HIVE Digital Technologies .(HIVE) - 2022 Q4 - Annual Report

Revenue and Financial Performance - Revenue from digital currency mining for the three months ended December 31, 2022, was $14.3 million, a significant decrease from $68.2 million in the same period in 2021[3] - Net loss for the three months ended December 31, 2022, was $90.0 million, compared to a net income of $51.2 million in the same period in 2021[3] - Net loss for the nine months ended December 31, 2022, was $222.3 million, compared to a net income of $113.6 million in the same period in 2021[5] - The company's revenue from digital currency mining for the nine months ended December 31, 2022, was $88,093,816, a decrease from $158,042,263 in the same period in 2021[123] - Basic loss per share for the three months ended December 31, 2022, was $1.09, compared to a basic income per share of $0.66 in the same period in 2021[3] - Net income for the period was restated from $137,598,748 to $113,593,813, with basic income per share adjusted from $0.36 to $1.49[128] Asset and Liability Changes - Total assets decreased from $452.3 million as of March 31, 2022, to $189.4 million as of December 31, 2022[2] - Digital currencies held by the company decreased from $170.0 million as of March 31, 2022, to $39.0 million as of December 31, 2022[2] - Total equity decreased from $389.1 million as of March 31, 2022, to $140.9 million as of December 31, 2022[2] - Accumulated deficit increased from $60.2 million as of March 31, 2022, to $304.7 million as of December 31, 2022[2] - The company's cash balance at the end of December 31, 2022, was $8.6 million, down from $63.6 million at the end of December 31, 2021[5] - Total digital currencies held by the company decreased to $38,952,964 as of December 31, 2022, from $170,000,412 on March 31, 2022, with Bitcoin holdings dropping to $38,864,138 from $117,669,390[31] - Liability component balance decreased from $5,599,006 on March 31, 2022, to $4,966,094 on December 31, 2022, due to principal and interest payments[42] - Derivative component balance significantly decreased from $4,986,354 on March 31, 2022, to $92,343 on December 31, 2022, due to changes in fair value[43] - Total loan balances decreased from $15,692,339 on March 31, 2022, to $14,165,317 on December 31, 2022, primarily due to foreign exchange movements[46] - Term loan balance decreased from $9,375,244 on March 31, 2022, to $7,552,744 on December 31, 2022, due to repayments and foreign exchange movements[49] - Right of use asset carrying amount decreased from $12,587,882 on March 31, 2022, to $11,167,807 on December 31, 2022, due to depreciation and foreign exchange movements[51] - Lease liability balance decreased from $12,649,194 on March 31, 2022, to $8,204,504 on December 31, 2022, due to lease payments and foreign exchange movements[52] Impairment and Depreciation - Impairment of miner equipment for the three months ended December 31, 2022, was $38.8 million, with no impairment recorded in the same period in 2021[3] - The company recorded an impairment charge of $71,416,760 on its equipment for the nine months ended December 31, 2022, due to the Ethereum blockchain merge and downturn in digital currency prices[33] - Equipment deposits decreased to $37,108,373 as of December 31, 2022, from $57,567,943 on March 31, 2022, with a provision for impairment of $22,653,287 recorded during the three months ended December 31, 2022[36] - The company revised the useful economic life of certain GPU machines from 4 years to 2 years due to the Ethereum merge, resulting in accelerated depreciation of $22,203,000 in the 3-month period ended September 30, 2022[35] - The company recorded provisions for impairment on equipment deposits of $22,653,287 during the three months ended December 31, 2022, based on the efficiency and quality of the expected equipment[37] Cash Flow and Financing - Cash provided by operating activities for the nine months ended December 31, 2022, was $46.8 million, down from $52.6 million in the same period in 2021[5] - Cash used in investing activities for the nine months ended December 31, 2022, was $40.8 million, a significant decrease from $145.1 million in the same period in 2021[5] - Cash used in financing activities for the nine months ended December 31, 2022, was $2.6 million, compared to cash provided by financing activities of $114.9 million in the same period in 2021[5] - The company allocated $8,560,630 of the $15,000,000 convertible loan proceeds to the derivative component, valued using the Black-Scholes option pricing model with a risk-free interest rate of 0.69% and expected volatility of 105%[41] - The ATM Equity Program was terminated, having sold 1,306,474 common shares for aggregate gross proceeds of $3,941,736 and net proceeds of $3,821,753[132] Digital Currency and Mining Operations - Revaluation loss on digital currencies for the nine months ended December 31, 2022, was $35.9 million, compared to a revaluation gain of $31.3 million in the same period in 2021[4] - The company stopped mining Ethereum after the Merge on September 15, 2022, shifting to a proof-of-stake validation method[109] - Digital currencies are measured at fair value less cost to sell, and their prices are influenced by global supply and demand, interest rates, and political conditions[100] - The company's digital currency holdings are vulnerable to hacking and malware, which could lead to theft and loss of digital wallets[101] - Digital asset