loto Interactive”, formerly known as MelcoLot Limited), a company listed on the Hong Kong Stock Exchange (Stock Code: 8198), representing approximately 40.65% of Loto Interactive’s existing issued share capital as of the acquisition date. The total consideration paid for the Sale Shares is approximately HK$322.2 million (US$41.3 million), equivalent to approximately HK$0.252 per Sale Share. The Company’s investment in equity shares of Loto Interactive decreased to 40.48% at the end of 2019 due to exercise of share options granted to directors and employees of Loto Interactive and was further diluted to 33.74% due to private placement of Loto Interactive in October 2020.
29
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
5. INVESTMENTS (continued)
Publicly listed company (continued)
On March 31, 2021, the Company completed the subscription for 169,354,839 shares of Loto Interactive, at a price of HK$0.62 per share for a total consideration of HK$105 million (US$13.5 million) in cash (the “Share Subscription”). The Company’s ownership of Loto Interactive thereby increased to 54.2%, and Loto Interactive became a subsidiary of the Company and was consolidated in the Consolidation statements of the Group from March 31, 2021.
The Group’s proportionate share of Loto Interactive’s net loss recognized in the unaudited interim condensed consolidated statements of comprehensive loss were RMB11,901 and RMB7,240 (US$1,121), including other comprehensive gain (loss) of RMB(1,973) and RMB4,063 (US$629), during the six months ended June 30, 2020 and 2021, respectively. The reclassification from other comprehensive loss into loss from equity method investments was RMB846 (US$131) for the consolidation of Loto Interactive on March 31, 2021.
Limited partnership
In April 2015, the Group and Guangda Sports Culture Capital L.P (“Guangda Sports Culture”) entered into a subscription agreement, whereby the Group agreed to purchase 9.9% limited partnership interest in Guangda Sports Culture’s fund for a total amount of RMB20,000. Based on actual funding, the limited partnership interest changed to 12.2% as of December 31, 2017.
Guangda Sports Culture’s investment strategy is primarily to invest in emerging companies operating in the PRC. Guangda Sports Culture’s investments are focused in the sports sectors. Guangda Sports Culture is scheduled to be in existence until February 9, 2018, and was extended to February 9, 2020 in 2018, unless terminated sooner or extended in accordance with the amended and restated limited partnership agreement. The Group’s proportionate share of Guangda’s net income (loss) recognized in the unaudited interim condensed consolidated statements of comprehensive loss were RMB(87) and RMB17 (US$2.6) during the six months ended June 30, 2020 and 2021, respectively.
In February 2017, the Group and Sparkland Venture Capital Growth Fund L.P (“Sparkland”) entered into a subscription agreement, whereby the Group agreed to purchase 6.67% limited partnership interest in Sparkland’s fund for a total amount of US$1,000. Based on actual funding, the limited partnership interest changed to 15.38% as of December 31, 2017.
Sparkland’s investments are focused in the Virtual Reality and Augmented Reality industries. The Group’s proportionate share of Sparkland’s net income recognized in the unaudited interim condensed consolidated statements of comprehensive loss were nil and RMB843 (US$131) during the six months ended June 30, 2020 and 2021, respectively.
All of these above-mentioned investments were classified as equity method investments as the Group does have significant influence over the entities. The net operating losses from these equity method investments recognized for the six months ended June 30, 2020 and 2021 were RMB7,980 and RMB8,772 (US$1,359), respectively. The Group recognized an impairment of RMB33,706 and nil in Loto Interactive for the six months ended June 30, 2020 and 2021, respectively.
30
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
6. CRYPTOCURRENCY ASSETS
The amounts represented the cryptocurrencies held by the Group as of June 30, 2021. For the six months ended June 30, 2021, the Group generated cryptocurrencies through cryptocurrency mining business and the mining pool business. The movement of cryptocurrencies was as follows:
|
|
|
|
|
|
|
|
|
For the six months |
||
|
|
|
ended June 30, 2021 |
||
|
|
|
RMB |
|
USD |
|
Beginning balance |
|
— |
|
— |
|
Receipts from issuance of ordinary shares for private placement |
|
124,607 |
|
19,289 |
|
Cryptocurrencies acquired from the BTC.com Pool Business |
|
516,686 |
|
79,981 |
|
Cryptocurrencies mined from mining pool business |
|
2,727,684 |
|
422,236 |
|
Cryptocurrencies mined from mining business |
|
73,051 |
|
11,314 |
|
Collection on behalf of a third party for promotion activities |
|
14,737 |
|
2,282 |
|
Distribution to pool participants |
|
(2,702,591) |
|
(418,351) |
|
Return of deposits |
|
(95,467) |
|
(14,786) |
|
Payment of service expense and non-current assets |
|
(4,440) |
|
(688) |
|
Disposal of cryptocurrencies |
|
(184,422) |
|
(28,563) |
|
Others |
|
(1,793) |
|
(222) |
|
Ending balance |
|
468,052 |
|
72,492 |
Additional information on impairment of cryptocurrency assets was as follows:
31
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
7. PREPAYMENTS AND OTHER RECEIVABLES
Prepayments and other receivables consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
As of |
|
As of |
|
|
|
December 31, |
|
June 30, |
|
June 30, |
|
|
|
2020 |
|
2021 |
|
2021 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
|
|
|
|
|
Receivables from third party payment service providers |
|
2,347 |
|
3,434 |
|
532 |
|
Interest receivables |
|
466 |
|
— |
|
— |
|
Deferred sponsorship and advertising expenses |
|
175 |
|
631 |
|
98 |
|
Prepaid insurance |
|
236 |
|
255 |
|
39 |
|
Utility deposits |
|
— |
|
15,619 |
|
2,419 |
|
Deferred expense* |
|
2,513 |
|
10,136 |
|
1,570 |
|
Receivables for disposal of long-term investments |
|
8,901 |
|
8,901 |
|
1,379 |
|
Deductible value-added input tax |
|
11,648 |
|
54,092 |
|
8,378 |
|
Others |
|
5,595 |
|
12,380 |
|
1,917 |
|
Less: allowance for doubtful accounts |
|
(8,901) |
|
(8,901) |
|
(1,379) |
|
Prepayments and other receivables, net |
|
22,980 |
|
96,547 |
|
14,953 |
The table below provides a reconciliation of the beginning and ending allowance for credit losses balance related to other receivables:
* 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.
32
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
8. PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
As of |
|
As of |
|
|
|
December 31, |
|
June 30, |
|
June 30, |
|
|
|
2020 |
|
2021 |
|
2021 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
|
|
|
|
|
Machinery and equipment |
|
— |
|
414,349 |
|
64,175 |
|
Electronics and office equipment |
|
33,353 |
|
33,950 |
|
5,258 |
|
Motor vehicles |
|
10,737 |
|
12,667 |
|
1,962 |
|
Leasehold improvements |
|
118,722 |
|
126,816 |
|
19,641 |
|
|
|
|
|
|
|
|
|
Property and equipment, cost |
|
162,812 |
|
587,782 |
|
91,036 |
|
Less: Accumulated depreciation |
|
(143,033) |
|
(244,546) |
|
(37,876) |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
19,779 |
|
343,236 |
|
53,160 |
Depreciation expenses for the six months ended June 30, 2020 and 2021 were approximately RMB14,146 and RMB41,129 (US$6,370), respectively.
33
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) 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 |
|
As of |
|
|
|
December 31, |
|
June 30, |
|
June 30, |
|
|
|
2020 |
|
2021 |
|
2021 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
Cost: |
|
|
|
|
|
|
|
Computer software |
|
28,424 |
|
30,246 |
|
4,686 |
|
License agreement |
|
151,177 |
|
151,177 |
|
23,414 |
|
Internet domain name |
|
1,512 |
|
2,481 |
|
384 |
|
Brand name |
|
86,049 |
|
468,422 |
|
72,549 |
|
|
|
267,162 |
|
652,326 |
|
101,033 |
|
Accumulated amortization: |
|
|
|
|
|
|
|
Computer software |
|
(23,154) |
|
(25,324) |
|
(3,922) |
|
License agreement |
|
(37,768) |
|
(37,768) |
|
(5,850) |
|
Internet domain name |
|
(837) |
|
(896) |
|
(139) |
|
Brand name |
|
(21,160) |
|
(29,126) |
|
(4,511) |
|
|
|
(82,919) |
|
(93,114) |
|
(14,422) |
|
|
|
|
|
|
|
|
|
Impairment *: |
|
|
|
|
|
|
|
Computer software |
|
(3,547) |
|
(3,547) |
|
(549) |
|
License agreement |
|
(113,409) |
|
(113,409) |
|
(17,565) |
|
Brand name |
|
(64,889) |
|
(64,889) |
|
(10,050) |
|
|
|
(181,845) |
|
(181,845) |
|
(28,164) |
|
Intangible assets, net |
|
2,398 |
|
377,367 |
|
58,447 |
* The impairment of RMB181,845 is related to the acquired intangible assets of the Multi Group that were recognized during the year ended December 31, 2019.
Amortization expenses for the six months ended June 30, 2020 and 2021 were approximately RMB1,160 and RMB8,832 (US$1,368), respectively. Annual estimated amortization expense for each of the five succeeding years is as follows:
|
|
|
|
|
|
|
|
|
RMB |
|
US$ |
|
|
|
|
|
|
|
2021 remaining |
|
19,382 |
|
3,002 |
|
2022 |
|
38,157 |
|
5,910 |
|
2023 |
|
37,885 |
|
5,868 |
|
2024 |
|
37,634 |
|
5,829 |
|
2025 |
|
37,623 |
|
5,827 |
|
2026 and thereafter |
|
206,686 |
|
32,011 |
|
|
|
|
|
|
|
Total |
|
377,367 |
|
58,447 |
34
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) 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 1.75 to 2.17 years. The Group’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table presents the operating lease related assets and liabilities recorded on the Group’s unaudited interim condensed consolidated balance sheet.
For the six months ended June 30, 2020, the Group had operating lease costs of RMB7,272 and recorded short-term lease costs of RMB1,382. For the six months ended June 30, 2021, the Group had operating lease costs of RMB3,167 (US$491) and recorded short-term lease costs of RMB1,246 (US$193) Cash paid for amounts included in the measurement of operating lease liabilities were RMB4,159 and RMB2,119 (US$328) for the six months ended June 30, 2020 and 2021, respectively. As of June 30, 2021, the weighted average remaining lease term was 1.75 to 2.17 years and the weighted average discount rate was 5.25% to 6.175%.
The following table summarizes the maturity of operating lease liabilities as of June 30, 2021:
35
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
11. SHORT-TERM LOANS
|
|
|
|
|
|
|
|
|
|
|
As of |
|
As of |
|
As of |
|
|
|
December 31, |
|
June 30, |
|
June 30, |
|
|
|
2020 |
|
2021 |
|
2021 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
|
|
|
|
|
Short-term loans |
|
— |
|
136,299 |
|
21,110 |
|
Total |
|
— |
|
136,299 |
|
21,110 |
In January 2021, for the purpose of acquisition, the Group entered into a loan agreement with Shanghai Bank, to borrow the overseas loan for a period of six months, with an amount of HKD173.4 million and a fixed interest rate of 6MHIBOR+200BPs per annum. The Company’s cash deposits in the amount of RMB155 million has been pledged under the loan. In March 2021, part of the loan in the amount of HKD15.6 million has been repaid. As of June 30, 2021, the principal of the loan was RMB131,299 (HKD$20,336). In July 2021, the loan have been repaid.
In January 2021, the Company further entered into loan agreements to borrow RMB18,000 and HKD11,000, respectively, for no more than three months, with a fixed interest rate of 6% per annum. As of June 30, 2021, both loans have been fully repaid.
In March and May 2021, the Company further entered into loan agreements to borrow RMB5,000 for no more than three months, with a fixed interest rate of 6% per annum. In July 2021, the loans have been fully repaid.
In March and May 2021, the Company, entered into a loan agreement and a pledge agreement for one year, pursuant to which the lender agreed to lend to the Company funds equal to 70%of the current fair market value (the “Loan-to-Value Ratio”) of 350.00971804 bitcoins and 120 bitcoins, respectively, with a fixed interest rate of 3.25% per annum and 2% service fee. As of June 2021, the loans have been fully settled by rendering the pledged bitcoins to the lender.
