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
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For
the month of May 2024
Commission
File Number: 001-40370
BITFARMS
LTD.
(Exact
Name of Registrant as Specified in Its Charter)
110
Yonge Street, Suite 1601, Toronto, Ontario, Canada M5C 1T4
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form
20-F ☐ Form 40-F ☒
DOCUMENTS INCLUDED AS PART
OF THIS FORM 6-K
This report on Form 6-K, including the interim condensed consolidated
financial statements for the three months ended March 31, 2024 and management’s discussion and analysis for the three months ended
March 31, 2024, shall be deemed to be incorporated by reference as exhibits to the Registration Statement of Bitfarms Ltd. on Form F-10
(File No. 333-272989) and the Registration Statement of Bitfarms Ltd. on Form S-8 (File No. 333-278868) and to be a part thereof from
the date on which this report was furnished, to the extent not superseded by documents or reports subsequently filed or furnished.
See the Exhibits listed below.
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.
|
BITFARMS LTD. |
|
|
|
By: |
/s/ Nicolas Bonta |
|
|
Name: |
Nicolas Bonta |
|
|
Title: |
Chairman and Interim Chief Executive Officer |
Date: May 15, 2024
2
Exhibit 99.1
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2024
AND 2023
(Expressed in thousands of U.S. dollars - unaudited)
BITFARMS LTD.
TABLE OF CONTENTS
BITFARMS LTD.
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
(Expressed in thousands of U.S. dollars - unaudited)
| |
| |
As of
March 31, | | |
As of
December 31, | |
| |
Notes | |
2024 | | |
2023 | |
Assets | |
| |
| | | |
| | |
Current | |
| |
| | | |
| | |
Cash | |
| |
| 65,961 | | |
| 84,038 | |
Trade receivables | |
| |
| 729 | | |
| 714 | |
Other assets | |
5 | |
| 3,592 | | |
| 2,199 | |
Short-term prepaid deposits | |
| |
| 4,507 | | |
| 6,393 | |
Digital assets | |
6 | |
| 57,542 | | |
| 31,870 | |
Digital assets - pledged as collateral | |
6, 13 | |
| — | | |
| 2,101 | |
Derivative assets | |
7 | |
| 3,016 | | |
| 1,281 | |
Assets held for sale | |
8 | |
| 1,972 | | |
| 1,388 | |
| |
| |
| 137,319 | | |
| 129,984 | |
Non-current | |
| |
| | | |
| | |
Property, plant and equipment | |
9, 22 | |
| 177,767 | | |
| 186,012 | |
Right-of-use assets | |
14 | |
| 13,225 | | |
| 14,315 | |
Long-term deposits, equipment prepayments and other | |
11 | |
| 93,616 | | |
| 44,714 | |
Intangible assets | |
10 | |
| 4,546 | | |
| 3,700 | |
Total assets | |
| |
| 426,473 | | |
| 378,725 | |
Liabilities | |
| |
| | | |
| | |
Current | |
| |
| | | |
| | |
Trade payables and accrued liabilities | |
12 | |
| 23,888 | | |
| 20,739 | |
Current portion of long-term debt | |
13 | |
| 151 | | |
| 4,022 | |
Current portion of lease liabilities | |
14 | |
| 2,126 | | |
| 2,857 | |
Taxes payable | |
| |
| 777 | | |
| 1,110 | |
Warrant liabilities | |
7, 16 | |
| 18,576 | | |
| 40,426 | |
| |
| |
| 45,518 | | |
| 69,154 | |
Non-current | |
| |
| | | |
| | |
Long-term debt | |
13 | |
| 1,491 | | |
| — | |
Lease liabilities | |
14 | |
| 12,183 | | |
| 12,993 | |
Asset retirement provision | |
| |
| 1,867 | | |
| 1,816 | |
Total liabilities | |
| |
| 61,059 | | |
| 83,963 | |
Shareholders’ equity | |
| |
| | | |
| | |
Share capital | |
| |
| 586,255 | | |
| 530,123 | |
Contributed surplus | |
| |
| 59,689 | | |
| 56,622 | |
Revaluation surplus | |
| |
| 12,876 | | |
| 2,941 | |
Accumulated deficit | |
| |
| (293,406 | ) | |
| (294,924 | ) |
Total equity | |
| |
| 365,414 | | |
| 294,762 | |
Total liabilities and equity | |
| |
| 426,473 | | |
| 378,725 | |
Should be read in conjunction with the notes
to the interim condensed consolidated financial statements
May 14, 2024 | |
/s/ Nicolas Bonta | |
|
/s/ Jeffrey Lucas |
Date of approval of the financial statements | |
Chairman of the Board of Directors & Interim Chief Executive Officer | |
|
Chief Financial Officer |
BITFARMS LTD.
INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND COMPREHENSIVE PROFIT OR LOSS
(Expressed in thousands of U.S. dollars, except
per share amounts - unaudited)
| |
Three months ended March 31, | |
| |
Notes | | |
2024 | | |
2023 (restated - Note 3d) | |
| |
| | |
| | |
| |
Revenues | |
| 6, 22 | | |
| 50,317 | | |
| 30,050 | |
Cost of revenues | |
| 21 | | |
| (60,999 | ) | |
| (38,403 | ) |
Gross loss | |
| | | |
| (10,682 | ) | |
| (8,353 | ) |
| |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | |
General and administrative expenses | |
| 21 | | |
| (13,196 | ) | |
| (8,360 | ) |
Realized gain on disposition of digital assets | |
| 6 | | |
| — | | |
| 587 | |
Reversal of revaluation loss on digital assets | |
| 6 | | |
| — | | |
| 2,695 | |
Gain (loss) on disposition of property, plant and equipment | |
| | | |
| 170 | | |
| (1,566 | ) |
Operating loss | |
| | | |
| (23,708 | ) | |
| (14,997 | ) |
| |
| | | |
| | | |
| | |
Net financial income | |
| 21 | | |
| 11,443 | | |
| 10,967 | |
Net loss before income taxes | |
| | | |
| (12,265 | ) | |
| (4,030 | ) |
| |
| | | |
| | | |
| | |
Income tax recovery | |
| 15 | | |
| 6,285 | | |
| 330 | |
Net loss | |
| | | |
| (5,980 | ) | |
| (3,700 | ) |
| |
| | | |
| | | |
| | |
Other comprehensive income (loss) | |
| | | |
| | | |
| | |
Item that will not be reclassified to profit or loss: | |
| | | |
| | | |
| | |
Change in revaluation surplus - digital assets, net of tax | |
| 6 | | |
| 17,433 | | |
| 1,225 | |
Total comprehensive income (loss), net of tax | |
| | | |
| 11,453 | | |
| (2,475 | ) |
| |
| | | |
| | | |
| | |
Loss per share | |
| 19 | | |
| | | |
| | |
Basic and diluted | |
| | | |
| (0.02 | ) | |
| (0.02 | ) |
Weighted average number of common shares outstanding | |
| 19 | | |
| | | |
| | |
Basic and diluted | |
| | | |
| 338,745,000 | | |
| 232,541,000 | |
Should be read in conjunction with the notes to the interim condensed consolidated financial statements
BITFARMS LTD.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY
(Expressed in thousands of U.S. dollars, except
number of shares - unaudited)
| |
Notes | | |
Number of shares | | |
Share capital | | |
Contributed surplus | | |
Accumulated deficit | | |
Revaluation surplus | | |
Total equity | |
Balance as of January 1, 2024 | |
| | | |
| 334,153,000 | | |
| 530,123 | | |
| 56,622 | | |
| (294,924 | ) | |
| 2,941 | | |
| 294,762 | |
Net loss | |
| | | |
| — | | |
| — | | |
| — | | |
| (5,980 | ) | |
| — | | |
| (5,980 | ) |
Change in revaluation surplus - digital assets, net of tax | |
| | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 17,433 | | |
| 17,433 | |
Total comprehensive income (loss), net of tax | |
| | | |
| — | | |
| — | | |
| — | | |
| (5,980 | ) | |
| 17,433 | | |
| 11,453 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Transfer of revaluation surplus on disposal of digital assets to accumulated deficit, net of tax | |
| | | |
| — | | |
| — | | |
| — | | |
| 7,498 | | |
| (7,498 | ) | |
| — | |
Share-based payment | |
| 20 | | |
| — | | |
| — | | |
| 3,094 | | |
| — | | |
| — | | |
| 3,094 | |
Issuance of common shares | |
| 16 | | |
| 16,997,000 | | |
| 37,268 | | |
| — | | |
| — | | |
| — | | |
| 37,268 | |
Exercise of stock options and warrants | |
| 16, 20 | | |
| 5,142,000 | | |
| 18,864 | | |
| (27 | ) | |
| — | | |
| — | | |
| 18,837 | |
Balance as of March 31, 2024 | |
| | | |
| 356,292,000 | | |
| 586,255 | | |
| 59,689 | | |
| (293,406 | ) | |
| 12,876 | | |
| 365,414 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of January 1, 2023 (restated - Note 3d) | |
| | | |
| 224,200,000 | | |
| 404,934 | | |
| 47,653 | | |
| (197,189 | ) | |
| — | | |
| 255,398 | |
Net loss | |
| | | |
| — | | |
| — | | |
| — | | |
| (3,700 | ) | |
| — | | |
| (3,700 | ) |
Change in revaluation surplus - digital assets, net of tax | |
| | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,225 | | |
| 1,225 | |
Total comprehensive income (loss), net of tax | |
| | | |
| — | | |
| — | | |
| — | | |
| (3,700 | ) | |
| 1,225 | | |
| (2,475 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Share-based payment | |
| 20 | | |
| — | | |
| — | | |
| 2,536 | | |
| — | | |
| — | | |
| 2,536 | |
Issuance of common shares | |
| 16 | | |
| 15,940,000 | | |
| 15,764 | | |
| — | | |
| — | | |
| — | | |
| 15,764 | |
Exercise of stock options | |
| 16, 20 | | |
| 122,000 | | |
| 76 | | |
| (29 | ) | |
| — | | |
| — | | |
| 47 | |
Balance as of March 31, 2023 (restated - Note 3d) | |
| | | |
| 240,262,000 | | |
| 420,774 | | |
| 50,160 | | |
| (200,889 | ) | |
| 1,225 | | |
| 271,270 | |
Should be read in conjunction with the notes
to the interim condensed consolidated financial statements
BITFARMS LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. dollars - unaudited)
| |
| | |
Three months ended March 31, | |
| |
Notes | | |
2024 | | |
2023 (restated - Note 3d) | |
| |
| | |
| | |
| |
Cash flows from operating activities | |
| | | |
| | | |
| | |
Net loss | |
| | | |
| (5,980 | ) | |
| (3,700 | ) |
Adjustments for: | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 21 | | |
| 38,977 | | |
| 20,700 | |
Net financial income | |
| 21 | | |
| (11,443 | ) | |
| (10,967 | ) |
Digital assets earned | |
| 6 | | |
| (49,423 | ) | |
| (29,208 | ) |
Proceeds from sale of digital assets earned | |
| 6 | | |
| 49,570 | | |
| 28,483 | |
Realized gain on disposition of digital assets | |
| 6 | | |
| — | | |
| (587 | ) |
Reversal of revaluation loss on digital assets | |
| 6 | | |
| — | | |
| (2,695 | ) |
Share-based payment | |
| 20 | | |
| 3,094 | | |
| 2,536 | |
Income tax recovery | |
| 15 | | |
| (6,285 | ) | |
| (330 | ) |
Loss (gain) on disposition of property, plant and equipment | |
| | | |
| (170 | ) | |
| 1,566 | |
Interest and financial income received (expenses paid) | |
| | | |
| 524 | | |
| (2,099 | ) |
Income taxes paid | |
| | | |
| (260 | ) | |
| — | |
Changes in non-cash working capital components | |
| 23 | | |
| (323 | ) | |
| (2,670 | ) |
Net change in cash related to operating activities | |
| | | |
| 18,281 | | |
| 1,029 | |
| |
| | | |
| | | |
| | |
Cash flows used in investing activities | |
| | | |
| | | |
| | |
Purchase of property, plant and equipment | |
| | | |
| (3,920 | ) | |
| (8,104 | ) |
Proceeds from sale of property, plant and equipment | |
| | | |
| 1,043 | | |
| 2,405 | |
Purchase of marketable securities | |
| 21 | | |
| (2,284 | ) | |
| (7,163 | ) |
Proceeds from disposition of marketable securities | |
| 21 | | |
| 2,622 | | |
| 9,334 | |
Equipment and construction prepayments | |
| | | |
| (74,015 | ) | |
| — | |
Net change in cash related to investing activities | |
| | | |
| (76,554 | ) | |
| (3,528 | ) |
| |
| | | |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | | |
| | |
Issuance of common shares | |
| 16 | | |
| 37,268 | | |
| 15,764 | |
Repayment of long-term debt | |
| 13 | | |
| (4,075 | ) | |
| (13,474 | ) |
Proceeds from long-term debt | |
| 13 | | |
| 1,695 | | |
| — | |
Repayment of lease liabilities | |
| 14 | | |
| (779 | ) | |
| (1,394 | ) |
Exercise of stock options and warrants | |
| 16, 20 | | |
| 6,027 | | |
| 47 | |
Net change in cash related to financing activities | |
| | | |
| 40,136 | | |
| 943 | |
| |
| | | |
| | | |
| | |
Net decrease in cash | |
| | | |
| (18,137 | ) | |
| (1,556 | ) |
Cash, beginning of the period | |
| | | |
| 84,038 | | |
| 30,887 | |
Exchange rate differences on currency translation | |
| | | |
| 60 | | |
| 47 | |
Cash, end of the period | |
| | | |
| 65,961 | | |
| 29,378 | |
Should be read in conjunction with the notes
to the interim condensed consolidated financial statements
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Expressed in thousands
of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 1: NATURE OF OPERATIONS
Bitfarms Ltd. was incorporated
under the Canada Business Corporations Act on October 11, 2018 and continued under the Business Corporations Act (Ontario) on August
27, 2021. The consolidated financial statements of the corporation comprise the accounts of Bitfarms Ltd. and its wholly-owned subsidiaries
(together referred to as the “Company” or “Bitfarms”). The common shares of the Company are listed on the Nasdaq
Stock Market and the Toronto Stock Exchange (NASDAQ/TSX: BITF). Its registered office is located at 110 Yonge Street, Suite 1601, Toronto,
Ontario, Canada, M5C 1T4.
The activities of the Company are mainly comprised
of selling its computational power used for hashing calculations for the purpose of cryptocurrency mining in multiple jurisdictions as
described in Note 22 “Geographical Information”. The Company’s operations are currently located in Canada, the United
States, Argentina and Paraguay. Volta, a wholly-owned subsidiary of the Company, assists the Company in building and maintaining its
server farms and provides electrician services to both commercial and residential customers in Quebec.
Bitfarms owns
and operates server farms comprised of computers (referred to as “Miners”) designed for the purpose of validating transactions
on the Bitcoin Blockchain (referred to as “Mining”). Bitfarms generally operates its Miners 24 hours a day to produce computational
power used for hashing calculations (measured by hashrate) that Bitfarms sells to a Mining Pool under a formula-driven rate commonly
known in the industry as Full Pay Per Share (“FPPS”). Under FPPS, Mining Pools compensate Mining companies for their computational
power used for hashing calculations, measured through hashrate, based on what the Mining Pool would expect to generate in revenue for
a given time period if there was no randomness involved. The fee paid by a Mining Pool to Bitfarms for its computational power used for
hashing calculations may be in cryptocurrency, U.S. dollars, or another currency. However, the fees are generally paid to the Company
on a daily basis in BTC. Bitfarms accumulates the cryptocurrency fees it receives or exchanges them for U.S. dollars through reputable
and established cryptocurrency trading platforms.
Terms and definitions
In these financial statements,
the terms below have the following definitions:
| |
Term | |
Definition |
1 | |
Backbone | |
Backbone Hosting Solutions Inc. |
2 | |
Volta | |
9159-9290 Quebec Inc. |
3 | |
Backbone Argentina | |
Backbone Hosting Solutions SAU |
4 | |
Backbone Paraguay | |
Backbone Hosting Solutions Paraguay SA |
5 | |
Backbone Mining | |
Backbone Mining Solutions LLC |
6 | |
BTC | |
Bitcoin |
7 | |
BVVE | |
Blockchain Verification and Validation Equipment (primarily Miners) |
8 | |
CAD | |
Canadian Dollars |
9 | |
USD | |
U.S. Dollars |
10 | |
ARS | |
Argentine Pesos |
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Expressed in thousands
of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 2: LIQUIDITY
Bitfarms is primarily engaged in the cryptocurrency
Mining industry, a highly volatile industry subject to significant inherent risk. Declines in the market prices of cryptocurrencies,
an increase in the difficulty of BTC mining, delays in the delivery of Mining equipment, changes in the regulatory environment and adverse
changes in other inherent risks can significantly and negatively impact the Company’s operations and cash flows and its ability
to maintain sufficient liquidity to meet its financial obligations. Adverse changes to the factors mentioned above have impacted the
recoverability of the Company’s digital assets and property, plant and equipment, resulting in impairment losses being recorded.
The Company’s
current operating budget and future estimated cash flows indicate that the Company will generate positive cash flow in excess of the
Company’s cash commitments within the twelve-month period. These analyses are based on BTC market factors including price, difficulty
and network hashrate for the twelve-month period following the date these interim condensed consolidated financial statements were authorized
for issuance.
A BTC Halving is scheduled to occur once every
210,000 blocks, or roughly every four years, until the total amount of BTC rewards issued reaches 21 million, which is expected to occur
around 2140. The most recent BTC Halving occurred on April 19, 2024, at which time BTC block rewards decreased from 6.25 BTC per block
to 3.125 BTC per block. Once 21 million BTC are generated on or about the year 2140, the network will stop producing more BTC, and the
industry will then need to rely on transaction fees and/or other sources of revenue. While BTC prices have had a history of significant
fluctuations around BTC Halving events, there is no guarantee that the price change will be favorable or would compensate for the reduction
in Mining rewards and the compensation from Mining Pools.
At current BTC prices, the Company’s existing
cash resources and the proceeds from sales of its BTC treasury and BTC earned may not be sufficient to fund capital investments to support
its growth objectives. If the proceeds from the sale of BTC are not sufficient, the Company would be required to raise additional funds
from external sources to meet these requirements. There is no assurance that the Company will be able to raise such additional funds
on acceptable terms, if at all.
If the Company raises additional funds by issuing
securities, existing shareholders’ ownership in the Company may be diluted. If the Company is unable to obtain financing, including by
issuing securities, or if funds from operations and proceeds from sales of the Company’s BTC holdings are negatively impacted by the
BTC price, the Company may have difficulty meeting its payment obligations.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Expressed in thousands
of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 3: BASIS OF PRESENTATION AND MATERIAL ACCOUNTING POLICY
INFORMATION
| a. | Basis of preparation and measurement |
The interim condensed
consolidated financial statements (“Financial Statements”) of the Company comprise the accounts of Bitfarms Ltd. and its
wholly-owned subsidiaries. These Financial Statements have been prepared in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board (“IFRS Accounting Standards”) applicable to the preparation of interim
financial statements, including International Accounting Standard 34, Interim Financial Reporting. These Financial Statements
were approved by the Board of Directors on May 14, 2024.
These Financial Statements do not include all
the information required for full annual financial statements and should be read in conjunction with the audited annual consolidated
financial statements of the Company and the notes thereto for the year ended December 31, 2023.
These Financial Statements
have been prepared under the same accounting policies used in the audited annual consolidated financial statements for the year ended
December 31, 2023, except for new accounting standards issued and adopted by the Company which are described below. The accounting
policies have been applied consistently by the Company’s entities and to all periods presented in these Financial Statements, unless
otherwise indicated.
The Financial Statements have been prepared on
the historical cost basis, except for the revaluation of certain financial instruments and digital assets recorded at fair value, and
assets held for sale measured at the lower of their carrying amount and fair value less costs to sell.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Expressed in thousands
of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 3: BASIS OF PRESENTATION AND MATERIAL ACCOUNTING POLICY
INFORMATION (Continued)
| b. | New accounting amendments issued and adopted by the Company |
The following amendments
to existing standards were adopted by the Company as of January 1, 2024:
Amendments to IFRS
16, Leases (“IFRS 16”)
Amendments to
IFRS 16 require a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a manner that does not recognize
any amount of the gain or loss that relates to the right-of-use retained. The new requirements do not prevent a seller-lessee from recognizing
in profit or loss any gain or loss relating to the partial or full termination of a lease.
Amendments to IAS
1, Presentation of the Financial Statements (“IAS 1”)
Amendments to
IAS 1 clarify how to classify debt and other liabilities as current or non-current. The amendments help to determine whether, in the
interim consolidated statements of financial position, debt and other liabilities with an uncertain settlement date should be classified
as current (due or potentially due to be settled within one year) or non-current. The amendments also include clarifying the classification
requirements for debt that an entity might settle by converting into equity.
Amendments to
IAS 1 specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current
at the reporting date. Instead, the amendments require information about these covenants be disclosed in the notes to the financial statements.
Amendments to IAS 7, Statement
of Cash Flows (“IAS 7”) and IFRS 7, Financial Instruments: Disclosures (“IFRS 7”)
Amendments to
IAS 7 and IFRS 7 introduce disclosure requirements to enhance the transparency of supplier finance arrangements and their effects on
an entity’s liabilities, cash flows and exposure to liquidity risk.
The adoption by the Company
of the amendments listed above did not have a significant impact on the Company’s Financial Statements.
| c. | New accounting amendments and standard
issued to be adopted at a later date |
The following
amendments to existing standards have been issued and are applicable to the Company for its annual period beginning on January 1, 2025,
with an earlier application permitted:
Amendments
to IAS 21, The Effects of Changes in Foreign Exchange Rates (“IAS 21”)
Amendments to
IAS 21 require an entity to apply a consistent approach in assessing whether a currency can be exchanged into another currency and, when
it cannot, in determining the exchange rate to use and the disclosures to provide.
The Company is
currently evaluating the impact of adopting the amendments on the Company’s Financial Statements.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 3: BASIS OF PRESENTATION
AND MATERIAL ACCOUNTING POLICY INFORMATION (Continued)
| c. | New accounting amendments and standard issued to be adopted at a later date (Continued) |
The following
new standard has been issued and is applicable to the Company for its annual period beginning on January 1, 2027, with an earlier application
permitted:
IFRS 18, Presentation
and Disclosure in Financial Statements (“IFRS 18”)
On April 9, 2024,
the International Accounting Standards Board issued IFRS 18, the new standard on presentation and disclosure in financial statements,
which will replace IAS 1, with a focus on updates to the statement of profit or loss. The key new concepts introduced in IFRS 18 relate
to:
| ● | the structure of the statement of profit or loss, including specified totals and subtotals; |
| ● | required disclosures in the financial statements for certain profit or loss performance measures that
are reported outside an entity’s financial statements (i.e., management-defined performance measures); and |
| ● | enhanced principles on aggregation and disaggregation which apply to the primary financial statements
and notes in general. |
The Company is
currently evaluating the impact of adopting the new standard on the Company’s Financial Statements.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 3: BASIS OF PRESENTATION AND MATERIAL
ACCOUNTING POLICY INFORMATION (Continued)
During the
year ended December 31, 2023, the Company identified errors in its accounting for warrants issued in connection with certain private placement
financings in 2021. The warrants and broker warrants are convertible for a fixed number of common shares of the Company but have a contingent
cashless exercise clause which results in a classification of the warrants and broker warrants as a financial liability and measurement
of such warrants at fair value through profit or loss, not equity.
The effects of the restatement on the affected
financial statement line items for the prior period are as follows:
Interim consolidated statements of profit or
loss and comprehensive profit or loss extract for the three months ended March 31, 2023 - Restatement
| |
Three months ended March 31, | |
| |
2023 (as reported) | | |
Warrant adjustments | | |
2023 (as restated) | |
| |
| | |
| | |
| |
Operating loss | |
| (14,997 | ) | |
| — | | |
| (14,997 | ) |
Net financial income (expenses) | |
| 12,188 | | |
| (1,221 | ) | |
| 10,967 | |
Net loss before income taxes | |
| (2,809 | ) | |
| (1,221 | ) | |
| (4,030 | ) |
Income tax recovery | |
| 330 | | |
| — | | |
| 330 | |
Net loss | |
| (2,479 | ) | |
| (1,221 | ) | |
| (3,700 | ) |
Other comprehensive income (loss) | |
| | | |
| | | |
| | |
Item that will not be reclassified to profit or loss: | |
| | | |
| | | |
| | |
Change in revaluation surplus - digital assets, net of tax | |
| 1,225 | | |
| — | | |
| 1,225 | |
Total comprehensive loss, net of tax | |
| (1,254 | ) | |
| (1,221 | ) | |
| (2,475 | ) |
| |
| | | |
| | | |
| | |
Loss per share | |
| | | |
| | | |
| | |
Basic and diluted | |
| (0.01 | ) | |
| (0.01 | ) | |
| (0.02 | ) |
Interim
consolidated statements of cash flows extract for the three months ended March 31, 2023 - Restatement
| |
Three months ended March 31, | |
| |
2023 (as reported) | | |
Warrant adjustments | | |
2023 (as restated) | |
Cash flows from operating activities | |
| | | |
| | | |
| | |
Net loss | |
| (2,479 | ) | |
| (1,221 | ) | |
| (3,700 | ) |
Adjustments for: | |
| | | |
| | | |
| | |
Net financial income | |
| (12,188 | ) | |
| 1,221 | | |
| (10,967 | ) |
Net change in cash related to operating activities | |
| 1,029 | | |
| — | | |
| 1,029 | |
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 4: SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation
of the Financial Statements requires Management to undertake judgments, estimates and assumptions about recognition and measurement of
assets, liabilities, income and expenses. These estimates and judgments are based on Management’s best knowledge of the events or circumstances
and actions the Company may take in the future. The actual results may differ from these assumptions and estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to assumptions and estimates are recognized in the period in which the assumption or estimate is revised
if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and
future periods.
The significant
judgements made by Management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the
same as those described in the audited annual consolidated financial statements for year ended December 31, 2023, except for the
following:
Property,
plant and equipment
Estimates
of useful lives, residual values and methods of depreciation are reviewed annually. Any changes based on additional available information
are accounted for prospectively as a change in accounting estimate.
During the three months ended March 31, 2024,
in connection with the replacement of older Miners following the Company’s transformative fleet upgrade as described in Note 9 - Property,
Plant and Equipment, the Company reviewed and adjusted the useful lives, residual values and method of depreciation of older Miners that
will be replaced by the new fleet in 2024.
