UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO SECTION 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of February 2024
Commission File Number: 001-41072
Iris Energy Limited
(Translation of registrant’s name into English)
Level 12, 44 Market Street
Sydney, NSW 2000 Australia
+61 2 7906 8301
(Address of principal executive office)
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 ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
EXPLANATORY NOTE
Results of Operations
On February 15, 2024, Iris Energy Limited (the “Company”) released information regarding its financial results for the three and six months ended December 31, 2023. Copies of the Company’s press release, management presentation, unaudited
interim consolidated financial statements and management’s discussion and analysis of financial condition and results of operations are furnished hereto as Exhibits 99.1, 99.2, 99.3 and 99.4, respectively.
INCORPORATION BY REFERENCE
This Report on Form 6-K (other than the information contained in the press release furnished as Exhibit 99.1 to this Report on Form 6-K and the information contained in the management presentation furnished as Exhibit 99.2 to this Report on
Form 6-K) shall be deemed to be incorporated by reference into the registration statements on Form S-8 (File Nos. 333-261320, 333-265949, 333-269201 and 333-273071) and the registration statements on Form F-3 (File Nos. 333-267568 and 333-274500)
of Iris Energy Limited and to be a part thereof from the date on which this report is filed to the extent not superseded by documents or reports subsequently filed or furnished.
The information contained in the press release furnished as Exhibit 99.1 and the management presentation furnished as Exhibit 99.2 to this Report on Form 6-K shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the
Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in any such filing
EXHIBIT INDEX
|
Exhibit
No.
|
Description
|
|
|
Press Release of Iris Energy Limited, dated February 15, 2024
|
||
|
Management Presentation, dated February 15, 2024
|
||
|
Unaudited Interim Consolidated Financial Statements for the Three and Six Months ended December 31, 2023
|
||
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months ended December 31, 2023
|
||
|
101
|
The following materials from this Report are formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Unaudited interim consolidated statements of profit or loss and other comprehensive income, (ii) Unaudited interim
consolidated statements of financial position, (iii) Unaudited interim consolidated statements of changes in equity, (iv) Unaudited interim consolidated statements of cash flows and (v) Notes to the unaudited interim consolidated
statements
|
|
|
104
|
Cover Page Interactive Data File – The cover page from this Report on Form 6-K is formatted in iXBRL (included as Exhibit 101)
|
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
Iris Energy Limited
|
||
| Date: February 15, 2024 | ||
| By: | /s/ Daniel Roberts | |
|
Daniel Roberts
|
||
|
Co-Chief Executive Officer and Director
|
||
Exhibit 99.1
Iris Energy Reports Second Quarter and Half Year FY24 Results
SYDNEY, AUSTRALIA, February 15, 2024 (GLOBE NEWSWIRE) -- Iris Energy Limited (NASDAQ: IREN) (together with its subsidiaries, “Iris Energy” or “the Company”), a
leading owner and operator of next-generation data centers powered by 100% renewable today reported its financial results for the three and six-months ended December 31, 2023. All $ amounts are in United States Dollars (“USD”) unless otherwise
stated.
Rebrand from Iris Energy to IREN
Iris Energy is excited to announce our official name change to IREN, a decision which better reflects our expanding next-generation data center business. Same business. Same goals. Different name.
Second Quarter FY24 Financial Results
“The business has continued to strengthen its position and execute upon significant planned expansion in 2024”, stated Daniel Roberts, Co-Founder and Co-Chief Executive Officer of Iris Energy.
“Our Bitcoin mining hashrate is on track to reach 10 EH/s over the coming months and 20 EH/s by the end of the year. Our AI cloud services business continues to outperform expectations and
recently tripled in size with another significant purchase order for NVIDIA H100 GPUs. We also continue to remain excited about our new 1,400MW data center development site in West Texas, which should provide substantial growth potential for years
to come.”
| • |
Bitcoin mining revenue of $42.0 million, as compared to $34.4 million in the first quarter of fiscal year 2024, primarily driven by an increase in average Bitcoin price realized
|
| • |
Mined 1,144 Bitcoin, as compared to 1,223 Bitcoin in the first quarter of our fiscal year 2024. Lower Bitcoin production was primarily driven by higher global hashrate rate during the period
|
| • |
Electricity costs of $16.6 million, as compared to $16.4 million in the first quarter of our fiscal year 2024, primarily driven by a consistent average operating hashrate of 5.6 EH/s across the periods1
|
| • |
Site and other costs of $11.9m, as compared to $11.4m in the first quarter of fiscal year 20242
|
| • |
Net loss after income tax of $(5.2) million, as compared to a $(5.3) million loss in the first quarter of our fiscal year 2024
|
| • |
Adjusted EBITDA of $14.0 million as compared to $6.8 million adjusted EBITDA in the first quarter of our fiscal year 20243
|
| • |
Cash and cash equivalents of $90.3 million as of December 31, 2023 and no debt facilities4
|
1 Reflects electricity
costs net of realized gain on financial asset. Realized gain on financial asset represents unaudited power credits (primarily driven by voluntary curtailment) earned under hedge contracts.
2 Site and other costs exclude one-off other expense items. See page 5 for a
reconciliation to the nearest IFRS metric.
3 Adjusted EBITDA is a non-IFRS metric. See page 5 for a reconciliation to the nearest IFRS metric.
4 Reflects USD
equivalent, unaudited cash and cash equivalents as of December 31, 2023 and February 9, 2024 respectively.
Second Quarter FY24 Operational Highlights
Bitcoin Mining
| • |
Continued expansion from 5.6 EH/s to 10 EH/s:
|
| o |
1.4 EH/s Bitmain S21 miners and 2.9 EH/s Bitmain T21 miners purchased5
|
| o |
Operating capacity increased to 6.2 EH/s (as of February 6, 2024)
|
| • |
Secured pathway to 20 EH/s in 2024 (January 2024):
|
| o |
1 EH/s of Bitmain T21 miners purchased5
|
| o |
9 EH/s of Bitmain T21 miner purchase options5
|
AI Cloud Services
| • |
Cloud services contract signed with AI company, Poolside AI SAS (February 2024)
|
| • |
Tripled cloud services business to 816 NVIDIA H100 GPUs via an additional purchase of 568 NVIDIA H100 GPUs which is expected to be installed in Q2 2024 (February 2024)
|
Corporate and Development
| • |
Announced 1,400MW data center development site in West Texas, with $4.7m initial connection deposit paid and an expected in-service date in late 2026
|
| • |
$146.0 million cash and cash equivalents as of February 9, 20244,6
|
| • |
Rebrand from Iris Energy to IREN
|
Webcast and Conference Details
A live webcast of the earnings conference call, along with the associated presentation, may be accessed at https://investors.irisenergy.co/events-and-presentations and
will be available for replay for one year.
|
Time & Date:
|
5:00 p.m. USA Eastern Time, Thursday, February 15, 2024
|
||
|
9:00 a.m. Australian Eastern Daylight Time, Friday, February 16, 2024
|
|||
|
Participant
|
Registration Link
|
||
|
Live Webcast
|
Use this link
|
||
|
Phone Dial-In with Live Q&A
|
Use this link
|
||
Please note, participants joining the conference call via the phone dial-in option will receive their dial-in number, passcode and PIN following registration using the link above. It would be appreciated if all
callers could dial in approximately 5 minutes prior to the scheduled start time.
There will be a Q&A session after the Company delivers its financial results. Those dialling in via phone can elect to ask a question via the moderator. Participants on the live webcast have the ability to
pre-submit a question upon registering to join the webcast or can submit a question during the live webcast.
5 Purchase and fixed option price of $14/TH excluding shipping and taxes.
6 Subsequent to December 31, 2023, the Company sold 19,660,120 ordinary shares for aggregate net
proceeds of approximately $90.2 million through our ATM Facility.
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to future events
or Iris Energy’s future financial or operating performance. For example, forward-looking statements include but are not limited to the Company’s business strategy, expected operational and financial results, and expected increase in power capacity
and hashrate. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “may,” “can,” “should,” “could,” “might,” “plan,” “possible,” “project,” “strive,” “budget,” “forecast,” “expect,” “intend,”
“target”, “will,” “estimate,” “predict,” “potential,” “continue,” “scheduled” or the negatives of these terms or variations of them or similar terminology, but the absence of these words does not mean that statement is not forward-looking. Such
forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. In addition, any statements or information
that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking.
These forward-looking statements are based on management’s current expectations and beliefs. These statements are neither promises nor guarantees, but involve known and unknown risks,
uncertainties and other important factors that may cause Iris Energy’s actual results, performance or achievements to be materially different from any future results performance or achievements expressed or implied by the forward looking
statements, including, but not limited to: Bitcoin price and foreign currency exchange rate fluctuations; Iris Energy’s ability to obtain additional capital on commercially reasonable terms and in a timely manner to meet our capital needs and
facilitate its expansion plans; the terms of any future financing or any refinancing, restructuring or modification to the terms of any future financing, which could require Iris Energy to comply with onerous covenants or restrictions, and its
ability to service its debt obligations; Iris Energy’s ability to successfully execute on its growth strategies and operating plans, including its ability to continue to develop its existing data center sites and its ability to diversify into the
market for HPC solutions; Iris Energy’s limited experience with respect to new markets it has entered or may seek to enter, including the market for HPC solutions; expectations with respect to the ongoing profitability, viability, operability,
security, popularity and public perceptions of the Bitcoin network; expectations with respect to the profitability, viability, operability, security, popularity and public perceptions of any HPC solutions that Iris Energy offers; Iris Energy’s
ability to secure and retain customers on commercially reasonable terms or at all, particularly as it relates to its strategy to expand into HPC solutions; Iris Energy’s ability to manage counterparty risk (including credit risk) associated with
any current or future customers and other counterparties; Iris Energy’s ability to secure renewable energy and renewable energy certificates, power capacity, facilities and sites on commercially reasonable terms or at all; the risk that any current
or future customers or other counterparties may terminate, default on or underperform their contractual obligations; Bitcoin network hashrate fluctuations; delays associated with, or failure to obtain or complete, permitting approvals, grid
connections and other development activities customary for greenfield or brownfield infrastructure projects; our reliance on third party mining pools, exchanges, banks, insurance providers and our ability to maintain relationships with such
parties; expectations regarding availability and pricing of electricity; Iris Energy’s participation and ability to successfully participate in demand response products and services and other load management programs run, operated or offered by
electricity network operators, regulators or electricity market operators; the availability, reliability and cost of electricity supply, hardware and electrical and data center infrastructure, including with respect to any electricity outages and
any laws and regulations that may restrict the electricity supply available to Iris Energy; any variance between the actual operating performance of Iris Energy’s hardware achieved compared to the nameplate performance including hashrate; Iris
Energy’s ability to curtail its electricity consumption and/or monetize electricity depending on market conditions, including changes in Bitcoin mining economics and prevailing electricity prices; actions undertaken by electricity network and
market operators, regulators, governments or communities in the regions in which Iris Energy operates; the availability, suitability, reliability and cost of internet connections at Iris Energy’s facilities; Iris Energy’s ability to secure
additional hardware, including hardware for Bitcoin mining and HPC solutions it may offer, on commercially reasonable terms or at all, and any delays or reductions in the supply of such hardware or increases in the cost of procuring such hardware;
expectations with respect to the useful life and obsolescence of hardware (including hardware for Bitcoin mining as well as hardware for other applications, including HPC solutions); delays, increases in costs or reductions in the supply of
equipment used in Iris Energy’s operations; Iris Energy’s ability to operate in an evolving regulatory environment; Iris Energy’s ability to successfully operate and maintain its property and infrastructure; reliability and performance of Iris
Energy’s infrastructure compared to expectations; malicious attacks on Iris Energy’s property, infrastructure or IT systems; Iris Energy’s ability to maintain in good standing the operating and other permits and licenses required for its operations
and business; Iris Energy ability to obtain, maintain, protect and enforce its intellectual property rights and other confidential information; whether the secular trends Iris Energy expects to drive growth in its business materialize to the degree
it expects them to, or at all; the occurrence of any environmental, health and safety incidents at Iris Energy’s sites; any material costs relating to environmental, health and safety requirements or liabilities; damage to our property and
infrastructure and the risk that any insurance Iris Energy maintains may not fully cover all potential exposures; ongoing securities litigation and proceedings relating to the default by two of Iris Energy’s wholly-owned special purpose vehicles
under limited recourse equipment financing facilities; ongoing securities litigation relating in part to the default; and any future litigation, claims and/or regulatory investigations, and the costs, expenses, use of resources, diversion of
management time and efforts, liability and damages that may result therefrom; any laws, regulations and ethical standards that may relate to Iris Energy’s business, including those that relate to Bitcoin and the Bitcoin mining industry and those
that relate to any other solutions we may offer (such as HPC solutions), including regulations related to data privacy, cybersecurity and the storage, use or processing of information; any intellectual property infringement and product liability
claims; our ability to attract, motivate and retain senior management and qualified employees; increased risks to our global operations including, but not limited to, political instability, acts of terrorism, theft and vandalism, cyberattacks and
other cybersecurity incidents and unexpected regulatory and economic sanctions changes, among other things; climate change and natural and man-made disasters that may materially adversely affect our business, financial condition and results of
operations; the ongoing effects of COVID-19 or any other outbreak of an infectious disease and any governmental or industry measures taken in response; our ability to remain competitive in dynamic and rapidly evolving industries; damage to our
brand and reputation; and other important factors discussed under the caption “Risk Factors” in Iris Energy’s annual report on Form 20-F filed with the SEC on September 13, 2023 as such factors may be updated from time to time in its other filings
with the SEC, accessible on the SEC’s website at www.sec.gov and the Investor Relations section of Iris Energy’s website at https://investors.irisenergy.co.
These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this investor update. Any forward-looking
statement that Iris Energy makes in this investor update speaks only as of the date of such statement. Except as required by law, Iris Energy disclaims any obligation to update or revise, or to publicly announce any update or revision to, any of
the forward-looking statements, whether as a result of new information, future events or otherwise.
Non-IFRS Financial Measures
This press release includes non-IFRS financial measures, including Adjusted EBITDA and Adjusted EBITDA Margin. We provide Adjusted EBITDA and Adjusted EBITDA Margin in addition to, and not as a
substitute for, measures of financial performance prepared in accordance with IFRS. There are a number of limitations related to the use of Adjusted EBTIDA and Adjusted EBITDA Margin. For example, other companies, including companies in our
industry, may calculate Adjusted EBITDA and Adjusted EBITDA Margin differently. The Company believes that these measures are important and supplement discussions and analysis of its results of operations and enhances an understanding of its
operating performance.