36
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
As of |
|
As of |
|
|
|
December 31, |
|
June 30, |
|
June 30, |
|
|
|
2020 |
|
2021 |
|
2021 |
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
|
|
|
|
|
Advance from end users* |
|
38,327 |
|
58,175 |
|
9,010 |
|
Business tax and other taxes payable |
|
1,798 |
|
1,723 |
|
267 |
|
Professional fees payable |
|
6,562 |
|
5,893 |
|
913 |
|
Promotional events payables |
|
2,077 |
|
2,717 |
|
421 |
|
Decoration payables |
|
175 |
|
4,133 |
|
640 |
|
Contingent consideration |
|
— |
|
99,137 |
|
15,354 |
|
Others |
|
7,021 |
|
11,644 |
|
1,805 |
|
|
|
|
|
|
|
|
|
Total |
|
55,960 |
|
183,422 |
|
28,410 |
* Advance from end users represents payments received by the Group in advance from the end users prior to the services to be provided.
13. CRYPTOCURRENCY ASSETS BORROWINGS
As of June 30, 2021, the Company had cryptocurrency assets borrowings of RMB38,508 (US$5,964), the equivalent of 28 bitcoins, 796 ETH, 6.9 million DOGE and many other kinds of cryptocurrency assets, which are payable to a third party.
14. INCOME TAXES
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.
USA
500.com USA is incorporated in the USA and does not conduct any substantive operations of its own. No provision for USA income tax has been made in the financial statements as 500.com USA had no assessable income for the six months ended June 30, 2020 and 2021.
British Virgin Islands
Under the current laws of the British Virgin Islands, subsidiaries incorporated in British Virgin Islands are not subject to tax on income or capital gains.
37
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
14. INCOME TAXES (continued)
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 2% of taxable income.
Malta
Under the current laws, profits tax in Malta is generally assessed at the rate of 35% of taxable income. When dividend is paid or declared to the holding company, the paying entity is entitled to claim 6/7 of the profit tax paid as refund, which may effectively reduce income tax rate to 5%.
Cyprus
Round Spot Services Ltd is incorporated in Cyprus and does not conduct any substantive operations of its own. No provision for Cyprus income tax has been made in the financial statements as Round Spot Services Ltd had no assessable income for the six months ended June 30, 2020 and 2021.
Hong Kong
Under the current laws, profits tax in Hong Kong is generally assessed at the rate of 16.5% of taxable income. As of June 30, 2021, the Hong Kong subsidiaries do not conduct any substantive operations of its own, no provision for Hong Kong income tax has been made in the financial statements.
People’s Republic of China
A new enterprise income tax law (the “EIT Law”) in the PRC was enacted and became effective on January 1, 2008. The EIT Law applies a uniform 25% enterprise income tax (“EIT”) rate to both foreign invested enterprises and domestic enterprises. Accordingly, subsidiaries and VIEs, are subject to the EIT rate of 25%in 2020 and 2021, respectively.
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$, which is the functional currency of the Company. The board of directors has authorized under the Plan the issuance of up to 12% of the Company’s issued and outstanding ordinary shares from time to time, on an as-exercised and fully diluted basis, upon exercise of awards granted under the Plan. The maximum term of any issued share option is ten years from the grant date.
38
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
15. SHARE-BASED PAYMENT (continued)
On June 26, 2020, the Company granted 12,977,740 RSUs to employees. For these rewards, 6,488,870 options were vested on July 1, 2020, and 6,488,870 options were vested on December 1, 2020.
On December 21, 2020, the Company granted and vested 4,500,000 RSUs to employees.
A summary of share option and restricted shares activity and related information for the years ended December 31, 2020 and for the six months ended June 30, 2021 are as follows:
Share options granted to employees and directors
39
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) 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
As of June 30, 2021, there was RMB38 (US$5.9) of unrecognized share-based compensation costs related to equity awards granted to employees and directors that is expected to be recognized over a weighted-average vesting period of 0.42 years. To the extent the actual forfeiture rate is different from the original estimate, actual share-based compensation costs related to these awards may be different from the expectation.
As of June 30, 2021, there was no unrecognized restricted share compensation costs related to equity awards granted to employees that is expected to be recognized. To the extent the actual forfeiture rate is different from the original estimate, actual restricted share compensation costs related to these awards may be different from the expectation.
As the share options granted to the consultants were fully vested at the grant date, the related compensation expenses were fully recognized in the unaudited interim condensed consolidated statement of comprehensive loss at the grant date.
40
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) 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 (continued)
The fair value of share options was determined using the binomial option valuation model, with the assistance from an independent third-party appraiser. The binomial model requires the input of highly subjective assumptions, including the expected share price volatility and the suboptimal early exercise factor. For expected volatilities, the Company has made reference to historical volatilities of several comparable companies. The sub-optimal early exercise factor was estimated based on the vesting and contractual terms of the awards and management’s expectation of exercise behavior of the grantees. The risk-free rate for periods within the contractual life of the options is based on market yield of U.S. Treasury Bond in effect at the time of grant. There was no share options granted for the six months ended June 30, 2021. The assumptions used to estimate the fair value of the share options granted for the six months ended June 30, 2020 are as follows:
The fair value of restricted shares was determined using the market price of the ordinary shares of the Company on the grant date.
Total share-based compensation expenses relating to options and restricted shares granted to employees and directors for the six months ended June 30, 2020 and 2021 are included in:
41
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
16. RELATED PARTY TRANSACTIONS
Amounts due from a Related Party
The balance as of December 31, 2020 consisted interest receivable with interest rate of 4.35% for a loan provided to the subsidiary of Loto Interactive by E-Sun Sky Network. In January 2021, the balance has been fully paid.
The balance as of June 30, 2021 consisted of the loan provided by Loto Interactive to a subsidiary of its equitiy securities without readily determinable fair values investee in prior year and was consolidated by the Group as a result of the consolidation of Loto Interactive on March 31, 2021. As of June 30, 2021, the balance of due from a related party was in the amount of RMB808 (US$125).
Amounts due to related parties
There was no amount due to related parties as of December 31, 2020.
The balance as of June 30, 2021 mainly consisted of the payment of property and equipment made by a former shareholder of a subsidiary of the Group on behalf of Loto Interactive, and outstanding payable for business cooperation due to a minority interest shareholder of a subsidiary of Loto Interactive, and the expense paid by a director of a subsidiary of the Group on behalf of Loto Interactive. As of June 30, 2021, the balance of due to related parties was in the amount of RMB2,491 (US$386).
Related Party transactions
For the six months ended June 30, 2020, the Company also paid expense on behalf of the Loto Interactive in the amount of RMB54. As of June 30, 2020, Loto Interactive has repaid the full amount to the Group.
42
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
17. COMMITMENTS AND CONTINGENCIES
Contractual arrangements among the Company and the VIEs
Under applicable PRC tax laws and regulations, arrangements and transactions among related parties may be subject to audit or scrutiny by the PRC tax authorities 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 PRC tax authorities 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 PRC tax authorities 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.
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, 2020 and June 31, 2021.
Indemnity cost
There was no indemnity cost occurred as of December 31, 2020 and June 30, 2021.
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 2020 and for the six months ended June 30, 2021.
43
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
17. COMMITMENTS AND CONTINGENCIES (continued)
Legal proceedings (continued)
On February 13, 2020, a securities class action lawsuit was filed against BIT Mining Limited and certain of the Group’s current and former officers (collectively, “Defendants”) in the United States District Court for the Eastern District of New York. The complaint alleges, among other things, that the Group made materially misleading statements and omissions regarding its compliance with applicable anti-corruption laws and regulations. In June 2020, the lead plaintiff filed an amended complaint. In November 2020, the lead plaintiff filed a second amended complaint. The claims raised in the first amended complaint do not differ materially from those raised in the original complaint. The second amended complaint raises the same claims as the first amended complaint, but alleges additional facts in support of those claims. On December 21, 2020, the Company served its Motion to Dismiss the second amendment complaint (“Motion to Dismiss”). On January 20, 2021, lead plaintiff served its opposition to the Company’s Motion to Dismiss. On February 19, 2021, the Company filed all papers associated with its Motion to Dismiss, including the Company’s reply in further support of the Motion to Dismiss. The Group believe it has meritorious defenses to each of the claims in this lawsuit and is prepared to vigorously defend against its allegations. On August 13, 2021, a Report and Recommendation that the Motion to Dismiss was granted was issued. Plaintiffs filed objections to the Report and Recommendation on August 27, 2021 and the defendants responded on September 10, 2021. There can be no assurance, however, that the Group will be successful. The Group cannot reasonably estimates the amount, or range, of potential losses, if any, related to the lawsuit. Accordingly, the Group has not recorded any liabilities in respect of this lawsuit as of June 30, 2021.
On January 15, 2020, a securities class action lawsuit, making allegations virtually identical with the abovementioned lawsuit filed on February 13, 2020, was filed in the United States District Court for the District of New Jersey. On March 23, 2020, the plaintiff noticed his voluntary dismissal of this case, and on April 8, 2020, the clerk of the Court was ordered to close the case file. As such, this case is now terminated.
Operating lease commitments
The information of lease commitments is provided in Note 10.
44
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) 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 2020 and 2021 presented is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
2021 |
||||||||
|
|
|
RMB |
|
RMB |
|
RMB |
|
US$ |
|
RMB |
|
US$ |
|
|
|
Class A |
|
Class B |
|
Class A |
|
Class A |
|
Class B |
|
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 income per ordinary share—basic |
|
(122,658) |
|
(488) |
|
(84,758) |
|
(13,124) |
|
(0.02) |
|
(0.002) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding used in calculating basic losses per share |
|
428,302,535 |
|
1,703,395 |
|
542,881,483 |
|
542,881,483 |
|
99 |
|
99 |
|
Denominator used for losses per share |
|
428,302,535 |
|
1,703,395 |
|
542,881,483 |
|
542,881,483 |
|
99 |
|
99 |
|
Losses per share from continuing operations — basic |
|
(0.29) |
|
(0.29) |
|
(0.16) |
|
(0.02) |
|
(0.16) |
|
(0.02) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
(122,658) |
|
(488) |
|
(84,758) |
|
(13,124) |
|
(0.02) |
|
(0.002) |
|
Reallocation of net loss from continuing operations attributable to BIT Mining Limited’s ordinary shareholders as a result of conversion of Class B to Class A shares |
|
(488) |
|
— |
|
(0.02) |
|
(0.002) |
|
— |
|
— |
|
Net loss from continuing operations attributable to ordinary shareholders |
|
(123,146) |
|
(488) |
|
(84,758) |
|
(13,124) |
|
(0.02) |
|
(0.002) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding used in calculating basic losses per share |
|
428,302,535 |
|
1,703,395 |
|
542,881,483 |
|
542,881,483 |
|
99 |
|
99 |
|
Conversion of Class B to Class A ordinary shares |
|
1,703,395 |
|
— |
|
99 |
|
99 |
|
— |
|
— |
|
Denominator used for losses per share |
|
430,005,930 |
|
1,703,395 |
|
542,881,582 |
|
542,881,582 |
|
99 |
|
99 |
|
Losses per share from continuing operations—diluted |
|
(0.29) |
|
(0.29) |
|
(0.16) |
|
(0.02) |
|
(0.16) |
|
(0.02) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses from continuing operations per ADS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator used for losses per ADS - basic |
|
42,830,254 |
|
— |
|
54,288,148 |
|
54,288,148 |
|
— |
|
— |
|
Denominator used for losses per ADS - diluted |
|
43,000,593 |
|
— |
|
54,288,158 |
|
54,288,158 |
|
— |
|
— |
|
Losses from continuing operations per ADS – basic |
|
(2.86) |
|
— |
|
(1.56) |
|
(0.24) |
|
— |
|
— |
|
Losses from continuing operations per ADS – diluted |
|
(2.86) |
|
— |
|
(1.56) |
|
(0.24) |
|
— |
|
— |
19. EQUITY TRANSACTIONS
The authorized share capital consisted of 2,000,000,000 ordinary shares at a par value of US$0.00005 per share, of which 1,599,935,000 shares were designated as Class A ordinary shares, 65,000 shares as Class A preference shares and 400,000,000 as Class B ordinary shares. The rights of the holders of Class A and Class B ordinary shares are identical, except with respect to voting and conversion rights. Each share of Class A ordinary shares is entitled to one vote per share and is not convertible into Class B ordinary shares under any circumstances. Each share of Class B ordinary shares is entitled to ten votes per share and is convertible into one Class A ordinary share at any time by the holder thereof. Preference Share is equal to that of 10,000 Class A ordinary shares and cannot be converted into Class A ordinary shares, Class B ordinary shares, or ADRs; and are not entitled to receive dividends
45
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
19. EQUITY TRANSACTIONS (continued)
For the six months ended June 30, 2020, 13,000 share options were exercised at the exercise prices of US$0.2 per share, resulting in the issuance of 13,000 Class A ordinary shares at US$0.00005 each for an aggregate consideration of US$2.6. During the six months ended June 30, 2020, 10,000,000 Class B ordinary shares were converted to Class A ordinary shares. As of June 30, 2020, 430,014,792 and 99 Class A and Class B ordinary shares were issued and outstanding, respectively.