For these Miners, the depreciation was accelerated
to bring the book value to the estimated recoverable value at the time they are expected to be replaced. The residual values were adjusted
to reflect the expected proceeds from the eventual sale and the depreciation method was modified from sum-of-years to straight-line method.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 5: OTHER ASSETS
| |
As of
March 31, | | |
As of
December 31, | |
| |
2024 | | |
2023 | |
Sales taxes receivable* | |
| 1,138 | | |
| 805 | |
Electrical component inventory | |
| 1,017 | | |
| 705 | |
Other receivables | |
| 1,437 | | |
| 689 | |
| |
| 3,592 | | |
| 2,199 | |
* Refer to Note 21b for more details about the provision applied to the Argentine value-added tax (VAT) receivable included in sales taxes receivable.
NOTE 6: DIGITAL ASSETS
BTC transactions
and the corresponding values for the three months ended March 31, 2024 and 2023 were as follows:
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
| |
Quantity | | |
Value | | |
Quantity | | |
Value | |
Balance of digital assets including digital assets pledged as collateral as of January 1, | |
| 804 | | |
| 33,971 | | |
| 405 | | |
| 6,705 | |
BTC earned* | |
| 943 | | |
| 49,423 | | |
| 1,297 | | |
| 29,208 | |
BTC exchanged for cash and services | |
| (941 | ) | |
| (49,570 | ) | |
| (1,267 | ) | |
| (28,483 | ) |
Realized gain on disposition of digital assets** | |
| — | | |
| 11,063 | | |
| — | | |
| 587 | |
Change in unrealized gain on revaluation of digital assets** | |
| — | | |
| 12,655 | | |
| — | | |
| 4,362 | |
Balance of digital assets including digital assets pledged as collateral as of March 31, | |
| 806 | | |
| 57,542 | | |
| 435 | | |
| 12,379 | |
Less digital assets pledged as collateral as of March 31,*** | |
| — | | |
| — | | |
| (74 | ) | |
| (2,122 | ) |
Balance of digital assets excluding digital assets pledged as collateral as of March 31, | |
| 806 | | |
| 57,542 | | |
| 361 | | |
| 10,257 | |
* Management
estimates the fair value of BTC earned on a daily basis as the quantity of cryptocurrency received multiplied by the price quoted on Coinbase
on the day it was received. Management considers the prices quoted on Coinbase to be a level 2 input under IFRS 13, Fair Value Measurement.
** A portion
of the realized gain on disposition of digital assets and the change in unrealized gain on revaluation of digital assets is presented
in other comprehensive income after reversing previously recorded revaluation loss on digital assets in the statement of profit or loss.
For the three months ended March 31, 2024, a gain of $17,433, net of $6,285 of deferred income tax expense, was presented in other comprehensive
income (three months ended March 31, 2023: $1,225 and $442, respectively).
*** Refer to
Note 13 for details of the Company’s long-term debt and BTC pledged as collateral. During the three months ended March 31, 2024,
the NYDIG Loan balance was fully repaid and the BTC previously pledged as collateral thereunder became unencumbered.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 7: DERIVATIVE ASSETS AND LIABILITIES
BTC option contracts
Starting in the first quarter of 2023, the Company
purchased BTC option contracts that gave it the right, but not the obligation, to sell digital assets at a fixed price. Option contracts
are used to reduce the risk of BTC price volatility and reduce the variability of cash flows resulting from future sales of digital assets.
The Company did not apply hedge accounting on these contracts.
Reconciliation of the fair value measurement
of derivatives (Level 2):
| |
As of
March 31, | | |
As of
December 31, | |
| |
2024 | | |
2023 | |
| |
Derivative Assets | | |
Derivative Liabilities | | |
Derivative Assets | | |
Derivative Liabilities | |
| |
three-month period | | |
twelve-month period | |
Balance as of January 1, | |
| 1,281 | | |
| — | | |
| — | | |
| — | |
Remeasurement recognized in statement of profit or loss during the period | |
| 2,490 | | |
| — | | |
| 28 | | |
| 20 | |
Purchases | |
| 631 | | |
| — | | |
| 1,253 | | |
| 366 | |
Sales | |
| (1,386 | ) | |
| — | | |
| — | | |
| (386 | ) |
Balance as of period end | |
| 3,016 | | |
| — | | |
| 1,281 | | |
| — | |
The following gain or loss on derivatives are
recognized in Net financial income in the interim consolidated statements of profit or loss and comprehensive profit or loss:
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
Unrealized change in fair value of outstanding contracts | |
| 2,128 | | |
| (35 | ) |
Realized gain on settled contracts | |
| 362 | | |
| 70 | |
| |
| 2,490 | | |
| 35 | |
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 7: DERIVATIVE ASSETS AND LIABILITIES
(Continued)
Warrant liabilities
The fair value of warrant liabilities is as follows:
| |
As of March 31, | | |
As of December 31, | |
| |
2024 | | |
2023 | |
2023 private placement | |
| 16,586 | | |
| 34,276 | |
2021 private placements | |
| 1,990 | | |
| 6,150 | |
| |
| 18,576 | | |
| 40,426 | |
In November 2023,
the Company completed a private placement that included 22,222,000 warrants and 3,000,000 broker warrants to purchase common shares. The
warrants and broker warrants are convertible for a fixed number of common shares of the Company but have a contingent cashless exercise
clause which results in a classification of the warrants and broker warrants as a financial liability and measurement of such warrants
at fair value through profit or loss recognized in Net financial income.
Details of the
outstanding warrants are as follows:
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
| |
Number of
warrants | | |
Weighted
average exercise
price (USD) | | |
Number of
warrants | | |
Weighted
average exercise
price (USD) | |
Outstanding, January 1, | |
| 35,105,000 | | |
| 2.83 | | |
| 19,153,000 | | |
| 4.21 | |
Exercised | |
| (5,111,000 | ) | |
| 1.17 | | |
| — | | |
| — | |
Expired | |
| (121,000 | ) | |
| 2.47 | | |
| — | | |
| — | |
Outstanding, March 31, | |
| 29,873,000 | | |
| 3.12 | | |
| 19,153,000 | | |
| 4.21 | |
The weighted average contractual life of the
warrants as of March 31, 2024, was 1.1 years (March 31, 2023: 1.2 years).
On January 7, 2024, 96,000 broker warrants from
the January 7, 2021 private placement expired and were derecognized, which resulted in a non-cash gain on revaluation of warrants of
$61 included in Net financial income.
In February 2024,
5,000,000 warrants and 111,000 broker warrants related to the 2023 private placement were exercised resulting in the issuance of 5,111,000
common shares for proceeds of approximately $5,986.
On March 11, 2024, 25,000 warrants relating to the acquisition of the Garlock building
in Quebec issued during the first quarter of 2022 expired. These warrants were recorded as equity instruments.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 7: DERIVATIVE ASSETS AND LIABILITIES
(Continued)
Warrant liabilities (Continued)
The Black-Scholes model and inputs
below were used in determining the weighted average values of the warrants and broker warrants prior to their derecognition as described
in Note 16 and at period end.
2023 warrants and broker warrants
| |
Remeasurement on settlement of warrants | | |
Remeasurement at period end | |
Measurement date | |
February 12 to 28, 2024 | | |
March 31, 2024 | | |
December 31, 2023 | |
Dividend yield (%) | |
| — | | |
| — | | |
| — | |
Expected share price volatility (%) | |
| 87 | % | |
| 86 | % | |
| 91 | % |
Risk-free interest rate (%) | |
| 4.67 | % | |
| 4.59 | % | |
| 4.23 | % |
Expected life of warrants (years) | |
| 2.74 | | |
| 2.65 | | |
| 2.90 | |
Share price (CAD) | |
| 4.42 | | |
| 3.01 | | |
| 3.85 | |
Exercise price (USD) | |
| 1.17 | | |
| 1.17 | | |
| 1.17 | |
Fair value of warrants (USD) | |
| 2.51 | | |
| 1.53 | | |
| 2.15 | |
Number of warrants outstanding (exercised) | |
| (5,111,000 | ) | |
| 10,841,000 | | |
| 15,952,000 | |
2021 warrants and broker warrants
| |
Remeasurement at period end | |
Measurement date | |
March 31, 2024 | | |
December 31, 2023 | |
Dividend yield (%) | |
| — | | |
| — | |
Expected share price volatility (%) | |
| 95 | % | |
| 82 | % |
Risk-free interest rate (%) | |
| 4.59 | % | |
| 4.23 | % |
Expected life of warrants (years) | |
| 0.21 | | |
| 0.46 | |
Share price (CAD) | |
| 3.01 | | |
| 3.85 | |
Exercise price (USD) | |
| 4.21 | | |
| 4.20 | |
Fair value of warrants (USD) | |
| 0.10 | | |
| 0.32 | |
Number of warrants outstanding | |
| 19,032,000 | | |
| 19,128,000 | |
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 8: ASSETS HELD FOR SALE
As of March 31, 2024 and
December 31, 2023, assets held for sale consisted of the following:
| |
| |
As of March 31, | | |
As of December 31, | |
| |
Notes | |
2024 | | |
2023 | |
Miners | |
i. | |
| 1,571 | | |
| 521 | |
Mining electrical components | |
| |
| 401 | | |
| 867 | |
| |
| |
| 1,972 | | |
| 1,388 | |
The following
table summarizes the movement of Miners held for sale:
| | |
MicroBT
WhatsMiner M30
& M31 Miners | | |
Innosilicon T2T & T3,
Canaan Avalon A10
and Antminer T15 &
S15 Miners | | |
MicroBT
WhatsMiner
M20S Miners | | |
Bitmain S19j Pro
Miners | | |
TOTAL | |
| | |
Qty | | |
Value | | |
Qty | | |
Value | | |
Qty | | |
Value | | |
Qty | | |
Value | | |
Qty | | |
Value | |
Balance as of January 1, 2023 | | |
— | | |
— | | |
1,272 | | |
190 | | |
2,512 | | |
1,030 | | |
— | | |
— | | |
3,784 | | |
1,220 | |
Additions | | |
| — | | |
| — | | |
| 1,848 | | |
| 198 | | |
| — | | |
| — | | |
| 300 | | |
| 205 | | |
| 2,148 | | |
| 403 | |
Dispositions | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,781 | ) | |
| (714 | ) | |
| — | | |
| — | | |
| (1,781 | ) | |
| (714 | ) |
Impairment | | |
| — | | |
| — | | |
| (3,120 | ) | |
| (388 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| (3,120 | ) | |
| (388 | ) |
Balance as of December 31, 2023 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 731 | | |
| 316 | | |
| 300 | | |
| 205 | | |
| 1,031 | | |
| 521 | |
Additions | | |
| 7,696 | | |
| 1,363 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 7,696 | | |
| 1,363 | |
Dispositions | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (258 | ) | |
| (108 | ) | |
| (300 | ) | |
| (205 | ) | |
| (558 | ) | |
| (313 | ) |
Balance as of March 31, 2024 | | |
| 7,696 | | |
| 1,363 | | |
| — | | |
| — | | |
| 473 | | |
| 208 | | |
| — | | |
| — | | |
| 8,169 | | |
| 1,571 | |
| a. | S19j Pro Bitmain Miners |
During the three
months ended March 31, 2024, the Company sold 300 Bitmain S19j Pro Miners with a carrying amount of $205 and disposed of them for net
proceeds of $205 resulting in no gain or loss.
| b. | MicroBT WhatsMiner M30 and M31 Miners |
During
the three months ended March 31, 2024, the Company ceased using 2,775 MicroBT WhatsMiner M30 Miners and 4,921 MicroBT WhatsMiner
M31 Miners and planned to dispose of them within the next 12 months.
| c. | MicroBT WhatsMiner M20S Miners |
During the three months ended March 31,
2024, the Company sold 258 MicroBT WhatsMiner M20S Miners with a carrying amount of $108 and disposed of them for net proceeds of $34
resulting in a loss of $74. Management determined that the remaining MicroBT WhatsMiner M20S Miners continue to meet the criteria to
be classified as held for sale as of March 31, 2024.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 9: PROPERTY, PLANT AND EQUIPMENT
As of March 31, 2024 and December 31,
2023, property, plant and equipment (“PPE”) consisted of the following:
| |
Notes | |
BVVE and electrical components | | |
Mineral assets | | |
Land and buildings | | |
Leasehold improvements | | |
Vehicles | | |
Total | |
Cost | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of January 1, 2024 | |
| |
| 354,803 | | |
| — | | |
| 5,740 | | |
| 50,728 | | |
| 1,262 | | |
| 412,533 | |
Additions | |
| |
| 28,480 | | |
| — | | |
| 3,247 | | |
| 305 | | |
| 14 | | |
| 32,046 | |
Dispositions | |
| |
| (4 | ) | |
| — | | |
| — | | |
| (560 | ) | |
| (27 | ) | |
| (591 | ) |
Transfer to assets held for sale | |
8 | |
| (24,875 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| (24,875 | ) |
Balance as of March 31, 2024 | |
| |
| 358,404 | | |
| — | | |
| 8,987 | | |
| 50,473 | | |
| 1,249 | | |
| 419,113 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated Depreciation | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of January 1, 2024 | |
| |
| 199,794 | | |
| — | | |
| 424 | | |
| 25,656 | | |
| 647 | | |
| 226,521 | |
Depreciation | |
| |
| 37,028 | | |
| — | | |
| 38 | | |
| 1,012 | | |
| 39 | | |
| 38,117 | |
Dispositions | |
| |
| (3 | ) | |
| — | | |
| — | | |
| (423 | ) | |
| (16 | ) | |
| (442 | ) |
Transfer to assets held for sale | |
8 | |
| (23,403 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| (23,403 | ) |
Impairment on deposits transferred to PPE | |
| |
| 553 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 553 | |
Balance as of March 31, 2024 | |
| |
| 213,969 | | |
| — | | |
| 462 | | |
| 26,245 | | |
| 670 | | |
| 241,346 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net book value as of March 31, 2024 | |
| |
| 144,435 | | |
| — | | |
| 8,525 | | |
| 24,228 | | |
| 579 | | |
| 177,767 | |
|
|
| |
BVVE and electrical components | | |
Mineral assets | | |
Land and buildings | | |
Leasehold improvements | | |
Vehicles | | |
Total | |
Cost |
|
| |
| | |
| | |
| | |
| | |
| | |
| |
Balance as of January 1, 2023 |
|
| |
| 308,205 | | |
| 9,000 | | |
| 4,392 | | |
| 45,278 | | |
| 1,082 | | |
| 367,957 | |
Additions |
|
| |
| 63,598 | | |
| — | | |
| 1,348 | | |
| 5,924 | | |
| 272 | | |
| 71,142 | |
Additions related to asset acquisitions |
|
| |
| 13 | | |
| — | | |
| — | | |
| 30 | | |
| — | | |
| 43 | |
Dispositions |
|
| |
| (7,325 | ) | |
| (9,000 | ) | |
| — | | |
| (5 | ) | |
| (92 | ) | |
| (16,422 | ) |
Transfer to assets held for sale |
|
8 | |
| (9,688 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| (9,688 | ) |
Effect of change in discount rate |
|
| |
| — | | |
| — | | |
| — | | |
| (499 | ) | |
| — | | |
| (499 | ) |
Balance as of December 31, 2023 |
|
| |
| 354,803 | | |
| — | | |
| 5,740 | | |
| 50,728 | | |
| 1,262 | | |
| 412,533 | |
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated Depreciation |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance as of January 1, 2023 |
|
| |
| 120,097 | | |
| 6,000 | | |
| 270 | | |
| 21,636 | | |
| 526 | | |
| 148,529 | |
Depreciation |
|
| |
| 77,551 | | |
| — | | |
| 154 | | |
| 3,556 | | |
| 194 | | |
| 81,455 | |
Dispositions |
|
| |
| (5,756 | ) | |
| (9,000 | ) | |
| — | | |
| (5 | ) | |
| (73 | ) | |
| (14,834 | ) |
Transfer to assets held for sale |
|
8 | |
| (8,418 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| (8,418 | ) |
Impairment |
|
| |
| 1,882 | | |
| 3,000 | | |
| — | | |
| — | | |
| — | | |
| 4,882 | |
Impairment on deposits transferred to PPE |
|
| |
| 14,438 | | |
| — | | |
| — | | |
| 469 | | |
| — | | |
| 14,907 | |
Balance as of December 31, 2023 |
|
| |
| 199,794 | | |
| — | | |
| 424 | | |
| 25,656 | | |
| 647 | | |
| 226,521 | |
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net book value as of December 31, 2023 |
|
| |
| 155,009 | | |
| — | | |
| 5,316 | | |
| 25,072 | | |
| 615 | | |
| 186,012 | |
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 9: PROPERTY, PLANT AND EQUIPMENT
(Continued)
BVVE
Further details of the quantity and models of BTC BVVE held by the Company as of March 31,
2024 and December 31, 2023 are as follows :
| |
Notes | | |
MicroBT WhatsMiner* | | |
Bitmain S19j Pro | | |
Bitmain T21 | | |
Total | |
Quantity as of January 1, 2024 | |
| | | |
| 51,738 | | |
| 16,361 | | |
| — | | |
| 68,099 | |
Additions | |
| | | |
| 100 | | |
| — | | |
| 2,982 | | |
| 3,082 | |
Dispositions | |
| | | |
| (258 | ) | |
| (300 | ) | |
| — | | |
| (558 | ) |
Quantity as of March 31, 2024 | |
| | | |
| 51,580 | | |
| 16,061 | | |
| 2,982 | | |
| 70,623 | |
Classified as assets held for sale | |
| 8 | | |
| (8,169 | ) | |
| — | | |
| — | | |
| (8,169 | ) |
Presented as property, plant and equipment | |
| | | |
| 43,411 | | |
| 16,061 | | |
| 2,982 | | |
| 62,454 | |
* Includes 473 M20S classified as assets held for sale, 36,018 M30 of which 2,775 M30 are classified as assets held for sale, 12,517 M31 of which 4,921 M31 are classified as assets held for sale and 2,572 M50 Miners.
Refer to Note
8 for more details on assets held for sale.
| |
Notes | | |
MicroBT WhatsMiner* | | |
Bitmain S19j Pro | | |
Innosilicon T3 & T2T | | |
Bitmain S19XP | | |
Total | |
Quantity as of January 1, 2023 | |
| | | |
| 45,375 | | |
| 7,172 | | |
| 5,711 | | |
| — | | |
| 58,258 | |
Additions | |
| | | |
| 8,281 | | |
| 9,289 | | |
| — | | |
| 409 | | |
| 17,979 | |
Dispositions | |
| | | |
| (1,918 | ) | |
| (100 | ) | |
| (5,711 | ) | |
| (409 | ) | |
| (8,138 | ) |
Quantity as of December 31, 2023 | |
| | | |
| 51,738 | | |
| 16,361 | | |
| — | | |
| — | | |
| 68,099 | |
Classified as assets held for sale | |
| 8 | | |
| (731 | ) | |
| (300 | ) | |
| — | | |
| — | | |
| (1,031 | ) |
Presented as property, plant and equipment | |
| | | |
| 51,007 | | |
| 16,061 | | |
| — | | |
| — | | |
| 67,068 | |
* Includes 731 M20S classified as assets held for sale, 36,018 M30S, 12,517 M31S and 2,473 M50 Miners.
Refer to Note
8 for more details on assets held for sale.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 9: PROPERTY, PLANT AND EQUIPMENT
(Continued)
Changes in
the useful life, residual value and depreciation method of certain BVVE
During
the three months ended March 31, 2024, the Company exercised its purchase option for 28,000 Bitmain T21 Miners and entered into
purchase agreements to acquire 19,280 Bitmain T21 Miners, 3,888 Bitmain S21 Miners and 740 Bitmain S21 hydro Miners. Refer to Note 11
for more details. The Company intends to liquidate its older Miners that are expected to be replaced with the Bitmain T21 Miners, Bitmain
S21 Miners, Bitmain S21 hydro Miners and other hydro Miners.
| ii. | Accelerated depreciation |
The older
Miners will remain in service until the new Miners are installed to replace them. The Company has changed the usage and the retention
strategy of the older Miners and, accordingly, revised their specific useful life, residual value and depreciation method.
The changes are
summarized as follows:
| ● | decreasing
the specific useful life of the older Miners from 5 years to 2 years to reflect their eventual disposal in 2024; |
| ● | decreasing the residual values to reflect the expected proceeds
from the eventual disposals; and |
| ● | accelerating the depreciation method from sum-of-years over
5 years to straight-line method over 2 years to represent the change in pattern in which their future economic benefits are expected
to be consumed by the Company. |
During the three
months ended March 31, 2024, the Company recorded accelerated depreciation of $18,503 on its older Miners. These assets are expected
to be depreciated to their residual values by the end of 2024.
The decision to
replace the older Miners, as well as a review of the useful life, residual value and depreciation method were indicators for impairment
testing. As a result, the Company performed evaluations of the recoverable amount of the assets for operating the cryptocurrency mining
facilities in Quebec, Washington State, Argentina and Paraguay separately. Based on its calculations, which were based on discounted cash
flow models, the Company determined that no impairment loss should be recorded during the three months ended March 31, 2024.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 10: INTANGIBLE ASSETS
| |
Systems software | | |
Access rights to
electricity | | |
Total | |
Cost | |
| | |
| | |
| |
Balance as of January 1, 2024 | |
| 5,150 | | |
| 3,801 | | |
| 8,951 | |
Additions | |
| — | | |
| 912 | | |
| 912 | |
Balance as of March 31, 2024 | |
| 5,150 | | |
| 4,713 | | |
| 9,863 | |
| |
| | | |
| | | |
| | |
Accumulated amortization | |
| | | |
| | | |
| | |
Balance as of January 1, 2024 | |
| 5,138 | | |
| 113 | | |
| 5,251 | |
Amortization | |
| 4 | | |
| 62 | | |
| 66 | |
Balance as of March 31, 2024 | |
| 5,142 | | |
| 175 | | |
| 5,317 | |
| |
| | | |
| | | |
| | |
Net book value as of March 31, 2024 | |
| 8 | | |
| 4,538 | | |
| 4,546 | |
| |
Systems software | | |
Access rights to
electricity | | |
Total | |
Cost | |
| | |
| | |
| |
Balance as of January 1, 2023 | |
| 5,150 | | |
| — | | |
| 5,150 | |
Additions related to asset acquisitions | |
| — | | |
| 3,801 | | |
| 3,801 | |
Balance as of December 31, 2023 | |
| 5,150 | | |
| 3,801 | | |
| 8,951 | |
| |
| | | |
| | | |
| | |
Accumulated amortization | |
| | | |
| | | |
| | |
Balance as of January 1, 2023 | |
| 5,117 | | |
| — | | |
| 5,117 | |
Amortization | |
| 21 | | |
| 113 | | |
| 134 | |
Balance as of December 31, 2023 | |
| 5,138 | | |
| 113 | | |
| 5,251 | |
| |
| | | |
| | | |
| | |
Net book value as of December 31, 2023 | |
| 12 | | |
| 3,688 | | |
| 3,700 | |
Additions related to access rights
to electricity
In April 2023, the Company received approval
from the power supplier in Washington State for a 6 MW expansion. During the second quarter of 2023, the Company began constructing an
additional production facility on Company-owned land and paid $912 to the power supplier for establishing the connection, which was capitalized
as long-term deposits, equipment, prepayments and other. During the three months ended March 31, 2024, the power supplier established
the electricity connection, allowing the Company to access the 6 MW of hydro power capacity. As a result, the balance of $912 was reclassified
from long-term deposits, equipment, prepayments and other to intangible assets.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 10: INTANGIBLE ASSETS
(continued)
The following
table summarizes the access rights to electricity:
Year | |
Location | |
Additions to intangibles ($) | | |
Additional capacity |
| |
Term of contractual access rights | |
Amortization method and period |
2024 | |
Washington State, USA | |
| 912 | | |
6 MW |
| |
No termination date | |
Declining balance 4% |
| |
| |
| 912 | | |
6 MW |
| |
| |
|
| |
| |
| | | |
|
| |
| |
|
2023 | |
Baie-Comeau, Quebec | |
| 2,315 | | |
22 MW |
| |
No termination date | |
Straight-line over the lease term of the facility |
2023 | |
Paso Pe, Paraguay | |
| 1,065 | | |
50 MW |
* | |
Ending in December 31, 2027 | |
Straight-line over the access rights period |
2023 | |
Yguazu, Paraguay | |
| 421 | | |
100 MW |
| |
Ending in December 31, 2027 | |
Straight-line over the access rights period |
| |
| |
| 3,801 | | |
172 MW |
| |
| |
|
| |
| |
| | | |
|
| |
| |
|
| |
| |
| | | |
178 MW |
| |
| |
|
* In November
2023, the Company finalized an amendment to the existing contract for an additional 20 MW of energy capacity for a total capacity of 70
MW.
NOTE 11: LONG-TERM DEPOSITS, EQUIPMENT PREPAYMENTS,
COMMITMENTS AND OTHER
| |
| |
As of
March 31, | | |
As of
December 31, | |
| |
| |
2024 | | |
2023 | |
Security deposits for energy, insurance and rent | |
| |
| 5,331 | | |
| 4,901 | |
Equipment and construction prepayments | |
a | |
| 88,285 | | |
| 39,813 | |
| |
| |
| 93,616 | | |
| 44,714 | |
| a. | Equipment and construction prepayments |
The following
table details the equipment and construction prepayments:
| |
| |
As of
March 31, | | |
As of
December 31, | |
| |
| |
2024 | | |
2023 | |
Miner credits | |
i. | |
| — | | |
| 11,330 | |
Bitmain T21 Miners Purchase Order and Purchase Option | |
ii. | |
| 66,333 | | |
| 16,912 | |
March 2024 Purchase Order | |
iii. | |
| 8,718 | | |
| — | |
Other BVVE and electrical components | |
iv. | |
| 4,963 | | |
| 4,400 | |
Construction work and materials | |
v. | |
| 8,271 | | |
| 7,171 | |
| |
| |
| 88,285 | | |
| 39,813 | |
In December 2022,
the Company renegotiated its previous purchase agreements for 48,000 Miners by extinguishing the outstanding commitments of $45,350 without
penalty and establishing a $22,376 credit for deposits previously made. The Company received $3,279 of Miners, reducing the outstanding
credit balance to $19,097 of as December 31, 2022, which was fully utilized during 2023 for the acquisition of hydro Miners and hydro
containers. These items were received or in transit during the three months ended March 31, 2024 and the long-term deposit balance
was reduced to nil upon the transfer to property, plant and equipment.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 11: LONG-TERM
DEPOSITS, EQUIPMENT PREPAYMENTS, COMMITMENTS AND OTHER (Continued)
| a. | Equipment and construction prepayments (Continued) |
| ii. | Bitmain T21 Miners Purchase Order and Purchase Option |
During the fourth
quarter of 2023, the Company placed a firm purchase order for 35,888 Bitmain T21 Miners (the “Purchase Order’’) totaling $95,462 with
deliveries scheduled from March 2024 to May 2024 and made a non-refundable deposit of $9,464. In addition, the Company secured a purchase
option for an additional 28,000 Bitmain T21 Miners (the “Purchase Option’’) totaling $74,480 and made a non-refundable deposit of $7,448.