EBITDA is calculated as our IFRS profit/(loss) after income tax expense, excluding interest income, finance expense and non-cash fair value loss and interest expense on hybrid financial
instruments, income tax expense, depreciation and amortization, which are important components of our IFRS profit/(loss) after income tax expense. Further, “Adjusted EBITDA” also excludes share-based payments expense, which is an important
component of our IFRS profit/(loss) after income tax expense, impairment of assets, loss on other receivables, loss on disposal of assets, foreign exchange gains and losses and other one-time expenses and income.
|
Adjusted EBITDA Reconciliation1
(USD$m)
|
3 months ended
Dec 31, 2023
|
3 months ended
Sep 30, 2023
|
|
Bitcoin mining revenue
|
42.0
|
34.4
|
|
Other income
|
0.5
|
-
|
|
Electricity costs2
|
(16.7)
|
(19.4)
|
|
Realized gain on financial asset2
|
0.1
|
3.0
|
|
Other costs
|
(11.9)
|
(11.4)
|
|
Adjusted EBITDA
|
14.0
|
6.7
|
|
Adjusted EBITDA Margin
|
33%
|
19%
|
|
Reconciliation to consolidated statement of profit or loss
|
||
|
Add/(deduct):
|
||
|
Foreign exchange loss
|
(4.7)
|
2.2
|
|
Non-cash share-based payments expense – $75 exercise price options
|
(3.1)
|
(3.0)
|
|
Non-cash share-based payments expense
|
(2.9)
|
(2.8)
|
|
Reversal of impairment of assets
|
0.1
|
-
|
|
Unrealized loss on financial asset3
|
(0.3)
|
-
|
|
Other expense items4
|
(2.6)
|
(0.6)
|
|
EBITDA
|
0.6
|
2.5
|
|
Other finance expense
|
-
|
(0.1)
|
|
Interest income
|
0.7
|
0.7
|
|
Depreciation
|
(7.6)
|
(7.6)
|
|
Loss before income tax (expense)/benefit
|
(6.3)
|
(4.5)
|
|
Income tax (expense)/benefit
|
1.1
|
(0.8)
|
|
Loss after income tax (expense)/benefit
|
(5.2)
|
(5.3)
|
| 1) |
For further detail, see our unaudited interim financial statements for the half-year ended December 31, 2023, included in our Form 6-K filed with the SEC on February 15, 2024.
|
| 2) |
Electricity costs net of realized gain on financial asset was $(16.6)m in 2Q FY24 and $(16.4)m in 1Q FY24. Realized gain on financial asset represents unaudited power credits (primarily driven by voluntary
curtailment) earned under hedge contracts.
|
| 3) |
Unrealized loss on financial asset represents the change in the fair value of the financial asset recorded in relation to electricity purchased for future usage periods.
|
| 4) |
Other expense items include one-off professional fees including legal fees.
|
Contacts
Media
|
Jon Snowball
|
Danielle Ghigliera
|
|
Domestique
|
Aircover Communications
|
|
+61 477 946 068
|
+1 510 333 2707
|
Investors
Lincoln Tan
Iris Energy
+61 407 423 395
lincoln.tan@irisenergy.co
To keep updated on Iris Energy’s news releases and SEC filings, please subscribe to email alerts at https://investors.irisenergy.co/ir-resources/email-alerts.
Exhibit 99.2
Exhibit 99.3
 |
Iris Energy Limited
Unaudited Interim Consolidated Financial Statements 31 December 2023
|
Iris Energy Limited
|
|
|
Contents
|
|
|
31 December 2023
|
|
Unaudited interim consolidated statements of profit or loss and other comprehensive income
|
2
|
|
Unaudited interim consolidated statements of financial position
|
3
|
|
Unaudited interim consolidated statements of changes in equity
|
4
|
|
Unaudited interim consolidated statements of cash flows
|
5
|
|
Notes to the unaudited interim consolidated financial statements
|
6
|
1
|
Iris Energy Limited
|
|
|
Unaudited interim consolidated statements of profit or loss and other comprehensive income
|
|
|
For the period ended 31 December 2023
|
|
Note
|
Three
months
ended 31
Dec 2023
|
Three
months
ended 31
Dec 2022
|
Six months
ended 31
Dec 2023
|
Six months
ended 31
Dec 2022
|
||||||||||||||||
|
$'000
|
$'000
|
$'000
|
$'000
|
|||||||||||||||||
|
Revenue
|
||||||||||||||||||||
|
Bitcoin mining revenue
|
|
|
|
|
||||||||||||||||
|
Other income
|
3 |
|
|
|||||||||||||||||
| Total revenue |
||||||||||||||||||||
|
Expenses
|
||||||||||||||||||||
|
Depreciation
|
10 |
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
|
Electricity charges
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Realized gain on financial asset
|
7 | |||||||||||||||||||
|
Employee benefits expense
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Share-based payments expense
|
17
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
|
Impairment of assets
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||
| Reversal of impairment of assets |
10 |
|||||||||||||||||||
|
Professional fees
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Other operating expenses
|
4
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
| Gain/(loss) on sale of assets |
( |
) | ( |
) | ||||||||||||||||
| Unrealized loss on financial asset |
7 | ( |
) | ( |
) | |||||||||||||||
|
Operating profit/(loss)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Finance expense
|
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
|
Interest income
|
|
|
|
|
||||||||||||||||
|
Foreign exchange loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Loss before income tax (expense)/benefit
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Income tax (expense)/benefit
|
|
|
|
|
(
|
)
|
||||||||||||||
|
Loss after income tax (expense)/benefit for the period
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Other comprehensive income/(loss)
|
||||||||||||||||||||
|
Items that may be reclassified subsequently to profit or loss
|
||||||||||||||||||||
|
Foreign currency translation
|
|
|
|
(
|
)
|
|||||||||||||||
|
Other comprehensive income/(loss) for the period, net of tax
|
|
|
|
(
|
)
|
|||||||||||||||
|
Total comprehensive income/(loss) for the period
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Cents
|
Cents
|
Cents
|
Cents
|
|||||||||||||||||
|
Basic earnings per share
|
14
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
|
Diluted earnings per share
|
14
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
The above unaudited interim consolidated statements of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes. Impairment expense for the periods ended 31 December 2022 includes $15,209
2
|
Iris Energy Limited
|
|
|
Unaudited interim consolidated statements of financial position
|
|
|
As at 31 December 2023
|
|
Note
|
31 Dec 2023
|
30 June 2023
|
||||||||||
|
$'000
|
$'000
|
|||||||||||
|
Assets
|
||||||||||||
|
Current assets
|
||||||||||||
|
Cash and cash equivalents
|
5
|
|
|
|||||||||
|
Other receivables
|
6
|
|
|
|||||||||
|
Financial assets at fair value through profit or loss
|
7 | |||||||||||
|
Prepayments and other assets
|
9 |
|
|
|||||||||
|
Total current assets
|
|
|
||||||||||
|
Non-current assets
|
||||||||||||
|
Property, plant and equipment
|
10
|
|
|
|||||||||
|
Right-of-use assets
|
|
|
|
|||||||||
|
Deferred tax assets
|
|
|
||||||||||
|
Computer hardware prepayments
|
8
|
|
|
|||||||||
|
Other assets
|
|
|
||||||||||
|
Prepayments and other assets
|
9 | |||||||||||
|
Total non-current assets
|
|
|
||||||||||
|
Total assets
|
|
|
||||||||||
|
Liabilities
|
||||||||||||
|
Current liabilities
|
||||||||||||
|
Trade and other payables
|
|
|
||||||||||
|
Lease liabilities
|
11 | |||||||||||
|
Income tax
|
|
|
||||||||||
|
Employee benefits
|
|
|
||||||||||
|
Provisions
|
12
|
|
|
|||||||||
|
Total current liabilities
|
|
|
||||||||||
|
Non-current liabilities
|
||||||||||||
|
Lease liabilities
|
11 | |||||||||||
|
Deferred tax liabilities
|
|
|
||||||||||
|
Employee benefits
|
||||||||||||
|
Total non-current liabilities
|
|
|
||||||||||
|
Total liabilities
|
|
|
||||||||||
| Net assets |
||||||||||||
|
Equity
|
||||||||||||
|
Issued capital
|
13 |
|
|
|||||||||
|
Reserves
|
|
(
|
)
|
|||||||||
|
Accumulated losses
|
(
|
)
|
(
|
)
|
||||||||
|
Total equity
|
|
|
||||||||||
The above unaudited interim consolidated statements of financial position should be read in
conjunction with the accompanying notes
3
|
Iris Energy Limited
|
|
|
Unaudited interim consolidated statements of changes in equity
|
|
|
For the period ended 31 December 2023
|
|
Issued
|
Accumulated
|
|||||||||||||||
|
capital
|
Reserves
|
losses
|
Total equity
|
|||||||||||||
|
$'000
|
$'000
|
$'000
|
$'000
|
|||||||||||||
|
Balance at 1 July 2022
|
|
(
|
)
|
(
|
)
|
|
||||||||||
|
Loss after income tax (expense)/benefit for the period
|
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Other comprehensive loss for the period, net of tax
|
|
(
|
)
|
|
(
|
)
|
||||||||||
|
Total comprehensive loss for the period
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Transactions with owners in their capacity as owners:
|
||||||||||||||||
|
Share-based payments
|
|
|
|
|
||||||||||||
|
Balance at 31 December 2022
|
|
(
|
)
|
(
|
)
|
|
||||||||||
|
Issued
|
Accumulated | |||||||||||||||
|
capital
|
Reserves
|
losses
|
Total equity | |||||||||||||
|
$'000
|
$'000
|
$'000
|
$'000
|
|||||||||||||
|
Balance at 1 July 2023
|
|
(
|
)
|
(
|
)
|
|
||||||||||
|
Loss after income tax expense for the period
|
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Other comprehensive loss for the period, net of tax
|
|
|
|
|
||||||||||||
|
Total comprehensive loss for the period
|
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Transactions with owners in their capacity as owners:
|
||||||||||||||||
| Issue of ordinary shares (note 13) | ||||||||||||||||
| Capital raise costs | ( |
) | ( |
) | ||||||||||||
|
Share-based payments
|
|
|
|
|
|
|
||||||||||
|
Balance at 31 December 2023
|
|
|
(
|
)
|
|
|||||||||||
The above unaudited interim consolidated statements of changes in equity should be read in conjunction with the accompanying
notes
4
|
Iris Energy Limited
|
|
| Unaudited interim consolidated statements of cash flows | |
|
For the period ended 31 December 2023
|
| Note |
Six months
ended 31
Dec 2023
|
Six months
ended 31
Dec 2022
|
||||||||||
|
$'000
|
$'000
|
|||||||||||
|
Cash flows from operating activities
|
||||||||||||
|
Receipts from disposal of Bitcoin mined
|
|
|
||||||||||
|
Payments for electricity, suppliers and employees (inclusive of GST)
|
(
|
)
|
(
|
)
|
||||||||
|
|
|
|||||||||||
|
Interest received
|
|
|
||||||||||
|
Interest paid
|
(
|
)
|
(
|
)
|
||||||||
|
Net cash from/(used in) operating activities
|
|
(
|
)
|
|||||||||
|
Cash flows from investing activities
|
||||||||||||
|
Payments for property, plant and equipment net of computer hardware prepayments
|
10 |
(
|
)
|
(
|
)
|
|||||||
|
Payments for computer hardware prepayments
|
8 |
(
|
)
|
(
|
)
|
|||||||
|
Repayments of loan proceeds
|
|
|
||||||||||
|
Prepayments and deposits
|
(
|
)
|
(
|
)
|
||||||||
|
Proceeds from disposal of property, plant and equipment
|
|
|
||||||||||
|
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||||||
|
Cash flows from financing activities
|
||||||||||||
|
Capital raising costs
|
13 |
(
|
)
|
(
|
)
|
|||||||
|
Repayment of borrowings
|
|
(
|
)
|
|||||||||
| Capital raising receipts |
||||||||||||
|
Payment of borrowing transaction costs
|
|
(
|
)
|
|||||||||
|
Repayment of lease liabilities
|
(
|
)
|
(
|
)
|
||||||||
|
Net cash from/(used in) financing activities
|
|
(
|
)
|
|||||||||
|
Net increase/(decrease) in cash and cash equivalents
|
|
(
|
)
|
|||||||||
|
Cash and cash equivalents at the beginning of the period
|
|
|
||||||||||
|
Effects of exchange rate changes on cash and cash equivalents
|
|
(
|
)
|
|||||||||
|
Cash and cash equivalents at the end of the period
|
|
|
||||||||||
The above unaudited interim consolidated statements of cash flows should be read in conjunction with the accompanying notes
5
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 2023
|
Note 1. General information
These unaudited interim consolidated financial statements cover Iris Energy Limited as a Group consisting of Iris
Energy Limited (“Company” or “Parent Entity”) and the entities it controlled at the end of, or during, the period (collectively the “Group”).
The Company’s shares trade on the NASDAQ under the ticker symbol “IREN”.
Iris Energy Limited is incorporated and domiciled in Australia. Its registered office and principal place of
business are:
|
Registered office
|
Principal place of business
|
|
c/o Pitcher Partners
|
Level 12, 44 Market Street
|
|
Level 13, 664 Collins Street
|
Sydney NSW 2000
|
|
Docklands VIC 3008
|
Australia
|
|
Australia
|
The Group is an owner and operator of institutional-grade, highly efficient proprietary Bitcoin mining data centers
powered by renewable energy.
The unaudited interim consolidated financial statements were authorized for issue, in accordance with a resolution
of Directors, on 15 February 2024. The Directors have the power to amend and reissue the unaudited interim consolidated financial statements.
Note 2. Significant accounting policies
These unaudited interim consolidated financial statements for the periods ended 31 December 2023 have been prepared
in accordance with IAS 34 Interim Financial Reporting, and should be read in conjunction with the Group’s last annual consolidated financial statements as at and for the year ended 30 June 2023 (‘last
annual financial statements’). They do not include all of the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards
(“IFRS”). However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group’s financial position and performance since the last annual financial statements
for the year ended 30 June 2023.
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim
reporting period, except for the policies stated
below.
6
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 2023
|
Note 2. Significant accounting policies (continued)
Revenue recognition
The Group records revenue from contracts with customers in accordance with IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)
as follows:
| ● |
Step 1: Identify the contract with a customer;
|
| ● |
Step 2: Identify the performance obligations in the contract;
|
| ● |
Step 3: Determine the transaction price, which is the total consideration provided by the customer;
|
| ● | Step 4: Allocate the transaction price among the performance obligations in the contract based on their relative fair values; and |
| ● |
Step 5: Recognize revenue when (or as) the Group satisfies a performance obligation.
|
Bitcoin mining revenue
The Group operates data center infrastructure supporting the verification and validation of Bitcoin blockchain transactions in
exchange for Bitcoin, referred to as “Bitcoin mining”. The Company has entered into arrangements with mining pools, whereby computing power is directed to the mining pools in exchange for non-cash consideration in the form of Bitcoin. The
provision of computing power is the only performance obligation in the contract with the mining pool operators.
The Company has the right to decide the point in time and duration for which it will provide hash computation services to the mining
pools. The contracts are terminable at any time by either party without substantive compensation to the other party for such termination. Upon termination, the mining pool operator (i.e., the customer) is required to pay the Company any
amount due related to previously satisfied performance obligations. Therefore, the Company has determined that the duration of the contract is less than 24 hours and that the contract continuously renews throughout the day.
In the mining pools which the Company participated in during the periods, the Company is not directly exposed to the pool’s success
in mining blocks. The Company is rewarded in Bitcoin for the hashrate it contributes to these mining pools. The reward for the hashrate contributed by the Company is based on the current network difficulty and global daily revenues from
transaction fees, less mining pool fees.
The fair value of the non-cash consideration is determined using the quantity of Bitcoin received multiplied by the spot price of the
Bitcoin price at the end of the day at the website of Kraken, the trading platform over which we exchange the Bitcoin we have mined (“Kraken”).
Management considers the prices quoted on Kraken to be a Level 1 input under IFRS 13 Fair Value Measurement. The Group did no t hold any Bitcoin on hand as at 31 December 2023 (31 December 2022: ).
