Mercurity Fintech Holding Inc. Reports First Half 2022 Financial Results
Mercurity Fintech Holding Inc. (MFH) reported significant financial growth for the first half of 2022, with revenues soaring to USD$783,089, a dramatic increase of 13254.18% from USD$5,864 in the same period of 2021. Despite a GAAP gross loss of USD$508,695 and a net loss of USD$2,368,573, the company highlighted improved cost management, reflecting an 84.51% reduction in net loss year-over-year. Strategic shifts include divesting from certain Asian operations and refocusing on global markets, particularly the U.S., amid ongoing challenges in the cryptocurrency market.
- Revenue increased by 13254.18% to USD$783,089 in H1 2022.
- GAAP net loss decreased by 84.51% from USD$15,295,667 in H1 2021.
- General and administrative expenses dropped by 81.14% to USD$1,247,344.
- Successful completion of three financing rounds in Q4 2022, raising significant capital.
- GAAP gross loss of USD$508,695 compared to a gross profit the previous year.
- Non-GAAP net loss increased by 108.70% to USD$1,439,610.
- Delay in launching large-scale physical cryptocurrency mining operations due to market conditions.
NEW YORK, Dec. 29, 2022 (GLOBE NEWSWIRE) -- Mercurity Fintech Holding Inc. (the "Company," "we," "us," "our company," or "MFH") (Nasdaq: MFH), a digital fintech group powered by blockchain technology, today announced its unaudited financial results for the six months ended June 30, 2022.
First Half 2022 Financial and Operating Highlights
- GAAP revenue - First half 2022 GAAP revenues of USD
$783,089 , compared to revenues of USD$5,864 in first half 2021, reflecting an increase of13254.18% in GAAP revenue and demonstrating the Company’s enhanced profitability and diversified revenue stream in the six months ended June 30, 2022. - GAAP gross loss - First half 2022 GAAP gross loss of USD
$508,695 , compared to gross profit of USD$5,864 in first half 2021, reflecting an increase of8774.88% in GAAP gross loss. - GAAP net loss - First half 2022 GAAP net loss of USD
$2,368,573 , compared to net loss of USD$15,295,667 in first half 2021, reflecting a decrease of84.51% in GAAP net loss and demonstrating the Company’s cost management improvement. - Non-GAAP net loss - First half 2022 Non-GAAP net loss of USD
$1,439,610 , compared to net loss of USD$689,786 in first half 2021, reflecting an increase of108.70% in non-GAAP net loss.
Mr. Shi Qiu, the Chief Executive Officer (“CEO”), commented, “MFH has reinvented itself in the first half of 2022 with the changes of our Board of Directors (the “Board” or the “Board of the Company” or the “Board of Directors”) and the management team, and has focused on setting the foundations for future business opportunities. Specifically, we have been divesting certain operations in Asia and moving toward global operations focusing on the United States. These are significant changes and as our Company continues to evolve with the future blockchain technologies, we expect to profit considerably in years to come. Despite the crypto winter and unpredictable capital markets, we are satisfied with how our Company has navigated these difficult market conditions; having increased revenue, cut overhead costs, and received significant investments through three rounds of financing in the fourth quarter of 2022. Through the capital raises and recent management restructuring, we have reaffirmed our Company’s core values with a focus on our shareholders and have set the foundations for robust future growth opportunities in 2023.”
RECENT DEVELOPMENTS
Dismantling of the VIE structure and divestment in companies in mainland China controlled by VIE agreements
On January 15, 2022, the Company disposed two of its variable interest entities, Beijing Lianji Technology Co., Ltd. (“Beijing Lianji”) and Beijing Mercurity Technology Co., Ltd. (“Beijing Mercurity”), both of which were under the control by Beijing Lianji Future Technology Co., Ltd. (“Lianji Future”), a wholly foreign owned subsidiary of the Company. On January 15, 2022, Lianji Future, Beijing Mercurity and Zhiyou Wang entered into a VIE termination agreement (the “Beijing Mercurity VIE Termination Agreement”) pursuant to which the parties thereto have agreed to terminate any and all of the control agreements among the parties and terminate the stock pledge on the shares of Beijing Mercurity held by Zhiyou Wang. In connection with the Beijing Mercurity VIE Termination Agreement, on January 15, 2022, Lianji Future, Beijing Mercurity, Ucon Capital (HK) Limited (“Ucon”), Mercurity Limited (“Mercurity BVI”) and the Company entered into a credit transfer agreement (the “Beijing Mercurity Credit Transfer Agreement”), whereby Beijing Mercurity transferred its right to receive RMB 3,543,697 Chinese Yuan (the “Beijing Mercurity Receivable”) from a third party to Lianji Future, effective immediately. Zhiyou Wang was a shareholder of the Company. Other than the Beijing Mercurity Receivable, as of January 15, 2022, the Company has divested all the other assets and liabilities of Beijing Mercurity, which was not material due to the decline and suspension of Beijing Mercurity’s defi platform business.