This Purchase Option gives the Company the right, exercisable until December 31, 2024, but not the obligation, to purchase, up to 28,000
additional Bitmain T21 Miners.
During the three
months ended March 31, 2024, the Company made additional deposits of $57,356 towards the Purchase Order, of which approximately 3,000
Bitmain T21 Miners with a book value of $7,935 were received or in transit. During the same period, the Company also fully exercised the
Purchase Option with deliveries scheduled from September 2024 to October 2024. As of March 31, 2024, the deposit balance for the
Purchase Order and the Purchase Option was $66,333.
| iii. | March 2024 Purchase Order |
During the three months ended
March 31, 2024, the Company purchased an additional 19,280 Bitmain T21 Miners, 3,888 Bitmain S21 Miners and 740 Bitmain S21 Hydro Miners
(collectively defined as the “March 2024 Purchase Order’’) for $51,285, $13,608 and $4,338, respectively, with deliveries scheduled from
April 2024 to November 2024. The Company made a deposit of $8,718 for the March 2024 Purchase Order during the three months ended March
31, 2024.
| iv. | Other BVVE and electrical components |
As of March 31,
2024, the Company had deposits for other BVVE and electrical components in the amount of $4,963.
| v. | Construction work and materials |
As of March 31,
2024, the Company had deposits for construction work and materials in the amount of $8,271, mainly for the Paraguay expansions.
The Company’s
remaining payment obligations in connection with the Purchase Order, the Purchase Option and the March 2024 Purchase Order are outlined
below:
| |
As of
March 31, | |
| |
2024 | |
Three months ending June 30, 2024 | |
| 39,528 | |
Three months ending September 30, 2024 | |
| 85,889 | |
Three months ending December 31, 2024 | |
| 30,772 | |
| |
| 156,189 | |
If the Company
is unable to meet its payment obligations, it could result in the loss of equipment prepayments and deposits paid by the Company under
the Purchase Order and remedial legal measures being taken against the Company, which may result in damages payable by the Company and
forced continuance of the contractual arrangement. Under such circumstances, the Company’s growth plans and ongoing operations could
be adversely impacted.
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 11: LONG-TERM
DEPOSITS, EQUIPMENT PREPAYMENTS, COMMITMENTS AND OTHER (Continued)
In 2021, the Company
imported Miners into Washington State that the vendor located in China claimed originated in Malaysia. In early 2022, U.S. Customs and
Border Protection challenged the origination of the Miners, asserting their manufacture in China, and notified the Company of a potential
assessment of a U.S. importation duty of 25%.
During the third
quarter of 2023, the Company submitted the supporting documentation to U.S. Customs and Border Protection in defense of its position that
the Miners were manufactured outside China and the associated custom duties in the amount of $9,424 do not apply. While the final outcome
of this matter is uncertain at this time, Management has determined it is not probable that it will result in a future cash outflow for
the Company, and, as such, no provision was recorded as of March 31, 2024.
NOTE 12: TRADE PAYABLES AND ACCRUED LIABILITIES
| |
As of
March 31, | | |
As of
December 31, | |
| |
2024 | | |
2023 | |
Trade accounts payable and accrued liabilities | |
| 10,669 | | |
| 9,077 | |
Government remittances | |
| 13,219 | | |
| 11,662 | |
| |
| 23,888 | | |
| 20,739 | |
NOTE 13: LONG-TERM DEBT
| |
As of
March 31, | | |
As of
December 31, | |
| |
2024 | | |
2023 | |
Building financing | |
| 1,642 | | |
| — | |
Equipment financing | |
| — | | |
| 4,022 | |
Total long-term debt | |
| 1,642 | | |
| 4,022 | |
Less current portion of long-term debt | |
| (151 | ) | |
| (4,022 | ) |
Non-current portion of long-term debt | |
| 1,491 | | |
| — | |
Movement in long-term debt is as follows:
| |
As of March 31, | | |
As of December 31 | |
| |
2024 | | |
2023 | |
| |
three-month period | | |
twelve-month period | |
Balance as of January 1, | |
| 4,022 | | |
| 47,147 | |
Issuance of long-term debt | |
| 1,695 | | |
| — | |
Payments | |
| (4,147 | ) | |
| (33,233 | ) |
Gain on extinguishment of long-term debt | |
| — | | |
| (12,580 | ) |
Interest on long-term debt | |
| 72 | | |
| 2,688 | |
Balance as of period end | |
| 1,642 | | |
| 4,022 | |
BITFARMS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 13: LONG-TERM DEBT (Continued)
During three months
ended March 31, 2024, the Company sold its Garlock building in Sherbrooke, Quebec for $1,695 and immediately leased it back for 10
years. Since the lease agreement included a substantive repurchase option of the building in a form of a call option, the Company has
not transferred the control of the asset to the buyer, and the transaction does not qualify as a sale. Accordingly, it is accounted for
as a financing arrangement for the proceeds received from the buyer, and the building continues to be recognized as property, plant and
equipment of the Company.
| b. | Equipment financing activity |
Repayment of
NYDIG Loan
In June
2022, Backbone entered into an equipment financing agreement, referred to as the “NYDIG
Loan”, for gross proceeds of $36,860 collateralized by 10,395 WhatsMiner M30S Miners.
The net proceeds received by the Company were $36,123, net of origination and closing fees of $737. As part of the agreement, the Company
was required to maintain in a segregated wallet an approximate quantity of BTC whose value equates to at least one month of interest and
principal payments on the outstanding loan. The pledged BTC was held in a segregated Coinbase Custody account and owned by the Company
unless there was an event of default under the NYDIG Loan.
During three months
ended March 31, 2024, the NYDIG Loan balance was fully repaid, and the Company’s Miners collateralizing the loan and BTC pledged
as collateral became unencumbered.
Repayment
of Foundry Loans #2, #3 and #4
In April and May
2021, the Company entered into four loan agreements for the acquisition of 2,465 WhatsMiner Miners referred to as “Foundry Loans
#1, #2, #3 and #4.” During 2022, Foundry Loan #1 matured and was fully repaid. In January 2023, the principal amounts of the remaining
Foundry Loans #2, #3 and #4 were fully repaid before their maturity date with forgiveness of prepayment penalties totaling $829.
Settlement
of the loan with BlockFi Lending LLC (“BlockFi”)
In February
2022, Backbone Mining entered into an equipment financing agreement for gross proceeds of
$32,000 collateralized by 6,100 Bitmain S19j Pro Miners referred to as the “BlockFi
Loan”. The net proceeds received by the Company were $30,994 after capitalizing origination,
closing and other transaction fees of $1,006.
In December 2022,
Backbone Mining ceased making installment payments, which constituted a default under the loan agreement, and the BlockFi Loan was classified
as current.
On February 8, 2023, BlockFi and the
Company negotiated a settlement of the loan in its entirety with a then- outstanding debt balance of $20,330 for cash consideration of
$7,750, discharging Backbone Mining of all further obligations and resulting in a gain on extinguishment of long-term debt of $12,580
recognized in Net financial expenses (income) in the consolidated statements of profit or loss and comprehensive profit or loss during
the three months ended March 31, 2023. Upon settlement, all of Backbone Mining’s assets, including the 6,100 Miners collateralizing
the loan, were unencumbered.
BITFARMS
LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 14: LEASES
Set out below
are the carrying amounts of the Company’s right-of-use (“ROU”) assets and
lease liabilities and their activity during the three months ended March 31, 2024 and the year ended December 31, 2023:
| |
Leased
premises | | |
Vehicles | | |
Other
equipment | | |
Total ROU
assets | | |
Lease
liabilities | |
As of January 1, 2024 | |
| 13,762 | | |
| 544 | | |
| 9 | | |
| 14,315 | | |
| 15,850 | |
Additions and extensions to ROU assets | |
| — | | |
| 91 | | |
| — | | |
| 91 | | |
| 91 | |
Depreciation | |
| (742 | ) | |
| (61 | ) | |
| (5 | ) | |
| (808 | ) | |
| — | |
Lease termination | |
| (373 | ) | |
| — | | |
| — | | |
| (373 | ) | |
| (518 | ) |
Payments | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,085 | ) |
Interest | |
| — | | |
| — | | |
| — | | |
| — | | |
| 306 | |
Foreign exchange | |
| — | | |
| — | | |
| — | | |
| — | | |
| (335 | ) |
As of March 31, 2024 | |
| 12,647 | | |
| 574 | | |
| 4 | | |
| 13,225 | | |
| 14,309 | |
Less current portion of lease liabilities | |
| | | |
| | | |
| | | |
| | | |
| (2,126 | ) |
Non-current portion of lease liabilities | |
| | | |
| | | |
| | | |
| | | |
| 12,183 | |
| |
Leased
premises | | |
Vehicles | | |
Other
equipment | | |
Total ROU
assets | | |
Lease
liabilities | |
As of January 1, 2023 | |
| 15,694 | | |
| 265 | | |
| 405 | | |
| 16,364 | | |
| 17,864 | |
Additions and extensions to ROU assets | |
| 1,020 | | |
| 534 | | |
| — | | |
| 1,554 | | |
| 1,553 | |
Reclass to property, plant and equipment | |
| — | | |
| — | | |
| (364 | ) | |
| (364 | ) | |
| — | |
Depreciation | |
| (2,952 | ) | |
| (213 | ) | |
| (32 | ) | |
| (3,197 | ) | |
| — | |
Lease termination | |
| — | | |
| (42 | ) | |
| — | | |
| (42 | ) | |
| (23 | ) |
Payments | |
| — | | |
| — | | |
| — | | |
| — | | |
| (5,025 | ) |
Gain on extinguishment of lease liabilities | |
| — | | |
| — | | |
| — | | |
| — | | |
| (255 | ) |
Interest | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,391 | |
Foreign exchange | |
| — | | |
| — | | |
| — | | |
| — | | |
| 345 | |
As of December 31, 2023 | |
| 13,762 | | |
| 544 | | |
| 9 | | |
| 14,315 | | |
| 15,850 | |
Less current portion of lease liabilities | |
| | | |
| | | |
| | | |
| | | |
| (2,857 | ) |
Non-current portion of lease liabilities | |
| | | |
| | | |
| | | |
| | | |
| 12,993 | |
BITFARMS
LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 15: INCOME TAXES
Deferred taxes
Deferred taxes are computed at a tax rate of 26.5%
based on tax rates expected to apply at the time of realization. Deferred taxes relate primarily to the timing differences on recognition
of expenses relating to the depreciation of fixed assets, loss carryforwards and professional fees relating to the Company’s equity activity
that are recorded as a reduction of equity.
As at March 31,
2024, the Company has analyzed the recoverability of its deferred tax assets and has concluded that it is not more likely than not that
sufficient taxable profit is expected to utilize these deferred tax assets.
Current and
deferred income tax (expense) recovery
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
Current tax expense: | |
| | | |
| | |
Current year | |
| — | | |
| (112 | ) |
Prior year | |
| — | | |
| — | |
| |
| — | | |
| (112 | ) |
| |
| | | |
| | |
Deferred tax recovery: | |
| | | |
| | |
Current year | |
| 6,285 | | |
| 442 | |
Prior year | |
| — | | |
| — | |
| |
| 6,285 | | |
| 442 | |
| |
| 6,285 | | |
| 330 | |
BITFARMS
LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 16: SHARE CAPITAL
Common shares
The Company’s
authorized share capital consists of an unlimited number of common shares without par value. As of March 31, 2024, the Company had
356,292,000 issued and outstanding common shares (December 31, 2023: 334,153,000).
| i. | At-The-Market Equity Offering Program (“ATM Program”) |
Bitfarms commenced an at-the-market equity offering
program on March 11, 2024 (the “2024 ATM Program”), pursuant to which the Company may, at its discretion and from time-to-time,
sell common shares of the Company, resulting in the Company receiving aggregate gross proceeds of up to $375,000.
During the three months ended March 31, 2024,
the Company issued 16,997,000 common shares in the 2024 ATM Program in exchange for gross proceeds of $39,341 at an average share price
of approximately $2.31. The Company received net proceeds of $38,107 after paying commissions of $1,180 to the sales agent for the 2024
ATM Program and $54 in other transaction costs. The Company capitalized $839 of professional fees and registration expenses to initiate
the 2024 ATM Program.
During the three months ended March 31, 2023,
the Company issued 15,940,000 common shares in the 2021 ATM Program in exchange for gross proceeds of $16,360 at an average share price
of approximately $1.03. The Company received net proceeds of $15,764 after paying commissions of $548 to the sales agent for the 2021
ATM Program and $47 in other transaction costs.
During the three months ended
March 31, 2024, option holders exercised stock options to acquire 31,000 common shares (three months ended March 31, 2023: 122,000)
resulting in proceeds of approximately $41 (three months ended March 31, 2023: $47) being paid to the Company.
In February 2024,
5,000,000 warrants and 111,000 broker warrants related to the 2023 private placement were exercised resulting in the issuance of 5,111,000
common shares for proceeds of approximately $5,986.
The Black Scholes
model and the inputs described in Note 7 were used in determining the values of the warrants and broker warrants prior to their derecognition,
which resulted in a non-cash loss on revaluation of warrants of $1,836 included in Net financial income.
BITFARMS
LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 17: FINANCIAL INSTRUMENTS
Measurement categories and fair value
Financial
assets and financial liabilities have been classified into categories that determine their basis of measurement. The following tables
show the carrying values and the fair value of assets and liabilities for each of the applicable categories:
| |
| |
As of
March 31, | | |
As of
December 31, | |
Measurement | |
2024 | | |
2023 | |
Financial assets at amortized cost | |
| |
| | |
| |
Cash | |
Level 1 | |
| 65,961 | | |
| 84,038 | |
Trade receivables | |
Level 3 | |
| 729 | | |
| 714 | |
Other receivables | |
Level 3 | |
| 1,437 | | |
| 689 | |
| |
| |
| | | |
| | |
Financial assets at fair value through profit and loss | |
| |
| | | |
| | |
Derivative assets | |
Level 2 | |
| 3,016 | | |
| 1,281 | |
Total carrying amount and fair value | |
| |
| 71,143 | | |
| 86,722 | |
| |
| |
| | | |
| | |
Financial liabilities at amortized cost | |
| |
| | | |
| | |
Trade accounts payable and accrued liabilities | |
Level 3 | |
| 10,669 | | |
| 9,077 | |
Long-term debt | |
Level 2 | |
| 1,642 | | |
| 4,022 | |
| |
| |
| | | |
| | |
Financial liabilities at fair value through profit and loss | |
| |
| | | |
| | |
Warrant liabilities | |
Level 2 | |
| 18,576 | | |
| 40,426 | |
Total carrying amount and fair value | |
| |
| 30,887 | | |
| 53,525 | |
| |
| |
| | | |
| | |
Net carrying amount and fair value | |
| |
| 40,256 | | |
| 33,197 | |
The carrying amounts of trade receivables, other
receivables, trade payables and accrued liabilities and long-term debt presented in the table above are a reasonable approximation of
their fair value.
BTC option contracts
The fair value of option contracts is categorized
as Level 2 in the fair value hierarchy and is presented under derivative assets and liabilities in the consolidated statements of financial
position when there is an outstanding contract at period end. Their fair values are a recurring measurement. Fair value of derivative
financial instruments generally reflects the estimated amounts that the Company would receive or pay, taking into consideration the counterparty
credit risk or the Company’s credit risk at each reporting date. The Company uses market data such as BTC option futures to estimate
the fair value of option contracts at each reporting date.
Warrant liabilities
Warrant liabilities related to the 2021 and 2023
private placements are classified as financial liabilities at fair value through profit or loss with the change in fair value recorded
to Net financial income. The fair value measurement is categorized as Level 2 in the fair value hierarchy, is a recurring measurement
and is calculated using a Black-Scholes pricing model at each reporting date.
Refer to Note 7 for more details.
BITFARMS
LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 18: TRANSACTIONS AND BALANCES WITH
RELATED PARTIES
The following
table details balances payable to related parties:
| |
As of
March 31, | | |
As of
December 31, | |
| |
2024 | | |
2023 | |
Trade payables and accrued liabilities | |
| | |
| |
Directors’ remuneration | |
| 116 | | |
| 112 | |
Senior management remuneration | |
| 1,614 | | |
| — | |
Director and senior management incentive plan | |
| 46 | | |
| 1,567 | |
| |
| 1,776 | | |
| 1,679 | |
Amounts due to
related parties are unsecured, non-interest bearing and payable on demand.
Transactions with related parties
In March 2024, the Board of Directors elected
to terminate the employment agreement of the Company’s Chief Executive Officer (the “CEO”). It was planned that the CEO would
depart upon completion of an executive search and would lead the Company during the interim. A termination payment under the CEO’s employment
agreement totaling $1,614 is expected to be paid after the CEO’s departure. However, the final amount of the termination payment has not
yet been agreed to by the Company and the CEO and may be subject to change. During the three months ended March 31, 2024, $1,614
was accrued and included in Trade payables and accrued liabilities (as of December 31, 2023: nil).
The transaction described above occurred in the
normal course of operations and recognized in profit or loss under General and administrative expenses.
NOTE 19: NET LOSS PER SHARE
For the three
months ended March 31, 2024 and 2023, potentially dilutive securities have not been included in the calculation of diluted loss per share because their effect is anti-dilutive. The additional potentially dilutive securities that would have been included in
the calculation of diluted earnings per share, had their effect not been anti-dilutive for the three months ended March 31, 2024,
would have totaled approximately 16,035,000 (three months ended March 31, 2023: 3,577,000).
BITFARMS
LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 20: SHARE-BASED PAYMENTS
The share-based payment expense related to stock
options and restricted stock units (“RSU”) for employees, directors, consultants
and former employees received was as follows:
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
Equity-settled share-based payment plans | |
| 3,094 | | |
| 2,536 | |
Options
Details of the outstanding stock options are as
follows:
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
| |
Number of
Options | | |
Weighted
Average
Exercise Price ($CAD) | | |
Number
of
Options | | |
Weighted
Average
Exercise Price ($CAD) | |
Outstanding, January 1, | |
| 20,939,000 | | |
| 2.41 | | |
| 21,804,000 | | |
| 3.47 | |
Exercised | |
| (31,000 | ) | |
| 1.85 | | |
| (122,000 | ) | |
| 0.52 | |
Forfeited | |
| (105,000 | ) | |
| 2.95 | | |
| — | | |
| — | |
Cancelled | |
| — | | |
| — | | |
| (10,535,000 | ) | |
| 5.40 | |
Expired | |
| — | | |
| — | | |
| (15,000 | ) | |
| 2.45 | |
Outstanding, March 31, | |
| 20,803,000 | | |
| 2.41 | | |
| 11,132,000 | | |
| 1.68 | |
Exercisable, March 31, | |
| 9,911,000 | | |
| 1.79 | | |
| 2,286,000 | | |
| 0.48 | |
The weighted average contractual life of the stock
options as of March 31, 2024 was 3.8 years (March 31, 2023: 3.9 years).
Restricted
Share Units (“RSU’’)
Details of the RSUs are as follows:
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
| |
Number of
RSUs | | |
Weighted
Average
Grant Price ($CAD) | | |
Number
of
RSUs | | |
Weighted
Average
Grant Price ($CAD) | |
Outstanding, January 1, | |
| 625,000 | | |
| 4.05 | | |
| 400,000 | | |
| 2.98 | |
Granted | |
| 175,000 | | |
| 2.95 | | |
| — | | |
| — | |
Outstanding, March 31, | |
| 800,000 | | |
| 3.81 | | |
| 400,000 | | |
| 2.98 | |
On March 28, 2024,
the Board of Directors approved the grant of 175,000 RSUs (three months ended March 31, 2023: nil) to certain members of senior management,
which vest 50% after approximately one month from the grant date and an additional 25% every 6 months. The value of the RSUs on the grant
date was $2.17 per RSU.
BITFARMS
LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 21: ADDITIONAL
DETAILS TO THE STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE PROFIT OR LOSS
Cost of revenues
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
Energy and infrastructure | |
| (21,314 | ) | |
| (17,027 | ) |
Depreciation and amortization | |
| (38,977 | ) | |
| (20,700 | ) |
Purchases of electrical components | |
| (387 | ) | |
| (320 | ) |
Electrician salaries and payroll taxes | |
| (321 | ) | |
| (356 | ) |
| |
| (60,999 | ) | |
| (38,403 | ) |
General and
administrative expenses
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
Salaries and share-based payments | |
| (9,141 | ) | |
| (5,157 | ) |
Professional services | |
| (1,658 | ) | |
| (1,878 | ) |
Insurance, duties and other | |
| (1,957 | ) | |
| (974 | ) |
Travel, motor vehicle and meals | |
| (246 | ) | |
| (178 | ) |
Hosting and telecommunications | |
| (78 | ) | |
| (92 | ) |
Advertising and promotion | |
| (116 | ) | |
| (81 | ) |
| |
| (13,196 | ) | |
| (8,360 | ) |
Net financial
income
| |
| |
Three months ended March 31, | |
| |
Notes | |
2024 | | |
2023 (restated - Note 3d) | |
Gain (loss) on revaluation of warrants | |
| |
| 9,040 | | |
| (1,221 | ) |
Gain on derivative assets and liabilities | |
| |
| 2,490 | | |
| 35 | |
Gain on disposition of marketable securities | |
a | |
| 338 | | |
| 2,171 | |
Gain on extinguishment of long-term debt and lease liabilities | |
| |
| — | | |
| 12,835 | |
Interest income | |
| |
| 680 | | |
| 266 | |
Loss on foreign exchange | |
| |
| (61 | ) | |
| (270 | ) |
Interest on long-term debt | |
| |
| (72 | ) | |
| (1,251 | ) |
Provision expense on VAT receivable | |
b | |
| (65 | ) | |
| (1,009 | ) |
Interest on lease liabilities | |
| |
| (306 | ) | |
| (369 | ) |
Other financial expenses | |
| |
| (601 | ) | |
| (220 | ) |
| |
| |
| 11,443 | | |
| 10,967 | |
BITFARMS
LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 21: ADDITIONAL
DETAILS TO THE STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE PROFIT OR LOSS (Continued)
Net financial
income (Continued)
| a. | Gain on disposition of marketable securities |
During the three
months ended March 31, 2024 and 2023, the Company funded its expansion in Argentina through the acquisition of marketable securities
and the in-kind contribution of those securities to the Company’s subsidiary in Argentina. The subsequent disposition of those marketable
securities in exchange for Argentine Pesos gave rise to a gain as the amount received in ARS exceeds the amount of ARS the Company would
have received from a direct foreign currency exchange.
| b. | Provision expense on VAT receivable |
Due to the political
and economic uncertainties in Argentina, the Company is uncertain when, or if at all, the Argentine VAT receivable will be settled. As
a result, the Company has recorded a provision to reduce the Argentine VAT receivable to nil. The
provision is classified within Net financial income during the three months ended
March 31, 2024. Prior to October 1, 2023, the Argentine VAT not expected to be settled
within the next 12 months was classified as a long-term receivable in Note 11 with the short-term portion included in sales tax receivable
in Note 5.
NOTE 22: GEOGRAPHICAL INFORMATION
Reportable segment
The reporting segments are identified on the basis
of information that is reviewed by the chief operating decision maker (“CODM”) to make decisions about resources to be allocated
and to assess performance. Accordingly, for Management purposes, the Company is organized into operating segments based on the products
and services of its business units and has one material reportable segment, cryptocurrency Mining, which is the operation of server farms
that support the validation and verification of transactions on the BTC blockchain, earning cryptocurrency for providing these services,
as described in Note 1.
Revenues
Revenues* by country are as follows:
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
Canada | |
| 32,138 | | |
| 23,489 | |
Argentina | |
| 11,576 | | |
| 1,296 | |
USA | |
| 4,887 | | |
| 3,891 | |
Paraguay | |
| 1,716 | | |
| 1,374 | |
| |
| 50,317 | | |
| 30,050 | |
*Revenues are
presented based on the geographical contribution of computational power used for hashing calculations (measured by hashrate) or sales
to external customers. During the three months ended March 31, 2024 and 2023, the Company earned 98% and 97% of its revenues, respectively,
from one Mining pool. The Company has the ability to switch Mining Pools or to mine independently at any time.
BITFARMS
LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. dollars, except data relating to number
of PPE, shares, warrants, options and digital assets - unaudited)
NOTE 22: GEOGRAPHICAL INFORMATION
(Continued)
Property, Plant and Equipment
The net book value of property, plant and equipment
by country is as follows:
| |
As of
March 31, | | |
As of
December 31, | |
| |
2024 | | |
2023 | |
Canada | |
| 78,618 | | |
| 101,454 | |
Argentina | |
| 50,598 | | |
| 54,657 | |
USA | |
| 15,902 | | |
| 18,154 | |
Paraguay | |
| 32,649 | | |
| 11,747 | |
| |
| 177,767 | | |
| 186,012 | |
NOTE 23: ADDITIONAL DETAILS TO THE STATEMENTS OF CASH FLOWS
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | |
Changes in working capital components: | |
| | |
| |
(Increase) decrease in trade receivables, net | |
| (15 | ) | |
| 327 | |
Decrease (increase) in other current assets | |
| 885 | | |
| (1,161 | ) |
Increase in deposits | |
| (1,670 | ) | |
| (1,821 | ) |
Increase in trade payables and accrued liabilities | |
| 550 | | |
| 97 | |
Decrease in taxes payable | |
| (73 | ) | |
| (112 | ) |
| |
| (323 | ) | |
| (2,670 | ) |
Significant non-cash transactions: | |
| | | |
| | |
Addition of ROU assets, property, plant and equipment and related lease liabilities | |
| 91 | | |
| 215 | |
Purchase of property, plant and equipment financed by short-term credit | |
| 3,142 | | |
| 1,416 | |
Equipment prepayments realized as additions to property, plant and equipment | |
| 26,717 | | |
| 4,714 | |
NOTE 24: SUBSEQUENT EVENTS
2024 ATM Program
During the period from April 1, 2024 to
May 14, 2024, the Company issued 42,155,000 common shares through the 2024 ATM Program in exchange for gross proceeds of $85,167
at an average share price of approximately $2.02. The Company received net proceeds of $82,477 after paying commissions of $2,690 to
the sales agent. Refer to Note 16 for further details of the Company’s 2024 ATM program.