7
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 2023
|
Note 2. Significant accounting policies (continued)
Going concern
The Group has determined there is material uncertainty that may cast significant doubt on the Group’s ability to
continue as a going concern but has concluded it is appropriate to prepare the consolidated financial statements on a going concern basis which contemplates continuity of normal business activities, the realization of assets and
settlement of liabilities in the ordinary course of business. The operating cash flows generated by the Group are inherently linked to several key uncertainties and risks including, but not limited to, volatility associated with the
economics of Bitcoin mining and the ability of the Group to execute its business plan.
For the six months ended 31 December 2023, the Group incurred a loss after tax of $10,527 ,000 (31 December 2022: $161,894 ,000)
and net operating cash inflows of $21,246 ,000 (31 December 2022: outflows of $6,263 ,000). As at 31 December 2023, the Group had net current assets of $76,843 ,000
(30 June 2023: net current assets of $65,229 ,000) and net assets of $381,848 ,000 (30 June 2023: net assets of $305,361 ,000).
As further background, the Group’s miners are designed specifically to mine Bitcoin and its future success will
depend in a large part upon the value of Bitcoin, and any sustained decline in its value could adversely affect the business and results of operations. Specifically, the revenues from Bitcoin mining operations are predominantly based upon
two factors: (i) the number of Bitcoin rewards that are successfully mined and (ii) the value of Bitcoin. A decline in the market price of Bitcoin, increases in the difficulty of Bitcoin mining, changes in the regulatory environment, the
halving event expected in Q4 FY2024 and/or adverse changes in other inherent risks would significantly negatively impact the Group’s operations. Due to the volatility of the Bitcoin price and the effects of the other aforementioned
factors, there can be no guarantee that future mining operations will be profitable.
The strategy to mitigate these risks and uncertainties is to try execute a business plan aimed at operational
efficiency, revenue growth, improving overall mining profit, managing operating expenses and working capital requirements, maintaining potential capital expenditure optionality, and securing additional financing, as needed, through one or
more debt and/or equity capital raisings.
The continuing viability of the Group and its ability to continue as a going concern and meet its debts and
commitments as they fall due are therefore significantly dependent upon several factors. These factors have been considered in preparing a cash flow forecast over the next 12 months to consider the going concern of the Group. The key
assumptions include:
| ● |
A base case scenario assuming recent Bitcoin prices and global hashrate, with a reduction in global hashrate following the halving event expected in Q4 FY2024;
|
| ● |
Three operational sites in British Columbia, Canada with installed nameplate capacity of 160MW; 80MW Mackenzie (BC, Canada), 50MW Prince
George (BC, Canada), and 30MW Canal Flats (BC, Canada).
|
| ● |
A fourth operational site at Childress, Texas with initial installed nameplate capacity of 20MW incrementally increasing to 100 MW by 30
June 2024.
|
The key assumptions have been stress tested using a range of Bitcoin price and global hashrate scenarios including
with respect to the halving event expected in Q4 FY2024. The Group aims to maintain a degree of flexibility in both operating and capital expenditure cash flow management where it practicably makes sense, including ongoing
internal cash flow monitoring and projection analysis performed to identify potential liquidity risks arising and to try to respond accordingly.
As a result, the Group has concluded there is material uncertainty related to events or conditions that may
cast significant doubt on the Group’s ability to continue as a going concern and, therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business. However, the Group considers that
it will be successful in the above matters and will have adequate cash reserves to enable it to meet its obligations for at least one year
from the date of approval of the consolidated financial statements, and, accordingly, has prepared the consolidated financial statements on a going concern basis.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or
amended IFRS and Interpretations as issued by the International Accounting Standards Board (“IASB”) that are mandatory for the current reporting period.
Any new or amended Accounting Standards or
Interpretations that are not yet mandatory have not been early adopted. The Group believes that the impact of recently issued standards or amendments to existing standards that are not yet effective will not have a material impact
on the Group’s unaudited interim consolidated financial statements.
8
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 2023
|
Note 3. Other income
|
Three
months
ended 31
Dec 2023
|
Three
months
ended 31
Dec 2022
|
Six months
ended 31
Dec 2023
|
Six months
ended 31
Dec 2022
|
|||||||||||||
| $’000 | $’000 |
|
$’000
|
|
$’000
|
|||||||||||
| Other income |
|
|
||||||||||||||
Other income comprises income generated from an Emergency Response Service (“ERS”) program entered into in Texas. This ERS program is a demand response program designed to help
Electric Reliability Council of Texas (“ERCOT”) mitigate rolling blackouts. Other income is generated by the Group’s participation in this program at the site in Childress, Texas.
Note 4. Other operating expenses
|
Three
months
ended 31
Dec 2023
|
Three
months
ended 31
Dec 2022
|
Six months
ended 31
Dec 2023
|
Six months
ended 31
Dec 2022
|
|||||||||||||
|
$'000
|
$'000
|
$'000
|
$'000
|
|||||||||||||
|
Insurance
|
|
|
|
|
||||||||||||
|
Sponsorship and marketing
|
|
|
|
|
||||||||||||
|
Short term office and equipment rental
|
|
|
|
|
||||||||||||
|
Site expenses
|
|
|
|
|
||||||||||||
|
Charitable donations
|
|
|
|
|
||||||||||||
|
Filing fees
|
|
|
|
|
||||||||||||
|
Site identification costs
|
|
|
|
|
||||||||||||
|
Other expenses
|
|
|
|
|
||||||||||||
|
Non-refundable sales tax (See Note 12)
|
|
|
|
|
||||||||||||
|
Non-refundable
provincial sales tax
|
||||||||||||||||
|
Legal expenses
|
||||||||||||||||
|
Total other operating expenses
|
|
|
|
|
||||||||||||
Note 5. Cash and cash equivalents
|
31 Dec 2023
|
30 Jun 2023
|
|||||||
|
$'000
|
$'000
|
|||||||
|
Current assets
|
||||||||
|
Cash at bank
|
|
|
||||||
| Cash on deposit |
||||||||
|
Total cash and cash equivalents
|
||||||||
9
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 20223
|
Note 6. Other receivables
|
31 Dec 2023
|
30 Jun 2023
|
|||||||
|
$'000
|
$'000
|
|||||||
|
Current assets
|
||||||||
|
Share issuance proceeds
|
|
|
||||||
|
Trade and other receivables
|
|
|
||||||
|
Provincial sales tax receivable
|
|
|
||||||
|
Goods and services tax receivable
|
|
|
||||||
| Total other receivables |
|
|
||||||
Note 7. Financial asset at fair value through
profit or loss
|
31 Dec 2023
|
30 Jun 2023
|
|||||||
|
$'000
|
$'000
|
|||||||
|
Current assets
|
||||||||
|
Electricity financial asset
|
|
|
||||||
|
Reconciliation
|
||||||||
|
Reconciliation of the fair values at the beginning and end of the current and previous financial period are set out below:
|
||||||||
|
Opening fair value
|
|
|
||||||
|
Additions
|
|
|
||||||
|
Revaluation decrements (unrealized loss)
|
(
|
)
|
|
|||||
|
Closing fair value
|
|
|
||||||
Power Supply Agreement
A subsidiary of the
Company entered into a Power Supply Agreement ("PSA") for the procurement of electricity at the Childress site.
Under the PSA, the
subsidiary has the right to purchase a fixed quantity of electricity in advance at a fixed price however, the subsidiary has no obligation to take physical delivery of electricity purchased. For any unused electricity purchased, the subsidiary
sells the unused electricity to the counterparty of the PSA at the prevailing spot price at the time of curtailment.
As the PSA meets the
definition of a financial instrument under IAS 32, it is accounted for as a financial asset at fair value through Profit and Loss under IFRS 9.
Accordingly, the PSA
is subsequently remeasured at an estimated fair value each reporting period with the change in the fair value recorded in change in fair value of financial asset in the consolidated statements of operations.
As at 31 December
2023, the financial asset comprises the fair value of unused electricity purchased for the forward period to 31 January 2024.
On settlement, a
realized gain or loss on a financial asset is recognised in profit or loss. The gain or loss is calculated based on the unused quantity of electricity multiplied by prevailing spot price at the time of curtailment less the price paid upon
prepayment (fixed costs). As at 31 December 2023, the realized gain for the six-months period is $3.1 m (30 June 2023: ) and the realized gain for the three-months period is $0.1 m (30 June 2023: ).
Note 8. Computer hardware prepayments
|
31 Dec 2023
|
30 Jun 2023
|
|||||||
|
$'000
|
$'000
|
|||||||
|
Non-current assets
|
||||||||
|
Mining hardware prepayments
|
|
|
||||||
|
High-performance computing hardware prepayments
|
|
|
||||||
| Total computer hardware prepayments |
|
|||||||
Computer hardware prepayments represent payments made by the Group for the purchase of mining hardware and
High-performance computing ("HPC") hardware, that are yet to be delivered as at 31 December 2023. These prepayments are in accordance with payment schedules set out in relevant purchase agreements with hardware manufacturers.
10
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 2023
|
Note 9. Prepayments and other assets
|
31 Dec 2023
|
30 Jun 2023
|
|||||||
|
$'000
|
$'000
|
|||||||
|
Current assets
|
||||||||
|
Security deposits
|
|
|
||||||
|
Prepayments
|
|
|
||||||
|
|
|
|||||||
|
Non-current assets
|
||||||||
|
Security deposits
|
|
|
||||||
|
Total prepayments and other assets
|
|
|
||||||
Non-current deposits include connection deposits paid for expansion projects in British Columbia, Canada and West Texas, USA.
Note 10.
Property, plant and equipment
|
31 Dec 2023
|
30 Jun 2023
|
|||||||
|
$'000
|
$'000
|
|||||||
|
Non-current assets
|
||||||||
|
Land - at cost
|
|
|
||||||
|
Buildings - at cost
|
|
|
||||||
| Less: Accumulated depreciation | ( |
) | ( |
) | ||||
|
|
|
|||||||
|
Plant and equipment - at cost
|
|
|
||||||
|
Less: Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
|
|
|||||||
|
HPC hardware – at cost
|
||||||||
|
Mining hardware - at cost
|
|
|
||||||
|
Less: Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
Less: Accumulated impairment
|
(
|
)
|
(
|
)
|
||||
|
|
|
|||||||
|
Development assets - at cost
|
|
|
||||||
|
Total property, plant and equipment
|
|
|
||||||
Reconciliations
Reconciliations of the written down values at the beginning and end of the current period are set out below:
|
Land
|
Buildings
|
Plant and equipment
|
Mining
hardware
|
HPC
hardware
|
Development assets
|
Total
|
||||||||||||||||||||||
|
Consolidated
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000 |
$'000
|
$'000
|
|||||||||||||||||||||
|
Balance at 1 July 2023
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Additions
|
|
|
|
|
|
|
||||||||||||||||||||||
| Disposals |
( |
) | ( |
) | ||||||||||||||||||||||||
|
Exchange differences
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||
| Reversal of impairment |
||||||||||||||||||||||||||||
|
Transfers in/(out)
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||||||
|
Depreciation expense
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||
|
Balance at 31 December 2023
|
|
|
|
|
|
|
||||||||||||||||||||||
Depreciation of mining hardware commences once units are installed onsite and available for use.
Development assets includes costs related to the development of data center infrastructure at Childress, Texas
along with other early-stage development costs.
Depreciation will commence on the development assets at Childress as each phase of the underlying infrastructure
becomes available for use.
11
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 2023
|
Note 11. Lease liabilities
|
31 Dec 2023
|
30 Jun 2023
|
|||||||
|
$'000
|
$'000
|
|||||||
|
Current liabilities
|
||||||||
|
Lease liability
|
|
|
||||||
|
Non-current liabilities
|
||||||||
|
Lease liability
|
|
|
||||||
|
Total lease liabilities
|
|
|
||||||
Lease liabilities
The Group's
lease liability includes a 30-year lease of a site in Prince George, B.C., Canada, a three-year lease of a corporate office in Sydney, Australia and a five-year
corporate office lease in Vancouver, B.C., Canada.
Note 12. Provisions
|
31 Dec 2023
|
30 Jun 2023
|
|||||||
|
$‘000
|
$‘000
|
|||||||
|
Current liabilities
|
||||||||
|
Non-refundable sales tax and other provisions
|
|
|
||||||
Non-Refundable Sales Tax
The Canada Revenue Agency (“CRA”) is currently conducting an audit of input tax credits (“ITCs”) claimed by
several of the Group’s Canadian subsidiaries. The CRA has issued an assessment in relation to one of the subsidiaries which, the Directors believe may be applied across the Group’s Canadian subsidiaries. Under the proposed decision, the
CRA has noted that ITCs claimed by the Group would be allowed. However, the Canadian subsidiaries would also be required to remit an amount of 5 %
on services exported to the Australian parent under an intercompany service agreement. The export of services typically attract a 0 %
rate of GST in Canada. If GST were to apply to these services at a rate of 5 %, the Australian parent may not be permitted to
recover this tax.
The Group has submitted additional information to the CRA to further support the ITCs claimed and the 0% rate
applied to the exported services and submitted a formal notice of objection to the CRA in November 2022. The CRA has acknowledged receipt of the appeal application however has not yet provided any further correspondence to the Group.
Recent amendments made to Canadian Tax legislation in June 2023 are being considered by the relevant subsidiaries and the CRA. To date, the CRA has not issued any interpretation guidance on the
new legislation or proposed any potential changes to previous conclusions communicated to subsidiaries of the Group. Consequently, the affected subsidiaries continue to accrue a provision in line with the aforementioned methodology.
12
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 2023
|
Note 13. Issued capital
|
Consolidated
|
||||||||||||||||
|
31 Dec 2023
|
30 Jun 2023
|
31 Dec 2023
|
30 Jun 2023
|
|||||||||||||
|
Shares
|
Shares
|
$'000
|
$'000
|
|||||||||||||
|
Ordinary shares - fully paid and unrestricted
|
|
|
|
|
||||||||||||
Movements in ordinary share capital
|
Details
|
Date
|
Shares
|
$'000
|
||||||
|
Opening balance as at
|
1 July 2023
|
|
|
||||||
|
Shares issued under Committed Equity Facility
|
|
|
|||||||
|
Shares issued under the ATM Facility
|
|
|
|||||||
|
Share based payment - vested shares
|
|
|
|||||||
|
Capital raise costs
|
|
(
|
)
|
||||||
|
|
|||||||||
|
Closing balance as at
|
31 December 2023
|
|
|
||||||
At-the-market Facility
On 13 September
2023, Iris Energy Limited entered into an At-the-market Sales Agreement with B. Riley Securities, Inc., Cantor Fitzgerald & Co. and Compass Point Research & Trading, LLC, pursuant to which Iris Energy Limited has the option, but not the
obligation, to sell up to $300,000,000 of its ordinary shares through or to the Brokers, for a period of up to 36 months (“the ATM Facility”). During the period 4,679,200
ordinary shares were issued under the ATM Facility raising gross proceeds of approximately $24,253,962 .
Committed Equity Facility
On 23 September
2022, Iris Energy Limited entered into a share purchase agreement with B. Riley Principal Capital II, LLC (“B. Riley”) to establish a committed equity facility (“ELOC”), pursuant to which Iris Energy Limited may, at its option, sell up to US$100 million of ordinary shares to B. Riley over a two-year
period. A resale registration statement relating to shares sold to B. Riley under the ELOC was declared effective by the SEC on 26 January 2023. During the period 12,887,814 shares were issued under the facility raising gross proceeds of $51,417,000 .