exchanges' operational issues or failures could result in loss or less favorable prices of digital currencies, adversely affecting the company[103] - The company utilizes the Fireblocks platform to secure digital assets, with multi-party computation (MPC) protection layers ensuring no single point of failure for private keys[104] - Bitcoin mining operations consume significant electricity, and regulatory changes or public utility actions could adversely affect the company's business[108] - A 5% variance in Bitcoin price impacts the company's earnings before tax by $1,943,207, while a 5% variance in Ethereum Classic price impacts earnings by $4,439[118] Share Issuance and Compensation - Weighted average number of common shares outstanding for the three months ended December 31, 2022, was 82.7 million, compared to 77.7 million in the same period in 2021[3] - The company consolidated its common shares on May 24, 2022, on a 5:1 basis[63] - Issued 218,016 common shares pursuant to the vesting of 218,016 restricted share-units, reallocating $1,092,790 from reserves to share capital[64] - Issued 1,306,473 common shares (ATM Shares) for gross proceeds of $3,941,736 (C$5,235,413), with an average price per ATM Share of C$4.01[64] - Stock options outstanding as of December 31, 2022, totaled 3,073,415 with a weighted average exercise price of C$6.20[65] - Warrants outstanding as of December 31, 2022, totaled 3,573,727 with a weighted average exercise price of C$22.92[66] - Granted 415,200 stock options to employees and officers with an exercise price of C$5.66 per share and an expiry date of August 26, 2027[74] - Granted 1,425,280 RSUs to employees and officers with a fair value of C$5.66 per share, vesting over 24 months[74] - Share-based compensation expense for the nine months ended December 31, 2022, was $2,593,424 for options and $2,863,345 for RSUs[73] - Basic weighted average number of common shares outstanding for the nine months ended December 31, 2022, was 82,555,946[77] - The company granted 1,200,000 restricted share units to directors and an officer with a fair value of C$3.10 per share, vesting quarterly over 12 months[131] Expenses and Liabilities - Total finance expense for the nine months ended December 31, 2022, was $2,932,234[78] - General and administrative expenses for the nine months ended December 31, 2022, totaled $9,850,515[79] - The company's total contractual cash flows for financial and other liabilities as of December 31, 2022, amounted to $51,676,817[91] - A 10% fluctuation in the US dollar exchange rate would impact the company's earnings before tax by $437,920[94] - The company's exposure to interest rate risk is limited, with interest rates on loans fixed for one year from the date of issuance[95] - The company is contesting a VAT liability of approximately $32.4 million with the Swedish Tax Authority[54] Investments and Fair Value - The company's investment balance as of December 31, 2022, was $5.5 million, down from $17.0 million as of March 31, 2022, due to unrealized losses and foreign exchange impacts[27] - The fair value of Level 2 Assets is determined using quoted prices from the exchanges most frequently used by the company, with no adjustments[82] - As of December 31, 2022, the company's cash holdings were $8,611,396, and digital currencies were valued at $38,952,964[83] - The company's investments in Level 1 assets were valued at $1,140,045, while Level 3 investments were valued at $4,397,938 as of December 31, 2022[83] - The company's convertible loan derivative component decreased in fair value from $4,986,354 as of March 31, 2022, to $92,343 as of December 31, 2022[87] Accounting and Restatements - The company revised the useful life of certain computing equipment from 4 years to 2 years due to changes in market and economic factors[17] - The company changed its accounting policy for digital currencies from IAS 2 to IAS 38 to better reflect business activities and enhance comparability with industry peers[126] - The company restated its financial statements for December 31, 2021, with adjustments including a liability of $1,900,533 for holdback shares and a gain of $963,983 from the change in fair value of holdback shares[127] - Intangible assets were adjusted from $14,622,817 to $14,304,675, and share capital decreased from $328,732,256 to $325,549,598 due to restatements[128] - Accumulated other comprehensive income increased by $25,595,536, while accumulated deficit decreased by $23,628,557 to $(16,657,527)[128] - Revaluation of digital currencies resulted in a loss of $1,057,432, and gain on sale of digital currencies was adjusted to $82,190[128] Acquisitions and Commitments - The company completed the acquisition of GPU Atlantic Inc. on April 15, 2021, for a total consideration of $18.6 million, including 1,000,000 common shares[21] - GPU Atlantic has a 50-megawatt data centre campus located in New Brunswick, Canada[22] - The company has purchase commitments of $4,078,800 for mining equipment as of December 31, 2022[53] Receivables and Prepaid Expenses - Sales tax receivable increased to $6,582,567 as of December 31, 2022, up from $4,516,993 on March 31, 2022[28] - Prepaid expenses and other receivables rose to $7,019,172 as of December 31, 2022, compared to $3,021,408 on March 31, 2022[28] Management Compensation - Key management compensation increased to $1,183,328 for the nine months ended December 31, 2022, compared to $471,757 for the same period in 2021[62]