Canadian Sales Tax Refund
In April 2024, the Company received a positive
ruling from the tax authorities that Canadian sales taxes paid by the Company will once again be refunded. Between February 5, 2022, the
date on which the new tax legislation was enacted, and April 2024, the Company filed monthly sales tax claims totaling approximately $23,703
(CAD$32,000) that were not paid to the Company. The refund of sales taxes relates to sales taxes charged on various expenditures including, but
not limited to electricity costs, cost of property, plant and equipment, professional services, etc.
Contingent Liability
As described in Note 18, in March 2024, as a
result of the Company’s decision to terminate the CEO’s employment, a termination payment of $1,614 was accrued during the three
months ended March 31, 2024 based on the terms of the CEO’s employment agreement, and classified in trade payables and accrued
liabilities. On May 10, 2024, the CEO filed a Statement of Claim in the Superior Court of Ontario against the Company claiming
damages for breach of contract, wrongful dismissal and aggravated and punitive damages for a total amount of $26,676. The Company
believes the claims are without merit and intends to defend itself vigorously against the claims. Such matters are inherently
uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company. The loss, if any, is not estimable
at this time and Management does not believe the outcome of this matter will have a material adverse impact on its results of
operations, cash flows and financial condition.
Yguazu Power Purchase Agreement Amendment
On May 13, 2024, the Company amended its power purchase agreement (“PPA”)
for its future Yguazu facility in Paraguay to increase the contracted power from 100 MW to 200 MW beginning on January 1, 2025. The Company
is required to pay security deposits totaling $16,245 between June 2024 and January 2025 for future electricity consumption. The security
deposits paid to the energy supplier are refundable at the end of the contract term in December 2027 assuming the Company draws power
based on the agreed upon schedule and is not in breach of other clauses in the PPA.
Exhibit 99.2
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Q1
2024
BITFARMS LTD.
Management’s
Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
TABLE OF CONTENTS
BITFARMS LTD.
Management’s
Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
1. INTRODUCTION
The following Management’s Discussion and
Analysis (the “MD&A”) for Bitfarms Ltd. (together with its subsidiaries, the “Company” or “Bitfarms”)
has been prepared as of May 14, 2024. This MD&A should be read in conjunction with the Company’s first quarter 2024 unaudited
interim condensed consolidated financial statements and its accompanying notes (the “Financial Statements”), the Company’s
2023 audited annual consolidated financial statements and its accompanying notes (the “2023 Annual Financial Statements”)
and the Company’s Annual Information Form dated March 6, 2024 (the “2023 AIF”), which are available on SEDAR+
at www.sedarplus.ca and EDGAR at www.sec.gov/edgar.
The Company’s Financial Statements have
been prepared in accordance with International Financial Reporting Standards (“IFRS Accounting Standards”) as issued by the
International Accounting Standards Board (“IASB”), including IAS 34, Interim Financial Reporting. The Company’s
Financial Statements and this MD&A are reported in thousands of US dollars and US dollars, respectively, except where otherwise noted.
Bitfarms’ management team (“Management”)
is responsible for the preparation and integrity of the Financial Statements including the maintenance of appropriate information systems,
procedures and internal controls. Management is also responsible for ensuring that information disclosed externally, including the Financial
Statements and MD&A, is complete and reliable.
The Company utilizes a number of non-IFRS financial
measures and ratios in assessing operating performance. Non-IFRS financial measures and ratios may exclude the impact of certain items
and are used internally when analyzing operating performance. Refer to Section 9 - Non-IFRS and Other Financial Measures and Ratios
and Section 23 - Cautionary Note Regarding Non-IFRS and Other Financial Measures and Ratios of this MD&A for more information.
This MD&A contains forward-looking statements.
Refer to the risk factors described in Section 19 - Risk Factors of this MD&A and in Section 19 - Risk Factors of the
Company’s MD&A for the year ended December 31, 2023, dated March 6, 2024 and to Section 22 - Cautionary Note Regarding Forward-Looking
Statements of this MD&A for more information. This MD&A contains various terms related to the Company’s business and
industry which are defined in Section 25 - Glossary of Terms of this MD&A.
In this MD&A, the following terms shall have
the following definitions:
Term |
Definition |
Q1 2024 |
Three months ended March 31, 2024 |
Q1 2023 |
Three months ended March 31, 2023 |
H1 2024 |
Six months ended June 30, 2024 |
H2 2024 |
Six months ended December 31, 2024 |
BITFARMS LTD.
Management’s
Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
2. COMPANY OVERVIEW
Founded in 2017, Bitfarms (Nasdaq/TSX: BITF) is
a global, publicly traded Bitcoin mining company. Bitfarms runs vertically integrated mining operations with an in-house management system
and company-owned electrical engineering, installation service, and onsite technical repair. The Company’s proprietary data analytics
system delivers best-in-class operational performance and uptime.
Bitfarms owns and operates server farms comprised
of computers (referred to as “Miners”) designed for the purpose of validating transactions on the Bitcoin Blockchain (referred
to as “Mining”). Bitfarms generally operates its Miners 24 hours a day to produce computational power used for hashing calculations
(measured by hashrate) that Bitfarms sells to a Mining Pool under a formula-driven rate commonly known in the industry as Full Pay Per
Share (“FPPS”). Under FPPS, Mining Pools compensate Mining companies for their computational power used for hashing calculations,
measured through hashrate, based on what the Mining Pool would expect to generate in revenue for a given time period if there was no randomness
involved. The fee paid by a Mining Pool to Bitfarms for its computational power used for hashing calculations may be in cryptocurrency,
U.S. dollars, or another currency. However, the fees are generally paid to the Company on a daily basis in bitcoin (“BTC”).
Bitfarms accumulates the cryptocurrency fees it receives or exchanges them for U.S. dollars through reputable and established cryptocurrency
trading platforms.
Bitfarms currently has 12 Bitcoin Mining
facilities and one under development situated in four countries: Canada, the United States, Paraguay and Argentina. Powered predominately
by environmentally friendly hydro-electric and long-term power contracts, Bitfarms is committed to using sustainable and often underutilized
energy infrastructure.
The Company’s ability to operate and secure power through its
production sites is summarized as follows:
Country | |
| Operating
power
as of May 14, 2024 | | |
| Contracted
power
as of May 14, 2024 | |
Canada | |
| 159 MW | | |
| 180
MW | 1, 2 |
United States | |
| 17
MW | | |
| 21
MW | 2 |
Paraguay | |
| 10
MW | | |
| 280 MW | 2 |
Argentina | |
| 54
MW | | |
| 210
MW | 2 |
| |
| 240
MW | | |
| 691
MW | |
1 |
The Company has secured the rights for 10 MW of hydro-electricity in the province of Quebec but does not currently have an expansion plan for those 10 MW of power. Bitfarms is continuing its efforts to search for economically viable properties for the available 10 MW of hydro-electricity. |
2 |
Refer to section 6 - Expansion Projects for details on the timing of the remaining MW not yet operational. |
BITFARMS LTD.
Management’s
Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
3. FINANCIAL HIGHLIGHTS
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 (3) | |
Revenues | |
| 50,317 | | |
| 30,050 | |
Gross loss | |
| (10,682 | ) | |
| (8,353 | ) |
Gross margin (1) | |
| (21 | )% | |
| (28 | )% |
Operating loss | |
| (23,708 | ) | |
| (14,997 | ) |
Operating margin (1) | |
| (47 | )% | |
| (50 | )% |
Net loss | |
| (5,980 | ) | |
| (3,700 | ) |
Basic and diluted loss per share | |
| (0.02 | ) | |
| (0.02 | ) |
Gross Mining profit (2) | |
| 29,312 | | |
| 12,026 | |
Gross Mining margin (2) | |
| 59 | % | |
| 41 | % |
Adjusted EBITDA (2) | |
| 21,007 | | |
| 6,364 | |
Adjusted EBITDA margin (2) | |
| 42 | % | |
| 21 | % |
| |
| As of
March 31, | | |
| As of
December 31, | |
| |
| 2024 | | |
| 2023 | |
Total assets | |
| 426,473 | | |
| 378,725 | |
Current financial liabilities | |
| 29,396 | | |
| 53,525 | |
Non-current financial liabilities | |
| 1,491 | | |
| — | |
Long-term debt included in financial liabilities | |
| 1,642 | | |
| 4,022 | |
There have not been any distributions or cash
dividends declared per share for the periods disclosed above.
1 |
Gross margin and Operating margin are supplemental financial ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios. |
2 |
Gross Mining profit, Gross Mining margin, Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures or ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios. |
3 |
Prior year figures are derived from restated financial statements. Refer to Section 14 - Restatement. |
BITFARMS LTD.
Management’s
Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
4. FIRST QUARTER 2024 FINANCIAL RESULTS AND OPERATIONAL HIGHLIGHTS
Financial
● | Revenues of $50.3 million, gross loss of $10.7 million (gross margin1 of negative 21%) including
non-cash depreciation and amortization expense of $39.0 million, operating loss of $23.7 million (operating margin1 of negative
47%), and net loss of $6.0 million; |
● | Gross Mining profit2 of $29.3 million (59% Gross Mining margin2); and |
● | Adjusted EBITDA2 of $21.0 million (42% Adjusted EBITDA margin2). |
Operations
● | Earned 943 BTC at an average direct cost of $20,500 per BTC2 or an average total cash cost
of $30,300 per BTC2 and held 806 BTC valued at approximately $57.5 million as of March 31, 2024; and |
● | Sold 941 BTC at an average price of $52,700 per BTC for total proceeds of $49.6 million, a portion of
which was used to fully repay equipment-related indebtedness and pay capital expenditures. |
Expansions
● | Exercised an option to purchase for 28,000 Bitmain T21 Miners; and |
● | Purchased an additional 19,280 Bitmain T21 Miners along with 3,888 Bitmain
S21 Miners and 740 Bitmain S21 hydro Miners with expected deliveries in 2024. |
Paraguay
● | Received and installed the main transformer of 80 MW at the Paso Pe facility; |
● | Purchased land for development of the planned 100 MW Yguazu facility; |
● | Signed engineering procurement and construction contract for the high-voltage interconnection to the Administración
Nacional de Electricidad (“ANDE”) substation and to the transmission line for the Yguazu facility; and |
● | Signed purchase agreements for long lead-time equipment for the Yguazu facility. |
Canada
● | Installed the first 1,400 Bitmain T21 Miners at the Farnham, Quebec facility. |
Financing
● | Commenced an at-the-market equity offering program on March 11, 2024 (“2024 ATM Program”); |
● | Raised $38.1 million in net proceeds through the Company’s 2024 ATM Program; |
● | Paid off in full the remaining $4.0 million of equipment-related indebtedness;
and |
● | Entered into a sale and leaseback agreement to monetize the value of the Garlock facility and received
net proceeds of $1.7 million to be allocated towards the Company’s expansion plans. |
1 |
Gross margin and Operating margin are supplemental financial ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios. |
2 |
Gross Mining profit, Gross Mining margin, Adjusted EBITDA, Adjusted EBITDA margin, Direct Cost per BTC and Total Cash Cost per BTC are non-IFRS measures or ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios. |
BITFARMS LTD.
Management’s
Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
5. PRODUCTION AND MINING OPERATIONS
Key Performance Indicators
| |
Three months ended March 31, | |
| |
2024 | | |
2023 | | |
% Change | |
Total BTC earned | |
| 943 | | |
| 1,297 | | |
| (27 | )% |
Average Watts/Average TH efficiency* | |
| 35 | | |
| 38 | | |
| (8 | )% |
BTC sold | |
| 941 | | |
| 1,267 | | |
| (26 | )% |
* | Average Watts represents the average energy consumption of deployed
Miners |
Q1 2024 v. Q1 2023
| ● | 943 BTC earned in Q1 2024, compared to 1,297 BTC earned in Q1 2023, representing a decrease of 27% as
a result of an 93% increase in average network difficulty, partially offset by an increase in hashrate from the Company’s expansions
and certain upgrades to its Miner fleet; |
| ● | 35 average Watts/average TH efficiency in Q1 2024, compared to 38 average Watts/average TH efficiency
in Q1 2023, representing an improvement of 8% due to the Company upgrading its fleet with more efficient Miners; and |
| ● | 941 BTC sold in Q1 2024, compared to 1,267 BTC in Q1 2023. The proceeds were used in part to fund operations
and repay equipment financing indebtedness. |
| |
As of March 31, | |
| |
2024 | | |
2023 | | |
% Change | |
Period-end operating EH/s | |
| 6.5 | | |
| 4.8 | | |
| 35 | % |
Period-end operating capacity (MW) | |
| 240 | | |
| 188 | | |
| 28 | % |
Hydro power (MW) | |
| 186 | | |
| 178 | | |
| 4 | % |
Hydro power proportion of period-end operating capacity | |
| 78 | % | |
| 95 | % | |
| (17 | )% |
As of March 31, 2024 v. as of March 31,
2023
| ● | 6.5 EH/s online as of March 31, 2024, compared to 4.8 EH/s online as of March 31, 2023, an increase
of 35%, as a result of the Company’s expansions in Rio Cuarto (Argentina) and Baie-Comeau (Quebec), as well as the upgrade
of its Miner fleet; |
| ● | 240 MW operating capacity as of March 31, 2024, compared to 188 MW operating capacity as of March 31,
2023, an increase of 28%, as a result of the installation of approximately 13,400 Miners in Rio Cuarto from Q2 2023 to Q1 2024 (resulting
in an additional 44 MW) and the expansion in Baie-Comeau (resulting in an additional 11 MW); and |
| ● | 186 MW hydro power as of March 31, 2024, compared to 178 MW hydro power as of March 31, 2023,
an increase of 4% as a result of the Company’s expansion in Baie-Comeau and representing 78% of the Company’s total operating
energy capacity at March 31, 2024. |
BITFARMS LTD.
Management’s
Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
6. EXPANSION PROJECTS
The Company has described its expansion plans
below under the sections entitled “Paraguay Expansion”, “Canada Expansion”, “Washington Expansion”
and “Argentina Expansion”. These expansion projects only include updates for 2024. For background or historical information
on these expansions, refer to the Company’s MD&A for the year ended December 31, 2023, dated March 6, 2024 and the 2023 AIF.
As of March 31, 2024, the Company operated
6.5 EH/s, an increase of 1.7 EH/s compared to Q1 2023, with the installation of additional Miners in Baie-Comeau, Québec, and Rio
Cuarto, Argentina. On April 12, 2024, the Company achieved 7.0 EH/s. Through its expansion projects and the investment in its transformative
fleet upgrade, the Company is executing towards its targets of 12 EH/s and 25 w/TH by end of the second quarter of 2024 and 21 EH/s and
21w/TH by the end of 2024.
The following table summarizes the operating and targeted operating
EH/s:
(Period-end operating hashrate in EH/s) | |
As of
March 31, | | |
As of
April 30, | | |
Target | | |
Target | |
Countries | |
2024 | | |
2024 | | |
H1 2024 | | |
H2 2024 | |
Canada | |
| 4.0 | | |
| 4.5 | | |
| 6.6 | | |
| 8.1 | |
Argentina | |
| 1.6 | | |
| 1.6 | | |
| 1.6 | | |
| 2.5 | |
Paraguay | |
| 0.3 | | |
| 0.3 | | |
| 3.1 | | |
| 9.5 | |
USA | |
| 0.6 | | |
| 0.6 | | |
| 0.7 | | |
| 0.9 | |
| |
| 6.5 | | |
| 7.0 | | |
| 12.0 | | |
| 21.0 | |
The most recent BTC halving event occurred on
April 19, 2024, and the Company continues to prudently explore further opportunities to expand its infrastructure and improve its Mining
hardware to increase the Company’s hashrate and Miner efficiency.
Cautionary statements
The estimated costs and timelines to achieve these
expansion plans may change based on, among other factors, the supply and cost of Bitcoin Mining equipment, the ability to import equipment
into countries where it operates in a cost-effective manner, the supply of electrical and other supporting infrastructure equipment, the
availability of construction materials, currency exchange rates, the impact of geopolitical events or global health related issues such
as pandemics on the supply chains described above, and the Company’s ability to fund its initiatives. Adding reliable, environmentally-friendly
hydro power is part of the Company’s strategy to expand cost-effectively its operating footprint. The Company’s expansion
plans rely on a consistent supply of electricity at cost-effective rates; refer to Section 18 - Risk Factors (Section Economic
Dependence on Regulated Terms of Service and Electricity Rates Risks) of the Company’s MD&A for the year ended December
31, 2023, dated March 6, 2024 for further details, including a description of these and other factors.
BITFARMS LTD.
Management’s
Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
6. EXPANSION PROJECTS (Continued)
Transformative Fleet Upgrade
The transformative fleet upgrade solidifies the
Company’s 2024 expansion strategy. Securing additional Miners is a key part of the Company’s strategy to capitalize on increasing
Bitcoin prices and to drive rapid and meaningful improvements across three key operating metrics: hashrate, energy efficiency and operating
costs per TH.
On November 27, 2023, the Company placed a firm
purchase order for 35,888 Bitmain T21 Miners (the “Purchase Order”) totaling $95.5 million, or $14/TH, with deliveries scheduled
from March 2024 to May 2024. In addition, the Company secured a purchase option for an additional 28,000 Bitmain T21 Miners (the “Purchase
Option”) for an aggregate purchase price of $74.5 million, or $14/TH.
On March 11, 2024, the Company exercised the Purchase
Option. The Company also purchased an additional 19,280 Bitmain T21 Miners for $14/TH, 3,888 Bitmain S21 Miners and 740 Bitmain S21 hydro
Miners for $17.50/TH for an aggregate purchase price of $69.2 million (collectively defined as the “March 2024 Purchase Order”). The
March 2024 Purchase Order, combined with the recent investment in Miners and expansion plan for 2024, is expected to enable the Company
to reach 21 EH/s and 21w/TH in 2024 without redeploying its older Miners, which the Company intends to liquidate to help offset the cost
of new Miners.
As of March 31, 2024, the Company paid $83.0
million towards these new orders with remaining payments of $156.2 million to be made in 2024. The Company commenced the 2024 ATM Program
on March 11, 2024, enabling the Company to access liquidity of up to $375.0 million, with the intention to use the proceeds primarily
on capital expenditures to support the Company’s growth and development. Refer to Section 10A - Liquidity and Capital Resources
- Cash Flows from Financing Activities.
The following table details the status of the new Miner orders as of
April 30, 2024:
Date | |
Order | |
Quantity | | |
Type of Miners | |
Miners Energized | | |
Hashrate
(EH/s)1 | | |
Remaining Miners | |
Q4 2023 | |
Purchase Order | |
| 35,888 | | |
Bitmain T21 | |
| 4,900 | | |
| 0.9 | | |
| 30,988 | |
Q1 2024 | |
Purchase Option | |
| 28,000 | | |
Bitmain T21 | |
| — | | |
| — | | |
| 28,000 | |
Q1 2024 | |
March 2024 Purchase Order | |
| 19,280 | | |
Bitmain T21 | |
| — | | |
| — | | |
| 19,280 | |
| |
| |
| 3,888 | | |
Bitmain S21 | |
| — | | |
| — | | |
| 3,888 | |
| |
| |
| 740 | | |
Bitmain S21 hydro | |
| — | | |
| — | | |
| 740 | |
| |
| |
| 87,796 | | |
| |
| 4,900 | | |
| 0.9 | | |
| 82,896 | |
1 |
The hashrate is based on the Miner specifications stated in the purchase agreements and the Company’s actual realized hashrate may differ. |
BITFARMS LTD.
Management’s
Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
6. EXPANSION PROJECTS (Continued)
Paso Pe 2024 update
In March 2024, construction of the facility progressed
as planned with the reception and installation of the primary 80 MW capacity transformer and the finalization of underground cable connections.
In April 2024, approximately 600 WhatsMiner M53S
Miners were installed and housed within a portion of the eight Hydro Containers. The Company also received and installed approximately
2,900 Bitmain T21 air-cooled Miners.
In May 2024, the substation was commissioned,
and the Company anticipates having 70 MW operational by June 30, 2024.
The cost of developing the expanded 50 MW of air-cooled
warehouse, constructing the substation capable of accommodating the total energy requirement, and the installation of the high voltage
lines is estimated to range from $25.0 million to $28.0 million, excluding the cost of the power purchase agreement guarantees required
by ANDE, the operator of Paraguay national electricity grid, for securing monthly electricity purchase payment obligations.
Upon completion, the Company expects Paso Pe to
contribute approximately 3.2 EH/s with an expected efficiency of 24 w/TH.
Yguazu 2024 update
In January 2024, the Company purchased the land
for the 100 MW Yguazu facility to provide sufficient infrastructure to achieve the 21.0 EH/s target by the end of 2024.
In February and March 2024, the Company signed
purchase agreements for major long-lead equipment and significant contracts including the engineering procurement and construction contract
for the high-voltage interconnection to the ANDE substation and to the transmission line to energize the new 100 MW hydro-powered project.
In April 2024, the Company started construction
of the Yguazu facility and expects to complete the facility during the fourth quarter of 2024. The cost of developing the 100 MW facility
and the installation of the high voltage lines is estimated to range from $34.0 million to $37.0 million, excluding the cost of the power
purchase agreement guarantees required by ANDE.
On May 13, 2024, the Company amended its power
purchase agreement for the Yguazu facility to increase the contracted power from 100 MW to 200 MW beginning on January 1, 2025. The Company
expects to complete the build out of the infrastructure for the additional 100 MW before June 30, 2025. The cost of developing the additional
100 MW is estimated to range from $23.0 million to $25.0 million, excluding the cost of the power purchase agreement guarantees required
by ANDE.
Position as of March 31, 2024
As of March 31, 2024, the Company had placed
deposits of $2.7 million and $3.5 million with suppliers for construction costs and for electrical components, respectively. As of March 31,
2024, property, plant and equipment included $24.8 million related to the Paso Pe facility, including warehouse and infrastructure equipment
costs.
2024 plan
The Company expects to complete construction of
its Paso Pe and Yguazu facilities and install its new T21 Miners and WhatsMiner M53S Miners during 2024, which will increase the Paraguay
online hashrate from 0.3 EH/s to 3.1 EH/s by June 30, 2024, and 9.5 EH/s by December 31, 2024.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
6. EXPANSION
PROJECTS (Continued)
Canada 2024 plan
As part of the Miner upgrade and expansion initiatives,
the Company expects to install new Miners at its facilities in Canada during 2024 with new T21 Miners and WhatsMiner M53S Miners, which
is expected to increase the online hashrate from 4.0 EH/s to 6.6 EH/s by June 30, 2024 and 8.1 EH/s by December 31, 2024.
Canada 2024 update
In March and April 2024, the Company installed
approximately 1,700 Bitmain T21 Miners and 100 WhatsMiner M53S Miners in the Farnham facility. The installation of Miners added a net
0.2 EH/s after removing older Miners.
In March 2024, the Company entered into a sale
leaseback agreement for the Garlock facility and received net proceeds of $1.7 million.
In April 2024, approximately 3,200 Bitmain T21
Miners were installed in the Garlock facility, adding a net 0.3 EH/s after removing older Miners, and approximately 2,200 Bitmain
T21 Miners were installed in the Bunker facility.
Baie-Comeau 2024 plan
The Company plans to commission the second 11 MW
during the second half of 2024 after local grid infrastructure improvements have been completed by the third quarter of 2024. The Company
expects the total cost to be approximately $9.2 million, including $3.9 million for the leasehold improvements, which will include
construction of a new building and $2.5 million for the electrical infrastructure.
Baie-Comeau position as of March 31,
2024
The Company has $4.5 million of property, plant
and equipment at the Baie-Comeau facility, including infrastructure equipment that was repurposed from other facilities.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
6. EXPANSION
PROJECTS (Continued)
2024 plan
The Company expects to complete the upgrade of
a portion of its current fleet of miners in Washington during Q2 2024 and Q4 2024 with new T21 Miners, which will increase the online
hashrate from 0.6 EH/s to 0.7 EH/s by September 30, 2024 and 0.9 EH/s by December 31, 2024.
2024 update
In January 2024, in connection with the construction
of the new 6 MW facility, the Company elected to cancel the lease of a 5 MW facility in Washington State in order to transfer Miners from
the leased facility to the newly constructed facility on Company owned property. In April 2024, the cancellation of the lease was effective.
In February 2024, the power supplier established
the electricity connection allowing the Company, subject to the completion of the civil work, to access the 6 MW of hydro power capacity.
The Company anticipates completing construction
of the 6 MW facility by the end of the third quarter of 2024. The total cost of construction is estimated to be approximately $2.1 million,
including the $0.9 million paid in 2023 to the power supplier for establishing the connection.
In March 2024, approximately 300 Bitmain T21 Miners
were received at the current operating facility and installed in April 2024.
2024 plan
The Company expects to upgrade its current fleet
of miners in Rio Cuarto during Q4 2024 with new T21 Miners, which is expected to increase the online hashrate from 1.6 EH/s to 2.5 EH/s
by December 31, 2024.
The Company retains the option, subject to the
receipt of additional government approvals, to expand the Rio Cuarto operation to the full contracted amount of 210 MW. Due to the
ongoing political and economic uncertainty, the Company is not yet in a position to determine when or if construction of additional infrastructure
in Argentina will commence. The Company will monitor general macroeconomic conditions and the evolution of the new government administration’s
economic program in assessing its expansion plans in the country.