Loan-funded shares
As at 31 December
2023, there are 1,954,049 (30 June 2023: 1,954,049 )
restricted ordinary shares issued to management under the Employee Share Plan as well as certain non-employee founders of Podtech Innovation Inc. The total number of ordinary shares outstanding (including the loan funded shares) is 84,373,099 as at 31 December 2023 (30 June 2023: 66,701,526 ).
Note 14. Earnings per share
|
Three
months
ended 31
Dec 2023
|
Three
months
ended 31
Dec 2022
|
|||||||
|
$'000
|
$'000
|
|||||||
|
Loss after income tax
|
(
|
)
|
(
|
)
|
||||
|
Number
|
Number
|
|||||||
|
Weighted average number of ordinary shares used in calculating basic earnings per share
|
|
|
||||||
|
|
||||||||
|
Weighted average number of ordinary shares used in calculating diluted earnings per share
|
|
|
||||||
|
Cents
|
Cents
|
|||||||
|
Basic earnings per share
|
(
|
)
|
(
|
)
|
||||
|
Diluted earnings per share
|
(
|
)
|
(
|
)
|
||||
|
Six months
ended 31
Dec 2023
|
Six months
ended 31
Dec 2022
|
|||||||
|
$'000
|
$'000
|
|||||||
|
Loss after income tax
|
(
|
)
|
(
|
)
|
||||
|
Number
|
Number
|
|||||||
|
Weighted average number of ordinary shares used in calculating basic earnings per share
|
|
|
||||||
|
|
||||||||
|
Weighted average number of ordinary shares used in calculating diluted earnings per share
|
|
|
||||||
|
Cents
|
Cents
|
|||||||
|
Basic earnings per share
|
(
|
)
|
(
|
)
|
||||
|
Diluted earnings per share
|
(
|
)
|
(
|
)
|
||||
As the
Group has recorded a loss after tax for all periods presented, any potential ordinary shares are antidilutive.
Note 15. Contingent liabilities
In addition to PwC continuing in their capacity as receiver in respect of the Non-Recourse SPVs, a hearing was
held in June 2023 in The Supreme Court of British Columbia with respect to, among other things, claims brought by the lender, NYDIG ABL LLC, seeking remedies regarding the limited recourse equipment financing facilities entered into by
the Non-Recourse SPVs. A judgement on these proceedings was delivered on 10 August 2023 which declared, among other things, that the transactions pursuant to hashpower services provided by the Non-Recourse SPVs to the Company to be void.
On 21 August 2023, the Company filed a notice to appeal the judgement. On January 31,2024 NYDIG ABL LLC filed a notice of cross appeal with the Court of Appeal seeking an order that the substantive consolidation and oppression remedies be
remitted to the Supreme Court for consideration and reasons. The Company’s appeal and NYDIG’s cross appeal will be heard by the Court of Appeal on March 12, 2024.
13
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 2023
|
Note 16. Commitments
As at 31 December 2023, the Group had commitments of $48,215 ,000 (30 June 2023: $7,481 ,000) which are
payable in instalments from January 2024 to December 2024.
As at 31 December 2023, total Group
commitments are set out in the table below (excludes shipping and taxes).
|
31 Dec 2023
|
30 Jun 2023
|
|||||||
|
$'000
|
$'000
|
|||||||
|
Amounts payable within 12 months of balance date
|
|
|
||||||
|
Amounts payable after 12 months of balance date
|
|
|
||||||
|
Total Commitments
|
|
|
||||||
Note 17. Share-based payments
The Group has entered into a number of share-based compensation arrangements. Details of these arrangements, which
are considered as options for accounting purposes, are described in Group’s Consolidated Financial Statements for the year ended 30 June 2023.
|
●
|
Employee
Share Plan
|
|
●
|
2021
Executive Director Liquidity and Price Target Options
|
|
●
|
Employee
Option Plan
|
|
●
|
Non-Executive
Director Option Plan
|
|
●
|
$
|
|
●
|
2022
Long-Term Incentive Plan Restricted Stock Units
|
|
●
|
2023
Long-Term Incentive Plan Restricted Stock Units (see below for the grants made under this 2023 LTIP this period)
|
2023
Long-Term Incentive Plan Restricted Stock Units
On 1
July 2023, our Board approved a revised long term incentive plan under which participating employees have been granted RSUs in three
tranches, the first two tranches being time-based vesting conditions and the tranche being performance-based vesting conditions. RSUs issued under the revised long term incentive plan are subject to other terms and conditions
contained in the plan.
Under
the terms of the plan, the Board maintains sole discretion over the administration, eligibility and vesting criteria of instruments issued under the LTIP.
During
the six months ended 31 December 2023, the following grants were made under the 2023 LTIP:
|
●
|
-
-
-
|
|
●
|
|
14
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 2023
|
Note 17. Share-based payments (continued)
Reconciliation of outstanding share options
Set out below are summaries of options granted under all plans:
|
Number of
options
|
Weighted
average
exercise price
|
Number of
options
|
Weighted
average
exercise price
|
|||||||||||||
|
31 Dec 2023
|
31 Dec 2023
|
30 Jun 2023
|
30 Jun 2023 | |||||||||||||
|
Outstanding as at 1 July 2023
|
|
$
|
|
$ | ||||||||||||
|
Granted during the period
|
|
$
|
|
$ | ||||||||||||
|
Forfeited during the period
|
|
$
|
|
( |
) | $ | ||||||||||
|
Vested during the period
|
|
$ | $ | |||||||||||||
|
Outstanding as at 31 December 2023
|
|
$
|
|
$ | ||||||||||||
|
Exercisable as at 31 December 2023
|
|
$
|
|
$ | ||||||||||||
As at 31 December 2023, the weighted average remaining contractual life of options outstanding is 6.88 years (30 June 2023: 7.57
years). As at 31 December 2023 the exercise prices associated with the options outstanding ranges from $1.53 to $75.00 (30 June 2023: $1.53 to $75.00 ).
Reconciliation
of outstanding RSUs
Set out
below are summaries of RSUs granted under all plans:
|
Number of
RSUs
|
||||
|
31 Dec 2023
|
||||
|
Outstanding
as at 1 July
|
|
|||
|
Granted
during the period
|
|
|||
|
Forfeited
during the period
|
(
|
)
|
||
|
Vested
during the period
|
(
|
)
|
||
|
|
||||
|
Outstanding
as at end of period
|
|
|||
|
|
||||
|
Exercisable
as at end of period
|
|
|||
As at 31
December 2023, the weighted average remaining contractual life of RSUs outstanding is 3.26 years (30 June 2023: 4.55 years). All RSUs have a
weighted average exercise price.
Note 18. Related party
transactions
Parent entity
Iris Energy Limited is the ultimate parent entity.
Changes in key management personnel
There have been no new appointments made to key management personnel during the period.
Transactions with related parties
There
were no
Receivable from and payable to related parties
There were no
Loans from/to related parties
There were no
Terms and conditions
The loan from related parties was interest free and has since been repaid.
15
|
Iris Energy Limited
|
|
|
Notes to the unaudited interim consolidated financial statements
|
|
|
31 December 2023
|
Note 19. Events after the reporting period
Mining
Hardware purchase contract and option
On 16
January, 2024, the Group announced it had entered into an agreement with Bitmain Technologies Delaware Limited (“Bitmain”) to purchase 5,000
Bitmain T21 miners (1.0 EH/s) which are scheduled for delivery in June 2024. The total contracted cost is $13,300,000 .
The
Group also paid a non-refundable deposit of $12,768,000 as an initial 10 % option down payment in relation to a hardware purchase option to acquire up to 48,000
Bitmain T21 miners (9.1 EH/s) at a price of $14/TH.
Decisions
with respect to exercising all, some or none of the miner purchase options will be made during 2024. If the entire option is exercised, the total contracted cost will be $127,680,000 . If the option is exercised, the miners are scheduled for phased delivery in monthly batches from June 2024 to November 2024.
ATM
Facility
Subsequent
to 31 December 2023, the Company issued a further 19,660,120 Ordinary shares for total gross proceeds of $92,938,000 .
Purchases
NVIDIA H100 GPUs to target generative AI
On 14
February 2024, the Group announced the additional purchase of 568 of NVIDIA’s latest-generation artificial intelligence
(“AI”) H100 GPUs for ~US$22 million.
No other
matter or circumstance has arisen since 31 December 2023 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Exhibit 99.4
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) for Iris Energy Limited should be read together with our unaudited interim
consolidated financial statements for the three- and six-months ended December 31, 2023 and the related notes thereto included elsewhere in the Report on Form 6-K of which this MD&A forms a part (this “Form 6-K”), and our audited consolidated
financial statements as of and for the fiscal year ended June 30, 2023 and the related notes included in our Annual Report on Form 20-F for the year ended June 30, 2023 (our “Annual Report”), which is available through the U.S. Securities and
Exchange Commission’s (“SEC”) Electronic Data Gathering and Analysis Retrieval (“EDGAR”) system at http://www.sec.gov. This MD&A is based on our financial information prepared in accordance with the International Financial Reporting
Standards, or IFRS, as issued by the IASB, which may differ in material respects from generally accepted accounting principles in other jurisdictions, including U.S. GAAP.
All references to “U.S. dollars,” “dollars,” “$,” “USD” or “US$” are to the U.S. dollar. All references to “Australian dollars,” “AUD” or “A$” are to the Australian dollar, the official currency of
Australia. All references to “Canadian dollars,” “CAD” or “C$” are to the Canadian dollar, the official currency of Canada. All references to “IFRS” are to International Financial Reporting Standards, as issued by the International Accounting
Standards Board, or the “IASB”.
Unless otherwise indicated or the context otherwise requires, all references in this MD&A to the terms “the Company,” “the Group,” “our,” “us,” and “we” refer to Iris Energy Limited and its
subsidiaries.
The consolidated financial statements which accompany this MD&A and are included in this Form 6-K are presented in U.S. dollars, which is Iris Energy Limited’s presentation currency. We prepared
our unaudited interim consolidated financial statements for the three- and six-months ended December 31, 2023 and 2022 in accordance with IFRS, as issued by the IASB. Unless otherwise noted, our financial information presented herein is stated in
U.S. dollars, our presentation currency.
Our fiscal year ends on June 30. References in this MD&A to a fiscal year, such as “fiscal year 2024,” “fiscal year 2023” and “fiscal year 2022” relate to our fiscal year ended on June 30 of that
calendar year.
Amounts in this MD&A have been rounded off to the nearest thousand dollars, or in certain cases, the nearest dollar.
Forward-Looking Statements
Some of the information contained in this MD&A, including information with respect to our plans and strategy for our business, includes “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Forward-looking statements generally relate to future events or our future financial or
operating performance. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “may,” “can,” “should,” “could,” “might,” “plan,” “possible,” “project,” “strive,” “budget,” “forecast,” “expect,”
“intend,” “target”, “will,” “estimate,” “predict,” “potential,” “continue,” “scheduled” or the negatives of these terms or variations of them or similar terminology, but the absence of these words does not mean that statement is not
forward-looking. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward looking statements. In addition, any
statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking. Actual results may
differ materially from those contained in any forward-looking statements.
These forward-looking statements are based on management’s current expectations and beliefs. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important
factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to:
| • |
Bitcoin price and foreign currency exchange rate fluctuations;
|
| • |
our ability to obtain additional capital on commercially reasonable terms and in a timely manner to meet our capital needs and facilitate our expansion plans;
|
| • |
the terms of any future financing or any refinancing, restructuring or modification to the terms of any future financing, which could require us to comply with onerous covenants or restrictions, and our ability
to service our debt obligations, any of which could restrict our business operations and adversely impact our financial condition, cash flows and results of operations;
|
| • |
our ability to successfully execute on our growth strategies and operating plans, including our ability to continue to develop our existing data center sites and its ability to diversify into the market for
high-performance computing (“HPC”) solutions we may offer;
|
| • |
our limited experience with respect to new markets we have entered or may seek to enter, including the market for HPC solutions;
|
| • |
expectations with respect to the ongoing profitability, viability, operability, security, popularity and public perceptions of the Bitcoin network;
|
| • |
expectations with respect to the profitability, viability, operability, security, popularity and public perceptions of any HPC solutions we offer;
|
| • |
our ability to secure and retain customers on commercially reasonable terms or at all, particularly as it relates to our strategy to expand into HPC solutions;
|
| • |
our ability to manage counterparty risk (including credit risk) associated with any current or future customers and other counterparties;
|
| • |
our ability to secure renewable energy, renewable energy certificates, power capacity, facilities and sites on commercially reasonable terms or at all;
|
| • |
the risk that any current or future customers or counterparties may terminate, default on or underperform their contractual obligations;
|
| • |
Bitcoin global hashrate fluctuations;
|
| • |
delays associated with, or failure to obtain or complete, permitting approvals, grid connections and other development activities customary for greenfield or brownfield infrastructure projects;
|
| • |
our reliance on power and utilities providers, third party mining pools, exchanges, banks, insurance providers and our ability to maintain relationships with such parties;
|
| • |
expectations regarding availability and pricing of electricity;
|
| • |
our participation and ability to successfully participate in demand response products and services and other load management programs run, operated or offered by electricity network operators, regulators or
electricity market operators;
|
| • |
the availability, reliability and/or cost of electricity supply, hardware and electrical and data center infrastructure, including with respect to any electricity outages and any laws and regulations that may
restrict the electricity supply available to us;
|
| • |
any variance between the actual operating performance of our hardware achieved compared to the nameplate performance including hashrate;
|
| • |
our ability to curtail our electricity consumption and/or monetize electricity depending on market conditions, including changes in Bitcoin mining economics and prevailing electricity prices;
|
| • |
actions undertaken by electricity network and market operators, regulators, governments or communities in the regions in which we operate;
|
| • |
the availability, suitability, reliability and cost of internet connections at our facilities;
|
| • |
our ability to secure additional hardware, including hardware for Bitcoin mining and HPC solutions we may offer, on commercially reasonable terms or at all, and any delays or reductions in the supply of such
hardware or increases in the cost of procuring such hardware;
|
| • |
expectations with respect to the useful life and obsolescence of hardware (including hardware for Bitcoin mining as well as hardware for other applications, including HPC solutions we may offer);
|
| • |
delays, increases in costs or reductions in the supply of equipment used in our operations;
|
| • |
our ability to operate in an evolving regulatory environment;
|
| • |
our ability to successfully operate and maintain our property and infrastructure;
|
| • |
reliability and performance of our infrastructure compared to expectations;
|
| • |
malicious attacks on our property, infrastructure or IT systems;
|
| • |
our ability to maintain in good standing the operating and other permits and licenses required for our operations and business;
|
| • |
our ability to obtain, maintain, protect and enforce our intellectual property rights and confidential information;
|
| • |
any intellectual property infringement and product liability claims;
|
| • |
whether the secular trends we expect to drive growth in our business materialize to the degree we expect them to, or at all;
|
| • |
the occurrence of any environmental, health and safety incidents at our sites, and any material costs relating to environmental, health and safety requirements or liabilities;
|
| • |
damage to our property and infrastructure and the risk that any insurance we maintain may not fully cover all potential exposures;
|
| • |
ongoing proceedings relating to the default by two of the Company’s wholly-owned special purpose vehicles under limited recourse equipment financing facilities;
|
| • |
ongoing securities litigation relating in part to the default;
|
| • |
and any future litigation, claims and/or regulatory investigations, and the costs, expenses, use of resources, diversion of management time and efforts, liability and damages that may result therefrom;
|
| • |
our failure to comply with any laws including the anti-corruption laws of the United States and various international jurisdictions;
|
| • |
any failure of our compliance and risk management methods;
|
| • |
any laws, regulations and ethical standards that may relate to our business, including those that relate to Bitcoin and the Bitcoin mining industry and those that relate to any other solutions we may offer (such
as HPC solutions), including regulations related to data privacy, cybersecurity and the storage, use or processing of information;
|
| • |
our ability to attract, motivate and retain senior management and qualified employees;
|
| • |
increased risks to our global operations including, but not limited to, political instability, acts of terrorism, theft and vandalism, cyberattacks and other cybersecurity incidents and unexpected regulatory and
economic sanctions changes, among other things;
|
| • |
climate change, severe weather conditions and natural and man-made disasters that may materially adversely affect our business, financial condition and results of operations;
|
| • |
the ongoing effects of COVID-19 or any other outbreak of an infectious disease and any governmental or industry measures taken in response;
|
| • |
our ability to remain competitive in dynamic and rapidly evolving industries;
|
| • |
damage to our brand and reputation;
|
| • |
expectations relating to Environmental, Social and Governance issues or reporting;
|
| • |
the costs of being a public company;
|
| • |
and other important factors discussed under “Item 3.D. Key Information—Risk Factors” in our Annual Report, as such factors may be updated from time to time in its other filings with the SEC, accessible on the
SEC’s website at www.sec.gov and the Investor Relations section of the Company’s website at https://investors.irisenergy.co.
|
These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this MD&A. Any forward-looking statement that the Company makes in
this MD&A speaks only as of the date of such statement. Except as required by law, the Company disclaims any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as
a result of new information, future events or otherwise.