Additionally, on January 15, 2022, Lianji Future, Beijing Lianji, Jie Zhou and Zhiyou Wang entered into a VIE termination agreement (the “Beijing Lianji VIE Termination Agreement”) pursuant to which the parties thereto have agreed to terminate any and all of the control agreements among the parties and terminate the stock pledge on the shares of Beijing Lianji held by Zhiyou Wang (
Since January 15, 2022, the Company has neither controlled nor owned Beijing Lianji or Beijing Mercurity and the Company no longer owns any companies controlled by any VIE agreement as of the date herein.
Efforts to recover the Company’s misplaced digital assets (the “Recovery Proceeding”)
In late February 2022, it came to the Company’s attention that the Company could not reach Wei Zhu (“Zhu”), the Company’s former acting Chief Financial Officer, former Co-Chief Executive Officer, and a former member and Co-Chairperson of the Board, and Minghao Li (“Li”), a former member of the Board. Around that time, the Company realized that it temporarily lost control of all cryptocurrencies attributed to the Company. The book value on June 30, 2022 of the Bitcoins and USD Coins stored in the out-of-control wallets was USD
PRC law firm Deheng Law Office (“Deheng”) has been representing the Company in their efforts to recover the seized cold wallet and cryptocurrencies from the Public Security Bureau. On November 21, 2022, Deheng submitted the complaint and evidentiary materials to the Public Security Bureau according to the Criminal Procedure Law and the Provisions on Procedures of Handling Criminal Cases by Public Security Organs (the “Law”). As of December 23, 2022, the Company and Deheng had not received any definitive response from the Public Security Bureau. The Company together with its PRC counsel will continue to vigorously pursue the Recovery Proceeding, attempting to regain its cold wallet and cryptocurrencies contained therein, which the Company believes were wrongfully seized and impounded by the Public Security Bureau.
As the Recovery Proceeding has not yet concluded, the Company’s financial statements for the first half of 2022 does not reflect the digital assets currently being held temporarily by the Chinese authorities.
Overview of business development for the first half of 2022
In the second half of 2021, the Company added cryptocurrency mining as one of the main businesses going forward. The Company has entered into digital asset mining pools by executing a business contract with a collective mining service provider to provide computing power to the mining pool and derived USD
According to the Company's five-year business plan laid out in the second half of 2021, the Company had originally planned to start physical cryptocurrency mining operations in the United States on a large scale in March 2022, but due to the Recovery Proceeding and the Bitcoin market price crash, the Company has delayed the implementation of some of these projects.
The Company also has focused on blockchain technology services since the second half of 2021, including designing and developing digital asset transaction platforms, digital asset quantitative investment software and other innovative and derivative services based on blockchain technologies, but in the first half of 2022, due in large part to the sustained cryptocurrency bear market and the time it takes for new technologies to achieve mass adoptions, the Company had yet to generate significant revenue from its blockchain technology services.
In the first half of 2022, the Company completed a novel software for the quantitative trading of digital assets through independent research and development. The software will first be implemented internally to enhance the quantitative cryptocurrency investment business before it will be made available to the public.
Changes in the Board and Management in the Six Months Ended June 30, 2022
There is no denying that the Recovery Proceeding has created some challenges regarding the Company’s daily operations in 2022. In response to the Recovery Proceeding, the Company underwent a series of significant changes in the Board of Directors and the management team.
On March 28, 2022, Mr. Wei Zhu resigned from the Director, the Co-Chairperson, the Acting Chief Financial Officer, and the Co-Chief Executive Officer positions from the Board and the Company, and Mr. Minghao Li resigned from the Director position from the Board of the Company on the same day. On April 7, 2022, the Board of the Company appointed Mr. Xuehui He and Mr. Yunhui Jin as Independent Directors of the Board, and Mr. Wenjie Han, and Mr. Junjie (Keith) Tan as Directors of the Board.
On April 13, 2022, Samuel Shen, Tony C. Luh, and Paul L. Gillis, each an Independent Director of the Company (each “Departing Director”), resigned from the Board of the Company because each Departing Director did not agree with certain other members of the Board regarding their requests for an internal inquiry and confirmation of certain events disclosed in the Company’s current reports on Form 6-K filed on April 11, 2022 and April 13, 2022.