Position as of March 31, 2024
As of March 31, 2024, the Company had placed
deposits of $3.9 million with suppliers for existing and additional construction work. Overall, in Argentina, the Company has acquired
$63.6 million of property, plant and equipment, incurred $0.3 million of expenditures relating to design and feasibility studies and recorded
cumulative gains on the disposition of marketable securities of $70.4 million associated with the mechanism to convert funds into Argentine
Pesos for disbursements.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
7. FINANCIAL PERFORMANCE
Consolidated Financial & Operational Results
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 (3) | | |
$ Change | | |
% Change | |
Revenues | |
| 50,317 | | |
| 30,050 | | |
| 20,267 | | |
| 67 | % |
Cost of revenues | |
| (60,999 | ) | |
| (38,403 | ) | |
| (22,596 | ) | |
| 59 | % |
Gross loss | |
| (10,682 | ) | |
| (8,353 | ) | |
| (2,329 | ) | |
| 28 | % |
Gross margin (1) | |
| (21 | )% | |
| (28 | )% | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
General and administrative expenses | |
| (13,196 | ) | |
| (8,360 | ) | |
| (4,836 | ) | |
| 58 | % |
Realized gain on disposition of digital assets | |
| — | | |
| 587 | | |
| (587 | ) | |
| (100 | )% |
Reversal of revaluation loss on digital assets | |
| — | | |
| 2,695 | | |
| (2,695 | ) | |
| (100 | )% |
Gain (loss) on disposition of property, plant and equipment | |
| 170 | | |
| (1,566 | ) | |
| 1,736 | | |
| 111 | % |
Operating loss | |
| (23,708 | ) | |
| (14,997 | ) | |
| (8,711 | ) | |
| 58 | % |
Operating margin (1) | |
| (47 | )% | |
| (50 | )% | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Net financial income | |
| 11,443 | | |
| 10,967 | | |
| 476 | | |
| 4 | % |
Net loss before income taxes | |
| (12,265 | ) | |
| (4,030 | ) | |
| (8,235 | ) | |
| 204 | % |
| |
| | | |
| | | |
| | | |
| | |
Income tax recovery | |
| 6,285 | | |
| 330 | | |
| 5,955 | | |
| nm | |
Net loss | |
| (5,980 | ) | |
| (3,700 | ) | |
| (2,280 | ) | |
| 62 | % |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted loss per share (in U.S. dollars) | |
| (0.02 | ) | |
| (0.02 | ) | |
| — | | |
| — | |
Change in revaluation surplus - digital assets, net of tax | |
| 17,433 | | |
| 1,225 | | |
| 16,208 | | |
| nm | |
Total comprehensive income (loss), net of tax | |
| 11,453 | | |
| (2,475 | ) | |
| 13,928 | | |
| 563 | % |
| |
| | | |
| | | |
| | | |
| | |
Gross Mining profit (2) | |
| 29,312 | | |
| 12,026 | | |
| 17,286 | | |
| 144 | % |
Gross Mining margin (2) | |
| 59 | % | |
| 41 | % | |
| — | | |
| — | |
EBITDA (2) | |
| 26,410 | | |
| 18,024 | | |
| 8,386 | | |
| 47 | % |
EBITDA margin (2) | |
| 52 | % | |
| 60 | % | |
| — | | |
| — | |
Adjusted EBITDA (2) | |
| 21,007 | | |
| 6,364 | | |
| 14,643 | | |
| 230 | % |
Adjusted EBITDA margin (2) | |
| 42 | % | |
| 21 | % | |
| — | | |
| — | |
nm: not meaningful
1 |
Gross margin and Operating margin are supplemental financial ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios. |
|
|
2 |
Gross Mining profit, Gross Mining margin, EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures or ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios. |
|
|
3 |
Prior year figures are derived from restated financial statements. Refer to Section 14 - Restatement. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
7. FINANCIAL PERFORMANCE (Continued)
Q1 2024 v. Q1 2023
Revenues were $50.3 million in Q1 2024, compared
to $30.1 million in Q1 2023, an increase of $20.3 million, or 67%.
The most significant factors impacting the increase
in Bitfarms’ revenues in Q1 2024, compared to Q1 2023, are presented in the table below. Revenues increased mostly due to the increase
in average Bitfarms’ BTC hashrate and average BTC price, partially offset by lower BTC earned as a result of the increase in network
difficulty.
(U.S. $ in thousands except where indicated) | |
Note | | |
BTC | | |
$ | | |
% Change | |
BTC and revenues, including Volta, for the three months ended March 31, 2023 | |
| | | |
| 1,297 | | |
| 30,050 | | |
| — | |
Impact of increase in network difficulty during Q1 2024 as compared to Q1 2023 | |
| 1 | | |
| (794 | ) | |
| (41,651 | ) | |
| (139 | )% |
Impact of increase in average Bitfarms’ BTC hashrate during Q1 2024 as compared to Q1 2023 | |
| 2 | | |
| 440 | | |
| 23,083 | | |
| 77 | % |
Impact of difference in average BTC price in Q1 2024 as compared to Q1 2023 | |
| 3 | | |
| | | |
| 38,783 | | |
| 129 | % |
Other Mining variance and change in Volta | |
| | | |
| | | |
| 52 | | |
| —% | |
BTC and revenues for the three months ended March 31, 2024 | |
| | | |
| 943 | | |
| 50,317 | | |
| 67 | % |
Notes |
|
1 |
Calculated as the difference in BTC earned in Q1 2024 compared to Q1 2023, based on the change in network difficulty, multiplied by Q1 2024 average BTC price |
2 |
Calculated as the difference in BTC earned in Q1 2024 compared to Q1 2023, based on the change in Bitfarms’ average BTC hashrate, multiplied by Q1 2024 average BTC price |
3 |
Calculated as the difference in average BTC price in Q1 2024 compared to Q1 2023 multiplied by BTC earned in Q1 2023 |
The following tables summarize the Company’s
revenues and average hashrate by country:
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 | | |
$ Change | | |
% Change | |
Canada | |
| 32,138 | | |
| 23,489 | | |
| 8,649 | | |
| 37 | % |
Argentina | |
| 11,576 | | |
| 1,296 | | |
| 10,280 | | |
| 793 | % |
USA | |
| 4,887 | | |
| 3,891 | | |
| 996 | | |
| 26 | % |
Paraguay | |
| 1,716 | | |
| 1,374 | | |
| 342 | | |
| 25 | % |
| |
| 50,317 | | |
| 30,050 | | |
| 20,267 | | |
| 67 | % |
| |
Three months ended March 31, | |
(Average hashrate in EH/s except where indicated) | |
2024 | | |
2023 | | |
Change | | |
% Change | |
Canada | |
| 3.7 | | |
| 3.5 | | |
| 0.2 | | |
| 6 | % |
Argentina | |
| 1.4 | | |
| 0.2 | | |
| 1.2 | | |
| 600 | % |
USA | |
| 0.6 | | |
| 0.6 | | |
| — | | |
| — | % |
Paraguay | |
| 0.2 | | |
| 0.2 | | |
| — | | |
| — | % |
| |
| 5.9 | | |
| 4.5 | | |
| 1.4 | | |
| 31 | % |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
7. FINANCIAL PERFORMANCE (Continued)
Q1 2024 v. Q1 2023 (Continued)
Bitfarms earned the majority of its revenues from
its Canadian operations in Q1 2024, which accounted for 64% of total revenues, compared to 78% in Q1 2023. The Company’s operations
in Argentina, USA and Paraguay accounted for 23%, 10% and 3% of total revenues in Q1 2024, respectively, compared to 4%, 13% and 5% in
Q1 2023, respectively.
In Q1 2024, revenues from the Company’s
operations in Canada, Argentina and Paraguay increased by $8.6 million, $10.3 million and $0.3 million, respectively, compared to Q1 2023.
The increases are due to the average hashrate increase of the Canada and Argentina operations of 0.2 EH/s or 6% and 1.2 EH/s or 600%,
respectively and the increase in average BTC price, partially offset by the increase in network difficulty. Revenues from the USA operations
increased by $1.0 million in Q1 2024 as compared to Q1 2023 due to the increase in average BTC price, partially offset by the impact of
the increase in network difficulty.
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 | | |
$ Change | | |
% Change | |
Energy and infrastructure | |
| (21,314 | ) | |
| (17,027 | ) | |
| (4,287 | ) | |
| 25 | % |
Depreciation and amortization | |
| (38,977 | ) | |
| (20,700 | ) | |
| (18,277 | ) | |
| 88 | % |
Purchases of electrical components | |
| (387 | ) | |
| (320 | ) | |
| (67 | ) | |
| 21 | % |
Electrician salaries and payroll taxes | |
| (321 | ) | |
| (356 | ) | |
| 35 | | |
| (10 | )% |
| |
| (60,999 | ) | |
| (38,403 | ) | |
| (22,596 | ) | |
| 59 | % |
Q1 2024 v. Q1 2023
Bitfarms’ cost of revenues for Q1 2024 was
$61.0 million, compared to $38.4 million for Q1 2023. The increase in cost of revenues was mainly attributable to:
| ● | A $18.3 million increase in non-cash depreciation and amortization expense mainly due to accelerated depreciation
of the older Miners that are expected to be replaced through the transformative fleet upgrade as the Company will progressively install
new Miners in 2024. Refer to Note 9 - Property, Plant and Equipment to the Financial Statements. |
| ● | A $4.3 million, or 25%, increase in energy and infrastructure expenses, mainly due to the Company adding
new Miners, which increased energy utilization to an average of 214 MW during Q1 2024 versus 170 MW for the same period in 2023, partially
offset by lower average energy rates in Q1 2024, resulting in an increase in total electricity costs of $3.2 million. The availability
and pricing of energy may be negatively affected by governmental or regulatory changes in energy policies in the countries, provinces
and states where the Company operates. |
| ● | A $1.3 million assessment on Washington State Business & Occupancy tax on gross receipts covering
the periods between the fourth quarter of 2021 and Q1 2024, included in energy and infrastructure expenses, during Q1 2024 compared to
nil in Q1 2023. |
BITFARMS
LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
7. FINANCIAL PERFORMANCE
(Continued)
| C. | General & Administrative Expenses |
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 | | |
$ Change | | |
% Change | |
Salaries and share-based payments | |
| (9,141 | ) | |
| (5,157 | ) | |
| (3,984 | ) | |
| 77 | % |
Professional services | |
| (1,658 | ) | |
| (1,878 | ) | |
| 220 | | |
| (12 | )% |
Insurance, duties and other | |
| (1,957 | ) | |
| (974 | ) | |
| (983 | ) | |
| 101 | % |
Travel, motor vehicle and meals | |
| (246 | ) | |
| (178 | ) | |
| (68 | ) | |
| 38 | % |
Hosting and telecommunications | |
| (78 | ) | |
| (92 | ) | |
| 14 | | |
| (15 | )% |
Advertising and promotion | |
| (116 | ) | |
| (81 | ) | |
| (35 | ) | |
| 43 | % |
| |
| (13,196 | ) | |
| (8,360 | ) | |
| (4,836 | ) | |
| 58 | % |
Q1 2024 v. Q1 2023
Bitfarms’ general and administrative (“G&A”)
expenses were $13.2 million in Q1 2024, compared to $8.4 million for Q1 2023. The increase of $4.8 million, or 58%, in G&A expense
was largely due to:
| ● | A $3.3 million increase in salaries and wages due to the increase in the Company’s headcount in
Q1 2024 compared to Q1 2023 to support global expansion as well as merit, market-based adjustments and cost of living salary increases,
and the expected Chief Executive Officer’s (“CEO”) termination payment. A termination payment under the CEO’s employment
agreement totaling $1.6 million is expected to be paid after the CEO’s departure. However, the final amount of the termination payment
has not yet been agreed to by the Company and the CEO and may be subject to change. |
| ● | A $1.0 million increase in insurance, duties and other due to increases of property and liability insurance
as a result of expanded infrastructure and larger number of Miners deployed as well as increases in property taxes, taxes and permits
and software and licenses to support the global expansion. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
7. FINANCIAL PERFORMANCE (Continued)
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 (1) | | |
$ Change | | |
% Change | |
Gain (loss) on revaluation of warrants | |
| 9,040 | | |
| (1,221 | ) | |
| 10,261 | | |
| 840 | % |
Gain on derivative assets and liabilities | |
| 2,490 | | |
| 35 | | |
| 2,455 | | |
| nm | |
Gain on disposition of marketable securities | |
| 338 | | |
| 2,171 | | |
| (1,833 | ) | |
| (84 | )% |
Gain on extinguishment of long-term debt and lease liabilities | |
| — | | |
| 12,835 | | |
| (12,835 | ) | |
| (100 | )% |
Interest income | |
| 680 | | |
| 266 | | |
| 414 | | |
| 156 | % |
Loss on foreign exchange | |
| (61 | ) | |
| (270 | ) | |
| 209 | | |
| (77 | )% |
Interest on long-term debt | |
| (72 | ) | |
| (1,251 | ) | |
| 1,179 | | |
| (94 | )% |
Provision expense on VAT receivable | |
| (65 | ) | |
| (1,009 | ) | |
| 944 | | |
| (94 | )% |
Interest on lease liabilities | |
| (306 | ) | |
| (369 | ) | |
| 63 | | |
| (17 | )% |
Other financial expenses | |
| (601 | ) | |
| (220 | ) | |
| (381 | ) | |
| 173 | % |
| |
| 11,443 | | |
| 10,967 | | |
| 476 | | |
| 4 | % |
nm: not meaningful
Q1 2024 v. Q1 2023
Bitfarms’ net financial income was $11.4
million for Q1 2024, compared to $11.0 million for Q1 2023. The $0.5 million increase was primarily related to:
| ● | A $10.3 million change in gain (loss) on revaluation of warrants due to the decrease in the fair value
of the warrant liabilities for the 2021 and 2023 private placements in Q1 2024 compared to the increase in the fair value of the warrant
liabilities for the 2021 private placements in Q1 2023. |
| ● | A $2.5 million increase in gain on derivative assets and liabilities mainly due to the unrealized change
in fair value of outstanding BTC option contracts under the Synthetic HODL program of digital assets which began in October 2023. The
related gain is attributable to the increase in the BTC price during Q1 2024. Refer to Section 10B - Liquidity and Capital Resources
(Synthetic HODL program of digital assets) for more details. |
| ● | A $1.2 million decrease in interest expense due to (i) the extinguishment in February 2023 of the BlockFi
Loan that commenced on February 18, 2022 as described below and (ii) the NYDIG Loan that commenced on June 15, 2022 and was fully repaid
in February 2024. |
| ● | A $0.9 million decrease in provision expense on VAT receivable due to the Company writing off the Argentine
VAT receivable balance to nil as a result of the political and economic uncertainties in Argentina during the fourth quarter of 2023.
During Q1 2024, the Argentine VAT receivable continued to be written off to nil for the same reasons but to a lesser extent as the carrying
amount of VAT receivable was already minimal in Q1 2024. |
1 |
Prior year figures are derived from restated financial statements. Refer to Section 14 - Restatement. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
7. FINANCIAL
PERFORMANCE (Continued)
| D. | Net financial income (Continued) |
Q1 2024 v. Q1 2023 (Continued)
The increase was partially offset by:
| ● | A $12.8 million gain on extinguishment of long-term debt and lease liabilities during Q1 2023. In February 2023: |
◦ | | BlockFi and the Company negotiated a settlement of
the loan in its entirety for cash consideration of $7.8 million, resulting in a gain on
extinguishment of long-term debt of $12.6 million; and |
◦ | | The Company negotiated a modification to its lease agreement with Reliz Ltd. (where BlockFi
was the lender to Reliz Ltd.) in order to settle its outstanding lease liability of $0.4 million for a payment of $0.1 million. As a
result, a gain on extinguishment of lease liabilities was recognized in the amount of $0.3 million. |
| ● | A $1.8 million decrease in the gain on disposition of marketable securities due to less funds being sent
to Argentina in Q1 2024 compared to Q1 2023 as the capital expenditures related to the first facility were mostly paid in 2022 and 2023.
The Company has been utilizing a mechanism since Q3 2021 to fund its Argentina expansion through the acquisition of marketable securities
and in-kind contribution of those securities to its wholly-owned Argentinian subsidiary that it controls. The subsequent disposition of
those marketable securities in exchange for Argentine Pesos gave rise to a gain as the equivalent amount received in Argentine Pesos exceeded
the amount of Argentine Pesos the Company would have received from a direct foreign currency exchange. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
8. SELECTED QUARTERLY INFORMATION
Comparative figures have been restated and will be corrected in subsequently
filed quarterly financial statements, refer to Section 14 - Restatement.
(U.S. $ in thousands except earnings per share) | |
Q1 2024 | | |
Q4 2023 | | |
Q3 2023 | | |
Q2 2023 | | |
Q1 2023 | | |
Q4 2022 | | |
Q3 2022 | | |
Q2 2022 | |
Revenues | |
| 50,317 | | |
| 46,241 | | |
| 34,596 | | |
| 35,479 | | |
| 30,050 | | |
| 27,037 | | |
| 33,247 | | |
| 41,815 | |
Net loss | |
| (5,980 | ) | |
| (57,159 | ) | |
| (16,507 | ) | |
| (26,670 | ) | |
| (3,700 | ) | |
| (13,084 | ) | |
| (82,728 | ) | |
| (106,395 | ) |
Basic net loss per share | |
| (0.02 | ) | |
| (0.19 | ) | |
| (0.06 | ) | |
| (0.11 | ) | |
| (0.02 | ) | |
| (0.06 | ) | |
| (0.39 | ) | |
| (0.52 | ) |
Net loss before income taxes | |
| (12,265 | ) | |
| (57,537 | ) | |
| (16,106 | ) | |
| (26,764 | ) | |
| (4,030 | ) | |
| (12,893 | ) | |
| (87,453 | ) | |
| (125,711 | ) |
Interest expense and (income) | |
| (302 | ) | |
| 91 | | |
| 368 | | |
| 846 | | |
| 1,354 | | |
| 3,071 | | |
| 3,221 | | |
| 4,492 | |
Depreciation and amortization | |
| 38,977 | | |
| 21,790 | | |
| 21,767 | | |
| 20,528 | | |
| 20,700 | | |
| 20,777 | | |
| 20,720 | | |
| 17,857 | |
EBITDA (1) | |
| 26,410 | | |
| (35,656 | ) | |
| 6,029 | | |
| (5,390 | ) | |
| 18,024 | | |
| 10,955 | | |
| (63,512 | ) | |
| (103,362 | ) |
EBITDA margin (1) | |
| 52 | % | |
| (77 | )% | |
| 17 | % | |
| (15 | )% | |
| 60 | % | |
| 41 | % | |
| (191 | )% | |
| (247 | )% |
Share-based payment | |
| 3,094 | | |
| 3,906 | | |
| 2,011 | | |
| 2,462 | | |
| 2,536 | | |
| 3,795 | | |
| 3,961 | | |
| 7,927 | |
Realized (gain) loss on disposition of digital assets | |
| — | | |
| — | | |
| — | | |
| 587 | | |
| (587 | ) | |
| 28,567 | | |
| 44,329 | | |
| 77,880 | |
(Reversal of) revaluation loss on digital assets | |
| — | | |
| (1,183 | ) | |
| 1,183 | | |
| — | | |
| (2,695 | ) | |
| (23,284 | ) | |
| (45,655 | ) | |
| 70,475 | |
Gain on extinguishment of long-term debt and lease liabilities | |
| — | | |
| — | | |
| — | | |
| — | | |
| (12,835 | ) | |
| — | | |
| — | | |
| — | |
Impairment (reversal) on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets | |
| — | | |
| 2,270 | | |
| — | | |
| 9,982 | | |
| — | | |
| (8,903 | ) | |
| 84,116 | | |
| — | |
Impairment on goodwill | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 17,900 | |
(Gain) loss on revaluation of warrants | |
| (9,040 | ) | |
| 37,874 | | |
| (2,196 | ) | |
| 1,189 | | |
| 1,221 | | |
| (3,759 | ) | |
| (2,080 | ) | |
| (35,523 | ) |
Gain on disposition of marketable securities | |
| (338 | ) | |
| (999 | ) | |
| (4,120 | ) | |
| (4,955 | ) | |
| (2,171 | ) | |
| (7,317 | ) | |
| (13,690 | ) | |
| (19,705 | ) |
Net financial expenses and other | |
| 881 | | |
| 7,722 | | |
| 3,696 | | |
| 3,846 | | |
| 2,871 | | |
| 1,761 | | |
| 2,809 | | |
| 4,134 | |
Adjusted EBITDA (1) | |
| 21,007 | | |
| 13,934 | | |
| 6,603 | | |
| 7,721 | | |
| 6,364 | | |
| 1,815 | | |
| 10,278 | | |
| 19,726 | |
Adjusted EBITDA margin (1) | |
| 42 | % | |
| 30 | % | |
| 19 | % | |
| 22 | % | |
| 21 | % | |
| 7 | % | |
| 31 | % | |
| 47 | % |
Although the BTC Mining industry experiences volatility,
it is not generally subject to seasonality or seasonal effects. Seasonal fluctuations in energy supply, however, may impact the Company’s
operations. The majority of the Company’s operations during the above periods were in Quebec, where power was sourced directly from
Hydro-Quebec, Hydro-Magog, Hydro-Sherbrooke and the City of Baie-Comeau. The Company also had operations in Washington State that were
powered by the Grant County Power Utility District as well as operations in Paraguay that were powered by Compañía de Luz
y Fuerza S.A (“CLYFSA”). In Q3 2022, the Company began operations in Argentina. The production facility in Argentina was temporarily
connected to the power grid until the private power producer obtained the requisite permits to provide power directly to the Company in
April 2023. Energy rates in Argentina increase during winter months of May through September, after which they return to their regular
rates. Among other phenomena, changing weather in Quebec, Washington State, Paraguay or Argentina may impact seasonal electricity needs,
and periods of extreme cold or extreme hot weather may contribute to service interruptions in cryptocurrency Mining operations. Changes
to supply and/or demand of electricity may result in curtailment of electricity to the Company’s cryptocurrency Mining operations.
The Company’s geographical diversification reduces the risk and extent of extreme weather and other external factors unduly affecting
the Company’s overall performance.
For Q1 2024 details, refer to Section 7A - Financial
Performance (Revenues); Section 10A - Liquidity and Capital Resources (Cash Flows); and Section 6 - Expansion Projects
(Washington Expansion, Paraguay Expansion, Argentina Expansion and Canada Expansion) of this MD&A.
1 |
EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures or ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS
Non-IFRS financial measures
The Company utilizes a number of non-IFRS financial
measures and ratios in assessing operating performance. Non-IFRS financial measures and ratios may exclude the impact of certain items
and are used internally when analyzing operating performance. Refer to Section 23 - Cautionary Note Regarding Non-IFRS and Other Financial
Measures and Ratios of this MD&A.
Measures |
Definition |
Purpose |
Gross Mining profit |
Gross Profit adjusted to exclude: (i) non-Mining revenues; (ii) depreciation and amortization; (iii) purchase of electrical components and other expenses; and (iv) electrician salaries and payroll taxes. |
● To
assess profitability after power costs in cryptocurrency production and other infrastructure costs. Power costs are the largest variable
expense in Mining.
● To provide the users of the MD&A the ability to assess the gross profitability of the Company’s core digital asset Mining
operations. |
EBITDA |
Net income (loss) adjusted to exclude: (i) interest expense; (ii) income tax expense; and (iii) depreciation and amortization. |
● To
assess profitability before the impact of different financing methods, income taxes, depreciation of capital assets and amortization of
intangible assets.
● To provide the users of the MD&A with additional information to assist them in understanding components of its financial
results, including a more complete understanding of factors and trends affecting the Company’s performance.
● Used
by Management to facilitate comparisons of operating performance from period to period and to prepare annual operating budgets and forecasts. |
Adjusted EBITDA |
EBITDA adjusted to exclude: (i) share-based payment; (ii) non-cash finance expenses; (iii) asset impairment charges; (iv) realized gains or losses on disposition of digital assets and (reversal of) revaluation loss on digital assets; (v) gain on disposition of marketable securities, gains or losses on derivative assets and liabilities and discount expense on VAT receivable; (vi) loss (gain) on revaluation of warrants and warrant issuance costs; (vii) loss on currency exchange; and (viii) other non-recurring items that do not reflect the core performance of the Company. |
● To
assess profitability before the impact of all of the items in calculating EBITDA in addition to certain other non-cash expenses.
● To
provide the users of the MD&A a consistent comparable metric for profitability of the Company’s core performance across time
periods.
● Used
by Management to facilitate comparisons of operating performance from period to period and to prepare annual operating budgets and forecasts. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)
Non-IFRS financial measures (Continued)
Measures |
Definition |
Purpose |
Direct Cost |
Cost of revenues adjusted to exclude: (i) depreciation and amortization; (ii) purchases of electrical components; (iii) electrician salaries and payroll taxes; (iv) infrastructure; and (v) other direct expenses. |
● To assess the Company’s power costs, the largest variable expense in Mining.
● To provide the users of the MD&A a metric to evaluate the Company’s direct variable cost for its core digital asset Mining operations
across time periods.
● Used by Management to assess the operating performance from period to period and to prepare annual operating budgets and forecasts.
|
Total Cash Cost |
The sum of cost of revenues and general and administrative expenses before: (i) depreciation and amortization; (ii) purchases of electrical components; (iii) electrician salaries and payroll taxes; (iv) share-based payment; (v) other direct expenses; and (vi) other non-recurring items that do not reflect the core performance of the Company. |
● To assess the total cash cost of the Company’s core digital asset Mining operations.
● To provide the users of the MD&A a consistent comparable metric for the liquidity impact of the Company’s mining
activities across time periods.
● Used by Management to assess the operating performance from period to period and to prepare annual operating budgets and forecasts.
|
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)
Non-IFRS financial ratios
Ratios |
Definition |
Purpose |
Gross Mining margin |
The percentage obtained when dividing Gross Mining profit by Mining related revenues. |
● To assess profitability after power costs in cryptocurrency production, the largest variable expense in Mining.
● To provide the users of the MD&A the ability to assess the profitability of the Company’s core digital asset Mining operations,
exclusive of depreciation and amortization and certain general and administrative expenses.
|
EBITDA margin |
The percentage obtained when dividing EBITDA by Revenues. |
● To assess profitability before the impact of different financing methods, income taxes, depreciation of capital assets and amortization
of intangible assets.
● Used by Management to facilitate comparisons of operating performance from period to period and to prepare annual operating budgets and
forecasts.
● Useful for providing users of the MD&A with additional information to assist them in understanding components of its financial results,
including a more complete understanding of factors and trends affecting the Company’s performance.
|
Adjusted EBITDA margin |
The percentage obtained when dividing Adjusted EBITDA by Revenues. |
● To assess profitability before the impact of all of the items in calculating EBITDA in addition to certain other non-cash expenses.
● To provide a consistent comparable metric for profitability of the Company’s core performance across time periods.
● Used by Management to facilitate comparisons of operating performance from period to period and to prepare annual operating budgets and
forecasts.
|
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)
Non-IFRS financial ratios (Continued)
Ratios |
Definition |
Purpose |
Direct Cost per BTC |
The amount obtained when dividing Direct Cost by the quantity of BTC earned. |
● To assess the Company’s power costs, the largest variable expense in Mining.
● To provide the users of the MD&A a metric to evaluate the Company’s direct variable cost for its core digital asset Mining operations
across time periods.
● Used by Management to assess the operating performance from period to period and to prepare annual operating budgets and forecasts.
|
Total Cash Cost per BTC |
The amount obtained when dividing Total Cash cost by the quantity of BTC earned. |
● To assess the total cash cost of the Company’s core digital asset Mining operations.