Overview
We are a leading owner and operator of next-generation data centers powered by 100% renewable energy (whether from clean or renewable energy sources or through the purchase of RECs). Our data centers are purpose-built
for high performance compute and today support a combination of ASICs for Bitcoin mining and GPUs for AI workloads.
Our Bitcoin mining operations generate revenue by earning Bitcoin through a combination of block rewards and transaction fees from the operation of our specialized computers called ASICs (which we refer to as “Bitcoin
miners”) and exchanging these Bitcoin for fiat currencies, such as U.S. dollars or Canadian dollars.
We have been mining Bitcoin since 2019. We typically liquidate all the Bitcoin we mine daily and therefore did not have any Bitcoin held on our balance sheet as of December 31, 2023. To date we have utilized Kraken, a
U.S.-based digital asset trading platform, to liquidate the Bitcoin we mine. The mining pools, that we utilize for the purposes of our Bitcoin mining, transfer the Bitcoin that we have mined to Kraken on a daily basis. Such Bitcoin is then
exchanged for fiat currency on the Kraken exchange or via its over-the-counter trading desk.
We are also diversifying our revenue streams into new markets. As previously announced in June 2023, we have revitalized our strategy of developing HPC solutions, and in August 2023 announced the purchase of 248 NVIDIA
H100 GPUs to target generative AI. In February 2024, we announced a three-month GPU cloud service agreement with Poolside SAS AI to utilise those GPUs (with an option to extend for a further three months at the customer’s election) along with the
further purchase of 568 NVIDIA H100 GPUs to service potential customer demand.
Our cash and cash equivalents were $90.3 million as of December 31, 2023. Our total revenue was $77.0 million and $30.0 million for the six months ended December 31, 2023 and 2022, respectively. We generated a loss
after income tax (expense)/benefit of $10.5 million and $161.9 million for the six months ended December 31, 2023 and 2022, respectively. We generated EBITDA of $3.1 million and $(127.2) million for the six months
ended December 31, 2023 and 2022, respectively. We generated Adjusted EBITDA of $20.7 million and $(6.4) million for the six months ended December 31, 2023 and 2022, respectively. EBITDA and Adjusted EBITDA are financial measures not defined by
IFRS. For a definition of EBITDA and Adjusted EBITDA, an explanation of our management’s use of these measures and a reconciliation of EBITDA and Adjusted EBITDA to loss after income tax (expense)/benefit, see “Key Indicators of Performance and
Financial Conditions.”
We are a vertically integrated business, and both own and operate our computing hardware (ASICs and GPUs), as well as our electrical infrastructure and data centers. We target development of
data centers in regions where there are low-cost, abundant, and attractive renewable energy sources. We have ownership of our proprietary data centers and electrical infrastructure, including freehold and long-term leasehold land. This provides
us with additional security and operational control over our assets. We believe data center ownership also allows our business to benefit from more sustainable cash flows in comparison with operators that rely upon third-party hosting services or
short-term land leases which may be subject to termination rights, profit sharing arrangements and/or potential changes to contractual terms such as pricing. We assess opportunities to utilize our available data center capacity on an ongoing
basis, including via potential third party hosting and alternative revenue sources. We also focus on grid-connected power access which we believe not only helps facilitate a more reliable, long-term supply of power, but also provides us with the
ability to support the energy markets in which we operate (for example, through potential participation in demand response, ancillary services provision, and load management in deregulated markets such as Texas).
In January 2020, we acquired our first site in Canal Flats, located in British Columbia, Canada (“BC”), from PodTech Innovation Inc. and certain of its related parties. This site is our first operational site and has
been operating since 2019, and, as of February 2024, has approximately 30MW of data center capacity and hashrate capacity of approximately 0.8 EH/s (assuming full utilization of existing available data center capacity with Bitmain S19j Pro
miners).
In addition, we have constructed data centers at our other BC sites in Mackenzie and Prince George. Our Mackenzie site has been operating since April 2022 and, as of February 2024, has approximately 80MW of data center
capacity and hashrate capacity of approximately 2.6 EH/s (assuming full utilization of existing available data center capacity with Bitmain S19j Pro miners). Our Prince George site has been operating since September 2022 and, as of February 2024,
has approximately 50MW of data center capacity and hashrate capacity of approximately 1.6 EH/s (assuming full utilization of existing available data center capacity with Bitmain S19j Pro miners). Our initial deployment of 248 NVIDIA H100 GPUs is
also located at our Prince George site.
Each of our sites in British Columbia are connected to the British Columbia Hydro and Power Authority (“BC Hydro”) electricity transmission network and have been 100% powered by renewable energy since commencement of
operations (currently approximately 98% sourced from clean or renewable sources as reported by BC Hydro and approximately 2% sourced from the purchase of RECs). Our contracts with BC Hydro have an initial term of one year and, unless terminated
at the end of the initial term shall extend until terminated in accordance with the terms of the agreement upon six months’ notice.
We have commenced operations at our Childress site (total potential power capacity of 600MW), located in the renewables-heavy Panhandle region of Texas, U.S. Our Childress site has been operating since April 2023 and, as
of February 13, 2024, has 40MW of data center capacity and installed hashrate capacity of approximately 1.1 EH/s. As of February 2024, we have purchased RECs in respect of 100% of our energy consumption to date at our Childress site.
The construction of an additional 60MW of data centers for Phase 1 (first 100MW) at our Childress site (total potential power capacity of 600MW) is underway, which is expected to increase our potential operating hashrate
capacity to approximately 10 EH/s (assuming the commissioning of certain purchased Bitmain S21 and T21 miners and full utilization of such additional data center capacity). Furthermore, we have commenced site civil works for Phase 2 (second 100MW)
and procured certain long-lead items for additional data centers and substations for Phases 2-3 (200MW).
As of February 13, 2024, we have approximately 200MW of data center capacity and installed hashrate capacity of approximately 6.2 EH/s across our sites in BC (160MW) and Texas (40MW).
Our Growth Strategy
We have the ability to further grow our data center capacity at our existing Childress site up to the total potential site capacity of 600MW.
Our near-term focus remains on completing our expansion to 10 EH/s. In relation to growth beyond 10 EH/s, in January 2024, we announced a pathway to increasing our self-mining capacity up to 20 EH/s in 2024 through the
purchase of an additional 1 EH/s of Bitmain T21 miners and 9 EH/s of Bitmain T21 miner purchase options. As described above, Childress Phases 2-3 site works to support the potential expansion to 20 EH/s are underway. Decisions with respect to
Childress expansion and exercising all, some or none of the miner purchase options will be made during 2024, taking into consideration market conditions, shareholder value and funding availability.
Our business strategy remains focused on continuing to expand our self-mining capacity by further growing our available data center capacity and acquiring additional miners as described under “Recent Developments –
Hardware Purchases”.
Furthermore, we have announced a new 1,400MW data center development site located in the renewables-heavy West region of Texas, US. We have paid an initial $4.7 million connection deposit and expect the site to be
in-service in late 2026.
We are also diversifying our revenue streams into new markets. As previously announced in June 2023, we have revitalized our strategy of developing HPC solutions, and in August 2023 announced the purchase of 248 NVIDIA
H100 GPUs to target generative AI. In February 2024, we announced a three-month GPU cloud service agreement with Poolside SAS AI to utilise those GPUs (with an option to extend for a further three months at the customer’s election) along with the
further purchase of 568 NVIDIA H100 GPUs to service potential customer demand. We believe we may be able to leverage our existing infrastructure and expertise to expand our offering HPC solutions and target a range of industries and applications,
such as AI/ML, scientific research, and rendering.
Recent Developments
Hardware Purchases
In August 2023, we entered into a purchase agreement for 248 NVIDIA H100 GPUs for a total purchase price of approximately $10 million, which have been deployed at our Prince George site. In February 2024, we entered
into a further purchase agreement for 568 NVIDIA H100 GPUs for a total purchase price of approximately $22 million.
In October 2023, we entered into a hardware purchase agreement with Bitmain Technologies Delaware Limited (“Bitmain”) to acquire 7,002 latest-generation Bitmain S21 miners with a total hashrate of 1.4 EH/s for $19.6
million, of which $2.9 million is deferred until one year after shipment, which are expected to be shipped before April 2024. As of January 31, 2024 we have paid $16.7 million relating to this purchase agreement.
In November 2023, we entered into a hardware purchase agreement with Bitmain to acquire 7,000 new-generation Bitmain T21 miners with a total hashrate of 1.3 EH/s for $18.6 million with an option to increase to 15,380
new-generation Bitmain T21 miners with an additional hashrate of 1.6 EH/s (for an additional $22.3 million) that was exercised in December 2023 which are expected to be shipped before June 2024. As of January 31, 2024, we have paid $14.3 million
relating to this purchase agreement including $12.1 million on the purchase of miners and $2.2 million on the exercised option.
In January 2024, we entered into a hardware purchase agreement with Bitmain to acquire 5,000 new-generation Bitmain T21 miners with a total hashrate of 1.0 EH/s for $13.3 million with options exercisable on or before
September 30, 2024, to increase up to 53,000 new-generation Bitmain T21 miners with an additional hashrate of 9.1 EH/s at a fixed purchase price of $14 per TH/s. The initial 5,000 new-generation Bitmain T21 miners are expected to be shipped
before July 2024 and the miner purchase options have delivery dates through the second half of 2024 (to the extent exercised). As of January 31, 2024, we have paid $14.1 million relating to this purchase agreement including $1.3 million on the
purchase of miners and $12.8 million on the exercisable options.
The Bitmain contracts are not able to be terminated by either party, are non-refundable except due to Bitmain’s delay sending a shipping notification for the hardware to us and default interest of 12% is charged on any
unpaid amounts under each batch.
Factors Affecting Our Performance
Market Value of Bitcoin
We derive our revenues from Bitcoin mining. We earn rewards from Bitcoin mining that are paid in Bitcoin. We currently liquidate rewards that we earn from mining Bitcoin in exchange for fiat currencies such as USD or
CAD, typically on a daily basis. Because the rewards we earn from mining Bitcoin are paid in Bitcoin, our operating and financial results are tied to fluctuations in the value of Bitcoin. In addition, positive or negative changes in the global
hashrate impact mining difficulty and therefore the rewards we earn from mining Bitcoins may as a result materially affect our revenue and margins.
In a declining Bitcoin price environment, the Bitcoin mining protocol may provide a natural downside protection for low-cost Bitcoin miners through an adjustment to the number of Bitcoin mined. For example, when the
Bitcoin price falls, the ability for higher cost miners to pay their operating costs may be impacted, which in turn may lead over time to higher cost miners switching off their operations (for example, if their marginal cost of power makes it
unprofitable to continue mining, they may exit the network). As a result, the global hashrate would fall, and remaining low-cost miners may benefit from an increased percentage share of the fixed Bitcoin network rewards.
Conversely, in a rising Bitcoin price environment, additional mining machines may be deployed by miners, leading to increased global hashrate in the overall network. In periods of rising Bitcoin prices we may increase
our capital expenditures in mining machines and related infrastructure to take advantage of potentially faster return on investments, subject to availability of capital and market conditions. However, we also note that the global hashrate may
also increase or decrease irrespective of changes in the Bitcoin price.
While the supply of Bitcoin is capped at 21 million, the price of Bitcoin fluctuates not just because of traditional notions of supply and demand but also because of the dynamic nature of the market for Bitcoin. Having
been created in just a little over a decade as of the date of this annual report, the market for Bitcoin is rapidly changing and subject to global regulatory, tax, political, environmental, cybersecurity, and market factors beyond our control.
For a discussion of other factors that could lead to material adverse changes in the market value of Bitcoin, which could in turn result in substantial damage to or even the failure of our business, see “Item 3. Key Information—Risk Factors—Risks
Related to our Business” in our Annual Report for further information.
Further, the rewards for each Bitcoin mined is subject to “halving” adjustments at predetermined intervals. At the outset, the reward for mining each block was set at 50 Bitcoins and this was cut in half to 25 Bitcoins
on November 28, 2012 at block 210,000, cut in half again to 12.5 Bitcoins on July 9, 2016 at block 420,000, and cut in half yet again to 6.25 Bitcoins on May 11, 2020 at block 630,000. The next three halving events for Bitcoin are expected to
take place in 2024 at block 840,000 (when the reward will reduce to 3.125 Bitcoins), in 2028 at block 1,050,000 (when the reward will reduce to 1.5625 Bitcoins), and in 2032 at block 1,260,000 (when the reward will reduce to 0.78125 Bitcoins). As
the rewards for each Bitcoin mined reduce, the Bitcoin we earn relative to our hashrate capacity decrease. As a result, these adjustments have had, and will continue to have, material effects on our operating and financial results.
Efficiency of Mining Machines
As global mining capacity increases, we will need to correspondingly increase our total hashrate capacity relative to the overall global hashrate —all else being equal—to maintain the same amount of Bitcoin mining
revenue. To remain cost competitive compared to other mining sector participants, in addition to targeting cost effective sources of energy and operating efficient data center infrastructure, we may also need to maintain an energy efficient
mining fleet.
Our Bitcoin mining operations currently utilize the Antminer S19j Pro miners and S21 miners produced by Bitmain, with additional miner purchase and/or option agreements for Antminer T21 miners.
In certain periods, there may be disruption in global supply chain leading to shortage of advanced mining machines that meet our standard of quality and efficiency. To maintain our competitive edge over the long-term,
we strive to maintain strong relationships with suppliers and vendors across the supply chain to ensure that our fleet of miners is competitive.