On May 6, 2022, Mr. Laibin Ding, Mr. Wenjie Han, and Mr. Yunhui Jin resigned from the Directors positions of the Board of the Company for their personal reasons. On May 7, 2022, Mr. Xuehui He resigned from the Director position from the Board of the Company due to personal reasons.
On May 7, 2022, the Board of the Company elected Shi Qiu, Xiang Qu, and Er-Yi Toh as new Directors of the Company, among whom Xiang Qu and Er-Yi Toh are deemed Independent Directors, and the Board removed Hua Zhou as the Chairperson of the Board and elected Huahui Deng as the Chairman of the Board. The Board also removed Hua Zhou as the Chief Executive Officer of the Company and appointed Shi Qiu as the new Chief Executive Officer of the Company, and appointed Cheng Hock Phuah as the new Chief Financial Officer of the Company.
In connection with the changes of the Board of Directors and the management team, the Company has been shifting directions and focusing on finding new funds and new business opportunities particularly related to its global business operations.
On June 13, 2022, the Company issued a promissory note (the “Note”) to Ying Wang (the “Noteholder”), a Singapore resident, in the principal amount of up to USD
FINANCIAL RESULTS
For the First Half Ending June 30, 2022:
Revenues were USD
General and administrative expenses were USD
Impairment loss of intangible assets for the first half of 2022 was USD
Loss from operations in the first half of 2022 was USD
Loss before provision for income taxes in the first half of 2022 was USD
Non-GAAP net (loss)/income attributable to Mercurity Fintech Holding Inc. is a non-GAAP measure which excludes amortization of acquired intangible assets, impairment loss, share-based compensation, and related provision for income tax expenses. Non-GAAP net loss attributable to Mercurity Fintech Holding Inc. was USD
Cash and cash equivalents were USD
Intangible assets, net were USD
Non-GAAP Measures
To supplement the Company's consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("U.S.GAAP"), the Company uses non-GAAP financial measures, including Non-GAAP loss/income from continuing operations and Non-GAAP net loss/income attributable to the Company, that are adjusted from results based on U.S. GAAP to exclude amortization of acquired intangible assets, impairment loss, share-based compensation and related provisions for income tax expenses. The non-GAAP financial information is provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors' overall understanding of the historical and current financial performance of the Company's operations and prospects for the future. The non-GAAP financial information should be considered in addition to results prepared in accordance with U.S. GAAP but should not be considered a substitute for or superior to U.S. GAAP financial results. In addition, the Company's calculations of this non-GAAP financial information may be different from the calculations used by other companies, and therefore comparability may be limited. A limitation of using these non-GAAP financial measures is that amortization of acquired intangible assets, impairment of goodwill, share-based compensation and related provision for income tax benefits have been and may continue to be for the foreseeable future significant recurring expenses in the Company's results of operations. The Company compensates for these limitations by providing reconciliations of non-GAAP financial measures to U.S. GAAP financial measures. Please see the reconciliation tables at the end of this earnings release.
BUSINESS OUTLOOK
On July 15, 2022, the Company incorporated Mercurity Fintech Technology Holding Inc. (the “Consultant”), which plans to develop cryptocurrency consultation services, including business and financial advisory services for small-scale enterprises in the cryptocurrency industry. On August 23, 2022, the Consultant signed a Consulting Agreement with a Chinese media company (the “Client”), pursuant to which the Consultant will serve as an independent contractor in order to facilitate the Client to conduct its initial public offering (the “IPO”). The Consulting Agreement shall continue until December 31, 2024 unless terminated earlier by both parties. In accordance with the Consulting Agreement, the total cash payment for the Consultant’s services shall be USD
On October 9, 2022, the Board of the Company appointed Lynn Alan Curtis, Daniel Kelly Kennedy, Zheng Cui, Qian Sun, and Hui Cheng as new Directors of the Company, among whom Lynn Alan Curtis, Zheng Cui, and Hui Cheng are deemed independent. On October 9, 2022, the Company appointed Qian Sun to be the Chief Executive Officer and Director of Mercurity Fintech Technology Holding Inc. (the “U.S. Subsidiary”).