For the six months ended June 30, 2021, 3,508,990 share options were exercised at the exercise prices of US$0.2 per share resulting in the issuance of 3,508,990 Class A ordinary shares at US$0.00005 each for an aggregate consideration of US$2,496, and 28,884,300 restricted shares were vested and exercised without exercise prices. For the six months ended June 30, 2021, 141,809,258 Class A ordinary shares were issued for private placement and business combinations. As of June 30, 2021, 604,330,240 and 99 Class A and Class B ordinary shares were issued and outstanding, respectively.
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 65,000 Class A preference shares (the “Preference Shares”) at US$1.0 per share, for a total consideration of US$65,000, to Good Luck Capital Limited (“Good Luck”), a company wholly-owned by Mr. Law. Following the issuance of the Preference Shares, Mr. Man San Vincent Law’s aggregate voting power increased from approximately 17.66% to approximately 60.28% (based on the Company’s total outstanding share capital as of March 31, 2021 and assuming issuance of all shares under the Share Exchange Agreement). The following is a summary of the key terms associated with the Preference Shares.
(1) The voting power of each Preference Share is equal to that of 10,000 Class A ordinary shares of the Company, subject to proportional reduction commensurate with the number of Class A ordinary shares beneficial owned by Good Luck;
(2) The Preference Shares cannot be converted into Class A ordinary shares, Class B ordinary shares, or ADRs;
(3) The Preference Shares are not entitled to receive dividends;
(4) If Good Luck transfers the Preference Shares to a third party which is not an affiliate of Good Luck, or when Good Luck ceases to be controlled by any person holding executive office in or being a member of the board of director of the Company, Class A Preference Shares shall cease to have any voting right and
(5) If Mr. Law ceases to serve as a director of the Company, the Company shall be entitled to redeem the Class A Preference Shares at the original subscription price.
46
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
20. FAIR VALUE MEASUREMENT
As of December 31, 2020 and June 30, 2021, information about inputs into the fair value measurement of the Group’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement |
||||
|
|
|
|
|
at December 31, 2020 |
||||
|
|
|
|
|
Quoted prices |
|
|
|
|
|
|
|
|
|
in active |
|
Significant |
|
|
|
|
|
Total fair |
|
markets for |
|
other |
|
Significant |
|
|
|
value at |
|
identical |
|
observable |
|
unobservable |
|
|
|
December 31, |
|
assets |
|
inputs |
|
inputs |
|
|
|
2020 |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
Description |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
Wealth management products |
|
232,579 |
|
— |
|
232,579 |
|
— |
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
232,579 |
|
— |
|
232,579 |
|
— |
47
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
20. FAIR VALUE MEASUREMENT (continued)
The Group measured the fair value of its weath management products based on alternative pricing sources and models utilizing market observable inputs and has classified those as level 2 measurement.
The Group’s financial liability based on Level 2 inputs consists of cryptocurrency assets borrowings, as derivative instruments, including bitcoin, ether and other kinds of cryptocurrencies borrowed from third parties. The Group measures the fair value of its derivative contract by taking the quoted prices from price aggregator websites, which the Group considers to be a Level 2 fair value input under ASC 820 “Fair Value Measurements and disclosures”.
The Group’s financial liability based on Level 3 inputs consists of a contingent consideration arrangement related to the acquisition of BTC.com Pool Business. The Company is contractually obligated to pay contingent consideration payments to Blockchain Alliance Holding if BTC.com Pool Business realizes certain net profit.
The Group measures certain financial assets, including the investment under the measurement alternative method and equity method at fair value on a nonrecurring basis only if they were determined to be impaired on an other-than-temporary basis. The Group’s non-financial assets, such as intangible assets, cryptocurrency assets goodwill and property and equipment, would be measured at fair value when an impairment charge is recognized.
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 instead of the previously geographic location operating results. As a result, the Group has three reportable segments, including the Mining pool business which acquired, the data center business, the cryptocurrency mining and others consisting of online gaming in Europe and the sport information services. Neither of these operating segments were individually reportable; therefore, we combined them in “Others” in accordance with ASC 280.
48
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
21. SEGMENT REPORTING (continued)
The following table presents summary information by segment for the six months ended June 30, 2020 and 2021, respectively.
49
BIT MINING LIMITED
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Amounts in thousands of Renminbi (“RMB”) and United States dollars (“US$”) and EUR, except for number of shares and per share (or ADS) data)
22. SUBSEQUENT EVENTS
Deployment of Ethereum Mining Operations
The Group has commenced ethereum mining operations outside of mainland China, with a theoretical maximum total hash rate capacity of 960 GH/s deployed as of today. The Group currently produce approximately 17 ethereum per day. Ethereum mining machines with a total hash rate capacity of 4,800 GH/s are expected to be deployed by the end of October 2021. The ethereum mining operations will be expected to bring considerable revenue for the Group in the third quarter of 2021.
International Strategy of Cryptocurrency Mining
As of today, the theoretical maximum total hash rate capacity of bitcoin mining machines of the Group is approximately 1,189.6 PH/s. As of today, the Group have delivered 7,849 bitcoin mining machines with a total hash rate capacity of 292.7 PH/s to Kazakhstan, of which 3,245 bitcoin mining machines, with a total hash rate capacity of 126.75 PH/s, have been deployed at data centers in Kazakhstan and 4,604 bitcoin mining machines are waiting to be deployed. As of today, the Group have delivered 4,300 bitcoin mining machines with a total hash rate capacity of 258.6 PH/s to USA. The Group has adopted a development strategy to focus on expanding its cryptocurrency mining operations internationally.
In terms of data center business, the Group has announced that it has entered into several term sheets to invest in cryptocurrency mining data centers internationally. The Group is now in the process of constructing one of the new data centers outside of mainland China, which is expected to begin operation late in the third quarter of 2021. In the meantime, the Company is proactively seeking additional high-quality mining resources to better execute its international development strategy.
Private Placement of US$50 million
In July 2021, the Company have completed the private placement of of 100,000,000 Class A ordinary shares and warrants to purchase up to an additional 100,000,000 Class A ordinary shares, at a purchase price of US$5.00 per ten Class A ordinary shares, with one warrant included in the price of each Class A ordinary share. The private placement resulted in gross proceeds to the Company of $50.0 million before the deduction of placement agent fees and expenses and offering expenses payable by the Company. The warrants have a term of three years, are exercisable six months following their issuance date and have an exercise price of US$6.81 per ten Class A ordinary shares. Ten Class A ordinary shares can be converted into one American depositary share of the Company (collectively, the “ADSs”) if certain conditions are satisfied.
Removal of VIE Structure and Disposal of Chinese Lottery Business
The Group have previously conducted the lottery business in 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 VIEs”), and their respective shareholders. On July 23, 2021, the Group announced its decision to dispose of its Chinese lottery related business and the Group terminated all of its lottery business-related VIE contracts. The lottery business-related VIE subsidiaries will be deconsolidated and their financial results will no longer be included in the Group’s consolidated financial statements as a result of eliminating the VIE structure.
On July 23, 2021, Loto Shenzhen, a subsidiary of Loto Interactive, terminated all contractual arrangements with Zhejiang Keying. The shareholders of Zhejiang Keying entered into an equity transfer agreement with Loto Shenzhen to transfer all of Zhejiang Keying’s equity interests to Loto Shenzhen. As of September 30, 2021, Zhejiang Keying is in the process of completing the business registration of equity changes. The shareholders of Zhejiang Keying also executed a letter of undertaking in favor of Loto Shenzhen and undertook to transfer all assets held by Zhejiang Keying to Loto Shenzhen in the event that the equity transfer could not be completed. The Group believes that the completion of the business registration of the equity changes of Zhejiang Keying is probable and Loto Shenzhen still effectively controls Zhejiang Keying based on the above arrangements despite the termination of the VIE arrangements.
50
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, 2020 and 2021. 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, 2020 and June 30, 2021 and for the six months ended June 30, 2020 and 2021.” We also recommend that you read our management’s discussion and analysis and our audited consolidated financial statements for fiscal year 2020, and the notes thereto, which appear in our annual report on Form 20-F for the year ended December 31, 2020, or the Annual Report, filed with the U.S. Securities and Exchange Commission, or the SEC, on April 14, 2021.
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 completed the transformation of our business into an enterprise that primarily provides cryptocurrency mining, data center operation and mining pool services. To a lesser extent, we also provide gaming, sports information and other services. As of September 30, 2021, we have discontinued and disposed of all lottery related businesses in mainland China.
Cryptocurrency mining business
On February 26, 2021, we officially began generating revenues from cryptocurrency mining operations. As of June 30, 2021, we produced 219 bitcoins and recognized revenues of approximately RMB73.5 million (US$11.4 million from our cryptocurrency mining business. For our cryptocurrency mining business, the theoretical maximum total hash rate capacity of our bitcoin mining machines is approximately 1,189.6 PH/s as of September 30, 2021.
We have adopted a development strategy to focus on expanding our cryptocurrency mining operations internationally. In July 2021, we commenced ethereum mining operations outside of mainland China, with a theoretical maximum total hash rate capacity of 960 GH/s deployed as of September 30, 2021. We currently produce approximately 17 ethereum per day. Ethereum mining machines with a total hash rate capacity of 4,800 GH/s are expected to be deployed by the end of October 2021. As of September 30, 2021, we have produced 751 ethereum and generated revenues of RMB16.3 million (US$2.5 million). We have also expanded our cryptocurrency mining business in Kazakhstan. As of September 30, 2021, we have delivered 7,849 bitcoin mining machines with a total hash rate capacity of 292.7 PH/s to Kazakhstan, of which 3,245 bitcoin mining machines, with a total hash rate capacity of 126.75 PH/s, have been deployed at data centers in Kazakhstan and 4,604 bitcoin mining machines are waiting to be deployed. As of September 30, 2021, we also have delivered 4,300 bitcoin mining machines with a total hash rate capacity of 258.6 PH/s to USA.
Data center business
We conduct our data center business through Loto Interactive Limited (HKEX: 08198), or Loto Interactive, and its subsidiaries. We completed the subscription of 54.2% of shares of Loto Interactive on March 31, 2021. As a result, the financial results of Loto Interactive have been included in our consolidated financial statements since March 31, 2021. On June 18, 2021, we completed a cash offer to acquire all the shares in issuance of Loto Interactive other than those already owned or agreed to be acquired by us, and a cash offer for the cancellation of all options of Loto Interactive. As a result, our ownership of Loto Interactive increased to 59.79%. On June 21, 2021, our two big data centers in Sichuan suspended their operations according to the written notice from State Grid Sichuan Ganzi Electric Power Co., Ltd.. From March 31, 2021 to June 30, 2021, data centers in Sichuan recognized revenues of approximately RMB73.8 million (US$11.4 million).