● To provide the users of the MD&A a consistent comparable metric for the liquidity impact of the Company’s mining activities
across time periods.
● Used by Management to assess the operating performance from period to period and to prepare annual operating budgets and forecasts.
|
Supplemental financial ratios
The Company utilizes the following supplemental
financial ratios in assessing operating performance.
Ratios |
Definition |
Purpose |
Gross margin |
The percentage obtained when dividing Gross profit by Revenues. |
● To assess profitability of the Company across time periods. |
Operating margin |
The percentage obtained when dividing Operating income (loss) by Revenues. |
● To assess operational profitability of the Company across time periods. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)
| A. | Reconciliation of
Consolidated Net Income (loss) to EBITDA and Adjusted EBITDA |
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 (1) | | |
$ Change | | |
% Change | |
Revenues | |
| 50,317 | | |
| 30,050 | | |
| 20,267 | | |
| 67 | % |
| |
| | | |
| | | |
| | | |
| | |
Net loss before income taxes | |
| (12,265 | ) | |
| (4,030 | ) | |
| (8,235 | ) | |
| 204 | % |
Interest expense and (income) | |
| (302 | ) | |
| 1,354 | | |
| (1,656 | ) | |
| (122 | )% |
Depreciation and amortization | |
| 38,977 | | |
| 20,700 | | |
| 18,277 | | |
| 88 | % |
EBITDA | |
| 26,410 | | |
| 18,024 | | |
| 8,386 | | |
| 47 | % |
EBITDA margin | |
| 52 | % | |
| 60 | % | |
| — | | |
| — | |
Share-based payment | |
| 3,094 | | |
| 2,536 | | |
| 558 | | |
| 22 | % |
Realized gain on disposition of digital assets | |
| — | | |
| (587 | ) | |
| 587 | | |
| 100 | % |
Reversal of revaluation loss on digital assets | |
| — | | |
| (2,695 | ) | |
| 2,695 | | |
| 100 | % |
Gain on extinguishment of long-term debt and lease liabilities | |
| — | | |
| (12,835 | ) | |
| 12,835 | | |
| 100 | % |
(Gain) loss on revaluation of warrants | |
| (9,040 | ) | |
| 1,221 | | |
| (10,261 | ) | |
| (840 | )% |
Gain on disposition of marketable securities | |
| (338 | ) | |
| (2,171 | ) | |
| 1,833 | | |
| (84 | )% |
Net financial expenses and other | |
| 881 | | |
| 2,871 | | |
| (1,990 | ) | |
| (69 | )% |
Adjusted EBITDA | |
| 21,007 | | |
| 6,364 | | |
| 14,643 | | |
| 230 | % |
Adjusted EBITDA margin | |
| 42 | % | |
| 21 | % | |
| — | | |
| — | |
1 | Prior
year figures are derived from restated financial statements. Refer to Section 14 - Restatement. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)
B. | Calculation of
Gross Mining Profit and Gross Mining Margin |
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 | | |
$ Change | | |
% Change | |
Gross loss | |
| (10,682 | ) | |
| (8,353 | ) | |
| (2,329 | ) | |
| 28 | % |
Non-Mining revenues (1) | |
| (894 | ) | |
| (842 | ) | |
| (52 | ) | |
| 6 | % |
Depreciation and amortization | |
| 38,977 | | |
| 20,700 | | |
| 18,277 | | |
| 88 | % |
Purchases of electrical components | |
| 387 | | |
| 320 | | |
| 67 | | |
| 21 | % |
Electrician salaries and payroll taxes | |
| 321 | | |
| 356 | | |
| (35 | ) | |
| (10 | )% |
Other | |
| 1,203 | | |
| (155 | ) | |
| 1,358 | | |
| 876 | % |
Gross Mining profit | |
| 29,312 | | |
| 12,026 | | |
| 17,286 | | |
| 144 | % |
Gross Mining margin | |
| 59 | % | |
| 41 | % | |
| — | | |
| — | |
(1) | Non-Mining
revenues reconciliation: |
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 | | |
$ Change | | |
% Change | |
Revenues | |
| 50,317 | | |
| 30,050 | | |
| 20,267 | | |
| 67 | % |
Less Mining related revenues for the purpose of calculating gross Mining margin: | |
| | | |
| | | |
| | | |
| | |
Mining revenues | |
| (49,423 | ) | |
| (29,208 | ) | |
| (20,215 | ) | |
| 69 | % |
Non-Mining revenues | |
| 894 | | |
| 842 | | |
| 52 | | |
| 6 | % |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)
| C. | Calculation of Direct
Cost and Direct Cost per BTC |
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 | | |
$ Change | | |
% Change | |
Cost of revenues | |
| 60,999 | | |
| 38,403 | | |
| 22,596 | | |
| 59 | % |
Depreciation and amortization | |
| (38,977 | ) | |
| (20,700 | ) | |
| (18,277 | ) | |
| 88 | % |
Purchases of electrical components | |
| (387 | ) | |
| (320 | ) | |
| (67 | ) | |
| 21 | % |
Electrician salaries and payroll taxes | |
| (321 | ) | |
| (356 | ) | |
| 35 | | |
| (10 | )% |
Infrastructure | |
| (1,974 | ) | |
| (942 | ) | |
| (1,032 | ) | |
| 110 | % |
Other | |
| — | | |
| 82 | | |
| (82 | ) | |
| (100 | )% |
Direct Cost | |
| 19,340 | | |
| 16,167 | | |
| 3,173 | | |
| 20 | % |
Quantity of BTC earned | |
| 943 | | |
| 1,297 | | |
| (354 | ) | |
| (27 | )% |
Direct Cost per BTC (in U.S. dollars) | |
| 20,500 | | |
| 12,500 | | |
| 8,000 | | |
| 64 | % |
| D. | Calculation of Total
Cash Cost and Total Cash Cost per BTC |
| |
Three months ended March 31, | |
(U.S.$ in thousands except where indicated) | |
2024 | | |
2023 | | |
$ Change | | |
% Change | |
Cost of revenues | |
| 60,999 | | |
| 38,403 | | |
| 22,596 | | |
| 59 | % |
General and administrative expenses | |
| 13,196 | | |
| 8,360 | | |
| 4,836 | | |
| 58 | % |
| |
| 74,195 | | |
| 46,763 | | |
| 27,432 | | |
| 59 | % |
Depreciation and amortization | |
| (38,977 | ) | |
| (20,700 | ) | |
| (18,277 | ) | |
| 88 | % |
Purchases of electrical components | |
| (387 | ) | |
| (320 | ) | |
| (67 | ) | |
| 21 | % |
Electrician salaries and payroll taxes | |
| (321 | ) | |
| (356 | ) | |
| 35 | | |
| (10 | )% |
Share-based payment | |
| (3,094 | ) | |
| (2,536 | ) | |
| (558 | ) | |
| 22 | % |
Other | |
| (2,814 | ) | |
| 62 | | |
| (2,876 | ) | |
| nm | |
Total Cash Cost | |
| 28,602 | | |
| 22,913 | | |
| 5,689 | | |
| 25 | % |
Quantity of BTC earned | |
| 943 | | |
| 1,297 | | |
| (354 | ) | |
| (27 | )% |
Total Cash Cost per BTC (in U.S. dollars) | |
| 30,300 | | |
| 17,700 | | |
| 12,600 | | |
| 71 | % |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
10. LIQUIDITY AND CAPITAL RESOURCES
As discussed below, the Company’s current
financing strategy involves (a) strategically selling the BTC it earns and the BTC it holds in treasury and (b) utilizing short-term debt,
long-term debt and equity instruments to fund its expansion activities, operating expenses and debt service requirements. The Company
anticipates requiring additional funds to complete its growth plans discussed in Section 6 - Expansion Projects of this MD&A.
Although the Company operates through its subsidiaries,
there are no material legal restrictions and generally no practical restrictions on the ability of the subsidiaries to transfer funds
to the Company, except that the Company may be subject to practical limitations on transferring funds from its Argentinian subsidiary.
Beginning in the second half of 2019, the Argentine government instituted certain foreign currency exchange controls that could restrict
the Company’s Argentinian subsidiary’s access to foreign currency, including the US dollar, for making payments abroad or
transferring funds to its parent without prior authorization from the Argentine Central Bank. These regulations have continued to evolve
and may become more stringent depending on the Argentine government´s perception of the availability of sufficient national foreign
currency reserves. Further, recent changes, as well as any future changes, in national and provincial leadership may result in changing
governmental perceptions and actions surrounding importation policies and the availability of foreign currency reserves for commerce.
In late 2023, Argentina held a presidential election, resulting in the election of a new president, for which the implications for economic
and monetary policy, and its impact on Bitfarms, cannot be ascertained as of the issuance date of this MD&A.
The Company sends funds periodically to its Argentinian
subsidiary to fund its expansion based on supplier invoices that are paid by the Argentinian subsidiary. The Argentinian subsidiary provides
hashrate services for a market-based fee to its Canadian parent, which, in turn, purchases that hashrate to consolidate and sell to a
third-party mining pool, for which the Canadian parent is compensated in BTC. Accordingly, the Argentinian subsidiary is not structured
or contemplated to generate substantial cash flows above its internal requirements.
| |
Three months ended March 31, | |
(U.S. $ in thousands except where indicated) | |
2024 | | |
2023 | | |
$ Change | | |
% Change | |
Cash, beginning of the period | |
| 84,038 | | |
| 30,887 | | |
| 53,151 | | |
| 172 | % |
Cash flows from (used in): | |
| | | |
| | | |
| | | |
| | |
Operating activities | |
| 18,281 | | |
| 1,029 | | |
| 17,252 | | |
| nm | |
Investing activities | |
| (76,554 | ) | |
| (3,528 | ) | |
| (73,026 | ) | |
| nm | |
Financing activities | |
| 40,136 | | |
| 943 | | |
| 39,193 | | |
| nm | |
Exchange rate differences on currency translation | |
| 60 | | |
| 47 | | |
| 13 | | |
| 28 | % |
Cash, end of the period | |
| 65,961 | | |
| 29,378 | | |
| 36,583 | | |
| 125 | % |
nm: not meaningful
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
10. LIQUIDITY AND CAPITAL RESOURCES (Continued)
Cash Flows from Operating Activities
Cash flows from operating activities amounted
to $18.3 million during Q1 2024 compared to cash flows from operating activities of $1.0 million in Q1 2023, primarily driven by:
| ● | An increase in proceeds from sale of digital assets earned
of $21.1 million as a result of selling BTC in Q1 2024 with significantly higher prices compared to Q1 2023; and |
| ● | Lower interest and financial expenses paid of $2.6 million
as a result of eliminating the remaining NYDIG debt balance. |
The increase was partially offset by:
| ● | Higher cash G&A expenses of $4.2 million; and |
| ● | Higher energy and infrastructure costs of $4.3 million as
explained in Section 7B - Financial Performance - Cost of Revenues of this MD&A. |
Cash Flows used in Investing Activities
Cash flows used in investing activities increased
by $73.0 million during Q1 2024 compared to Q1 2023.
The increase in cash flow used in investing activities
is driven primarily by:
| ● | $74.0 million in advance payments mainly for the transformative fleet upgrade during Q1 2024, compared
to nil in advanced payments during Q1 2023; and |
| ● | $2.9 million of net additions of property, plant and equipment (“PPE”) during Q1 2024, compared
to $5.7 million for the same period in 2023, primarily due to the acquisition of Miners and infrastructure build-out. |
The increase was partially offset by:
| ● | $0.3 million of net proceeds received in Q1 2024 from the
purchase and disposition of marketable securities to fund the Argentina expansion activities, compared to $2.2 million of net proceeds
for the same period in 2023, as described in Note 21 - Additional Details to the Statement of Profit or Loss and Comprehensive Profit
or Loss to the Financial Statements. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
10. LIQUIDITY AND CAPITAL RESOURCES (Continued)
Cash Flows from Financing Activities
Cash flows from financing activities increased
by $39.2 million from $0.9 million for Q1 2023 to $40.1 million for Q1 2024.
Q1 2024
| ◦ | $38.1 million of net proceeds from its 2024 ATM Program as
discussed below, partially offset by $0.9 million of capitalized professional fees and registration expenses to initiate the 2024 ATM
Program; |
| ◦ | $6.0 million of net proceeds from the exercise of stock options
and warrants; and |
| ◦ | $1.7 million from the sale and leaseback of its Garlock (Quebec)
facility. |
| ● | The amounts raised were partially offset by scheduled and
one-time payments relating to: |
| ◦ | Principal repayments of $4.0 million to fully repay the NYDIG
loan, which matured and expired in February 2024; and |
| ◦ | Lease liabilities of approximately $0.8 million. |
Q1 2023
| ● | The Company raised $15.8 million of net proceeds from an at-the-market equity offering program, initiated
on August 16, 2021 and expired on September 12, 2023 (“2021 ATM program”), which were partially offset by repayments
towards the long-term debt and lease liabilities of $13.5 million and $1.4 million, respectively. |
| ● | The long-term debt repayments included: |
| ◦ | The settlement of the BlockFi Loan on February 8, 2023 for cash consideration
of $7.8 million, as discussed below; |
| ◦ | Principal repayments of $5.3 million towards the NYDIG loan; and |
| ◦ | The full repayment of the principal amount of the remaining equipment financing (the “Foundry Loans”)
before maturity and without prepayment penalty for $0.8 million. |
BlockFi Loan
On February
18, 2022, Bitfarms’ subsidiary, Backbone Mining Solutions Inc. (“Backbone Mining”), entered into a $32.0 million
equipment financing facility with BlockFi. On February 8, 2023, BlockFi and the Company negotiated
a settlement of the loan in its entirety for cash consideration of $7.8 million, discharging
Backbone Mining of all further obligations and resulting in a gain on extinguishment of long-term debt of $12.6 million. Upon settlement,
all of Backbone Mining’s assets, including 6,100 Miners collateralizing the loan, became unencumbered.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
10. LIQUIDITY AND CAPITAL RESOURCES (Continued)
Cash Flows from Financing Activities (Continued)
At-The-Market Equity Offering Program
Bitfarms
commenced the 2024 ATM Program on March 11, 2024, by means of a prospectus supplement dated
March 8, 2024, to the Company’s short form base shelf prospectus dated November 10, 2023, and U.S. registration statement
on Form F-10, which included a prospectus supplement related to the ATM. The Company may, at its discretion and from time-to-time, sell
common shares of the Company in the ATM as would result in the Company receiving gross proceeds of up to $375.0 million.
Q1 2024 v. Q1 2023
During the three months ended March 31, 2024,
the Company issued 16,997,000 common shares through the 2024 ATM Program in exchange for gross proceeds of $39.3 million at an average
share price of approximately $2.31. The Company received net proceeds of $38.1 million after paying commissions of $1.2 million to the
sales agent.
During the three months ended March 31, 2023,
the Company issued 15,940,000 common shares through the 2021 ATM program in exchange for gross proceeds of $16.4 million at an average
share price of approximately $1.03. The Company received net proceeds of $15.8 million after paying commissions of $0.5 million to the
sales agent.
Use of Proceeds
The Company has used and intends to continue
to use the proceeds from the 2024 ATM Program prudently to support the growth and development of the Company’s Mining
operations, as described in Section 6 - Expansion Projects of this MD&A, as well as for working capital and
general corporate purposes. The Company used the $38.1 million raised from the 2024 ATM Program from March 11, 2024 through
March 31, 2024 for the transformative fleet upgrade.
Private placements
Q1 2024 v. Q1 2023
During the three months ended March 31, 2024,
5,000,000 warrants and 111,000 broker warrants related to the 2023 private placement were exercised, resulting in the issuance of 5,111,000
common shares for proceeds of approximately $6.0 million. During the three months ended March 31, 2023, no warrants were exercised.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
10. LIQUIDITY AND CAPITAL RESOURCES (Continued)
Bitfarms’ capital management objective is to provide
the financial resources that will enable the Company to maximize the return to its shareholders while optimizing its cost of capital and
still ensuring the Company has sufficient liquidity to fund its normal operating activities. In order to achieve this objective, the Company
monitors its capital structure and makes adjustments as required in light of the Company’s funding requirements, changes in economic
conditions, the cost of providing financing, and the risks to which the Company is exposed. The Company’s financing strategy is
to maintain a flexible capital structure that optimizes the cost of capital at an acceptable level of risk, to preserve its ability to
meet financial obligations as they come due, and to ensure the Company has sufficient financial resources to fund its organic and acquisitive
growth.
Based on the current capital budget and BTC prices,
the Company currently anticipates that additional financing will be required to fund expansion activities in Canada and Paraguay to achieve
its published hashrate targets and to complete construction of additional facilities in Argentina, if the Company elects to do so. In
order to achieve its business objectives, the Company may sell or borrow against the BTC that are held in treasury as of the date hereof
as well as BTC received from its ongoing operations, which may or may not be possible on commercially attractive terms. Bitfarms intends
to continue to manage its capital structure by striving to reduce operating expenses and unnecessary capital spending, disposing of inefficient
or underutilized assets, obtaining short-term and long-term debt financing and issuing equity.
A BTC Halving is scheduled to occur once every
210,000 blocks, or roughly every four years, until the total amount of BTC rewards issued reaches 21 million, which is expected to occur
around 2140. The most recent BTC Halving occurred on April 19, 2024, at which time BTC block rewards decreased from 6.25 BTC per block
to 3.125 BTC per block. Once 21 million BTC are generated on or about the year 2140, the network will stop producing more BTC, and the
industry will then need to rely on transaction fees and/or other sources of revenue. While BTC prices have had a history of significant
fluctuations around BTC Halving events, there is no guarantee that the price change will be favorable or would compensate for the reduction
in Mining rewards and the compensation from Mining Pools.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
10. LIQUIDITY AND CAPITAL RESOURCES (Continued)
| B. | Capital Resources
(Continued) |
Digital Asset Management Program
In early January 2021, the Company implemented
a digital asset management program under which it holds BTC for its intrinsic value and as a source of liquidity. The Company has internal
controls over the management of its digital assets, which it evaluates and, as appropriate, enhances on a quarterly basis. On August 1
2022, Management received approval from the Board of Directors (the “BOD”) to sell daily production, in addition to any sale
of up to 1,000 BTC from treasury, should market conditions justify such sales in Management’s discretion. Since January 2022, the
Company has not purchased any BTC.
Presented
below are the total BTC sold and proceeds in Q1 2024, a portion of which was used
to fully repay equipment-related indebtedness, with the remaining portion used to fund operations and expansion plans:
| |
Three months ended | |
(U.S. $ in thousands except where indicated) | |
March 31, 2024 | |
Quantity of BTC sold | |
| 941 | |
Total proceeds | |
| 49,570 | |
The sale of BTC as described above, while the
Company continued to earn BTC, resulted in total holdings of 806 BTC as of March 31, 2024, valued at approximately $57.5 million
based on a BTC price of approximately $71,300, as of March 31, 2024.
Custody of digital assets
The Company’s BTC received from the Mining
Pool for its computational power used for hashing calculations is delivered to multi-signature wallets that the Company controls or directs
to external third-party custodians. On a regular basis, the Company transfers BTC from its multi-signature wallets to external third-party
custodians, Coinbase Custody Trust Company, LLC (“Coinbase Custody”), a subsidiary of Coinbase Global, Inc. (“Coinbase”)
and Anchorage Digital Bank National Association (“Anchorage Digital”). Coinbase Custody provides custody and related services
for clients’ digital assets as a fiduciary pursuant to the New York State Department of Financial Services under Section 100 of
the New York Banking Law. Anchorage Digital is the only federally chartered crypto bank in the U.S., serves as a custodian for digital
assets, and is licensed and regulated by the Office of the Comptroller of the Currency. Currently, Coinbase Custody and Anchorage Digital
provide only custodial services to the Company and do not use a sub-custodian. Coinbase Custody and Anchorage Digital are not related
parties to the Company.
The Company has internal controls in place to
evaluate its custodians on a quarterly basis. The Company can transfer digital assets between custodians and has its own multi-signature
wallets as a contingency plan that would have a minimal impact on the Company’s operations.
As of May 14, 2024, the Company has 844
BTC, valued at $51.9 million on its balance sheet. As of the date of this MD&A, 100% of the Company’s BTC are held in custody
with Coinbase Custody and Anchorage Digital.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
10. LIQUIDITY AND CAPITAL RESOURCES (Continued)
| B. | Capital Resources
(Continued) |
Custody of digital assets (Continued)
Coinbase Custody maintains an insurance policy
of $320 million for its cold storage and Anchorage Digital maintains an insurance policy of $50 million for its cold and hot storage;
however, the Company cannot ensure that the full limits of those policies would be available to the Company or, if available, would be
sufficient to make the Company whole for any BTC that are lost or stolen. The Company is unaware of: (i) any security breaches involving
Coinbase Custody or Anchorage Digital which have resulted in the Company’s crypto assets being lost or stolen, or (ii) anything
with regards to Coinbase Custody’s or Anchorage Digital’s operations that would adversely affect the Company’s ability
to obtain an unqualified audit opinion on its audited financial statements. The Company’s crypto assets held in custody with Coinbase
or Anchorage Digital may not be recoverable in the event of bankruptcy by Coinbase, Anchorage Digital or their affiliates. In Coinbase’s
quarterly report, on Form 10-Q, filed with the U.S. Securities Exchange Commission on May 2, 2024, Coinbase disclosed that, in the event
of a bankruptcy, custodially held crypto assets could be considered to be the property of the bankruptcy estate and that the crypto assets
held in custody could be subject to bankruptcy proceedings with Coinbase Custody’s customers being treated as general unsecured
creditors. Further, regardless of efforts made by the Company to securely store and safeguard assets, there can be no assurance that
the Company’s cryptocurrency assets will not be defalcated through hacking or other forms of theft.
Hedging program of digital assets
The Company’s hedging strategy aims to
reduce the risk associated with the variability of cash flows resulting from future disposals of digital assets and in consideration
of the volatility and adverse price movements of the digital assets in the prior months. In March 2023, the BOD approved a hedging program
and authorized Management, through a risk management committee specifically created for this purpose, to implement hedges using BTC option
contracts for up to 20% of the Company’s BTC compensation per month and up to three months of future BTC compensation. In April
2023, the BOD authorized Management to increase the BTC option contracts to up to 50% of the Company’s BTC compensation per month
and up to six months of expected future BTC compensation. As of May 14, 2024, the risk management committee has not engaged in hedging
to the full extent approved by the BOD. The Company has a hedge in place of 100 BTC of expected future BTC compensation.
During the three months ended March 31,
2024, the Company had BTC option contracts to sell digital assets that expired which resulted in a realized loss and an unrealized gain
of $0.7 million and $0.1 million, respectively, mainly related to premiums for the option contracts hedging the risk of the BTC price
decreasing and protecting the Company’s margins. Refer to Note 17 to the Financial Statements for more details.
Synthetic HODL program of digital assets
Alongside the hedging program, and with the intent
to manage a more capital-efficient portfolio, in June 2023, the BOD approved a HODL strategy, referred to as a Synthetic HODL strategy,
which allows up to 20% of the Company’s BTC exposure to be replicated using BTC call options. In October 2023, the Company initiated
its Synthetic HODL strategy with the purchase of long-dated BTC call options. The primary objective of the Synthetic HODL is to allow
the Company to accumulate BTC in treasury and increase BTC exposure in a manner that is risk-managed and capital efficient. As of May 14,
2024, the Company has active call option contracts providing the right to buy up to 170 BTC. It remains within the risk management committee’s
discretion to dynamically adjust Bitfarms’ hedge and Synthetic HODL ratios within the risk limits approved by the BOD to more adequately
respond to market factors that are beyond the Company’s operational control. During the three months ended March 31, 2024,
the Company purchased long-dated BTC call options which resulted in a realized gain and an unrealized gain of $1.1 million and $2.0 million,
respectively, attributable to the increase in the BTC price during the period.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
10. LIQUIDITY AND CAPITAL RESOURCES (Continued)
| C. | Contractual obligations |
The following
are the contractual maturities of financial liabilities and gross lease liabilities (non-financial liabilities) with estimated
future interest payments, as applicable, as of March 31, 2024:
(U.S. $ in thousands) | |
2024 | | |
2025 | | |
2026 | | |
2027 | | |
2028 and
thereafter | | |
Total | |
Trade accounts payable and accrued liabilities | |
| 10,669 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 10,669 | |
Long-term debt | |
| 164 | | |
| 224 | | |
| 231 | | |
| 238 | | |
| 1,573 | | |
| 2,430 | |
Lease liabilities | |
| 2,301 | | |
| 2,948 | | |
| 2,792 | | |
| 2,516 | | |
| 7,894 | | |
| 18,451 | |
| |
| 13,134 | | |
| 3,172 | | |
| 3,023 | | |
| 2,754 | | |
| 9,467 | | |
| 31,550 | |
As of March 31, 2024, the Company’s
remaining payment obligations in connection with the Purchase Order, the Purchase Option and the March 2024 Purchase Order are outlined
below:
| |
As of
March 31, | |
(U.S. $ in thousands) | |
2024 | |
Three months ending June 30, 2024 | |
| 39,528 | |
Three months ending September 30, 2024 | |
| 85,889 | |
Three months ending December 31, 2024 | |
| 30,772 | |
| |
| 156,189 | |
If the Company is unable to meet its payment obligations,
it could result in the loss of equipment prepayments and deposits paid by the Company under the Purchase Order and remedial legal measures
being taken against the Company, which may result in damages payable by the Company and forced continuance of the contractual arrangement.
Under such circumstances, the Company’s growth plans and ongoing operations could be adversely impacted.
In 2021, the Company imported Miners into Washington
State that the vendor located in China claimed originated in Malaysia. In early 2022, U.S. Customs and Border Protection challenged the
origination of the Miners, asserting their manufacture in China, and notified the Company of a potential assessment of a U.S. importation
duty of 25%. Since the request for information by U.S. Customs and Border Protection, the Company has been working with the vendor to
validate their origination outside of China by visiting contract manufacturer sites and by examining and documenting the manufacture and
assembly of the Miners by the vendor and its third-party contractors.