Ability to Secure Low-Cost Renewable Power
Bitcoin mining consumes extensive energy for both the mining and cooling aspects of the operation. In particular, we believe the increasing difficulty of the network, driven by more miners and higher global hashrate,
and the periodic halving adjustments of Bitcoin reward rates, will drive the increasing importance of power efficiency in Bitcoin mining over the long-term.
Governments and regulators are increasingly focused on the energy and environmental impact of Bitcoin mining activities. This has led, and could lead, to new governmental measures regulating, restricting or prohibiting
the use of electricity for Bitcoin mining activities, or Bitcoin mining activities generally. The price we pay for electricity depends on numerous factors including sources of generation, regulatory environment, electricity market structure,
commodity prices, instantaneous supply/demand balances, counterparty and procurement method. These factors may be subject to change over time and result in increased power costs. In regulated markets, such as in BC, suppliers of renewable power
rely on regulators to approve raises in rates, resulting in fluctuations subject to requests for rate increases and there approval thereof; in deregulated markets, such as in Texas, prices of renewable power will fluctuate with the wholesale
market (including price fluctuations in commodity prices such as the price of fossil fuels).
Competitive Environment
We compete with a variety of miners globally, including individual hobbyists, mining pools and public and private companies. We believe that, even if the price of Bitcoin decreases, the market will continue to draw new
miners and increase the scale and sophistication of competition in the Bitcoin mining industry. Increasing competition generally results in increase to the global hashrate, which in turn would generally lead to a reduction in the percentage share
of the fixed Bitcoin network rewards that Bitcoin miners, including the Company, would earn.
Market Events Impacting the Digital Asset Industry
In the past, market events in the digital asset industry have negatively market sentiment towards the broader digital asset industry. There have also been declines from time to time in the value of digital assets,
including the value of Bitcoin, in connection with these events, which have impacted the Group from a financial and operational perspective. We expect that any such declines that may occur in the future would also impact the business and
operations of the Group, and if such declines are significant, they could result in reduced revenue and operating cash flows and increased net operating losses, and could also negatively impact our ability to raise additional financing.
Market Events Impacting Digital Asset Trading Platforms
In the past, market events in the digital asset markets have involved and/or impacted certain digital asset trading platforms. As described under “Item 3.D. Key Information—Risk Factors” and “Item 5. Operating and
Financial Review and Prospects” in our Annual Report, we are subject to a number of risks outside our control which could impact our business.
Ability to Secure Customers
Our growth strategies include exploring the potential diversification of our revenue streams into new markets. We have revitalized our strategy of exploring the development of HPC solutions. We believe we may be able to
leverage our existing infrastructure and expertise to expand into offering HPC solutions and target a range of customers across various sectors, including AI customers. Our ability to secure customers on commercially reasonable terms or at all,
will affect our expansion into HPC solutions. Our strategy may not be successful as a result of a number of factors described under “Item 3.D. Risk Factors—Risks Related to Our Business—Our increased focus on potential HPC solutions may not be
successful and may result in adverse consequences to our business, results of operations and financial condition” in our Annual Report. Our efforts to explore the diversification of our revenue streams may distract management, require significant
additional capital, expose us to new competition and market dynamics, and increase our cost of doing business.
Key Indicators of Performance and Financial Condition
Key operating and financial metrics that we use, in addition to our IFRS consolidated financial statements, to assess the performance of our business are set forth below for the three and six months ended December 31,
2023 and 2022, include:
EBITDA
EBITDA excludes interest income, income tax expense, depreciation and amortization, other finance expenses, and non-cash fair value gains and losses on hybrid financial instruments, which are
important components of our IFRS profit/(loss) after income tax expense. As a capital-intensive business, EBITDA excludes in the impact of the cost of depreciation of mining equipment and other fixed assets, which allows us to measure the
liquidity of our business on a current basis and we believe provides a useful tool for comparison to our competitors in a similar industry. The fair value gains and losses on hybrid financial instruments are significant non-cash accounting
entries and are extracted to enable management to review and compare the underlying results of operations period on period. We believe EBITDA is a useful metric for assessing operating performance before the impact of non-cash and other items.
Our presentation of EBITDA should not be construed as an inference that our future results will be unaffected by these items.
We believe EBITDA and EBITDA Margin have limitations as analytical tools. These measures should not be considered as alternatives to profit/(loss) after income tax expense, as applicable, determined
in accordance with IFRS. They are supplemental measures of our operating performance only, and as a result you should not consider these measures in isolation from, or as a substitute analysis for, our profit/(loss) after income tax as determined
in accordance with IFRS, which we consider to be the most comparable IFRS financial measure. For example, we expect depreciation of our fixed assets will be a large recurring expense over the course of the useful life of our assets. EBITDA and
EBITDA Margin do not have any standardized meaning prescribed by IFRS and therefore are not necessarily comparable to similarly titled measures used by other companies, limiting their usefulness as a comparative tool.
The following table shows a reconciliation of EBITDA to loss after income tax (expense)/benefit:
|
Three Months
Ended
December 31,
2023
|
Three Months
Ended
December 31,
2022
|
Six Months
Ended
December 31,
2023
|
Six Months
Ended
December 31,
2022
|
|||||||||||||
|
($ thousands)
|
($ thousands)
|
($ thousands)
|
($ thousands)
|
|||||||||||||
|
Loss after income tax (expense)/benefit
|
(5,228
|
)
|
(143,954
|
)
|
(10,527
|
)
|
(161,894
|
)
|
||||||||
|
Add/(deduct) the following:
|
||||||||||||||||
|
Other finance expense/(benefit)
|
30
|
10,350
|
64
|
13,915
|
||||||||||||
|
Interest income
|
(665
|
)
|
(257
|
)
|
(1,378
|
)
|
(214
|
)
|
||||||||
|
Depreciation
|
7,558
|
11,544
|
15,177
|
18,996
|
||||||||||||
|
Income tax expense/(benefit)
|
(1,065
|
)
|
(411
|
)
|
(244
|
)
|
2,030
|
|||||||||
|
EBITDA
|
630
|
(122,728
|
)
|
3,092
|
(127,167
|
)
|
||||||||||
|
|
||||||||||||||||
|
Bitcoin Mining Revenue
|
42,047
|
13,755
|
76,444
|
29,967
|
||||||||||||
|
|
||||||||||||||||
|
Loss after income tax benefit/ (expense) margin(1)
|
(12
|
%)
|
(1,047
|
%)
|
(14
|
%)
|
(540
|
%)
|
||||||||
|
|
||||||||||||||||
|
EBITDA margin(2)
|
2
|
%
|
(892
|
%)
|
4
|
%
|
(424
|
%)
|
||||||||
| (1) |
Loss after income tax (expense)/benefit margin is calculated as Loss after income tax (expense)/benefit divided by Bitcoin Mining Revenue.
|
| (2) |
EBITDA margin is calculated as EBITDA divided by Bitcoin Mining Revenue.
|
Adjusted EBITDA
Adjusted EBITDA is EBITDA as further adjusted to exclude share-based payments expense, foreign exchange gains/losses, impairment of assets, certain other non-recurring income, loss on disposal of
property, plant and equipment, gain on disposal of subsidiaries, unrealized fair value gains/losses on financial assets, and certain other expense items. Beginning in the fiscal year ended June 30, 2024, the Company has changed its definition of
Adjusted EBITDA to exclude unrealized fair value gains/losses on financial instruments. This is a change from the presentation of Adjusted EBITDA in prior periods, and these adjustments did not have any impact on the calculation of Adjusted
EBITDA in prior periods. We believe Adjusted EBITDA is a useful metric because it allows us to monitor the profitability of our business on a current basis and removes expenses which do not impact our ongoing profitability and which can vary
significantly in comparison to other companies. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items.
We believe Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools. These measures should not be considered as alternatives to profit/(loss) after income tax expense, as
applicable, determined in accordance with IFRS. They are supplemental measures of our operating performance only, and as a result you should not consider these measures in isolation from, or as a substitute analysis for, our profit/(loss) after
income tax as determined in accordance with IFRS, which we consider to be the most comparable IFRS financial measure. For example, we expect depreciation of our fixed assets will be a large recurring expense over the course of the useful life of
our assets, and that share-based compensation is an important part of compensating certain employees, officers and directors. Adjusted EBITDA and Adjusted EBITDA Margin do not have any standardized meaning prescribed by IFRS and therefore are not
necessarily comparable to similarly titled measures used by other companies, limiting their usefulness as a comparative tool.
The following table shows a reconciliation of Adjusted EBITDA to loss after income tax (expense)/benefit:
|
Three Months
Ended
December 31,
2023
|
Three Months
Ended
December 31,
2022
|
Six Months
Ended
December 31,
2023
|
Six Months
Ended
December 31,
2022
|
|||||||||||||
|
($ thousands)
|
($ thousands)
|
($ thousands)
|
($ thousands)
|
|||||||||||||
|
Loss after income tax (expense)/benefit
|
(5,228
|
)
|
(143,954
|
)
|
(10,527
|
)
|
(161,894
|
)
|
||||||||
|
Add/(deduct) the following:
|
||||||||||||||||
|
Other finance expense
|
30
|
10,350
|
64
|
13,915
|
||||||||||||
|
Interest income
|
(665
|
)
|
(257
|
)
|
(1,378
|
)
|
(214
|
)
|
||||||||
|
Depreciation
|
7,558
|
11,544
|
15,177
|
18,996
|
||||||||||||
|
Income tax expense/(benefit)
|
(1,065
|
)
|
(411
|
)
|
(244
|
)
|
2,030
|
|||||||||
|
EBITDA
|
630
|
(122,728
|
)
|
3,092
|
(127,167
|
)
|
||||||||||
|
Bitcoin Mining Revenue
|
42,047
|
13,755
|
76,444
|
29,967
|
||||||||||||
|
Loss after income tax (expense)/benefit margin(1)
|
(12
|
%)
|
(1,047
|
%)
|
(14
|
%)
|
(540
|
%)
|
||||||||
|
EBITDA margin(2)
|
2
|
%
|
(892
|
%)
|
4
|
%
|
(424
|
%)
|
||||||||
|
Add/(deduct) the following:
|
||||||||||||||||
|
Impairment of assets(3)
|
-
|
105,172
|
-
|
105,172
|
||||||||||||
|
Reversal of impairment of assets(4)
|
(108
|
)
|
-
|
(108
|
)
|
-
|
||||||||||
|
Share-based payment expense – $75 exercise price options
|
3,030
|
3,036
|
5,895
|
5,920
|
||||||||||||
|
Share-based payment expense – other
|
2,936
|
116
|
5,910
|
850
|
||||||||||||
|
Foreign exchange (gain)/loss
|
4,707
|
6,225
|
2,449
|
7,176
|
||||||||||||
|
Other expense items(5)
|
2,455
|
144
|
3,186
|
1,689
|
||||||||||||
|
Unrealized (gain)/loss on financial asset
|
258
|
-
|
258
|
-
|
||||||||||||
|
Adjusted EBITDA
|
13,908
|
(8,035
|
)
|
20,682
|
(6,360
|
)
|
||||||||||
|
Adjusted EBITDA margin(6)
|
33
|
%
|
(58
|
%)
|
27
|
%
|
(21
|
%)
|
||||||||
| (1) |
Loss after income tax (expense)/benefit margin is calculated as Loss after income tax (expense)/benefit divided by Bitcoin Mining Revenue.
|
| (2) |
EBITDA margin is calculated as EBITDA divided by Bitcoin Mining Revenue.
|
| (3) |
Impairment of assets for the six months ended December 31, 2023 and December 31, 2022 was nil and $105.2 million, respectfully. See “—Components of our Results of Operations—Expenses—Impairment of assets” for
further information. Impairment expense for the period ended December 31, 2022 includes $15.2 million previously reported as loss on other receivables.
|
| (4) |
Reversal of impairment of assets for the six months ended December 31, 2023 and December 31, 2022 was $(0.1) million and nil, respectfully. See “—Components of our Results of Operations—Expenses—Impairment of
assets” for further information.
|
| (5) |
Other expense items include professional fees incurred in relation to the securities class action, and one-off additional remuneration.
|
| (6) |
Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Bitcoin Mining Revenue.
|
Components of our Results of Operations
Revenue
Bitcoin mining revenue
The Group operates data center infrastructure supporting the verification and validation of Bitcoin blockchain transactions in exchange for Bitcoin, referred to as “Bitcoin mining”. The Company has entered into
arrangements with mining pools, whereby computing power is directed to the mining pools in exchange for non-cash consideration in the form of Bitcoin. The provision of computing power is the only performance obligation in the contract with the
mining pool operators.
The Company has the right to decide the point in time and duration for which it will provide hash computation services to the mining pools. The contracts are terminable at any time by either party without substantive
compensation to the other party for such termination. Upon termination, the mining pool operator (i.e., the customer) is required to pay the Company any amount due related to previously satisfied performance obligations. Therefore, the Company
has determined that the duration of the contract is less than 24 hours and that the contract continuously renews throughout the day.
In the mining pools which the Company participated in during the periods, the Company is not directly exposed to the pool’s success in mining blocks. The Company is rewarded in Bitcoin for the hashrate it contributes to
these mining pools. The reward for the hashrate contributed by the Company is based on the current network difficulty and global daily revenues from transaction fees, less mining pool fees.
The fair value of the non-cash consideration is determined using the quantity of Bitcoin received multiplied by the spot price of the Bitcoin price at the end of the day at the website of Kraken, the trading platform
over which we exchange the Bitcoin we have mined (“Kraken”).
Management considers the prices quoted on Kraken to be a Level 1 input under IFRS 13 Fair Value Measurement. The Group did not hold any Bitcoin on hand as at December 31, 2023 (December 31, 2022: Nil).
Other income
Other income has been earned for our participation in demand response programs at the Group's site in Childress, Texas.
Expenses
Our expenses are characterized by the nature of the expense, with the main expense categories set out below.
Depreciation
We capitalize the cost of our buildings, plant and equipment and mining hardware. Depreciation expense is recorded on a straight-line basis to nil over the estimated useful life of the underlying
assets. Our buildings are currently depreciated over 20 years, mining hardware is depreciated over 4 years and plant and equipment is depreciated over 3-10 years depending on the expected life of the underlying asset.
Electricity charges
Electricity charges primarily consists of the cost of electricity to power our data center sites. The price of electricity in BC is subject to a regulated tariff that may be adjusted by the supplier
from time to time, resulting in increases or decreases in the cost of electricity we purchase. In Texas, the electricity market is deregulated and operates through a competitive wholesale market. Electricity prices in Texas are subject to many
factors, such as, for example, fluctuations in commodity prices including the price of fossil fuels and other energy sources. Electricity at Childress, Texas is sourced from the Electricity Reliability Council of Texas (“ERCOT”), the organization
that operates Texas’ electrical grid. We may participate in demand response programs, load curtailment in response to prices, or other programs, as part of our electricity procurement strategies in Texas, including the use of automated systems to
reduce our power consumption in response to market signals.
Realized gain/(loss) on financial asset
Realized gain/(loss) on financial asset represents a gain on the electricity purchased and subsequently resold under a power supply agreement at the Group’s Childress site. See note 7 of the unaudited interim
consolidated financial statements included in this Form 6-K for further information.
Employee benefits expense
Employee benefits expense represents salary and other employee costs, including superannuation and other similar payments and associated employee taxes.