In May 2021, we entered into several term sheets to invest in cryptocurrency mining data centers in overseas jurisdictions, such as the United States and Kazakhstan. We are now in the process of constructing one of our new data centers outside of mainland China,
1
which is expected to begin operation in the late third quarter of 2021. In the meantime, we are proactively seeking additional high-quality mining resources to better execute our global development strategy. For example, in September 2021, we entered into a membership interest purchase agreement and certain other auxiliary agreements with Viking Data Centers, LLC to jointly invest in the development of a cryptocurrency mining data center space in Ohio with access to power capacity of up to 85 megawatts.
Mining pool business
On April 15, 2021, we completed the acquisition of the entire mining pool business of Bitdeer Technologies Holding Company operated under BTC.com, including the domain name BTC.com and the cryptocurrency wallet of BTC.com. As a leading multi-currency comprehensive service mining pool, the total hash rate capacity of BTC.com has accounted for about 10% of the entire bitcoin hash rate during the most recent year and the actual hash rate has remained fairly stable so far. From April 15, 2021 to June 30, 2021, the mining pool business recognized revenues of approximately RMB2,729.9 million (US$422.8 million) and incurred cost of revenue of approximately RMB2,675.9 million (US$414.4 million).
Gaming and other services
We provide (i) online gaming services in Europe through our own platform, (ii) sports information services and other services such as online spot commodity trading services in the PRC, and (iii) money lending business through Loto Interactive. We began to generate revenues from online gaming services in Europe in July 2017, after we acquired a 93% equity interest in The Multi Group Ltd. (“TMG”). We acquired the remaining 7% equity interest in April 2020. TMG currently holds licenses from Curacao, Malta, the United Kingdom, Ireland and Sweden to operate online gaming sites. We generated revenues of RMB6.0 million and RMB9.3 million (US$1.4 million) from TMG’s online gaming services for the six months ended June 30, 2020 and 2021, respectively. Our newly acquired subsidiary, Loto Interactive, also engages in the distribution of online mobile games.
Since June 2020, we have provided users with detailed information on specific sports matches generated by our proprietary analysis engine in exchange for a fee. Revenues from sports information services were RMB0.7 million and RMB6.3 million (US$1.0 million) for the six months ended June 30, 2020 and 2021, respectively.
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 will be deconsolidated and their financial results will no longer be included in our consolidated financial statements in the third quarter of this year as a result of eliminating the VIE structure.
Our total revenues were RMB2,893.5 million (US$448.1 million) for the six months end June 30, 2021, representing a significant increase of RMB2,886.8 million from RMB6.7 million for the six months ended June 30, 2020. We acquired Loto Interactive on March 31, 2021 and the mining pool business on April 15, 2021, which contributed to the significant growth of our total revenues.
Net loss attributable to BIT Mining Limited was RMB123.1 million and RMB84.8 million (US$13.1 million) for the six months ended June 30, 2020 and 2021, respectively. Net loss attributable to BIT Mining Limited for the six months ended June 30, 2020 was partially due to share-based compensation expenses of RMB23.8 million and an impairment provision of RMB33.7 million provided for long-term investment. Net loss attributable to BIT Mining Limited for the six months ended June 30, 2021 was partially due to an impairment provision of RMB57.3 million (US$8.9 million) provided for cryptocurrency assets, mainly due to the decreasing market prices for cryptocurrencies and net loss on disposal of cryptocurrencies of RMB55.6 million (US$8.6 million) related to the decreasing market prices for cryptocurrencies during the six months ended June 30, 2021 by using first-in-first-out (FIFO) to calculate the cost of disposition.
2
Description of Key Statement of Operations Items from Continuing Operation
Revenues
The table below sets forth our net revenues by service types for the six months ended 2020 and 2021:
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
||||
|
|
|
2020 |
|
2021 |
|
||
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
(in thousands) |
|
||||
|
Cryptocurrency mining |
|
— |
|
73,462 |
|
11,378 |
|
|
Data center services |
|
— |
|
73,762 |
|
11,424 |
|
|
Mining pool |
|
— |
|
2,729,901 |
|
422,808 |
|
|
Online gaming services in Europe and beyond |
|
6,019 |
|
9,330 |
|
1,445 |
|
|
Sports information services |
|
740 |
|
6,320 |
|
979 |
|
|
Others |
|
(47) |
|
703 |
|
109 |
|
|
Total revenues |
|
6,712 |
|
2,893,478 |
|
448,143 |
|
Our total revenues increased significantly, from RMB6.7 million in the six months ended June 30, 2020 to RMB2,893.5 million in the six months ended June 30, 2021, primarily due to the revenues attributable to our mining pool business, which was consolidated by us on April 15, 2021 and accounted for approximately 94.3% of the total revenues for the six months ended June 30, 2021. Our cryptocurrency mining business and data center business accounted for approximately 2.5% of our total revenues for the six months ended June 30, 2021, respectively.
Operating Costs and Expenses
The table below sets forth our operating costs and expenses from continuing operations for the six months ended June 30, 2020 and 2021:
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
||||
|
|
|
2020 |
|
2021 |
|
||
|
|
|
RMB |
|
RMB |
|
US$ |
|
|
|
|
(in thousands) |
|
||||
|
Operating Costs and Expenses: |
|
|
|
|
|
|
|
|
Cost of revenue |
|
8,600 |
|
2,818,901 |
|
436,592 |
|
|
Sales and marketing |
|
8,040 |
|
5,909 |
|
915 |
|
|
General and administrative |
|
65,249 |
|
68,501 |
|
10,609 |
|
|
Service development |
|
17,216 |
|
9,164 |
|
1,419 |
|
|
Total operating costs and expenses |
|
99,105 |
|
2,902,475 |
|
449,535 |
|
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.
Our cost of revenue primarily consists of (i) the costs for the allocation to pool participants associated with the mining pool business, (ii) the technology service expenses associated with data center business, (iii) the server hosting expenses associated with the cryptocurrency mining business, (iv) depreciation cost primarily for the mining machines, (v) amortization cost primarily for amortization of intangible assets arising from business combination, (vi) costs related to the online gaming business of TMG, including the 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, 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 and 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, and (vii) server leasing and maintenance expenses, which consist primarily of leasing expense of servers and other equipment used in providing online services.
3
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) bad debt provisions of other receivables, which consist primarily of bad debt provision 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 and related parties.
Government Grant
For the six months ended June 30, 2021 and 2020, 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 the accounting method of first-in-first-out (FIFO) to calculate the cost of disposition.
Impairment of Cryptocurrencies
Impairment of cryptocurrencies was related to the cryptocurrencies assets including the part of cryptocurrencies payable to pool participants related to mining pool business due to the decreasing market prices for cryptocurrency assets.
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.
Gain on previously held equity interest
Gain on previously held equity interest 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.
Impairment of long-term investments
The impairment loss for the six months ended June 30, 2020 was primarily related to our 40.65% (later changed to 59.79% in 2021) equity interest in Loto Interactive, which was acquired in June 2017.
4
Gain from disposal of subsidiaries
For the six months ended June 30, 2021, we recognized a disposition gain of RMB1.2 million (US$0.2 million) in connection with our disposal of 500.com Nihon Co., Ltd. in February 2021, Beijing Lewanwuxian Information Technology Co., Ltd., a subsidiary of Loto Interactive, in June 2021 and 20% of the equity of our equity method investment of Shenzhen Jinyingzaixian Technology Service Co., Ltd. in June 2021.
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.
6
About Non-GAAP Financial Measures
To supplement our financial results presented in accordance with U.S. GAAP, we use non-GAAP financial measures, which are adjusted from results based on U.S. GAAP to exclude share-based compensation expenses, impairment of long-term investments, impairment of cryptocurrencies, net loss on disposal of cryptocurrencies, changes in fair value of derivative instrument, gain on previously-held equity interest and deferred tax benefit relating to valuation allowance in our consolidated affiliated entities. Reconciliations of non-GAAP financial measures to U.S. GAAP financial measures are set forth in table at the end of this release, which provide more details on the non-GAAP financial measures.
Non-GAAP financial information is provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors' overall understanding of the historical and current financial performance of our continuing operations and prospects for the future. Non-GAAP financial information should not be considered a substitute for or superior to U.S. GAAP results. In addition, calculations of this non-GAAP financial information may be different from calculations 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：
The six months ended June 30, 2021 compared with the six months ended June 30, 2020
Revenues
Our total revenues increased significantly from RMB6.7 million for the six months ended June 30, 2020 to RMB2,893.5 million (US$448.1million) for the six months ended 2021, primarily attributable to the acquisition of our mining pool business, and our strategy to transform our business into a cryptocurrency business and explore market opportunities in the cryptocurrency mining industry.
7
Revenues generated from mining pool business, which was consolidated from April 15, 2021, were RMB2,729.9 million (US$422.8 million) and accounted for approximately 94.3% of the total revenues for the six months ended June 30, 2021. We recognize the mining pool revenues on a gross basis. The corresponding cost of revenue of the mining pool business was RMB2,675.9 million (US$414.4 million), primarily attributable to the allocation to pool participants.
Revenues generated from the data center business, which was consolidated from March 31, 2021, were RMB73.8 million (US$11.4 million) and accounted for approximately 2.5% of the total revenues for the six months ended June 30, 2021.
Revenues generated from cryptocurrency mining business, which we started from February 2021, were RMB73.5 million (US$11.4 million) and accounted for approximately 2.5% of the total revenues for the six months ended June 30, 2021.
Operating costs and expenses
Our operating costs and expenses increased significantly from RMB99.1 million for the six months ended June 30, 2020 to RMB2,902.5 million (US$449.5 million) for the six months ended June 30, 2021, primarily due to the following:
Cost of Revenue. Our cost of revenue increased from RMB8.6 million for the six months ended June 30, 2020 to RMB2,818.9 million (US$436.6 million) for the six months ended June 30, 2021. The increase was primarily due to a significant increase of RMB2,675.9 million (US$414.4 million) in cost for the allocation to pool participants associated with the mining pool business and an increase of RMB55.3 million (US$8.6 million) in service expense associated with data center business.
Sales and marketing expenses. Sales and marketing expenses decreased by 26.5% from RMB8.0 million for the six months ended June 30, 2020 to RMB5.9 million (US$0.9 million) for the six months ended June 30, 2021. The decrease was mainly due to including (i) a decrease of RMB2.3 million in share-based compensation expenses associated with share options granted to our directors and employees, and (ii) a decrease of RMB1.2 million in salary and benefit expenses as a result of decrease in headcount, which was partially offset by an increase of RMB2.1 million in marketing and promotion expense.
General and administrative expenses. General and administrative expenses increased by 5.0% from RMB65.2 million for the six months ended June 30, 2020 to RMB68.5 million (US$10.6 million) for the six months ended 2021. The increase was mainly due to (i) an increase of RMB22.8 million in third-party professional service fees mainly associated with the acquisition activities, (ii) an increase of RMB3.3 million in salary and benefit expenses for employees, which was primarily caused by an increase number of employees from acquired companies, (iii) an increase of RMB1.5 million in travel, communication and other business expenses, (iv) an increase of RMB1.4 million in transaction expense associated with mining pool business, which was partially offset by (i) a decrease of RMB15.9 million in share-based compensation expenses associated with share options granted to our directors and employees granted and mainly expensed in 2020, (ii) a decrease of RMB8.5 million in depreciation expense mainly associated with leasehold improvements for the partial termination of office lease, and (iii) a decrease of RMB2.4 million in office rental expenses which was primarily attributable to the termination of office lease.
Service development expenses. Service development expenses decreased by 46.8% from RMB17.2 million for the six months ended June 30, 2020 to RMB9.2 million (US$1.4 million) for the six months ended June 30, 2021. The decrease was primarily due to (i) a decrease of RMB5.0 million in share-based compensation expenses associated with restricted share units granted to our service development employees, (ii) a decrease in rental expenses from RMB2.8 million which was primarily related to the termination of office lease, and (iii) a decrease of RMB1.1 million in salary and benefit expenses for employees primarily due to the decrease in the number of employees.
Other operating income
Other operating income decreased by 74.9% from RMB4.5 million for the six months ended June 30, 2020 to RMB1.1 million (US$0.2 million) for the six months ended June 30, 2021.