During the third quarter of 2023, the Company
submitted the supporting documentation to U.S. Customs and Border Protection in defense of its position that the Miners were manufactured
outside China and the associated custom duties in the amount of $9.4 million do not apply. While the final outcome of this matter is uncertain
at this time, Management has determined it is not probable that it will result in a future cash outflow for the Company, and, as such,
no provision was recorded as of March 31, 2024.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
11. FINANCIAL POSITION
| |
As of
March 31, | | |
As of
December 31, | | |
| | |
| |
(U.S. $ in thousands) | |
2024 | | |
2023 (1) | | |
$ Change | | |
% Change | |
Total Current Assets | |
| 137,319 | | |
| 129,984 | | |
| 7,335 | | |
| 6 | % |
Total Current Liabilities | |
| 45,518 | | |
| 69,154 | | |
| (23,636 | ) | |
| (34 | )% |
Working Capital | |
| 91,801 | | |
| 60,830 | | |
| 30,971 | | |
| 51 | % |
With the BTC halving event that occurred on April
19, 2024, the Company continues to place importance on maintaining sufficient liquidity to manage the uncertainty and capitalize upon
suitable opportunities the halving event may present. As of March 31, 2024, Bitfarms had working capital of $91.8 million, compared
to $60.8 million as of December 31, 2023. The increase in working capital was mostly due to:
| ● | A $23.6 million increase in total digital assets resulting
from the appreciation of the BTC price during Q1 2024. |
| ● | A $21.9 million decrease in warrant liabilities due to the
subsequent fair value revaluation of the warrants from the 2021 and the 2023 private placements, and the exercise of 2023 private placements
warrants. |
| ● | Scheduled capital repayments of $4.0 million to fully pay
off the NYDIG loan. The effect on working capital is nil as the repayments decreased the cash balance and the loan balance by corresponding
amounts. |
The increases in working capital was partially
offset by:
| ● | A $18.1 million decrease in cash, mainly used for expansion
projects during Q1 2024, with the remainder intended for future payments of Miners as part of the transformative fleet upgrade and general
working capital purposes. |
| 1 | Prior
year figures are derived from restated financial statements. Refer to Section 14 - Restatement. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
11. FINANCIAL POSITION (Continued)
| B. | Property, plant and equipment |
The net book value of PPE by country is as follows:
| |
As of
March 31, | | |
As of
December 31, | | |
| | |
| |
(U.S. $ in thousands) | |
2024 | | |
2023 | | |
$ Change | | |
% Change | |
Canada | |
| 78,618 | | |
| 101,454 | | |
| (22,836 | ) | |
| (23 | )% |
Argentina | |
| 50,598 | | |
| 54,657 | | |
| (4,059 | ) | |
| (7 | )% |
USA | |
| 15,902 | | |
| 18,154 | | |
| (2,252 | ) | |
| (12 | )% |
Paraguay | |
| 32,649 | | |
| 11,747 | | |
| 20,902 | | |
| 178 | % |
| |
| 177,767 | | |
| 186,012 | | |
| (8,245 | ) | |
| (4 | )% |
As of March 31, 2024, Bitfarms had PPE of
$177.8 million, compared to $186.0 million as of December 31, 2023.
| ● | The decrease of $8.2 million, or 4%, was primarily due to the $22.8 million decrease of PPE in Canada,
mainly related to regular depreciation expense in addition to accelerated depreciation of older Miners and the classification to assets
held for sale. Refer to Note 9 - Property, Plant and Equipment to the Financial statements for more details about the accelerated
depreciation. |
| ● | PPE in Argentina and the USA decreased by $4.1 million and $2.3 million, respectively, mostly due to regular
depreciation expense and the accelerated depreciation of older Miners. Refer to Note 9 - Property, Plant and Equipment to the Financial
Statements. |
| ● | These decreases were partially offset by the $20.9 million increase in Paraguay PPE primarily due to approximately
600 WhatsMiner M53S and 2,900 Bitmain T21 Miners in transit and the construction of the Paso Pe warehouse and substation during Q1 2024. |
As of March 31, 2024, Bitfarms had intangible
assets of $4.5 million, compared to $3.7 million as of December 31, 2023. The $0.8 million increase is mainly due to the Washington
State access right to electricity being available for use and reclassified from long-term deposits, equipment, prepayments and other to
intangible assets. The increase was partially offset by the amortization of the Company’s access rights to electricity in Washington
State and access rights to electricity already held in Quebec and Paraguay since 2023. The following table summarizes those access rights
to electricity:
Year | |
Location | |
Additions to
intangibles ($) | | |
Additional
capacity |
| |
Term of contractual access
rights | |
Amortization method and period |
2024 | |
Washington State, USA | |
| 912 | | |
6 MW |
| |
No termination date | |
Declining balance 4% |
| |
| |
| 912 | | |
6 MW |
| |
| |
|
2023 | |
Baie-Comeau, Quebec | |
| 2,315 | | |
22 MW |
| |
No termination date | |
Straight-line over the lease term of the facility |
2023 | |
Paso Pe, Paraguay | |
| 1,065 | | |
50 MW |
* | |
Ending in December 31, 2027 | |
Straight-line over the access rights period |
2023 | |
Yguazu, Paraguay | |
| 421 | | |
100 MW |
| |
Ending in December 31, 2027 | |
Straight-line over the access rights period |
| |
| |
| 3,801 | | |
172 MW |
| |
| |
|
| |
| |
| | | |
|
| |
| |
|
| |
| |
| | | |
178 MW |
| |
| |
|
| * | In November 2023, the Company finalized an amendment to the
existing contract for an additional 20 MW of energy capacity for a total capacity of 70 MW. |
Refer to Notes 5 and 14 to the 2023 Annual Financial Statements and
Note 10 to the Financial Statements for more details.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
12. FINANCIAL INSTRUMENTS
The Company discloses information on the classification
and fair value of its financial instruments, as well as on the nature and extent of risks arising from financial instruments, and related
risk management in Note 17 to the Financial Statements and Note 22 to the 2023 Annual Financial Statements. Risks are related to foreign
currency, credit, counterparty, liquidity, and concentration.
13. RELATED PARTY TRANSACTIONS
The Company discloses information on its related
party transactions, as defined in IAS 24, Related Party Disclosures, in Note 18 to the Financial Statements.
14. RESTATEMENT
In the Financial
Statements, the Company has restated its consolidated statements of profit or loss and comprehensive profit or loss for the three
months March 31, 2023 and its consolidated statements of cash flows for the three months March 31, 2023, which were previously filed on
SEDAR+ and EDGAR. Subsequent to the original issuance of those financial statements, Management, with the assistance of outside counsel,
conducted a review of the private placement financings which closed in 2021 (“2021 private placements”) to determine if
the warrants issued should be recognized as financial liabilities and accounted for at fair value through profit and loss rather than
as equity instruments.
The 2021 private placement financings were comprised
of common shares and warrants. The warrants are convertible into a fixed number of common shares of the Company but have a contingent
cashless exercise clause (i.e., there was a contingent variability provision). In accordance with IAS 32, Financial Instruments: Presentation,
variability in the number of its own shares delivered upon exercise of the warrants would result in a financial liability.
In 2023, the Company concluded that the proper
accounting classification of the warrants was as financial liabilities and accounted for at fair value through profit and loss. Although
the conditional settlement provisions attached to the warrants are unlikely to occur, they are deemed to be genuine, and, accordingly,
the warrants should be recognized as financial liabilities.
The Company has made adjustments to the figures
reported in the previously mentioned financial statements periods and present the warrants issued in connection with the private placement
financings as financial liabilities as shown in the Financial Statements.
For additional information on the financial statements
restatement, please refer to Note 3d of the Financial Statements.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
15. INTERNAL CONTROLS OVER FINANCIAL REPORTING
| A. | Disclosure Controls
and Procedures |
Management, under the supervision of the
Interim CEO and Chief Financial Officer (“CFO”) of the Company, has designed or caused to be designed under their
supervision, disclosure controls and procedures (“DC&P”) to provide reasonable assurance that:
i) material information relating to the Company
is made known to them by others, particularly during the period in which the annual filings are being prepared; and
ii) information required to be disclosed by the
Company in its annual filings, interim filings or other reports filed or submitted by the Company under securities legislation is recorded,
processed, summarized and reported within the time periods specified in securities legislation.
| B. | Management’s
quarterly report on internal control over financial reporting |
Management, under the supervision of the
Interim CEO and CFO, is also responsible for establishing and maintaining adequate internal controls over financial reporting
(“ICFR”). Management, under the supervision of the Interim CEO and CFO, has designed ICFR, or caused them to be designed
under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with IFRS Accounting Standards.
Identified
material weaknesses
A material weakness is a deficiency, or a combination
of deficiencies, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis.
In conjunction with the preparation of the Company’s
financial statements for the year ended December 31, 2023 and specifically, in connection with the accounting for private placement warrants
that were issued in the fourth quarter of 2023, Management identified an error in its accounting for previously issued warrants that were
issued in connection with certain private placement financings in 2021. Management has determined that the control over accounting for
complex financing transactions did not operate effectively in 2021 as the warrants issued in 2021 should have been classified as a financial
liability and accounted for at fair value through profit and loss, and not as equity instruments. The restatement to correct the classification
and subsequent accounting for those warrants impacted the consolidated financial statements of the company for the year ended December
31, 2022 and for the three months ended March 31, 2023, which has been reflected in the restated comparative periods (including an opening
balance sheet as of January 1, 2022 and December 31, 2022, respectively) presented in the consolidated financial statements for the year
ended December 31, 2023 and for the three months ended March 31, 2024, respectively.
Refer to Section 14 for more details about the
material errors and related restatements. Management considers these restatements to constitute a material weakness that requires remediation,
and Management is in the process of implementing remediation measures to address the material weakness.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
15. INTERNAL CONTROLS OVER FINANCIAL REPORTING (Continued)
| B. | Management’s
quarterly report on internal control over financial reporting (Continued) |
Status of remediation plan
Remediation efforts to date comprise expanding
the finance team to include more Chartered Professional Accountants (CPAs) with technical expertise and experience in evaluating more
complex areas of IFRS Accounting Standards, involving the Company’s legal counsel on evaluating complex agreements involving financial
instruments and engaging third-party consultants to assist with assessing the accounting for complex financial instruments and review
of financial statements. Management’s efforts are ongoing, and its remediation plan is expected to be completed during 2024.
If these remedial measures are insufficient to
address the material weakness described above, or are not implemented timely, or additional deficiencies arise in the future, material
misstatements in our interim or annual financial statements may occur in the future and could have the effects described in the “Risk
Factors” section of the MD&A for the year ended December 31, 2023.
| C. | Changes in internal
control over financial reporting |
There have been no changes in the Company’s
ICFR that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR during the period beginning
on January 1, 2024 and ended March 31, 2024.
| D. | Limitation of DC&P
and ICFR |
All control systems contain inherent limitations,
regardless of how well designed. As a result, Management acknowledges that its internal control over financial reporting will not prevent
or detect all misstatements due to error or fraud. In addition, Management’s evaluation of controls can provide only reasonable,
not absolute, assurance that all control issues that may result in material misstatements, if any, have been detected.
16. RECENT AND SUBSEQUENT EVENTS
During the period from April 1, 2024 to
May 14, 2024, the Company issued 42,155,000 common shares through the 2024 ATM Program in exchange for gross proceeds of $85.2 million
at an average share price of approximately $2.02. The Company received net proceeds of $82.5 million after paying commissions of $2.7
million to the sales agent.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
16. RECENT AND SUBSEQUENT EVENTS (Continued)
| B. | Canadian Sales Tax Refund |
In April 2024, the Company received a positive
ruling from the tax authorities that Canadian sales taxes paid by the Company will once again be refunded. Between February 5, 2022, the
date on which the new tax legislation was enacted, and April 2024, the Company filed monthly sales tax claims totaling approximately $23.7
million (CAD$32.0 million) that were not paid to the Company. The refund of sales taxes relates to sales taxes charged on various expenditures
including, but not limited to electricity costs, cost of property, plant and equipment, professional services, etc.
As
described in Note 18 to the Financial Statements, in March 2024, as a result of the Company’s decision to terminate the CEO’s
employment, a termination payment of $1.6 million was accrued during the three months ended March 31, 2024 based on the terms of the
CEO’s employment agreement, and classified in trade payables and accrued liabilities. On May 10, 2024, the CEO filed a Statement of
Claim in the Superior Court of Ontario against the Company claiming damages for breach of contract, wrongful dismissal and
aggravated and punitive damages for a total amount of $26.7 million. The Company believes the claims are without merit and intends
to defend itself vigorously against the claims. Such matters are inherently uncertain, and there can be no guarantee that the
outcome of any such matter will be decided favorably to the Company. The loss, if any, is not estimable at this time and Management
does not believe the outcome of this matter will have a material adverse impact on its results of operations, cash flows and
financial condition.
| D. | Yguazu Power Purchase Agreement Amendment |
On May 13, 2024, the Company amended its power purchase agreement (“PPA”)
for its future Yguazu facility in Paraguay to increase the contracted power from 100 MW to 200 MW beginning on January 1, 2025. The Company
is required to pay security deposits totaling $16.2 million between June 2024 and January 2025 for future electricity consumption. The
security deposits paid to the energy supplier are refundable at the end of the contract term in December 2027 assuming the Company draws
power based on the agreed upon schedule and is not in breach of other clauses in the PPA.
17. SHARE CAPITAL
As of the date of this MD&A, the Company
has 398,587,000 common shares outstanding, 11,992,000 vested and 8,645,000 unvested stock options, 29,873,000 warrants outstanding and
800,000 restricted stock units. There are no preferred shares or any other classes of shares outstanding.
BITFARMS
LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
18. REGULATORY COMPLIANCE
The Company has engaged legal counsel in each
jurisdiction in which it maintains operations to monitor changes to the laws and regulations of such jurisdiction and to advise how it
can maintain compliance with such laws and regulations. Legal counsel reports directly to the Interim CEO. The following is a discussion
of regulatory compliance considerations specific to each such jurisdiction:
Argentina
The Company operates one 54 MW server farm located
in Cordoba, Argentina (with an electrical infrastructure capacity of 55 MW). Refer to Section 6 - Expansion Projects - A. Argentina
Expansion of this MD&A and the 2023 AIF under Section 5.2 - FUTURE GROWTH PLANS - ARGENTINA EXPANSION.
There are no material restrictions in Argentina
on the business of operating a server farm or conducting the business of the Company as described herein and in the 2023 AIF, and, as
of the date of this MD&A, the Company has not received any material notices or statements from regulatory authorities in Argentina
that would negatively impact its operations in Argentina. The Company is not relying on any registrations, exemptions, or “no action”
letters to conduct its business in Argentina.
Paraguay
The Company operates one 10 MW server farm located in Villarrica, Paraguay. Refer to Section 6 - Expansion Projects - B. Paraguay Expansion
of this MD&A and the 2023 AIF under Section 5.3 - FUTURE GROWTH PLANS - PARAGUAY EXPANSION.
There are no material restrictions in Paraguay
on the business of operating a server farm or conducting the business of the Company as described herein and in the 2023 AIF, and as of
the date of this MD&A, the Company has not received any material notices or statements from regulatory authorities in Paraguay that
would negatively impact its operations in Paraguay. The Company is not relying on any registrations, exemptions, or “no action”
letters to conduct its business in Paraguay.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
18. REGULATORY COMPLIANCE (Continued)
On April 4, 2024, Paraguay’s Senate initially
proposed a 180-day blanket ban on cryptocurrency mining due to concerns over power theft and disruptions to the electricity supply. However,
the Senate is reevaluating its position regarding the proposed ban. Senators are now exploring the possibility of leveraging Paraguay’s
excess energy from the Itaipu hydropower plant to power Bitcoin mining operations, arguing that selling excess energy to Bitcoin miners
could unlock substantial revenue streams and bolster Paraguay’s economy. The Paraguayan Senate held a public hearing on April 23, 2024
to debate the merits and drawbacks of Bitcoin mining in the country. Lawmakers acknowledged the issues caused by illegal mining operations
disrupting the power supply, but also recognized the potential economic benefits of embracing licensed mining. The public hearing appears
to have shifted Paraguay’s stance towards exploring ways to regulate and monetize the industry through the use of the country’s abundant
hydroelectric resources.
Washington State
The Company operates one 17 MW server farm located
in the State of Washington in the United States. Refer to Section 6 - Expansion Projects - C. Washington Expansion of this MD&A
and the 2023 AIF under the Section 5.4 - FUTURE GROWTH PLANS - WASHINGTON EXPANSION.
There are no material restrictions in Washington
on the business of operating a server farm or conducting the business of the Company as described herein and in the 2023 AIF, and as of
the date of this MD&A, the Company has not received any material notices or statements from regulatory authorities in Washington that
would negatively impact its operations in Washington. The Company is not relying on any registrations, exemptions, or “no action”
letters to conduct its business in Washington.
Québec
The Company operates
a total of eight server farms with an aggregate power capacity of 159 MW located in the Province of Québec, Canada. Refer to Section
6 - Expansion Projects - D. Canada Expansion of this MD&A and the 2023 AIF under the Section
5.5 - FUTURE GROWTH PLANS - CANADA EXPANSION.
There are no material restrictions in Québec
or Canada on the business of operating a server farm or conducting the business of the Company as described herein and in the 2023 AIF,
and as of the date of this MD&A, the Company has not received any material notices or statements from regulatory authorities in the
Québec or Canada that would negatively impact its operations in Québec or Canada. The Company is not relying on any registrations,
exemptions, or “no action” letters to conduct its business in Québec or Canada.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
19. RISK FACTORS
The Company is subject to a number of risks and
uncertainties and is affected by several factors that could have a material adverse effect on the Company’s business, financial
condition, operating results, and/or future prospects. These risks should be considered when evaluating an investment in the Company and
may, among other things, cause a decline in the price of the Corporation’s shares.
The risks and uncertainties that Management considers
as the most material to the Company’s business are described in the section entitled Risk Factors of the Company’s MD&A for
the year ended December 31, 2023, dated March 6, 2024. These risks and uncertainties have not materially changed during the three
months ended March 31, 2024.
20. SIGNIFICANT ACCOUNTING ESTIMATES
The Company’s significant accounting judgments,
estimates and assumptions are summarized in Note 4 to the 2023 Annual Financial Statements.
21. MATERIAL ACCOUNTING POLICY INFORMATION AND NEW ACCOUNTING POLICIES
Refer to Note 3 to the 2023 Annual Financial Statements
and Note 3 to the Financial Statements for more information regarding the Company’s material accounting policy information and new accounting
policies.
22. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This MD&A contains forward-looking statements
about the Company’s objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance,
prospects, opportunities and legal and regulatory matters. Specific forward-looking statements in this MD&A include, but are not limited
to, statements with respect to the Company’s anticipated future results, events and plans, strategic initiatives, future liquidity,
and planned capital investments. Forward-looking statements are typically identified by words such as “expect”, “anticipate”,
“believe”, “foresee”, “could”, “estimate”, “goal”, “intend”, “plan”,
“seek”, “strive”, “will”, “may”, “maintain”, “achieve”, “grow”,
“should” and similar expressions, as they relate to the Company and its Management.
Forward-looking statements reflect the Company’s
current estimates, beliefs and assumptions, which are based on management’s perception of historical trends, current conditions
and expected future developments, as well as other factors it believes are appropriate under the circumstances. The Company’s expectation
of operating and financial performance is based on certain assumptions including assumptions about operational growth, anticipated cost
savings, operating efficiencies, anticipated benefits from strategic initiatives, future liquidity, and planned capital investments. The
Company’s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties
and contingencies regarding future events and as such, are subject to change. The Company can give no assurance that such estimates, beliefs
and assumptions will prove to be correct.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
22. CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS (Continued)
Numerous risks and uncertainties could cause the
Company’s actual results to differ materially from those expressed, implied or projected in the forward-looking statements. Such
risks and uncertainties include:
| ● | insolvency, bankruptcy, or cessation of operations of mining pool operator; |
| ● | reliance on foreign mining pool operator; |
| ● | emerging markets operating risks; |
| ● | reliance on manufacturing in foreign countries and the importation of equipment to the jurisdictions in which the company operates; |
| ● | dependency on continued growth in blockchain and cryptocurrency usage; |
| ● | the availability of financing opportunities and risks associated with economic conditions, including BTC price, Bitcoin network difficulty
and share price fluctuations; |
| ● | global financial conditions; |
| ● | employee retention and growth; |
| ● | cybersecurity threats and hacking; |
| ● | limited operating history and limited history of de-centralized financial system; |
| ● | risk related to technological obsolescence and difficulty in obtaining hardware; |
| ● | economic dependence on regulated terms of service and electricity rates; |
| ● | costs and demands upon Management and accounting and finance resources as a result of complying with the laws and regulations affecting
public companies; |
| ● | expense and impact of restatement of the Company’s historical financial statements; |
| ● | lack of comprehensive accounting guidance for cryptocurrencies under IFRS Accounting Standards; |
| ● | internal control material weakness; |
| ● | increases in commodity prices or reductions in the availability of such commodities could adversely impact the Company’s results
of operations; |
| ● | server or internet failures; |
| ● | environmental regulations and liability; |
| ● | adoption of environmental, social, and governance practices and the impacts of climate change; |
| ● | erroneous transactions and human error; |
| ● | non-availability of insurance; |
| ● | hazards associated with high-voltage electricity transmission and industrial operations; |
| ● | corruption, political and regulatory risk; |
| ● | potential being classified as a passive foreign investment company; |
| ● | lawsuits and other legal proceedings and challenges; |
| ● | conflict of interests with directors and management; and |
| ● | other factors beyond the Company’s control. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
22. CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS (Continued)
The above is not an exhaustive list of the factors
that may affect the Company’s forward-looking statements. For a more comprehensive discussion of factors that could affect the Company,
refer to the risk factors discussed above and those contained in the “Risk Factors” of the 2023 AIF. Other risks and uncertainties
not presently known to the Company or that the Company presently believes are not material could also cause actual results or events to
differ materially from those expressed, implied or projected in its forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect the Company’s expectations only as of the date of this MD&A. Except
as required by law, the Company does not undertake to update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
23. CAUTIONARY NOTE REGARDING NON-IFRS AND OTHER FINANCIAL MEASURES
AND RATIOS
This MD&A makes reference to certain measures
that are not recognized under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable
to similar measures presented by other companies. The Company uses non-IFRS and other financial measures and ratios including “EBITDA,”
“EBITDA margin,” “Adjusted EBITDA,” “Adjusted EBITDA margin,” “Gross Mining profit,” “Gross
Mining margin,” “Gross margin”, “Operating margin”, “Direct Cost”, “Direct Cost per BTC”,
“Total Cash Cost” and “Total Cash Cost per BTC” as additional information to complement IFRS measures by providing
further understanding of the Company’s results of operations from Management’s perspective. Refer to Section 9 - Non-IFRS
and Other Financial Measures and Ratios of the MD&A for more details.
These measures are provided as additional information
to complement IFRS measures by providing further understanding of the Company’s results of operations from Management’s perspective. Accordingly,
they should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS.
Reconciliations from IFRS measures to non-IFRS measures are included throughout this MD&A.
24. ADDITIONAL INFORMATION
Additional
information and other publicly filed documents relating to the Company, including the Company’s 2023 AIF, are available through
the internet on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov/edgar.
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
25. GLOSSARY OF TERMS
Terms |
Definition |
ASIC |
ASIC stands for Application Specific Integrated Circuit and refers primarily to specific computer devices designed to solve the SHA-256 algorithm. |
Bitcoin (BTC) |
BTC is a decentralized digital currency that is not controlled by any centralized authority (e.g., a government, financial institution or regulatory organization) that can be sent from user to user on the Bitcoin network without the need for intermediaries to clear transactions. Transactions are verified through the process of Mining and recorded in a public ledger known as the Blockchain. BTC is created when the Bitcoin network issues Block Rewards through the Mining process. |
Block Reward |
A Bitcoin block reward refers to the new BTC that are awarded by the Blockchain network to eligible cryptocurrency Miners for each block they successfully mine. The current block reward is 3.125 BTC per block. |
Blockchain |
A Blockchain is a cloud-based public ledger that exists on computers that participate on the network globally. The Blockchain grows as new sets of data, or ‘blocks’, are added to it through Mining. Each block contains a timestamp and a link to the previous block, such that the series of blocks form a continuous chain. Given that each block has a separate hash and each hash requires information from the previous block, altering information an established block would require recalculating all the hashes on the Blockchain which would require an enormous and impracticable amount of computing power. As a result, once a block is added to the Blockchain it is very difficult to edit and impossible to delete. |
Exahash or EH/s |
One quintillion (1,000,000,000,000,000,000) hashes or one million Terahash per second. |
Hash |
A hash is a function that converts or maps an input of letters and numbers into an encrypted output of a fixed length, which outputs are often referred to as hashes. A hash is created using an algorithm. The algorithm used in the validation of Bitcoin transactions is the SHA-256 algorithm. |
Hashrate |
Hashrate refers to the number of hash operations performed per second and is a measure of computing power in Mining cryptocurrency. |
Megawatt |
A megawatt is 1,000 kilowatts of electricity and, in the industry of cryptocurrency Mining, is typically a reference to the number of megawatts of electricity per hour that is available for use. |
Miners |
ASICs used by the Company to perform Mining. |
Mining |
Mining refers to the process of using specialized computer hardware, and in the case of the Company, ASICs, to perform mathematical calculations to confirm transactions and increase security for the BTC Blockchain. As a reward for their services, Bitcoin Miners collect transaction fees for the transactions they confirm, along with newly created BTC as Block Rewards. |
Mining Pool |
A Mining pool is a group of cryptocurrency Miners who pool their computational resources, or hashrate, in order to increase the probability of finding a block on the BTC Blockchain. Mining pools administer regular payouts to mitigate the risk of Miners operating for a prolonged period of time without finding a block. |
BITFARMS LTD.