Share-based payments expense
Share-based payments expense represents the amortization of share-based compensation arrangements that have been granted to directors, executive offers and management. These arrangements include,
loan-funded share arrangements granted to management, options and restricted share units issued to directors, executive officers and management.
Impairment of assets
Impairment of assets represents impairment expense recorded on mining hardware, mining hardware prepayments, goodwill, development assets and other assets.
Reversal of impairment of assets
Reversal of impairment of assets represent the reversal of an impairment loss recognised on mining hardware, mining hardware prepayments, development assets and other assets in prior periods.
Professional fees
Professional fees represent legal fees, audit fees, broker fees and fees paid to tax, regulatory and other advisers.
Other operating expenses
Other operating expenses represent insurance, marketing, office rent, travel, repairs and maintenance, charitable donations, a provision for non-refundable GST and PST on services exported to the Australian parent by
certain Canadian subsidiaries, legal costs, and general business expenses required to operate the business.
Gain/(loss) on sale of assets
Gain/(loss) on sale of assets includes net gains or losses on disposal of mining hardware and other assets.
Unrealized gain/(loss) on financial asset
Unrealized gain/(loss) on financial asset represents the change in the fair value of the financial asset recorded in relation to electricity purchased for future usage periods. See note 7 of the unaudited interim
consolidated financial statements included in this Form 6-K for further information.
Finance expense
Finance expense consists primarily of interest expense on lease liabilities, mining hardware financing arrangements and amortization of capitalized borrowing costs.
Interest income
Interest income includes interest generated on short-term cash deposits with regulated financial institutions.
Foreign exchange gain/(loss)
Foreign exchange gain/(loss) includes realized and unrealized foreign exchange movements on monetary assets and liabilities denominated in foreign currencies.
Income tax (expense)/benefit
We are liable to pay tax in a number of jurisdictions, including Australia, Canada and the United States. Tax liabilities arise to the extent that we do not have sufficient prior year tax losses to offset future taxable
income in these jurisdictions.
Results of Operations
The following table summarizes our results of operations, disclosed in the unaudited interim consolidated statement of profit or loss and other comprehensive income/(loss) for the three and six months ended December 31,
2023 and 2022.
|
Three Months
Ended December
31, 2023
|
Three Months
Ended December
31, 2022
|
Six Months
Ended December
31, 2023
|
Six Months
Ended December
31, 2022
|
|||||||||||||
|
Revenue
|
($ thousands)
|
($ thousands)
|
($ thousands)
|
($ thousands)
|
||||||||||||
|
Bitcoin mining revenue
|
42,047
|
13,755
|
76,444
|
29,967
|
||||||||||||
|
Other income
|
527
|
-
|
527
|
-
|
||||||||||||
|
|
||||||||||||||||
|
Expenses
|
||||||||||||||||
|
Depreciation
|
(7,558
|
)
|
(11,544
|
)
|
(15,177
|
)
|
(18,996
|
)
|
||||||||
|
Electricity charges
|
(16,746
|
)
|
(7,362
|
)
|
(36,111
|
)
|
(13,937
|
)
|
||||||||
|
Realized gain/(loss) on financial asset
|
101
|
-
|
3,119
|
-
|
||||||||||||
|
Employee benefits expense
|
(4,334
|
)
|
(4,064
|
)
|
(8,511
|
)
|
(8,662
|
)
|
||||||||
|
Share-based payments expense
|
(5,966
|
)
|
(3,152
|
)
|
(11,805
|
)
|
(6,770
|
)
|
||||||||
|
Impairment of assets
|
-
|
(105,172
|
)
|
-
|
(105,172
|
)
|
||||||||||
|
Reversal of impairment of assets
|
108
|
-
|
108
|
-
|
||||||||||||
|
Professional fees
|
(2,322
|
)
|
(1,747
|
)
|
(3,932
|
)
|
(3,040
|
)
|
||||||||
|
Other operating expenses
|
(7,825
|
)
|
(3,624
|
)
|
(14,056
|
)
|
(7,240
|
)
|
||||||||
|
Gain/(loss) on sale of assets
|
5
|
(5,137
|
)
|
16
|
(5,137
|
)
|
||||||||||
|
Unrealized gain/(loss) on financial asset
|
(258
|
)
|
-
|
(258
|
)
|
-
|
||||||||||
|
Profit/(loss) before interest, foreign exchange gain/(loss) and income tax
|
(2,221
|
)
|
(128,047
|
)
|
(9,636
|
)
|
(138,987
|
)
|
||||||||
|
Finance expense
|
(30
|
)
|
(10,350
|
)
|
(64
|
)
|
(13,915
|
)
|
||||||||
|
Interest income
|
665
|
257
|
1,378
|
214
|
||||||||||||
|
Foreign exchange gain/(loss)
|
(4,707
|
)
|
(6,225
|
)
|
(2,449
|
)
|
(7,176
|
)
|
||||||||
|
Loss before income tax expense
|
(6,293
|
)
|
(144,365
|
)
|
(10,771
|
)
|
(159,864
|
)
|
||||||||
|
Income tax (expense)/benefit
|
1,065
|
411
|
244
|
(2,030
|
)
|
|||||||||||
|
Loss after income tax (expense)/benefit
|
(5,228
|
)
|
(143,954
|
)
|
(10,527
|
)
|
(161,894
|
)
|
||||||||
|
Other comprehensive income/(loss)
|
||||||||||||||||
|
Items that may be reclassified subsequently to profit or loss:
|
||||||||||||||||
|
Foreign currency translation
|
7,584
|
14,112
|
2,002
|
(12,115
|
)
|
|||||||||||
|
Other comprehensive income/(loss), net of tax
|
7,584
|
14,112
|
2,002
|
(12,115
|
)
|
|||||||||||
|
Total comprehensive income/(loss)
|
2,356
|
(129,842
|
)
|
(8,525
|
)
|
(174,009
|
)
|
|||||||||
Comparison of the six months ended December 31, 2023 and 2022
Revenue
Bitcoin mining revenue
Our Bitcoin mining revenue for the six months ended December 31, 2023 and 2022, was $76.4 million and $30.0 million, respectively. This revenue was generated from the mining and sale of 2,367 and
1,503 Bitcoin during the six months ended December 31, 2023 and 2022, respectively. The $46.4 million increase in revenue comprises a $18.9 million increase attributable to the increase in the average Bitcoin price and $27.5 million increase
attributable to the increase in average operating hashrate during the six months ended December 31, 2023 as compared to the six months ended December 31, 2022, which was partially offset by the increase in the difficulty implied global hashrate
during the same period. Average operating hashrate increased to 5.6 EH/s for the six months ended December 31, 2023 from 2.1 EH/s for the six months ended December 31, 2022.
Other income
Our other income for the six months ended December 31, 2023 and 2022, was $0.5 million and nil, respectively. Other income generated during the six months ended December 31, 2023 primarily comprised of $0.5 million
revenue generated for our participation in an ERCOT demand response program at the Group’s site at Childress.
Expenses
Depreciation
Depreciation primarily consists of the depreciation of Bitcoin mining hardware and data centers. Depreciation expense for the six months ended December 31, 2023 and 2022 was $15.2 million and $19.0 million,
respectively. This decrease was primarily due to the impairment of mining hardware recorded during the six months ended December 31, 2022 resulting in a decreased depreciation charge recorded over the remaining portion of the useful economic life
of the impaired assets.
Electricity charges
Electricity charges for the six months ended December 31, 2023 and 2022 was $36.1 million and $13.9 million, respectively. This increase was primarily due to the increase in average operating hashrate to 5.6 EH/s for
the six months ended December 31, 2023 from 2.1 EH/s for the six months ended December 31, 2022.
The electricity charges per Bitcoin mined increased from $9,273 for the six months ended December 31, 2022 to $15,256 for the six months ended December 31, 2023 primarily due to an increase in the average global
hashrate. The electricity charges per Bitcoin mined excludes other income generated for our participation in an ERCOT demand response program and the realized gain/(loss) on financial asset as outlined below.
Realized gain/(loss) on financial asset
Realized gain/(loss) on financial asset represents a gain on the electricity purchased and subsequently resold under a power supply agreement at the Group’s Childress site. Realized gain
recorded on financial asset for the six months ended December 31, 2023 and December 31, 2022 was $3.1 million and nil respectively. See note 7 of the unaudited interim consolidated financial statements included in this Form 6-K for further
information.
Employee benefits expenses
Employee benefits expenses consist primarily of wages and salaries to employees and contractors, and associated taxes. Employee benefits expenses for the six months ended December 31, 2023 and 2022 was $8.5 million and
$8.7 million, respectively.
Share-based payments expense
Share-based payments expense for the six months ended December 31, 2023 and 2022 was $11.8 million and $6.8m, respectively. The increase was primarily due to amortization expenses recorded in relation to incentives
issued under our 2022 Long-Term Incentive Plan and 2023 Long-Term Incentive Plan. See note 17 of the unaudited interim consolidated financial statements included in this Form 6-K for further information.
Impairment of assets
Impairment of assets for the six months ended December 31, 2023 of and 2022 was nil and $105.2 million, respectively. During the six months ended December 31, 2022 we recorded an impairment of $105.2 million which
included an impairment of $90.5 million of mining hardware, $13.0 million related to mining hardware prepayments, $1.1 million related to development assets and $0.6 million related to goodwill.
Reversal of impairment of assets
Reversal of impairment of assets for the six months ended December 31, 2023 of and 2022 was $(0.1) million and nil, respectively. The reversal of impairment of assets for the six months ended December 31, 2023 reflects
a reversal of $0.1 million on a previously impaired development asset which was partially recovered.
Professional fees
Professional fees for the six months ended December 31, 2023 and 2022 was $3.9 million and $3.0 million, respectively. In the six months ended December 31, 2023 $0.5 million related to the audit fees and $1.3 million
related to one-off costs in relation to the securities class action litigation.
Other operating expenses
Other operating expenses for the six months ended December 31, 2023 and 2022 was $14.1 million and $7.2 million, respectively. Other operating expenses represent insurance, marketing, office rent, travel, repairs and
maintenance, charitable donations, a provision for GST and PST on services exported to the Australian parent by certain Canadian subsidiaries, legal costs, and general business expenses required to operate the business (see note 4 to our
unaudited interim consolidated financial statements included in this Form 6-K). The increase primarily related to the expansion of the business operations and ongoing costs as a publicly listed company and includes an increase of $0.6 million in
sponsorship and marketing, $1.7 million in site expenses which include repairs and maintenance costs, $1.8 million in legal expenses, and $1.9 million and $0.6 million of a provision for non-refundable GST and PST, respectfully.
Gain/(loss) on disposal of assets
Our gain/(loss) on disposal of assets for the six months ended December 31, 2023 and 2022, was a $0.02 million gain and $5.1 million loss, respectively. During the six months ended December 31, 2022 a net loss of $5.1
million on disposal of mining hardware and other assets was recognised. No such sales occurred during the six months ended December 31, 2023.
Unrealized gain/(loss) on financial asset
Unrealized gain/(loss) on financial asset represents the change in the fair value of the financial asset recorded in relation to electricity purchased for future usage periods. The Group recorded an unrealized loss on
financial asset for the six months ended December 31, 2023 and December 31, 2022 of $0.3 million and nil respectively. See note 7 of the unaudited interim consolidated financial statements included in this Form 6-K for further information.
Finance expense
Finance expense for the six months ended December 31, 2023 and 2022 was $0.1 million and $13.9 million, respectively. Finance expense for the six months ended December 31, 2023 primarily relates to interest on the lease
liability. The decrease from the six-month period ended December 31, 2022 primarily related to interest expense on borrowings including late fees and interest charged on third-party loans held by the two separate wholly-owned, special purpose
vehicles of the Company (collectively the “Non-Recourse SPVs") which were deconsolidated during the year ended June 30, 2023 and as such did not recur during the six months ended December 31, 2023.
Interest income
Interest income for the six months ended December 31, 2023 and 2022 was $1.4 million and $0.2 million, respectively. The increase was primarily driven by an increase in interest rates and underlying cash deposits.
Foreign exchange gains/(loss)
Foreign exchange loss for the six months ended December 31, 2023 and 2022 was $2.4 million and $7.2 million, respectively. The decreased loss was primarily relating to foreign exchange movements in
the translation of assets and liabilities held in currencies other than the functional currency of the company holding the asset or liability. We use the U.S. dollar as our presentation currency; however, the companies in the Group use the
Australian dollar, Canadian dollar, or the U.S. dollar as their functional currencies.
Foreign currency transactions are translated into each entity’s functional currency using the exchange rates prevailing at the dates of the transactions. Accordingly, foreign exchange gains and
losses resulting from the settlement of such transactions and the translation at financial period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss.
Income tax (expense)/benefit
Income tax (expense)/benefit for the six months ended December 31, 2023 and 2022 was a $0.2 million benefit and a $(2.0) million expense, respectively. The income tax benefit for the six months ended
December 31, 2023 was primarily due to the recognition of deferred tax benefits on accrued expenses and provisions. The income tax expenses for the six months ended December 31, 2022 was primarily due to accelerated tax depreciation utilised on
mining hardware.
Loss after income tax (expense)/benefit for the period
The loss after income tax expense for the six months ended December 31, 2023 and 2022 was $10.5 million and $161.9 million, respectively. The decreased loss is primarily attributable to the increase in bitcoin revenue
and the decrease in the impairment of assets during the six months ended December 31, 2023.
Comparison of the three months ended December 31, 2023 and 2022
Revenue
Bitcoin mining revenue
Our Bitcoin mining revenue for the three months ended December 31, 2023 and 2022, was $42.0 million and $13.8 million, respectively. This revenue was generated from the mining and sale of 1,144 and
723 Bitcoin during the three months ended December 31, 2023 and 2022, respectively. The $28.2 million increase in revenue comprises a $13.4 million increase attributable to the increase in the average Bitcoin price and $14.8 million attributable to
the increase in the average operating hashrate during the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, which was partially offset by the increase in the difficulty implied global hashrate during the
same period. Average operating hashrate increased to 5.6 EH/s for the three months ended December 31, 2023 from 2.2 EH/s for the three months ended December 31, 2022.
Other income
Other income for the three months ended December 31, 2023 and 2022, was $0.5 million and nil, respectively. Other income generated during the three months ended December 31, 2023 primarily comprised of $0.5 million
revenue generated for our participation in an ERCOT demand response program at the Group’s site at Childress.
Expenses
Depreciation
Depreciation expense for the three months ended December 31, 2023 and 2022, was $7.6 million and $11.5 million, respectively. This decrease was primarily due to the impairment of mining hardware recorded during the
three months ended December 31, 2022, resulting in a decreased depreciation charge recorded over the remaining portion of the useful economic life of the impaired assets.
Electricity charges
The electricity charges for the three months ended December 31, 2023 and 2022, was $16.7 million and $7.4 million, respectively. This increase was primarily due to the increase in average operating hashrate to 5.6 EH/s
for the three months ended December 31, 2023 from 2.2 EH/s for the three months ended December 31, 2022.
The electricity charges per Bitcoin mined increased from $10,183 for the three months ended December 31, 2022 to $14,638 for the three months ended December 31, 2023 primarily due to an increase in the average global
hashrate. The electricity charges per Bitcoin mined excludes other income generated for our participation in an ERCOT demand response program and the realized gain/(loss) on financial asset as outlined below.