Net Loss on disposal of cryptocurrencies
Net loss on disposal of cryptocurrencies was RMB55.6 million (US$8.6 million) for the six months ended June 30, 2021, which was related to the decreasing market prices for cryptocurrencies by using the accounting method of first-in-first-out (FIFO) to calculate the cost of disposition.
8
Impairment of Cryptocurrencies
Impairment of cryptocurrencies was RMB57.3 million (US$8.9 million) for the six months ended June 30, 2021, which was related to the cryptocurrencies assets including the part of cryptocurrencies payable to pool participants related to mining pool business due to the decreasing market prices for cryptocurrency assets.
Changes in fair value of derivative instrument
Changes in fair value of derivative instrument was RMB5.4 million (US$0.8 million) for the six months ended June 30, 2021, which was related to the changes in fair value of the cryptocurrency assets borrowings from the third-party as derivative instrument.
Operating loss
As a result of the foregoing factors, we recorded operating loss of RMB117.8 million (US$18.2 million) for six months ended June 30, 2021, representing an increase of RMB28.7 million, compared with operating loss of RMB89.1 million for the six months ended June 30, 2020.
Gain on previously held equity interest
Gain on previously held equity interest was RMB36.1 million (US$5.6 million) 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.
Impairment of long-term investments.
Impairment of long-term investments was RMB33.7 million for the six months ended June 30, 2020. The impairment loss for the six months ended June 30, 2020 was provided for our 40.65% (later changed to 33.74% in October 2020 and to 54.2% on March 31, 2021 and further to 59.79% on June 18, 2021) equity interest in Loto Interactive, which was acquired in June 2017.
Loss before income taxes
Loss before income taxes was RMB90.4 million (US$14.0 million) for the six months ended June 30, 2021, a decrease of RMB34.7 million compared with loss before income taxes of RMB125.1 million for the six months ended June 30, 2020.
Income tax benefit
We recorded income tax benefit of RMB3.7 million for the six months ended June 30, 2020. Income tax benefit was primarily due to a reversal of uncertain tax liabilities and deferred tax liabilities.
Net loss
As a result of the foregoing factors, we recorded net loss of RMB90.4 million (US$14.0 million) for the six months ended June 30, 2021, as compared to net loss of RMB121.5 million for the six months ended June 30, 2020.
Net loss attributable to BIT Mining Limited
We recorded net loss attributable to BIT Mining Limited of RMB84.8 million (US$13.1 million) for the six months ended June 30, 2021, as compared to net loss attributable to BIT Mining Limited of RMB123.1 million for the six months ended June 30, 2020. We also recorded non-GAAP net loss attributable to BIT Mining Limited of RMB13.0 million (US$2.0 million) for the six months ended June 30, 2021, as compared to non-GAAP net loss attributable to BIT Mining Limited of RMB69.3 million for the six months ended June 30, 2020.
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, 2021, we had RMB65.4 million (US$10.1 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 in mainland China and overseas, and prior to the termination of the VIE arrangements in July 2021,
9
through our then consolidated affiliated entities in mainland China. Our PRC subsidiaries’ ability to make dividends or other cash payments to us are subject to various restrictions under PRC laws and regulations. Prior to the termination of our VIE arrangement in July 2021, although we consolidated the results of our then PRC consolidated affiliated entities, we did not have direct access to their cash and cash equivalents or future earnings, but could direct the use of their cash through agreements that provide us with effective control of these entities. Moreover, we received service fees from them in exchange for certain technology consulting and other services provided by us and the use of certain intellectual properties owned by us. As of the date of this interim report, we don’t maintain any VIE structure in China.
We believe that our current cash and the net proceeds we 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 that we have suspended all of our online sports lottery sales since April 4, 2015 and are currently not generating any revenue from sports lottery sales. We also have reduced the 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. All these factors combined 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 and our ability to pay dividends to our shareholders. 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, 2020 and 2021 indicated.
Net cash used in operating activities
Net cash used in operating activities for the six months ended June 30, 2021 was RMB106.3 million (US$16.5 million), which was primarily attributable to (i) net loss of RMB90.4 million adjusted by subtracting RMB50.0 million of depreciation and amortization expenses, (ii) impairment of cryptocurrency assets of RMB57.3 million, (iii) net loss on disposal of cryptocurrencies of RMB55.6 million, (iv) loss from equity method investments of RMB8.8 million, (v) an increase in accounts payable of RMB70.4 million, and (vi) amortization of right-of-use assets of RMB2.7 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 RMB36.1 million, (ii) changes in fair value of derivative instrument of RMB5.4 million, (iii) gain on disposal of subsidiary of RMB1.2 million, (iv) an increase of cryptocurrency assets of RMB159.4 million, (v) a decrease of accrued expenses and other current liabilities of RMB33.9 million, (vi) a decrease in accrued payroll and welfare payable of RMB11.0 million, and (vii) an increase in prepayments and other receivables of RMB11.3 million.
Net cash used in operating activities for the six months ended June 30, 2020 was RMB39.8 million, which was primarily attributable to (i) net loss of RMB121.5 million adjusted by subtracting RMB23.8 million of share-based compensation, (ii) depreciation and amortization expenses of RMB15.3 million, (iii) impairment on long-term investments of RMB33.7 million, (iv) loss from equity method investments of RMB8.0 million, (v) a decrease in prepayments and other receivables of RMB3.3 million, (vi) an increase in accrued expenses and other current liabilities of RMB2.3 million, and (vii) amortization of right-of-use assets of RMB12.4 million. Net cash used in operating activities for the six months ended June 30, 2020 was partially offset by (i) a decrease in operating lease liabilities of RMB10.4 million, (ii) deferred tax benefits of RMB3.7 million, and (iii) a decrease in accrued payroll and welfare payable of RMB3.8 million.
10
Net cash used in investing activities
Net cash used in investing activities for the six months ended June 30, 2021 was RMB211.4 million (US$32.7 million), which was primarily attributable to (i) cash paid for acquisition of property and equipment of RMB163.9 million, and (ii) cash paid for business combination, net of cash received of RMB42.4 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 RMB10.4 million, (ii) cash received from return of long-term investments of RMB3.5 million, and (iii) cash proceeds from disposal of long-term investments of RMB2.7 million.
Net cash used in investing activities for the six months ended June 30, 2020 was RMB29.1 million, which was primarily attributable to (i) cash paid for acquisition of long-term investments of RMB14.8 million, and (ii) cash paid for short-term investments of RMB80.0 million. Net cash used in investing activities for the six months ended June 30, 2020 was partially offset by (i) cash received from return of time deposits of RMB24.0 million, (ii) repayment of loans provided to related and third-parties of RMB12.3 million, and (iii) cash received from return of short-term investments of RMB30.0 million.
Net cash provided by financing activities
Net cash provided by financing activities for the six months ended June 30, 2021 was RMB351.6 million (US$54.5 million) which was primarily attributable to (i) proceeds from the exercise of share-based awards of RMB16.5 million, (ii) proceeds from short-term bank borrowings of RMB303.3 million, and (iii) proceeds from the private placements of RMB74.6 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 RMB42.8 million.
Net cash provided by financing activities for the six months ended June 30, 2020 was RMB0.03 million which was primarily attributable to proceeds from the exercise of share-based awards.
Capital Expenditures
We made capital expenditures, including for property and equipment and intangible assets, of RMB0.6 million and RMB163.9 million (US$25.4 million) for the six months ended June 30, 2020 and 2021, respectively. In addition, our capital expenditures for the six months ended June 30, 2021 primarily consisted of purchases of bitcoin and ethereum mining machines. 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 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; |
11
|
· |
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 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.
12
LOTO INTERACTIVE LIMITED
乐透互娱有限公司
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
LOTO INTERACTIVE LIMITED
乐透互娱有限公司
REPORT AND CONDENSED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
CONTENTS
|
|
|
|
PAGE |
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME |
3 |
|
4 |
|
|
5 |
|
|
6 |
|
|
7 |
LOTO INTERACTIVE LIMITED
乐透互娱有限公司
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
-3-
LOTO INTERACTIVE LIMITED
乐透互娱有限公司
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 March 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 March |
|
31 December |
|
|
|
|
|
|
2021 |
|
2020 |
|
|
|
|
|
|
HK$’000 |
|
HK$’000 |
|
|
|
|
Notes |
|
(unaudited) |
|
(audited) |
|
|
NON-CURRENT ASSETS |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
11 |
|
246,475 |
|
263,269 |
|
|
Right-of-use assets |
|
|
|
5,550 |
|
6,409 |
|
|
Goodwill |
|
|
|
11,654 |
|
11,703 |
|
|
Intangible assets |
|
|
|
600 |
|
— |
|
|
Investments in associates |
|
|
|
2,450 |
|
2,431 |
|
|
Investment in a joint venture |
|
|
|
— |
|
— |
|
|
Equity investments at fair value through other comprehensive income |
|
|
|
— |
|
5,057 |
|
|
Loan receivables |
|
|
|
30,000 |
|
30,000 |
|
|
|
|
|
|
296,729 |
|
318,869 |
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Trade receivables |
|
12 |
|
23,135 |
|
8,400 |
|
|
Prepayments, deposits and other receivables |
|
|
|
85,699 |
|
83,018 |
|
|
Cash and cash equivalents |
|
|
|
156,396 |
|
44,252 |
|
|
|
|
|
|
265,230 |
|
135,670 |
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Trade payables |
|
13 |
|
22,954 |
|
4,611 |
|
|
Accruals and other payables |
|
|
|
129,517 |
|
25,734 |
|
|
Lease liabilities |
|
|
|
3,285 |
|
3,360 |
|
|
Amount due to a related company |
|
|
|
— |
|
467 |
|
|
Tax payable |
|
|
|
7,403 |
|
7,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163,159 |
|
41,593 |
|
|
NET CURRENT ASSETS |
|
|
|
102,071 |
|
94,077 |
|
|
TOTAL ASSETS LESS CURRENT LIABILITIES |
|
|
|
398,800 |
|
412,946 |
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Lease liabilities |
|
|
|
2,389 |
|
3,236 |
|
|
NET ASSETS |
|
|
|
396,411 |
|
409,710 |
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
Equity attributable to owners of the Company |
|
|
|
|
|
|
|
|
Share capital |
|
14 |
|
54,838 |
|
37,902 |
|
|
Reserves |
|
|
|
341,806 |
|
280,764 |
|
|
|
|
|
|
396,644 |
|
318,666 |
|
|
Non-controlling interests |
|
|
|
(233) |
|
91,044 |
|
|
TOTAL EQUITY |
|
|
|
396,411 |
|
409,710 |
|
-4-
LOTO INTERACTIVE LIMITED
乐透互娱有限公司
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(Unaudited) |
|
||||||||||||||||||||
|
|
|
Attributable to owners of the Company |
|
|
|
|
|
||||||||||||||
|
|
|
Issued
|
|
Share
|
|
Share-based
|
|
Other
|
|
Exchange
|
|
Equity
|
|
Accumulated
|
|
Total |
|
Non-
|
|
Total equity |
|
|
|
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
|
At 1 January 2020 |
|
31,586 |
|
329,194 |
|
20,881 |
|
(5,255) |
|
3,692 |
|
(12,570) |
|
(37,657) |
|
329,871 |
|
12,876 |
|
342,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(17,622) |
|
(17,622) |
|
(166) |
|
(17,788) |
|
|
Other comprehensive loss for the period |
|
— |
|
— |
|
— |
|
— |
|
(4,432) |
|
(2,388) |
|
— |
|
(6,820) |
|
(6) |
|
(6,826) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period |
|
— |
|
— |
|
— |
|
— |
|
(4,432) |
|
(2,388) |
|
(17,622) |
|
(24,442) |
|
(172) |
|
(24,614) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-settled share-based payment expense |
|
— |
|
— |
|
1,041 |
|
— |
|
— |
|
— |
|
— |
|
1,041 |
|
— |
|
1,041 |
|
|