Management’s Discussion & Analysis
(In U.S. dollars, except where otherwise indicated)
25. GLOSSARY OF TERMS (Continued)
Terms |
Definition |
Network Difficulty |
Network difficulty is a unitless measure of how difficult it is to find a hash below a given target. The Bitcoin network protocol automatically adjusts Network Difficulty by changing the target every 2,016 blocks hashed based on the time it took for the total computing power used in Bitcoin Mining to solve the previous 2,016 blocks such that the average time to solve each block is ten minutes. |
Network Hashrate |
Network hashrate refers to the total global hashrate (and related computing power) used in Mining for a given cryptocurrency. |
Petahash or PH/s |
One quadrillion (1,000,000,000,000,000) hashes or one thousand Terahash per second. |
SHA-256 |
SHA stands for Secure Hash Algorithm. The SHA-256 algorithm was designed by the US National Security Agency and is the cryptographic hash function used within the Bitcoin network to validate transactions on the Bitcoin Blockchain. |
Synthetic HODL |
Synthetic HODL is the Company’s use of financial instruments to create BTC-equivalent exposure. |
Terahash or TH/s |
One trillion (1,000,000,000,000) hashes or one Terahash per second. |
Exhibit 99.3
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Nicolas Bonta, Interim Chief Executive Officer of Bitfarms Ltd., certify the following
| 1. | Review: I have reviewed the interim financial
report and interim MD&A (together, the “interim filings”) of Bitfarms Ltd. (the “issuer”) for the interim
period ended March 31, 2024. |
| 2. | No misrepresentations: Based on my knowledge,
having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which
it was made, with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those
terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the
issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s
other certifying officer(s) and I have, as at the end of the period covered by the interim filings: |
| (a) | designed DC&P, or caused it to be designed under our supervision,
to provide reasonable assurance that: |
| (i) | material information relating to the issuer is made known
to us by others, particularly during the period in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its
annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized
and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the
issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | ICFR - material weakness relating to design:
The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period: |
| (a) | a description of the material weakness; |
| (b) | the impact of the material weakness on the issuer’s
financial reporting and its ICFR; and |
| (c) | the issuer’s current plans, if any, or any actions already undertaken, for remediating the material
weakness. |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in
the issuer’s ICFR that occurred during the period beginning on January 1, 2024 and ended on March 31, 2024 that has materially affected,
or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 15, 2024
(signed) “Nicolas Bonta” |
|
Nicolas Bonta |
|
Interim Chief Executive Officer |
|
Exhibit 99.4
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Jeffrey Lucas, Chief Financial Officer of Bitfarms
Ltd., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the
“interim filings”) of Bitfarms Ltd. (the “issuer”) for the interim period ended March 31, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those
terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the
issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s
other certifying officer(s) and I have, as at the end of the period covered by the interim filings: |
| (a) | designed DC&P, or caused it to be designed under our supervision,
to provide reasonable assurance that: |
| (i) | material information relating to the issuer is made known
to us by others, particularly during the period in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its
annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized
and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s)
and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). |
| 5.2 | ICFR - material weakness relating to design: The issuer has disclosed in its interim MD&A
for each material weakness relating to design existing at the end of the interim period: |
| (a) | a description of the material weakness; |
| (b) | the impact of the material weakness on the issuer’s financial reporting and its ICFR; and |
| (c) | the issuer’s current plans, if any, or any actions already undertaken, for remediating the material
weakness. |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in
the issuer’s ICFR that occurred during the period beginning on January 1, 2024 and ended on March 31, 2024 that has materially affected,
or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 15, 2024
(signed) “Jeffrey Lucas” |
|
Jeffrey Lucas |
|
Chief Financial Officer |
|
Exhibit 99.5
FORM 51-102F3
MATERIAL CHANGE REPORT
Item 1 Name and Address of Company
Bitfarms Ltd. (“Bitfarms” or the “Company”)
110 Yonge
Street, Suite 1601
Toronto, Ontario M5C 1T4
Item 2 Date of Material Change
May 15, 2024.
Item 3 News Release
The press release attached as Schedule “A” was
released on May 15, 2024 by a newswire company in Canada.
Item 4 Summary of Material Change
The material change is described in the press release attached
as Schedule “A”.
Item 5 Full Description of Material Change
The material change is described in the press release
attached as Schedule “A”.
Item 6 Reliance of subsection 7.1(2) of National Instrument 51-102
Not applicable.
Item 7 Omitted Information
Not applicable.
Item 8 Executive Officer
Nicolas Bonta
Chairman
Bitfarms Ltd.
nbonta@bitfarms.com
Item 9 Date of Report
May 15, 2024.
Bitfarms Reports First Quarter 2024 Results
- Revenue of $50 million,
up 9% Q/Q and 67% Y/Y -
- Gross mining margin of 59%,
up from 52% in Q4 2023 & 41% in Q1 2023 -
- Secured additional 24,000 miners in March, increasing
total delivery to 88,000 in 2024 -
- Current hashrate of 7.0
EH/s, up from 6.5 EH/s at year end -
- On track to achieve guidance of 21 EH/s and 21
w/TH in 2024 -
This news release constitutes a “designated
news release” for the purposes of the Company’s prospectus supplement dated March 8, 2024, to its short form base shelf prospectus
dated November 10, 2023.
Toronto, Ontario and Brossard, Québec
(May 15, 2024) - Bitfarms Ltd. (Nasdaq/TSX: BITF), a global Bitcoin vertically integrated company, reported its financial results
for the first quarter ended March 31, 2024. All financial references are in U.S. dollars.
Executing the expansion and transformative
fleet upgrade, Bitfarms has realized notable efficiency gains and is progressing toward 2024 guidance of 21 EH/s and 21 w/TH,
representing a 223% hashrate increase and 40% efficiency improvement. This would be the strongest growth and efficiency gains in
both the Company’s history and among publicly-traded Bitcoin mining peers this year.
In addition, the Company recently doubled its contracted power capacity at its Yguazu site, in Paraguay, from 100 MW to 200 MW of stable,
low-cost, sustainable hydropower. This will increase Bitfarms total megawatts under management by 23%, from 428 MW at year-end 2024 to
528 MW in 2025, and will provide significant capacity for growth.
“These strategic actions position us well
to drive significant organic growth and capture a greater share of the global demand for Bitcoin,” said Ben Gagnon, Bitfarms Chief
Mining Officer. “Our growth is gaining momentum. We are currently at 7 EH/s and on track to achieve 12 EH/s and 25 w/TH in Q2
2024. Our miner upgrades have improved overall fleet efficiency from 35 w/TH to 31 w/TH, including the 51% combined efficiency improvement
at our Garlock and Farnham facilities in Quebec. Ongoing miner installations are expected to contribute to progressively lower corporate w/TH and
dramatically lower production costs, which would make Bitfarms one of the most efficient Bitcoin miners by year-end 2024.”
In April, Bitfarms received confirmation from
the Canadian tax authorities that $24 million in previously paid value added taxes (VAT) will be refunded as will future payments. With
the recoverability of the VAT, the average direct cost of production per BTC would have been reduced by $2,100 in Q1 2024.
Jeff Lucas, Bitfarms CFO, said, “This
cash infusion further enhances our financial flexibility. Combined with our robust balance sheet and our capital efficient strategy,
we are well positioned to fund our 2024 growth initiatives. Most notably, we have sufficient liquidity to pay for all of the miners
needed to reach 21 EH/s.”
Q1 2024 & Recent Operating Highlights
| ● | Current hashrate of 7.0 EH/s, up from 6.5 EH/s in Q1 2024. |
| ● | Averaged 10.4 BTC per day in daily production for Q1 2024. |
| ● | Fleet Upgrade & Farm Expansions |
| ● | Exercised purchase option for 28,000 Bitmain T21 miners and secured an additional 19,280 Bitmain T21 miners,
3,888 Bitmain S21 miners and 740 Bitmain S21 hydro miners in March, all of which are slated for delivery and deployment in H2 2024. |
| ● | Energized the first tranche of Bitmain T21 miners at two farms in Québec and began installations
at Paso Pe, Paraguay in April. |
| ● | Upgraded Farnham and Garlock miners in April, resulting in a combined 51% improvement in energy efficiency
at these locations and a 9% corporate efficiency improvement. |
| ● | Purchased land in Yguazu in January and began construction on the 100MW facility site. |
Q1 2024 Financial Highlights
| ● | Total revenue of $50 million, up 9% compared to $46 million in Q4 2023. |
| ● | Gross mining profit* and gross mining margin* of $29 million and 59%, respectively, up from $23 million
and 52% in Q4 2023, respectively. |
| ● | General and administrative expenses of $13 million, down 2% from Q4 2023. |
| ● | Operating loss of $24 million, which included a $19 million accelerated depreciation on older miners,
compared to an operating loss of $13 million in Q4 2023, which included a $1 million non-cash reversal of revaluation loss on digital
assets and $2 million in non-cash impairment charges. |
| ● | Net loss of $6 million, or $(0.02) per basic and diluted share which included a $9 million non-cash gain
for revaluation of warrant liability in connection with 2021 and 2023 financing activities. This compares to a net loss of $57 million,
or $(0.19) per basic and diluted share in Q4 2023, which included a $38 million non-cash expense for revaluation of warrant liability. |
| ● | Adjusted EBITDA* of $21 million, or 42% of revenue, up from $14 million, or 30% of revenue, in Q4 2023,
with the increase driven largely by higher average BTC price. |
| ● | The Company earned 943 BTC at an average direct cost of production per BTC* of $20,500, compared to $16,200
in Q4 2023. |
| ● | Total cash cost of production per BTC* was $30,300 in Q1 2024, up from $25,200 in Q4 2023 due to less
quantity of BTC earned. |
Liquidity**
As of March 31, 2024, the Company had total
liquidity** of $124 million, comprised of $66 million in cash and 806 BTC valued at $58 million based on a BTC price of $71,400 at March 31,
2024.
Q1 2024 and Recent Financing Activities
| ● | Sold 941 BTC at an average price of $52,700 for total proceeds of $50 million in Q1 2024 and sold 245
of the 269 BTC earned during April 2024, generating total proceeds of $16 million. A portion of the funds was used to fully repay equipment-related
indebtedness and pay capital expenditures. |
| ● | Added 24 BTC to treasury in April 2024 for a total of 830 BTC held in treasury, representing a total value
of $51 million based on a $61,300 BTC price on April 30, 2024. |
| ● | Commenced a new at-the-market (ATM) equity offering program on March 11, 2024, raising net proceeds of $38
million during Q1 2024 and $121 million through May 14, 2024. |
| ● | Paid off remaining equipment-related indebtedness in February. |
| ● | Entered into sale & leaseback agreement to monetize the value of the Garlock facility and
received net proceeds of $2 million to be allocated towards expansion plans. |
| ● | Received confirmation from the Canadian tax authorities, in April 2024, that $24 million in previously
paid VAT will be refunded. |
Quarterly Operating Performance
|
Q1 2024 |
Q4 2023 |
Q1 2023 |
Total BTC earned |
943 |
1,236 |
1,297 |
Average Watts/Average TH efficiency*** |
35 |
35 |
38 |
BTC sold |
941 |
1,135 |
1,267 |
|
As of March 31, |
As of December 31, |
As of March 31, |
|
2024 |
2023 |
2023 |
Operating EH/s |
6.5 |
6.5 |
4.8 |
Operating capacity (MW) |
240 |
240 |
188 |
Hydropower (MW) |
186 |
186 |
178 |
Quarterly Average Revenue**** and Cost of Production
per BTC*
|
Q1 2024 |
Q4 2023 |
Q3 2023 |
Q2 2023 |
Q1 2023 |
Avg. Rev****/BTC |
$52,400 |
$36,400 |
$28,100 |
$28,000 |
$22,500 |
Direct Cost*/BTC |
$20,500 |
$16,200 |
$16,900 |
$15,700 |
$12,500 |
Total Cash Cost*/BTC |
$30,300 |
$25,200 |
$22,700 |
$21,800 |
$17,700 |
* | Gross mining profit, gross mining margin, EBITDA, EBITDA
margin, Adjusted EBITDA, Adjusted EBITDA margin, Direct Cost per BTC and Total Cash Cost per BTC are non-IFRS financial measures or ratios
and should be read in conjunction with, and should not be viewed as alternatives to or replacements of measures of operating results
and liquidity presented in accordance with IFRS. Readers are referred to the reconciliations of non-IFRS measures included in the Company’s
MD&A and at the end of this press release. |
** | Liquidity represents cash and balance of digital assets. |
*** | Average watts represents the energy consumption of miners. |
**** | Average revenue per BTC is for mining operations only
and excludes Volta revenue. |
Conference Call
Management will
host a conference call today at 8:00 am EST. A presentation of the Q1 2024 results will be accessible before the call on the Investor
website and can be accessed here.
Participants may join by calling: 1-877-545-0523
(domestic), or 1-973-528-0016 (international), and should do so 10 minutes prior to the start time. Participants will be greeted by an
operator and asked for the access code, which is 878603. If you do not have the code, then you may reference the Bitfarms’
Q1 2024 results conference call.
The conference call will also be available through
a live webcast found here.
A webcast replay will be available and can be
accessed in the Events section of our Investor website. An audio replay will be available through June 3, 2024, and can be accessed at
1-877-481-4010 (domestic), or 1-919-882-2331 (international), using access code 50495.
Upcoming Conferences & Events
| ● | May 15: Digital Blockchain Summit, Washington DC |
| ● | May 22-23: B Riley Securities 24th Annual Institutional Investor Conference, Beverly Hills, CA |
| ● | June 25:
Northland Capital Markets Growth Conference, Virtual |
Non-IFRS Measures*
As a Canadian company, Bitfarms follows International
Financial Reporting Standards (IFRS) which are issued by the International Accounting Standard Board (IASB). Under IFRS rules, the Company
does not reflect the revaluation gains on the mark-to-market of its Bitcoin holdings in its income statement. It also does not include
the revaluation losses on the mark-to-market of its Bitcoin holdings in Adjusted EBITDA, which is a measure of the cash profitability
of its operations and does not reflect the change in value of its assets and liabilities.
The Company uses Adjusted EBITDA to measure its
operating activities' financial performance and cash generating capability.
2023 Restatement
During the preparation of the Company's financial
statements for the year ended December 31, 2023, the Company reassessed the application of IFRS Accounting Standards on the accounting
for warrants issued in connection with private placement financings conducted in 2021 and, as such, restated (the “Restatement”)
its consolidated statements of financial position as of December 31, 2022 and January 1, 2022, its consolidated statements of profit or
loss and comprehensive profit or loss for the year ended December 31, 2022 and the three months ended March 31, 2023 and its consolidated
statements of cash flows for the year ended December 31, 2022 and the three months ended March 31, 2023, which were previously filed
on SEDAR+ and EDGAR. For further details, consult Note 3e of the audited consolidated financial statements for the year ended December
31, 2023, and Note 3d of the interim condensed consolidated financial statements for the three months ended March 31, 2024, available
on SEDAR+ and EDGAR. As described in the interim MD&A for three months ended March 31, 2024, available on SEDAR+ and EDGAR, the
Company is undertaking remediation efforts in light of the Restatement and in order to improve the overall effectiveness of its internal
control over financial reporting for the accounting of complex financial instruments.
About Bitfarms Ltd.
Founded in 2017, Bitfarms is a global Bitcoin
mining company that contributes its computational power to one or more mining pools from which it receives payment in Bitcoin. Bitfarms
develops, owns, and operates vertically integrated mining farms with in-house management and company-owned electrical engineering, installation
service, and multiple onsite technical repair centers. The Company’s proprietary data analytics system delivers best-in-class operational
performance and uptime.
Bitfarms currently has 12 Bitcoin mining facilities
and one under development situated in four countries: Canada, the United States, Paraguay, and Argentina. Powered predominantly by environmentally
friendly hydro-electric and long-term power contracts, Bitfarms is committed to using sustainable and often underutilized energy infrastructure.
To learn more about Bitfarms’ events, developments,
and online communities:
www.bitfarms.com
https://www.facebook.com/bitfarms/
https://twitter.com/Bitfarms_io
https://www.instagram.com/bitfarms/
https://www.linkedin.com/company/bitfarms/
Glossary of Terms
| ● | BTC BTC/day = Bitcoin or Bitcoin per day |
| ● | EH or EH/s = Exahash or exahash per second |
| ● | MW or MWh = Megawatts or megawatt hour |
| ● | w/TH = Watts/Terahash efficiency (includes cost of powering supplementary equipment) |
| ● | Synthetic HODL™ = the use of instruments that create Bitcoin equivalent exposure |
Cautionary Statement
Trading in the securities of the Company should
be considered highly speculative. No stock exchange, securities commission or other regulatory authority has approved or disapproved the
information contained herein. Neither the Toronto Stock Exchange, Nasdaq, or any other securities exchange or regulatory authority accepts
responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements
This news release contains certain “forward-looking
information” and “forward-looking statements” (collectively, “forward-looking information”) that are based
on expectations, estimates and projections as at the date of this news release and are covered by safe harbors under Canadian and United
States securities laws. The statements and information in this release regarding projected growth, target hashrate, opportunities relating
to the Company’s geographical diversification and expansion, upgrading and deployment of miners as well as the timing therefor,
improved financial performance and balance sheet liquidity, other growth opportunities and prospects, and other statements regarding future
growth, plans and objectives of the Company are forward-looking information. Any statements that involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such
as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”,
“plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “prospects”,
“believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results
“may” or “could”, “would”, “might” or “will” be taken to occur or be achieved)
are not statements of historical fact and may be forward-looking information.
This forward-looking information is based
on assumptions and estimates of management of the Company at the time they were made, and involves known and unknown risks,
uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially
different from any future results, performance or achievements expressed or implied by such forward-looking information. Such
factors include, among others, risks relating to: the construction and operation of the Company’s facilities may not occur as
currently planned, or at all; expansion may not materialize as currently anticipated, or at all; the power purchase agreements
and economics thereof may not be as advantageous as expected; the digital currency market; the ability to successfully mine digital
currency; revenue may not increase as currently anticipated, or at all; it may not be possible to profitably liquidate the current
digital currency inventory, or at all; a decline in digital currency prices may have a significant negative impact on operations; an
increase in network difficulty may have a significant negative impact on operations; the volatility of digital currency prices; the
anticipated growth and sustainability of hydroelectricity for the purposes of cryptocurrency mining in the applicable jurisdictions;
the inability to maintain reliable and economical sources of power for the Company to operate cryptocurrency mining assets; the
risks of an increase in the Company’s electricity costs, cost of natural gas, changes in currency exchange rates, energy
curtailment or regulatory changes in the energy regimes in the jurisdictions in which the Company operates and the potential adverse
impact on the Company’s profitability; the ability to complete current and future financings; the impact of the Restatement on
the price of the Company’s common shares, financial condition and results of operations; the risk that a material weakness in
internal control over financial reporting could result in a misstatement of the Company’s financial position that may lead to
a material misstatement of the annual or interim consolidated financial statements if not prevented or detected on a timely basis;
historical prices of digital currencies and the ability to mine digital currencies that will be consistent with historical prices;
and the adoption or expansion of any regulation or law that will prevent Bitfarms from operating its business, or make it more
costly to do so. For further information concerning these and other risks and uncertainties, refer to the Company’s filings on www.sedarplus.ca
(which are also available on the website of the U.S. Securities and Exchange Commission at www.sec.gov),
including the MD&A for the year-ended December 31, 2023, filed on March 7, 2024 and the
MD&A for three-month period ended March 31, 2024 filed on May 15, 2024. Although the Company has attempted to
identify important factors that could cause actual results to differ materially from those expressed in forward-looking statements,
there may be other factors that cause results not to be as anticipated, estimated or intended, including factors that are currently
unknown to or deemed immaterial by the Company. There can be no assurance that such statements will prove to be accurate as actual
results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place
undue reliance on any forward-looking information. The Company undertakes no obligation to revise or update any forward-looking
information other than as required by law.
Investor
Relations Contact:
Tracy Krumme
SVP, Investor Relations
+1 786-671-5638
tkrumme@bitfarms.com
Media Contacts:
Actual Agency
Khushboo Chaudhary
+1 646-373-9946
mediarelations@bitfarms.com
Québec Media: Tact
Louis-Martin Leclerc
+1 418-693-2425
lmleclerc@tactconseil.ca
Bitfarms Ltd. Consolidated Financial & Operational
Results
|
Three months ended March 31, |
(U.S.$ in thousands except where indicated) |
2024 |
2023 (3) |
$ Change |
% Change |
Revenues |
50,317 |
30,050 |
20,267 |
67% |
Cost of revenues |
(60,999) |
(38,403) |
(22,596) |
59% |
Gross loss |
(10,682) |
(8,353) |
(2,329) |
28% |
Gross margin (1) |
(21)% |
(28)% |
— |
— |
Operating expenses |
|
|
|
|
General and administrative expenses |
(13,196) |
(8,360) |
(4,836) |
58% |
Realized gain on disposition of digital assets |
— |
587 |
(587) |
(100)% |
Reversal of revaluation loss on digital assets |
— |
2,695 |
(2,695) |
(100)% |
Gain (loss) on disposition of property, plant and equipment |
170 |
(1,566) |
1,736 |
111% |
Operating loss |
(23,708) |
(14,997) |
(8,711) |
58% |
Operating margin (1) |
(47)% |
(50)% |
— |
— |
Net financial income |
11,443 |
10,967 |
476 |
4% |
Net loss before income taxes |
(12,265) |
(4,030) |
(8,235) |
204% |
Income tax recovery |
6,285 |
330 |
5,955 |
nm |
Net loss |
(5,980) |
(3,700) |
(2,280) |
62% |
Basic and diluted loss per share (in U.S. dollars) |
(0.02) |
(0.02) |
— |
— |
Change in revaluation surplus - digital assets, net of tax |
17,433 |
1,225 |
16,208 |
nm |
Total comprehensive income (loss), net of tax |
11,453 |
(2,475) |
13,928 |
563% |
Gross Mining profit (2) |
29,312 |
12,026 |
17,286 |
144% |
Gross Mining margin (2) |
59% |
41% |
— |
— |
EBITDA (2) |
26,410 |
18,024 |
8,386 |
47% |
EBITDA margin (2) |
52% |
60% |
— |
— |
Adjusted EBITDA (2) |
21,007 |
6,364 |
14,643 |
230% |
Adjusted EBITDA margin (2) |
42% |
21% |
— |
— |
nm: not meaningful
1 |
Gross margin and Operating margin are supplemental financial ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios of the Company's MD&A. |
2 |
Gross Mining profit, Gross Mining margin, EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures or ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios of the Company's MD&A. |
3 |
Prior year figures are derived from restated financial statements. Refer to the Q1 2024 interim financial statements Note 3d - Basis of Presentation and Material Accounting Policy Information - Restatement. |
Bitfarms Ltd. Reconciliation of Consolidated
Net Income (loss) to EBITDA and Adjusted EBITDA
|
Three months ended March 31, |
(U.S.$ in thousands except where indicated) |
2024 |
2023 (1) |
$ Change |
% Change |
Revenues |
50,317 |
30,050 |
20,267 |
67% |
Net loss before income taxes |
(12,265) |
(4,030) |
(8,235) |
204% |
Interest expense and (income) |
(302) |
1,354 |
(1,656) |
(122)% |
Depreciation and amortization |
38,977 |
20,700 |
18,277 |
88% |
EBITDA |
26,410 |
18,024 |
8,386 |
47% |
EBITDA margin |
52% |
60% |
— |
— |
Share-based payment |
3,094 |
2,536 |
558 |
22% |
Realized gain on disposition of digital assets |
— |
(587) |
587 |
100% |
Reversal of revaluation loss on digital assets |
— |
(2,695) |
2,695 |
100% |
Gain on extinguishment of long-term debt and lease liabilities |
— |
(12,835) |
12,835 |
100% |
(Gain) loss on revaluation of warrants |
(9,040) |
1,221 |
(10,261) |
(840)% |
Gain on disposition of marketable securities |
(338) |
(2,171) |
1,833 |
(84)% |
Net financial expenses and other |
881 |
2,871 |
(1,990) |
(69)% |
Adjusted EBITDA |
21,007 |
6,364 |
14,643 |
230% |
Adjusted EBITDA margin |
42% |
21% |
— |
— |
1 | Prior
year figures are derived from restated financial statements. Refer to the Q1 2024 interim financial statements Note 3d - Basis of
Presentation and Material Accounting Policy Information - Restatement. |
Bitfarms Ltd. Calculation of Gross Mining
Profit and Gross Mining Margin
|
Three months ended March 31, |
(U.S.$ in thousands except where indicated) |
2024 |
2023 |
$ Change |
% Change |
Gross loss |
(10,682) |
(8,353) |
(2,329) |
28% |
Non-Mining revenues (1) |
(894) |
(842) |
(52) |
6% |
Depreciation and amortization |
38,977 |
20,700 |
18,277 |
88% |
Purchases of electrical components |
387 |
320 |
67 |
21% |
Electrician salaries and payroll taxes |
321 |
356 |
(35) |
(10)% |
Other |
1,203 |
(155) |
1,358 |
876% |
Gross Mining profit |
29,312 |
12,026 |
17,286 |
144% |
Gross Mining margin |
59% |
41% |
— |
— |
(1) |
Non-Mining revenues reconciliation: |
|
Three months ended March 31, |
(U.S.$ in thousands except where indicated) |
2024 |
2023 |
$ Change |
% Change |
Revenues |
50,317 |
30,050 |
20,267 |
67% |
Less Mining related revenues for the purpose of calculating gross Mining margin: |
|
|
|
|
Mining revenues |
(49,423) |
(29,208) |
(20,215) |
69% |
Non-Mining revenues |
894 |
842 |
52 |
6% |
Bitfarms Ltd. Calculation of Direct Cost and
Direct Cost per BTC
|
Three months ended March 31, |
(U.S.$ in thousands except where indicated) |
2024 |
2023 |
$ Change |
% Change |
Cost of revenues |
60,999 |
38,403 |
22,596 |
59% |
Depreciation and amortization |
(38,977) |
(20,700) |
(18,277) |
88% |
Purchases of electrical components |
(387) |
(320) |
(67) |
21% |
Electrician salaries and payroll taxes |
(321) |
(356) |
35 |
(10)% |
Infrastructure |
(1,974) |
(942) |
(1,032) |
110% |
Other |
— |
82 |
(82) |
(100)% |
Direct Cost |
19,340 |
16,167 |
3,173 |
20% |
Quantity of BTC earned |
943 |
1,297 |
(354) |
(27)% |
Direct Cost per BTC (in U.S. dollars) |
20,500 |
12,500 |
8,000 |
64% |
Bitfarms Ltd. of Total Cash Cost and Total Cost
per BTC
|
Three months ended March 31, |
(U.S.$ in thousands except where indicated) |
2024 |
2023 |
$ Change |
% Change |
Cost of revenues |
60,999 |
38,403 |
22,596 |
59% |
General and administrative expenses |
13,196 |
8,360 |
4,836 |
58% |
|
74,195 |
46,763 |
27,432 |
59% |
Depreciation and amortization |
(38,977) |
(20,700) |
(18,277) |
88% |
Purchases of electrical components |
(387) |
(320) |
(67) |
21% |
Electrician salaries and payroll taxes |
(321) |
(356) |
35 |
(10)% |
Share-based payment |
(3,094) |
(2,536) |
(558) |
22% |
Other |
(2,814) |
62 |
(2,876) |
nm |
Total Cash Cost |
28,602 |
22,913 |
5,689 |
25% |
Quantity of BTC earned |
943 |
1,297 |
(354) |
(27)% |
Total Cash Cost per BTC (in U.S. dollars) |
30,300 |
17,700 |
12,600 |
71% |
11
Grafico Azioni Bitfarms (NASDAQ:BITF)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni Bitfarms (NASDAQ:BITF)
Storico
Da Set 2023 a Set 2024