Realized gain/(loss) on financial asset
Realized gain/(loss) on financial asset represents a gain on the electricity purchased and subsequently resold under a power supply agreement at the Group’s Childress site. Realized gain recorded on financial asset for
the three months ended December 31, 2023 and December 31, 2022 was $0.1 million and nil, respectfully. See note 7 of the unaudited interim consolidated financial statements included in this Form 6-K for further information.
Employee benefits expenses
Employee benefits expenses for the three months ended December 31, 2023 and 2022 was $4.3 million and $4.1 million, respectively. Both periods include employee benefits expenses consisting primarily of wages and
salaries paid to employees and contractors, and associated taxes.
Share-based payments expense
Share-based payments expense for the three months ended December 31, 2023 and 2022 were $6.0 million and $3.2 million, respectively. The increase was primarily due to amortization expenses recorded in relation to
incentives issued under our 2022 Long-Term Incentive Plan and 2023 Long-Term Incentive Plan. See note 17 of the unaudited interim consolidated financial statements included in this Form 6-K for further information.
Impairment of assets
Impairment of assets for the three months ended December 31, 2023 of and 2022 was nil and $105.2 million, respectively. During the three months ended December 31, 2023, we recorded an impairment of $105.2 million which
included an impairment of $90.5 million of mining hardware, $13.0 million related to mining hardware prepayments, $1.1 million related to development assets and $0.6 million related to goodwill.
Reversal of impairment of assets
Reversal of impairment of assets for the three months ended December 31, 2023 of and 2022 was $(0.1) million and nil, respectively. The reversal of impairment of assets for the three months ended December 31, 2023
reflects a reversal of $0.1 million on a previously impaired asset which was partially recovered.
Professional fees
Professional fees for the three months ended December 31, 2023 and 2022 was $2.3 million and $1.7 million, respectively. In the three months ended December 31, 2023 $0.3 million related to the audit fees and $0.6
million related to one-off costs in relation to the securities class action litigation.
Other operating expenses
Other operating expenses for the three months ended December 31, 2023 and 2022 was $7.8 million and $3.6 million, respectively. Other operating expenses represent insurance, marketing, office rent, travel, repairs and
maintenance, charitable donations, a provision for GST and PST on services exported to the Australian parent by certain Canadian subsidiaries, legal costs, and general business expenses required to operate the business (see note 4 to our
unaudited interim consolidated financial statements included in this Form 6-K). The increase primarily related to the expansion of the business operations and ongoing costs as a publicly listed company, and includes an increase of $0.6 million in
site expenses which include repairs and maintenance costs , $1.8 million in legal expenses, and $0.8 million and $0.3 million of a provision for non-refundable GST and PST, respectfully.
Gain/(loss) on disposal of assets
Our gain/(loss) on disposal of assets for the three months ended December 31, 2023 and 2022, were $0.01 million gain and $5.1 million loss, respectively. During the three months ended December 31, 2022, a net loss of
$5.1 million on disposal of mining hardware and other assets was recognised. No such sales occurred during the three months ended December 31, 2023.
Unrealized gain/(loss) on financial asset
Unrealized gain/(loss) on financial asset represents the change in the fair value of the financial asset recorded in relation to electricity purchased for future usage periods. The Group recorded an unrealized loss on
financial asset for the three months ended December 31, 2023 and December 31, 2022 of $0.3 million and nil respectively. See note 7 of the unaudited interim consolidated financial statements included in this Form 6-K for further information.
Finance expense
Finance expense for the three months ended December 31, 2023 and 2022 was $0.03 million and $10.4 million, respectively. Finance expense for the three months ended December 31, 2023 primarily relates to interest on the
lease liability. The decrease from the three month period ended December 31, 2022 primarily related to interest expense on borrowings including late fees and interest charged on third-party loans held by two of the Non-Recourse SPVs which were
deconsolidated during the year ended June 30, 2023 and as such did not recur during the three months ended December 31, 2023.
Interest income
Interest income for the three months ended December 31, 2023 and 2022 was $0.7 million and $0.3 million, respectively. The increase was primarily driven by an increase in interest rates and underlying cash deposits.
Foreign exchange loss
Foreign exchange loss for the three months ended December 31, 2023 and 2022 was $4.7 million and $6.2 million, respectively. The decrease in the loss reported was primarily related to foreign exchange movements in the
translation of assets and liabilities held in currencies other than the functional currency of the company holding the asset or liability. We use the U.S. dollar as our presentation currency; however, the companies in the Group use the Australian
dollar, Canadian dollar, or the U.S. dollar as their functional currencies.
Foreign currency transactions are translated into each entity’s functional currency using the exchange rates prevailing at the dates of the transactions. Accordingly, foreign exchange gains and losses resulting from the
settlement of such transactions and the translation at financial period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss.
Income tax (expense)/benefit
Income tax (expense)/benefit for the three months ended December 31, 2023 and 2022 was a benefit of $1.1 million and $0.4 million, respectively. The increase in benefit was primarily related to an increase in the
recognition of deferred tax benefits on accrued expenses and provisions.
Loss after income tax (expense)/benefit for the period
The loss after income tax expense for the three months ended December 31, 2023 and 2022 was $5.2 million and $144.0 million, respectively. The decrease was primarily attributable to the increased bitcoin mining revenue
and decrease in impairment and loss allowance for other receivables as discussed above.
Prior to our IPO, we primarily relied on private financings to fund our operations, meet ongoing working capital needs, and execute on our business plan’s initial stages. For example, in fiscal year 2021, we made the
following financings: (i) on October 28, 2020, we issued SAFE instruments at a conversion price of $2.57 (A$3.50) per Ordinary share; (ii) on January 5, 2021, we issued convertible notes at a conversion price of $2.57 (A$3.50) per Ordinary share;
(iii) on April 1, 2021 we issued convertible notes at a conversion price of $8.63 (A$11.75) per Ordinary share; and iv) on October 8, 2021 we issued convertible notes at a conversion price of $21.00 per Ordinary share. These SAFE instruments and
convertible notes were converted into 1,192,934 Ordinary shares, 8,067,517 Ordinary shares, 10,130,879 Ordinary shares and 5,443,778 Ordinary shares, respectively, upon consummation of the IPO on November 16, 2021.
On November 19, 2021, we consummated our IPO in which we issued 8,269,231 Ordinary shares for net proceeds of $215,330,775.
On September 23, 2022, we entered into an Ordinary shares purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with B. Riley Principal Capital II, LLC
(“B. Riley”). Pursuant to the Purchase Agreement, we have the right to sell to B. Riley up to $100.0 million of our Ordinary shares, subject to certain limitations and conditions set forth in the Purchase Agreement, from time to time during the
term of the Purchase Agreement ending on September 23, 2024, unless earlier terminated. Sales of our Ordinary shares pursuant to the Purchase Agreement, and the timing of any sales, are solely at our option, and we are under no obligation to sell
any securities to B. Riley under the Purchase Agreement. A resale registration statement relating to shares sold to B. Riley under the Purchase Agreement was subsequently declared effective by the SEC on January 26, 2023. As of December 31, 2023,
we had sold 24,342,138 Ordinary shares under the Purchase Agreement for aggregate gross proceeds of approximately $93.0 million (net proceeds of $90.2 million). On February 15, 2024, we terminated the Ordinary shares purchase agreement and
registration rights agreement terminating the offering and sale of its Ordinary shares that were registered thereunder.
On September 13, 2023, we entered into an At Market Sales Agreement (“Sales Agreement”) with B. Riley Securities, Inc., Cantor Fitzgerald & Co. and Compass Point Research & Trading, LLC (each a “Broker” and
collectively, “the Brokers”), pursuant to which we have the option, but not the obligation, to sell up to $300,000,000 of its Ordinary shares through or to the Brokers, for a period of up to 36 months (“the ATM Facility”). As of December 31,
2023, we had sold 4,679,200 Ordinary shares were under the Sales Agreement for aggregate gross proceeds of approximately $24.3 million (net proceeds of $23.5 million). Subsequent to December 31, 2023, we sold a further 19,660,120 Ordinary shares
for aggregate gross proceeds of approximately $92.9 million (net proceeds of $90.2 million).
The total number of Ordinary shares outstanding as of February 14, 2024, is 104,033,219.
We continue to monitor funding markets for opportunities to raise additional debt, equity or equity-linked capital to fund further capital or liquidity needs, and growth plans.
Going Concern Determination
The Group has determined there is material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern but has concluded it is
appropriate to prepare the consolidated financial statements on a going concern basis which contemplates continuity of normal business activities, the realization of assets and settlement of liabilities in the ordinary course of business. The
operating cash flows generated by the Group are inherently linked to several key uncertainties and risks including, but not limited to, volatility associated with the economics of Bitcoin mining and the ability of the Group to execute its
business plan.
For the six months ended December 31, 2023, the Group incurred a loss after tax of $10.5 million (December 31, 2022: $161.9 million) and net operating cash inflows of $21.2 million (December 31, 2022: outflows of $6.3
million). As at December 31, 2023, the Group had net current assets of $76.8 million (June 30, 2023: net current assets of $65.2 million) and net assets of $381.8 million (June 30, 2023: net assets of $305.4 million).
As further background, the Group’s miners are designed specifically to mine Bitcoin and its future success will depend in a large part upon the value of Bitcoin, and any sustained decline in its value could adversely
affect the business and results of operations. Specifically, the revenues from Bitcoin mining operations are predominantly based upon two factors: (i) the number of Bitcoin rewards that are successfully mined and (ii) the value of Bitcoin. A
decline in the market price of Bitcoin, increases in the difficulty of Bitcoin mining, changes in the regulatory environment, the halving event expected in the fourth fiscal quarter of fiscal year 2024 and/or adverse changes in other inherent
risks would significantly negatively impact the Group’s operations. Due to the volatility of the Bitcoin price and the effects of the other aforementioned factors, there can be no guarantee that future mining operations will be profitable.
The strategy to mitigate these risks and uncertainties is to try execute a business plan aimed at operational efficiency, revenue growth, improving overall mining profit, managing operating expenses and working capital
requirements, maintaining potential capital expenditure optionality, and securing additional financing, as needed, through one or more debt and/or equity capital raisings.
The continuing viability of the Group and its ability to continue as a going concern and meet its debts and commitments as they fall due are therefore significantly dependent upon several factors. These factors have been
considered in preparing a cash flow forecast over the next 12 months to consider the going concern of the Group.
The key assumptions include:
| • |
A base case scenario assuming recent Bitcoin prices and global hashrate, with a reduction in global hashrate following the halving event expected in the fourth fiscal quarter of fiscal year 2024;
|
| • |
Three operational sites in British Columbia, Canada with installed nameplate capacity of 160MW; 80MW Mackenzie (BC, Canada), 50MW Prince George (BC, Canada), and 30MW Canal Flats (BC, Canada).
|
| • |
A fourth operational site at Childress, Texas with initial installed nameplate capacity of 20MW incrementally increasing to 100 MW by June 30, 2024.
|
The key assumptions have been stress tested using a range of Bitcoin price and global hashrate scenarios including with respect to the halving event expected in the fourth fiscal quarter of fiscal
year 2024. The Group aims to maintain a degree of flexibility in both operating and capital expenditure cash flow management where it practicably makes sense, including ongoing internal cash flow monitoring and projection analysis performed to
identify potential liquidity risks arising and to try to respond accordingly.
As a result, the Group has concluded there is material uncertainty related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern and,
therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business. However, the Group considers that it will be successful in the above matters and will have adequate cash reserves to enable it
to meet its obligations for at least one year from the date of approval of the consolidated financial statements, and, accordingly, has prepared the consolidated financial statements on a going concern basis.
Off-Balance Sheet Arrangements
As of December 31 and June 30, 2023, we did not have any material off-balance sheet arrangements.
Historical Cash Flows
The following table sets forth a summary of our historical cash flows for the six months ended December 31, 2023, and December 31, 2022 presented.
|
Six Months
Ended
December 31,
2023
|
Six Months
Ended
December 31,
2022
|
|||||||
|
|
($ thousands)
|
($ thousands)
|
||||||
|
|
||||||||
|
Net cash from/(used) in operating activities
|
21,246
|
(6,263
|
)
|
|||||
|
Net cash used in investing activities
|
(74,258
|
)
|
(50,715
|
)
|
||||
|
Net cash from financing activities
|
74,114
|
(9,954
|
)
|
|||||
|
Net cash and cash equivalents increase/(decrease)
|
21,102
|
(66,932
|
)
|
|||||
|
Cash and cash equivalents at the beginning of the period
|
68,894
|
109,970
|
||||||
|
Effects of exchange rate changes on cash and cash equivalents
|
311
|
(2,377
|
)
|
|||||
|
Net cash and cash equivalents at the end of the period
|
90,307
|
40,661
|
||||||
Operating activities
Net cash from/(used in) operating activities was a net cash inflow of $21.2 million for the six months ended December 31, 2023, compared to a net cash outflow of $6.3 million for the six months ended December 31, 2022.
For the six months ended December 31, 2023, there was an increase in operating cashflows due in part to the increasing price of Bitcoin and increase in operating capacity of our miners to 5.6 EH/s.
Investing activities
Net cash used in investing activities was a cash outflow of $74.3 million for the six months ended December 31, 2023, compared to a cash outflow of $50.7 million for the six months ended December 31, 2022. For the six
months ended December 31, 2023, the net cash used in investing activities primarily consisted of payments for infrastructure and computer hardware for our sites in Childress, Texas, and British Columbia, Canada.
Financing activities
Net cash from financing activities was a net cash inflow of $74.1 million for the six months ended December 31, 2023, compared to a cash outflow of $10.0 million for the six months ended December 31, 2022. For the six
months ended December 31, 2023, the net cash inflow from financing activities primarily consisted of proceeds relating to both our committed equity facility and at the market offering program.
Contractual Obligations
Financial instruments and other liabilities
The following table summarizes our remaining contractual maturity for financial instruments and other liabilities as of December 31, 2023, and the years which these obligations are due:
|
1 year or
less
|
Between 1
and 2
years
|
Between 2
and 5 years
|
Over 5
years
|
Total |
||||||||||||||||
|
|
($ thousands)
|
|||||||||||||||||||
|
Non-interest bearing
|
||||||||||||||||||||
|
Trade and other payables
|
17,503
|
-
|
-
|
-
|
17,503
|
|||||||||||||||
|
Lease liability
|
341
|
247
|
406
|
2,220
|
3,214
|
|||||||||||||||
|
Total
|
17,844
|
247
|
406
|
2,220
|
20,717
|
|||||||||||||||
Hardware Purchase Contracts
The details of the Hardware Purchase Contracts are disclosed in the “Hardware Purchases” section above.
JOBS Act Election
We are an emerging growth company, as defined in the JOBS Act. We intend to rely on certain of the exemptions and reduced reporting requirements provided by the JOBS Act. As an emerging growth company, we are not
required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, and (ii) comply with any requirement that may be
adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and
analysis).
Legal Proceedings
From time to time, we may become involved in legal proceedings arising in the ordinary course of business. There have been no material changes to the Company’s legal proceedings as disclosed in “Item 4.B. Information on
the Company—Business Overview” in our Annual Report, except as described in note 15 of the unaudited interim consolidated financial statements included in this Form 6-K.
Risk Factors
There have been no material changes to the Company’s risk factors as disclosed in “Item 3.D. Key Information—Risk Factors” in our Annual Report.