Non-controlling interests arising from establishment of a new subsidiary |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
5,319 |
|
5,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2020 |
|
31,586 |
|
329,194 |
|
21,922 |
|
(5,255) |
|
(740) |
|
(14,958) |
|
(55,279) |
|
306,470 |
|
18,023 |
|
324,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021 |
|
37,902 |
|
338,906 |
|
9,370 |
|
(5,255) |
|
19,281 |
|
(12,653) |
|
(68,885) |
|
318,666 |
|
91,044 |
|
409,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(17,199) |
|
(17,199) |
|
(5,596) |
|
(22,795) |
|
|
Other comprehensive (loss)/income for the period |
|
— |
|
— |
|
— |
|
— |
|
(1,631) |
|
14,397 |
|
— |
|
12,766 |
|
(290) |
|
12,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss)/income for the period |
|
— |
|
— |
|
— |
|
— |
|
(1,631) |
|
14,397 |
|
(17,199) |
|
(4,433) |
|
(5,886) |
|
(10,319) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allotment and issue of the Subscription Shares (Note 14(c)) |
|
16,936 |
|
83,618 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
100,554 |
|
— |
|
100,554 |
|
|
Purchase of non-controlling interests (Note 15(a)) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(18,966) |
|
(18,966) |
|
(85,391) |
|
(104,357) |
|
|
Equity-settled share-based payment expense |
|
— |
|
— |
|
823 |
|
— |
|
— |
|
— |
|
— |
|
823 |
|
— |
|
823 |
|
|
Disposal of equity investments at fair value through other comprehensive income |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(11,744) |
|
11,744 |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2021 |
|
54,838 |
|
422,524 |
|
10,193 |
|
(5,255) |
|
17,650 |
|
(10,000) |
|
(93,306) |
|
396,644 |
|
(233) |
|
396,411 |
|
|
* |
Other reserve represents the difference between the adjustment to non-controlling interests and the consideration paid arising in equity transactions. |
|
# |
These reserve accounts comprise the consolidated reserves in the consolidated statement of financial position. |
-5-
LOTO INTERACTIVE LIMITED
乐透互娱有限公司
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
|
|
|
|
|
|
|
|
|
Three-month period
|
||
|
|
|
2021 |
|
2020 |
|
|
|
HK$'000 |
|
HK$'000 |
|
|
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
Loss before tax |
|
(22,795) |
|
(18,076) |
|
Adjustments for: |
|
|
|
|
|
Equity-settled share-based payment expense |
|
823 |
|
1,041 |
|
Depreciation |
|
15,873 |
|
5,798 |
|
Amortisation of intangible assets |
|
— |
|
1,563 |
|
Depreciation of right-of-use assets |
|
857 |
|
2,079 |
|
Share of profit/(loss) of associates |
|
(32) |
|
64 |
|
Interest income |
|
(729) |
|
(557) |
|
Finance costs |
|
79 |
|
158 |
|
Rental concession |
|
(300) |
|
— |
|
|
|
|
|
|
|
Operating cash flows before working capital changes |
|
(6,224) |
|
(7,930) |
|
Change in trade receivables |
|
(14,735) |
|
(3,958) |
|
Change in prepayments, deposits and other receivables |
|
(2,681) |
|
(20,410) |
|
Change in trade payables |
|
18,343 |
|
(2,408) |
|
Change in accruals and other payables |
|
(574) |
|
(2,353) |
|
|
|
|
|
|
|
Cash used in operating activities |
|
(5,871) |
|
(37,059) |
|
Income taxes paid |
|
— |
|
(19) |
|
Lease interest paid |
|
(79) |
|
(38) |
|
|
|
|
|
|
|
Net cash flows used in operating activities |
|
(5,950) |
|
(37,116) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
Purchase of property, plant and equipment |
|
(33) |
|
(14,604) |
|
Purchase of intangible assets |
|
(600) |
|
— |
|
Disposal of equity investments at fair value through other comprehensive income |
|
19,455 |
|
— |
|
Interest received |
|
729 |
|
557 |
|
Repayment from loan receivables |
|
— |
|
55,409 |
|
|
|
|
|
|
|
Net cash flows generated from investing activities |
|
19,551 |
|
41,362 |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
Advance from holding company |
|
— |
|
43 |
|
Repayment to related parties |
|
(467) |
|
(327) |
|
Repayment of lease liabilities |
|
(622) |
|
(1,373) |
|
Proceeds from issue of shares |
|
105,000 |
|
— |
|
Share issue expenses paid |
|
(4,446) |
|
— |
|
Contributions from non-controlling shareholders |
|
— |
|
5,319 |
|
Interest paid |
|
— |
|
(120) |
|
|
|
|
|
|
|
Net cash flows generated from financing activities |
|
99,465 |
|
3,542 |
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
113,066 |
|
7,788 |
|
Cash and cash equivalents at beginning of period |
|
44,252 |
|
95,030 |
|
Net foreign exchange difference |
|
(922) |
|
(311) |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
156,396 |
|
102,507 |
|
|
|
|
|
|
|
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS |
|
|
|
|
|
Cash and bank balances |
|
156,396 |
|
102,507 |
-6-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
Loto Interactive Limited (the "Company") is a public limited company incorporated in the Cayman Islands and its shares have been listed on the Growth Enterprise Market ("GEM") of the Stock Exchange of Hong Kong Limited (the "Stock Exchange") since 17 May 2002. The addresses of the registered office and principal place of business of the Company are disclosed in the corporate information section of the annual report.
In the opinion of the directors of the Company, as at 31 December 2020 and 30 March 2021, the substantial shareholder of the Company is BIT Mining Limited (formerly known as 500.com Limited) ("Holding Company"), which is incorporated in the Cayman Islands and listed on the New York Stock Exchange (stock code: WBAI).
2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS
In the current period, the Group has adopted all the new and revised International Financial Reporting Standards ("IFRSs") issued by the International Accounting Standards Board (the “IASB”) that are relevant to its operations and effective for its accounting year beginning on 1 January 2019. IFRSs comprise International Financial Reporting Standards ("IFRS"); International Accounting Standards (“IAS”); and Interpretations. The adoption of these new and revised IFRSs did not result in substantial changes to the Group’s accounting policies and amounts reported for the current year and prior years.
3. FAIR VALUE MEASUREMENTS
The carrying amounts of the Group’s financial assets and financial liabilities as reflected in the consolidated statement of financial position approximate their respective fair values.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following disclosures of fair value measurements use a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value:
Level 1 inputs: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.
Level 2 inputs: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs: unobservable inputs for the asset or liability.
The Group’s policy is to recognise transfers into and transfers out of any of the three levels as of the date of the event or change in circumstances that caused the transfer.
-7-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
| (a) | Disclosures of level in fair value hierarchy at 31 March 2021: |
|
|
|
|
|
|
|
|
|
Fair value
|
|
Total |
|
Description |
|
Level 1 |
|
2021 |
|
Recurring fair value measurements: |
|
HK$'000 |
|
HK$'000 |
|
|
|
|
|
|
|
Equity investments at fair value through other comprehensive income |
|
|
|
|
|
Listed securities in United States of America ("US") |
|
— |
|
— |
|
|
|
|
|
|
|
Total recurring fair value measurements |
|
— |
|
— |
4. OPERATING SEGMENT INFORMATION
(a) Reportable segments
The chief operating decision-maker has been identified as the board of directors. The board of directors reviews the Group’s internal reporting in order to assess performance and allocate resources. The Group determines its operating segments based on the reports reviewed by the chief operating decision-maker that are used to make strategic decisions.
The Group has three (2020: four) reportable segments. The segments are managed separately as each business segment offers different products and requires different business strategies. The following summary describes the operations in each of the Group’s reportable segments:
- Provision of big data centre services ("Big Data Centre Services")
- Distribution of mobile gaming ("Online Game Business")
- Money lending business ("Money Lending Business")
-8-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
- Trading of lottery terminals and parts and provision of services and solutions for the distribution of lottery products ("Lottery Business")#
#In the opinion of the directors, Lottery Business was no longer a reportable segment of the Group in 2020 since both the performance and the resources allocated were minimal to the Group.
Segment profits or losses do not include dividend income, and gains or losses from investments and derivative instruments. Segment assets do not include amounts due from related parties, investments and derivative instruments. Segment liabilities do not include convertible loans and derivative instruments. Segment non-current assets do not include financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts.
| (i) | Information about reportable segment profit or loss, assets and liabilities: |
-9-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Big Data Centre
|
|
Online Game
|
|
Money Lending
|
|
Lottery Business |
|
Total |
|
|
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
Three-month period ended 31 March 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers |
|
71,976 |
|
233 |
|
— |
|
30 |
|
72,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment loss |
|
(8,233) |
|
(137) |
|
(56) |
|
(928) |
|
(9,354) |
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 31 December 2020 |
|
(audited) |
|
(audited) |
|
(audited) |
|
(audited) |
|
(audited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
350,053 |
|
756 |
|
32,258 |
|
189 |
|
383,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
(29,310) |
|
(2,085) |
|
— |
|
— |
|
(31,395) |
| (ii) | Reconciliations of reportable segment revenue and profit or loss: |
-10-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
5. REVENUE
|
|
|
|
|
|
|
|
|
Three-month period
|
||
|
|
|
2021 |
|
2020 |
|
|
|
HK$'000 |
|
HK$'000 |
|
|
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
Provision of services and solutions for the distribution of lottery products |
|
— |
|
30 |
|
Distribution of mobile gaming |
|
249 |
|
233 |
|
Provision of big data centre services |
|
73,260 |
|
71,976 |
|
Revenue from contracts with customers |
|
73,509 |
|
72,239 |
|
Interest income |
|
750 |
|
— |
|
Total revenue |
|
74,259 |
|
72,239 |
Disaggregation of revenue from contracts with customers:
-11-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
|
|
|
|
|
|
|
|
|
|
|
Segments |
|
Three-month period ended 31 March |
|
2020 |
||||
|
|
|
Big Data Centre
|
|
Online Game
|
|
Lottery Business |
|
Total |
|
|
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
HK$'000 |
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
Geographical markets |
|
|
|
|
|
|
|
|
|
The PRC |
|
71,976 |
|
233 |
|
30 |
|
72,239 |
|
|
|
|
|
|
|
|
|
|
|
Major products/service |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision of big data centre services |
|
71,976 |
|
— |
|
— |
|
71,976 |
|
Distribution of mobile gaming |
|
— |
|
233 |
|
— |
|
233 |
|
Provision of services and solutions for the distribution of lottery products |
|
— |
|
— |
|
30 |
|
30 |
|
|
|
71,976 |
|
233 |
|
30 |
|
72,239 |
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition |
|
|
|
|
|
|
|
|
|
At a point in time |
|
— |
|
233 |
|
30 |
|
263 |
|
Over time |
|
71,976 |
|
— |
|
— |
|
71,976 |
|
|
|
71,976 |
|
233 |
|
30 |
|
72,239 |
Big Data Centre Services
The Group operates big data centres (the "Big Data Centres") in People's Republic of China, providing data analysis, storage services and ancillary administrative and consulting services.
Revenue generated from the Big Data Centres consists of services fees and/or rental income charged on the users for provision of big data centre services and use of storage places.
Services income is rendered and there is no unfulfilled obligation that could affect the customer’s acceptance of the service.
Online Game Business
The Group is in cooperation with various reputable companies in the online game industry to distribute online mobile games.
Revenue is recognised when the control of the goods is transferred to customers.
Lottery Business
The Group sells lottery terminals and parts to the customers. Sales are recognised when control of the products has transferred, being when the products are delivered to a customer, there is no unfulfilled obligation that could affect the customer’s acceptance of the products and the customer has obtained legal titles to the products.
Sales to customers are normally made with credit terms of 60 days. For new customers, deposits or cash on delivery may be required. Deposits received are recognised as a contract liability.
-12-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
A receivable is recognised when the products are delivered to the customers as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
6. FINANCE COSTS
|
|
|
|
|
|
|
|
|
Three-month period
|
||
|
|
|
2021 |
|
2020 |
|
|
|
HK$'000 |
|
HK$'000 |
|
|
|
(unaudited) |
|
(unaudited) |
|
Lease interests |
79 |
38 |
||
|
Interests on amount due to a related company |
|
— |
|
120 |
|
|
|
79 |
|
158 |
7. INCOME TAX CREDIT
|
|
|
|
|
|
|
|
|
|
Three-month period
|
|
||
|
|
|
2021 |
|
2020 |
|
|
|
|
HK$'000 |
|
HK$'000 |
|
|
|
|
(unaudited) |
|
(unaudited) |
|
|
Deferred tax |
|
— |
|
288 |
|
No provision for Hong Kong profits tax has been made as the Hong Kong subsidiaries did not generate any assessable profits arising in Hong Kong during the period (2020: Nil).
Pursuant to the PRC Corporate Income Tax Law effective on 1 January 2008, the PRC subsidiaries are subject to corporate income tax ("CIT") at a statutory rate of 25% (2020: 25%) on their respective taxable income for the three months ended 31 March 2021. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates.
8. LOSS FOR THE PERIOD
The Group's loss for the period is arrived at after charging:
|
|
|
|
|
|
|
|
|
|
Three-month period
|
|
||
|
|
|
2021 |
|
2020 |
|
|
|
|
HK$'000 |
|
HK$'000 |
|
|
|
|
(unaudited) |
|
(unaudited) |
|
|
Cost of sales and service rendered |
|
85,895 |
|
72,174 |
|
|
Directors’ remuneration |
|
1,050 |
|
1,684 |
|
-13-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
9. DIVIDEND
The directors do not recommend the payment of any dividend for each of the three-month period ended 31 March 2021 and 2020.
10. LOSS PER SHARE
The calculation of the basic and diluted loss per share is based on the following:
|
|
|
|
|
|
|
|
|
|
Three-month period |
|
||
|
|
|
ended 31 March |
|
||
|
|
|
2021 |
|
2020 |
|
|
|
|
HK$'000 |
|
HK$'000 |
|
|
|
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
Loss |
|
|
|
|
|
|
Loss for the purpose of calculating basic and diluted loss per share |
|
(17,199) |
|
(17,622) |
|
11. PROPERTY, PLANT AND EQUIPMENT
During the three-month period ended 31 March 2021, the Group acquired property, plant and equipment of approximately HK$33,000 (2020: HK$14,604,000).
-14-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
12. TRADE RECEIVABLES
An aging analysis of the trade receivables as at the balance sheet date, based on the invoice date and net of provisions, is as follows:
|
|
|
|
|
|
|
|
|
|
31 March 2021 |
|
31 December 2020 |
|
|
|
|
HK$'000 |
|
HK$'000 |
|
|
|
|
(unaudited) |
|
(audited) |
|
|
|
|
|
|
|
|
|
Within 30 days |
|
14,647 |
|
7,250 |
|
|
31 days to 90 days |
|
8,462 |
|
1,124 |
|
|
91 days to 180 days |
|
6 |
|
4 |
|
|
181 days to 365 days |
|
8 |
|
17 |
|
|
Over 1 year |
|
12 |
|
5 |
|
|
|
|
|
|
|
|
|
|
|
23,135 |
|
8,400 |
|
-15-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
13. TRADE PAYABLES
The aging analysis of trade payables, based on the date of receipt of goods, is as follows:
|
|
|
|
|
|
|
|
|
|
|
31 December |
|
|
|
|
|
31 March 2021 |
|
2020 |
|
|
|
|
HK$'000 |
|
HK$'000 |
|
|
|
|
(unaudited) |
|
(audited) |
|
|
|
|
|
|
|
|
|
Within 30 days |
|
18,864 |
|
1,057 |
|
|
31 to 90 days |
|
3,026 |
|
2,702 |
|
|
91 to 180 days |
|
175 |
|
194 |
|
|
181 to 365 days |
|
201 |
|
63 |
|
|
Over 1 year |
|
688 |
|
595 |
|
|
|
|
|
|
|
|
|
|
|
22,954 |
|
4,611 |
|
14. SHARE CAPITAL
|
|
|
|
|
|
|
|
|
|
31 March 2021 |
|
31 December 2020 |
|
|
|
|
HK$’000 |
|
HK$’000 |
|
|
|
|
(unaudited) |
|
(audited) |
|
|
Authorised |
|
|
|
|
|
|
550,000,000 (At 31 December 2020: 550,000,000 ordinary shares of HK$0.1 (At 31 December 2020: HK$0.1) each |
|
55,000 |
|
55,000 |
|
|
|
|
|
|
|
|
|
Issued and fully paid: |
|
|
|
|
|
|
548,378,822 (At 31 December 2020: 379,023,983) ordinary shares of HK$0.1 (At 31 December 2020: HK$0.1) each |
|
54,838 |
|
37,902 |
|
A summary of movements in the Company’s share capital is as follows:
-16-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
Note:
|
(a) |
A share consolidation has taken place on 28 May 2020. that every ten issued and unissued existing shares of HK$0.01 each in the share capital of the Company has been consolidated into one consolidated share of HK$0.1 each in the share capital of the Company. |
|
(b) |
A placing has taken place on 9 October 2020. A total of 63,164,000 placing shares have been placed at the placing price of HK$0.26 per placing share. The gross proceeds and net proceeds from the placing amounted to approximately HK$16,423,000 and HK$16,028,000, respectively. |
|
(c) |
An allotment and issue of the subscription shares has taken place on 31 March 2021. A total of 169,354,859 subscription shares have been subscribed at the subscription price of HK$0.62 per subscription share. The gross proceeds and net proceeds from the allotment and issue of the subscription shares amounted to approximately HK$105,000,000 and HK$100,554,000, respectively. |
15. NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
(a) |
Purchase of non-controlling interests |
During the period, the Group acquired 49% interests in a 51% subsidiary from the non-controlling shareholders at a cash consideration of approximately RMB88,200,000 (equivalent to approximately HK$104,357,000). The effect of the acquisition on the equity attributable to the owners of the Company is as follows:
|
|
|
|
|
|
|
|
HK$'000 |
|
|
Share of net assets in the subsidiary acquired |
|
85,391 |
|
|
|
|
|
|
|
Consideration |
|
(104,357) |
|
|
|
|
|
|
|
Loss on acquisition recognised directly in equity |
|
(18,966) |
|
As at 31 March 2021, the cash consideration of approximately HK$104,357,000 was outstanding.
16. SEASONALITY
The Group’s provision of big data centre services is subject to seasonal fluctuations, with peak demand in the third quarter of the year. This is due to relatively high hydro power price and relatively low processing utilisation for the low water season, which is generally between November to April. For the three-month period ended 31 March 2021, provision of big data centre services represented 19% (three-month period ended 31 March 2020: 115%) of the annual provision of big data centre services in the year ended 31 December 2020.
17. CONTINGENT LIABILITIES
The Group did not have any significant contingent liabilities at 31 March 2021 (31 December 2020: HK$Nil).
-17-
LOTO INTERACTIVE LIMITED
樂透互娛有限公司
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021
18. CAPITAL COMMITMENTS
|
|
|
|
|
|
|
|
|
|
31 March 2021 |
|
31 December 2020 |
|
|
|
|
HK$'000 |
|
HK$'000 |
|
|
|
|
(unaudited) |
|
(audited) |
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
Contracted, but not provided for |
|
561 |
|
33 |
|
-18-
Exhibit 99.4
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information is comprised of the unaudited pro forma condensed combined statement of operations of the Company for the year ended December 31, 2020 and interim period ended June 30, 2021, after giving effects to the acquisitions of Loto Interactive Limited (HKEX: 08198) (“Loto Interactive”) and Blockchain Alliance Technologies Limited ("Blockchain Alliance") , and the disposition of the lottery related VIEs, as if it had occurred on January 1, 2020.
We refer the two acquired companies, Loto Interactive and the Blockchain Alliance, collectively as “the acquired companies”, and the corresponding transactions collectively as “Acquisitions”, and the transaction of disposition of the lottery related VIEs as “Disposition”.
The pro forma financial information should be read in conjunction with the accompanying notes. In addition, the pro forma financial information is derived from and should be read in conjunction with the following historical financial statements and accompanying notes of the Company and the acquired companies:
| (i) | audited consolidated financial statements as of and for the fiscal year ended December 31, 2020 and the related notes included in the annual report on Form 20-F for the year ended December 31, 2020 filed by the Company and |
| (ii) | audited consolidated financial statements of Loto Interactive Limited as of and for the year ended December 31, 2020 and the related notes included as Exhibit 99.1 on Form 6-K filed July 30, 2021 and |
| (iii) | audited combined financial statements of Blockchain Alliance Technologies Limited as of and for the year ended December 31, 2020 and the related notes included as Exhibit 99.2 on Form 6-K filed July 30, 2021 and |
| (iv) | unaudited interim condensed combined financial statements of Loto Interactive Limited for the three- month period ended March 31, 2021 and the related notes included as Exhibit 99.3 to this Current Report on Form 6-K filed September 30, 2021 and |
| (v) | financial information received by us relating to Blockchain Alliance for the period January 1, 2021 through April 15, 2021. |
1
Unaudited Pro Forma Condensed Combined Statements of Operations
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares, per share (or ADS) data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2020 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
BIT Mining |
|
Loto |
|
Blockchain |
|
Pro forma |
|
|
|
for |
|
|
|
|
|
|
|
Limited |
|
Interactive |
|
Alliance |
|
acquisition |
|
|
|
Disposition |
|
Pro forma |
|
Pro forma |
|
|
|
Historical |
|
Historical |
|
Historical |
|
Adjustments |
|
Note |
|
(a) |
|
Combined |
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
|
|
|
|
RMB |
|
US$* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
21,815 |
|
340,332 |
|
8,619,353 |
|
— |
|
|
|
(6,886) |
|
8,974,614 |
|
1,375,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
(16,774) |
|
(304,124) |
|
(8,713,807) |
|
(28,444) |
|
A |
|
2,884 |
|
(9,060,265) |
|
(1,388,546) |
|
Sales and marketing expenses |
|
(16,748) |
|
(93) |
|
(10,655) |
|
— |
|
|
|
8,845 |
|
(18,651) |
|
(2,858) |
|
General and administrative expenses |
|
(152,541) |
|
(68,503) |
|
(31,854) |
|
217 |
|
B |
|
53,874 |
|
(198,807) |
|
(30,469) |
|
Service development expenses |
|
(30,201) |
|
— |
|
— |
|
— |
|
|
|
16,830 |
|
(13,371) |
|
(2,049) |
|
Total operating costs and expenses |
|
(216,264) |
|
(372,720) |
|
(8,756,316) |
|
(28,227) |
|
|
|
82,433 |
|
(9,291,094) |
|
(1,423,922) |
|
Other operating income |
|
5,518 |
|
1,576 |
|
— |
|
(217) |
|
B |
|
(1,833) |
|
5,044 |
|
773 |
|
Government grant |
|
891 |
|
— |
|
— |
|
— |
|
|
|
(741) |
|
150 |
|
23 |
|
Other operating expenses |
|
(2,752) |
|
(4,060) |
|
(48) |
|
— |
|
|
|
874 |
|
(5,986) |
|
(917) |
|
Impairment loss of cryptocurrencies |
|
— |
|
— |
|
(1,186) |
|
— |
|
|
|
— |
|
(1,186) |
|
(182) |
|
Net gain on disposal of cryptocurrencies |
|
— |
|
— |
|
12,773 |
|
— |
|
|
|
— |
|
12,773 |
|
1,958 |
|
Operating loss |
|
(190,792) |
|
(34,872) |
|
(125,424) |
|
(28,444) |
|
|
|
73,847 |
|
(305,685) |
|
(46,847) |
|
Other income, net |
|
748 |
|
— |
|
— |
|
(74) |
|
C |
|
(449) |
|
225 |
|
34 |
|
Interest income |
|
9,093 |
|
394 |
|
— |
|
(129) |
|
B |
|
(7,429) |
|
1,929 |
|
296 |
|
Interest expense |
|
— |
|
(398) |
|
— |
|
129 |
|
B |
|
— |
|
(269) |
|
(41) |
|
(Loss) gain from equity method investments |
|
(10,798) |
|
(988) |
|
— |
|
13,284 |
|
B |
|
(2,060) |
|
(562) |
|
(86) |
|
Gain on previously held equity investments |
|
|
|
|
|
— |
|
33,945 |
|
B |
|
|
|
33,945 |
|
5,202 |
|
Impairment of long-term investments |
|
(33,001) |
|
— |
|
— |
|
33,001 |
|
B |
|
— |
|
— |
|
— |
|
Loss before income tax |
|
(224,750) |
|
(35,864) |
|
(125,424) |
|
51,712 |
|
|
|
63,909 |
|
(270,417) |
|
(41,442) |
|
Income tax benefit |
|
3,654 |
|
(2,576) |
|
— |
|
— |
|
|
|
(3,445) |
|
(2,367) |
|
(363) |
|
Net loss |
|
(221,096) |
|
(38,440) |
|
(125,424) |
|
51,712 |
|
|
|
60,464 |
|
(272,784) |
|
(41,805) |
|
Less: Net income attributable to noncontrolling interests |
|
2,130 |
|
3,121 |
|
— |
|
(20,727) |
|
D |
|
(2,130) |
|
(17,606) |
|
(2,698) |
|
Net loss attributable to BIT Mining Limited |
|
(223,226) |
|
(41,561)** |
|
(125,424) |
|
72,439 |
|
|
|
62,594 |
|
(255,178) |
|
(39,107) |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized loss |
|
(1,218) |
|
(74) |
|
— |
|
1,292 |
|
B C |
|
— |
|
— |
|
— |
|
Foreign currency translation (loss) gain |
|
(11,825) |
|
14,865 |
|
— |
|
— |
|
|
|
(14,289) |
|
(11,249) |
|
(1,724) |
|
Other comprehensive (loss) income, net of tax |
|
(13,043) |
|
14,791 |
|
— |
|
1,292 |
|
|
|
(14,289) |
|
(11,249) |
|
(1,724) |
|
Comprehensive loss |
|
(234,139) |
|
(23,649) |
|
(125,424) |
|
53,004 |
|
|
|
46,175 |
|
(284,033) |
|
(43,529) |
|
Less: Comprehensive (loss) income attributable to noncontrolling interests and Redeemable noncontrolling interest |
|
2,130 |
|
4,132 |
|
— |
|
(14,963) |
|
D |
|
(2,130) |
|
(10,831) |
|
(1,660) |
|
Comprehensive loss attributable to BIT Mining Limited |
|
(236,269) |
|
(27,781) |
|
(125,424) |
|
67,967 |
|
|
|
48,305 |
|
(273,202) |
|
(41,869) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class A and Class B ordinary shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
430,011,263 |
|
|
|
|
|
44,353,435 |
|
|
|
|
|
474,364,698 |
|
474,364,698 |
|
Diluted |
|
430,011,263 |
|
|
|
|
|
44,353,435 |
|
|
|
|
|
474,364,698 |
|
474,364,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses per share attributable to BIT Mining Limited-Basic and Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
(0.52) |
|
|
|
|
|
|
|
|
|
|
|
(0.54) |
|
(0.08) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses per ADS*** attributable to BIT Mining Limited-Basic and Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
(5.19) |
|
|
|
|
|
|
|
|
|
|
|
(5.38) |
|
(0.82) |
2
Unaudited Pro Forma Condensed Combined Statements of Operations
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares, per share (or ADS) data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2021 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
BIT Mining |
|
Loto |
|
Blockchain |
|
Pro forma |
|
|
|
for |
|
|
|
|
|
|
|
Limited |
|
Interactive |
|
Alliance |
|
acquisition |
|
|
|
Disposition |
|
|
|
|
|
|
|
Historical |
|
Historical |
|
Historical |
|
Adjustments |
|
Note |
|
(a) |
|
Pro forma |
|
Pro forma |
|
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
|
|
|
|
RMB |
|
US$* |
|
Revenues |
|
2,893,478 |
|
62,236 |
|
8,354,242 |
|
(21,639) |
|
B |
|
(6,320) |
|
11,281,997 |
|
1,747,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
(2,818,901) |
|
(71,989) |
|
(8,371,460) |
|
13,157 |
|
A B |
|
1,054 |
|
(11,248,139) |
|
(1,742,115) |
|
Sales and marketing expenses |
|
(5,909) |
|
(18) |
|
(1,455) |
|
— |
|
|
|
2,983 |
|
(4,399) |
|
(681) |
|
General and administrative expenses |
|
(68,501) |
|
(9,904) |
|
(11,738) |
|
— |
|
|
|
13,279 |
|
(76,864) |
|
(11,905) |
|
Service development expenses |
|
(9,164) |
|
— |
|
— |
|
— |
|
|
|
3,418 |
|
(5,746) |
|
(890) |
|
Total operating costs and expenses |
|
(2,902,475) |
|
(81,911) |
|
(8,384,653) |
|
13,157 |
|
|
|
20,734 |
|
(11,335,148) |
|
(1,755,591) |
|
Other operating income |
|
1,140 |
|
443 |
|
— |
|
— |
|
|
|
(1,065) |
|
518 |
|
80 |
|
Government grant |
|
121 |
|
— |
|
— |
|
— |
|
|
|
(121) |
|
— |
|
— |
|
Other operating expenses |
|
(2,499) |
|
— |
|
— |
|
— |
|
|
|
(17) |
|
(2,516) |
|
(390) |
|
Net gain on disposal of cryptocurrencies |
|
(55,618) |
|
— |
|
711 |
|
— |
|
|
|
— |
|
(54,907) |
|
(8,504) |
|
Impairment loss of cryptocurrencies |
|
(57,331) |
|
— |
|
— |
|
— |
|
|
|
— |
|
(57,331) |
|
(8,879) |
|
Changes in fair value of derivative instruments |
|
5,409 |
|
— |
|
— |
|
— |
|
|
|
— |
|
5,409 |
|
838 |
|
Operating loss |
|
(117,775) |
|
(19,232) |
|
(29,700) |
|
(8,482) |
|
|
|
13,211 |
|
(161,978) |
|
(25,087) |
|
Other income, net |
|
2,921 |
|
— |
|
— |
|
— |
|
|
|
(1,329) |
|
1,592 |
|
247 |
|
Interest income |
|
636 |
|
167 |
|
— |
|
— |
|
|
|
(399) |
|
404 |
|
63 |
|
Interest expense |
|
(4,767) |
|
(66) |
|
— |
|
— |
|
|
|
193 |
|
(4,640) |
|
(719) |
|
(Loss) gain from equity method investments |
|
(8,772) |
|
27 |
|
— |
|
7,240 |
|
B |
|
2,571 |
|
1,066 |
|
165 |
|
Gain on previously held equity investments |
|
36,142 |
|
— |
|
— |
|
(36,142) |
|
B |
|
— |
|
— |
|
— |
|
Gain from disposal of subsidiaries |
|
1,227 |
|
— |
|
— |
|
— |
|
|
|
(202) |
|
1,025 |
|
159 |
|
Loss before income tax |
|
(90,388) |
|
(19,104) |
|
(29,700) |
|
(37,384) |
|
|
|
14,045 |
|
(162,531) |
|
(25,172) |
|
Income tax benefit |
|
— |
|
— |
|
— |
|
— |
|
|
|
— |
|
— |
|
— |
|
Net loss |
|
(90,388) |
|
(19,104) |
|
(29,700) |
|
(37,384) |
|
|
|
14,045 |
|
(162,531) |
|
(25,172) |
|
Less: Net income attributable to noncontrolling interests |
|
(5,630) |
|
(4,690) |
|
— |
|
417 |
|
D |
|
1,153 |
|
(8,750) |
|
(1,355) |
|
Net loss attributable to BIT Mining Limited |
|
(84,758) |
|
(14,414) |
** |
(29,700) |
|
(37,801) |
|
|
|
12,892 |
|
(153,781) |
|
(23,817) |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of other comprehensive loss of an equity method investment |
|
4,063 |
|
12,066 |
|
— |
|
(4,063) |
|
B |
|
|
|
12,066 |
|
1,869 |
|
Reclassification into loss of loss from equity method investments |
|
846 |
|
— |
|
— |
|
(846) |
|
B |
|
— |
|
— |
|
— |
|
Foreign currency translation (loss) gain |
|
5,839 |
|
(1,610) |
|
— |
|
64 |
|
B |
|
(2,075) |
|
2,218 |
|
344 |
|
Other comprehensive (loss) income, net of tax |
|
10,748 |
|
10,456 |
|
— |
|
(4,845) |
|
|
|
(2,075) |
|
14,284 |
|
2,213 |
|
Comprehensive loss |
|
(79,640) |
|
(8,648) |
|
(29,700) |
|
(42,229) |
|
|
|
11,970 |
|
(148,247) |
|
(22,959) |
|
Less: Comprehensive (loss) income attributable to noncontrolling interests |
|
(5,668) |
|
(4,933) |
|
— |
|
5,487 |
|
D |
|
1,153 |
|
(3,961) |
|
(613) |
|
Comprehensive loss attributable to BIT Mining Limited |
|
(73,972) |
|
(3,715) |
|
(29,700) |
|
(47,716) |
|
|
|
10,817 |
|
(144,286) |
|
(22,346) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class A and Class B ordinary shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
542,881,582 |
|
|
|
|
|
|
|
|
|
|
|
542,881,582 |
|
542,881,582 |
|
Diluted |
|
542,881,582 |
|
|
|
|
|
|
|
|
|
|
|
542,881,582 |
|
542,881,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses per share attributable to BIT Mining Limited-Basic and Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
(0.16) |
|
|
|
|
|
|
|
|
|
|
|
(0.28) |
|
(0.04) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses per ADS*** attributable to BIT Mining Limited-Basic and Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
(1.56) |
|
|
|
|
|
|
|
|
|
|
|
(2.83) |
|
(0.44) |
*This statements contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars were made at the exchange rate of RMB6.5250 to US$1.00 and RMB6.4566 to US$1.00, as set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2020 and June 30, 2021, respectively.
**Amount attributable to Loto Interactive’s shareholders.
***American Depositary Shares, which are traded on the NYSE. Each ADS represents ten Class A ordinary shares of the Company.
3
NOTES TO UNAUDITED PRO FORMA COMSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The pro forma financial information was prepared in conformity with Article 11 of Regulation S-X. The pro forma financial information for acquisitions was prepared using the acquisition method of accounting in accordance with Accounting Standards Codification 805, “Business Combinations” (“ASC 805”) and was derived from the audited historical financial statements of the Company and the acquired companies.
The pro forma financial information has been prepared by the Company for illustrative and informational purposes only in accordance with Article 11. The pro forma financial information is not necessarily indicative of what the Company’s consolidated statement of comprehensive loss actually would have been had the Acquisitions, Disposition and other adjustments been completed as of the dates indicated or will be for any future periods. The pro forma financial information does not purport to project the Company’s future financial position or results of operations following the completion of the Acquisitions and Disposition.
The Company is still in the process of performing a full review of the acquired companies’ accounting policies to determine if there are any additional material differences that require modification or reclassification of the acquired companies’ revenues, expenses, assets or liabilities to conform to the Company’s accounting policies and classifications. As a result of that review, the Company may identify differences between the accounting policies of the companies that, when conformed, could have a material impact on the pro forma financial information.
2. Pro Forma Adjustments for Acquisitions
A. Represents adjustments provided on depreciation and amortization for property and equipment and finite intangible assets based on the preliminary purchase price allocation. Property and equipment have been depreciated on a straight-line basis over their estimated useful lives. Intangible assets having a finite life have been amortized on a straight-line basis over their estimated useful lives.
B. Represents the elimination of internal transactions between Loto Interactive and the Company and Blockchain Alliance and the Company during reporting period.
C. Reflects the adjustments to conform the accounting and presentation of certain equity investments to the accounting and presentation of the Company.
D. Reflects the adjustments provided on net loss attributable to the non-controlling interest and comprehensive loss attributable to non-controlling interest based on the net loss and comprehensive loss of Loto Interactive and the percentage of ownership of the non-controlling interest.
3. Pro Forma Adjustments for Disposition
(a) Reflects the elimination of revenues and expenses associated with the operations of the lottery business-related VIEs.
4