On November 11, 2022, the Company entered into a Securities Purchase Agreement in connection with a private investment in public equity (the “PIPE”) financing with certain non-U.S. investors to offer and sell the Company’s units, each consisting of one ordinary share and three warrants for total gross proceeds of USD
On November 11, 2022, Cheng Hock Phuah resigned the Chief Financial Officer position of the Company without any disagreement from the Company on any matter relating to its operations, accounting policies, or practices. On November 13, 2022, the Board of Directors of the Company appointed Yukuan Zhang, previously served as the Chief Accountant of the Company, as the new Chief Financial Officer to fill the vacancy created by Mr. Phuah’s resignation.
On November 21, 2022, the Company held a shareholders' meeting, the proposals approved by the requisite majority of the votes cast by the shareholders that attended the Meeting by proxy or in person are as follows: 1) Election of Shi Qiu, Xiang Qu, Er-Yi Toh, Cong Huang, Keith Tan Jun Jie, Lynn Alan Curtis, Daniel Kelly Kennedy, Zheng Cui, Qian Sun, and Hui Cheng, to serve the Board of Directors of the Company, until the next annual shareholders meeting and until their successors are duly elected and qualified. 2) Approval of the reverse split (the “Reverse Split”) of the Company’s issued ordinary shares at a ratio of not less than one (1)-for-three hundred sixty (360) and not more than one (1)-for-seven hundred twenty (720), with the exact ratio to be set at a whole number within this range to be determined by the Company’s Board, or any duly constituted committee thereof, in its discretion. 3) Suspension of the trading of the Company’s American Depositary Receipts / Shares (“ADRs”), termination of the Deposit Agreement for the ADRs among the Company, its depositary bank, Citibank, N.A., and the holders and beneficial owners of the Company’s ADRs, the exchange of ADRs for the corresponding ordinary shares of the Company, and commencement of trading of the Company’s ordinary shares on the Nasdaq Stock Market upon the effectiveness of the Reverse Split.
At the annual shareholders’ meeting held on November 21, 2022 (the “2022 Annual Shareholder Meeting”), the Board and management of the Company reformulated the Company's development strategy for the next three years. The Company's business will include: 1) digital asset business, including cryptocurrency mining and quantitative investment; 2) Blockchain technology services business, including designing and developing digital asset transaction platforms, digital asset quantitative investment software and other innovative and derivative services based on blockchain technologies; 3) cryptocurrency consultation services, providing industry advisory services and financial advisory services for small-scale enterprises in the cryptocurrency industry.
The Company is currently creating a digital report, which it will release publicly in early 2023, detailing more specific plans related to the three-year growth strategy as outlined by the Board of Directors and management team at the 2022 Annual Shareholder Meeting. According to Shi Qiu, the Company’s CEO “It took hundreds of years to build Wall Street, but with crypto everything is accelerated. We plan to dedicate the next three years, during fluctuating market conditions, to building the Web3 and blockchain infrastructure of the future, and we believe that we will prosper from our business model and steadfast devotion to this exciting and ever-expanding space.”
On November 30, 2022, the Company entered into a Securities Purchase Agreement with two investors to offer and sell the Company’s units, each consisting of one ordinary share and three warrants for total gross proceeds of USD
On December 15, 2022, the Company (the "Purchaser") entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Huangtong International Co., Ltd. (the "Vendor" or “Huangtong International”), providing for the acquisition and purchase of Web3 decentralized storage infrastructure, including cryptocurrency mining servers, cables, and other electronic devices (the “Assets”), for an aggregate consideration of USD
On December 23, 2022, the Company entered into a Securities Purchase Agreement in connection with a private investment in public equity (the “PIPE”) financing with an accredited non-U.S. investor to offer and sell the Company’s units, each consisting of one ordinary share and three warrants for total gross proceeds of USD
SAFE HARBOR STATEMENT
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "aim," "anticipate," "believe," "estimate," "expect," "hope," "going forward," "intend, " "ought to, " "plan, " "project," "potential," "seek," "may," "might," "can," "could," "will," "would," "shall," "should," "is likely to" and the negative form of these words and other similar expressions. Among other things, statements that are not historical facts, including statements about the Company's beliefs and expectations are or contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. All information provided in this press release is as of the date of this press release and is based on assumptions that the Company believes to be reasonable as of this date, and the Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
CONTACTS
Ke Yang
Mercurity Fintech Holding Inc.
ir@mercurityfintech.com
Tel: + 86 18234456883
International Elite Capital Inc.
Vicky Chueng
Tel: +1(646) 866-7989
Email: mfhfintech@iecapitalusa.com
MERCURITY FINTECH HOLDING INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(US dollars in thousands, except for number of shares and per share (or ADS) data)
| Six Months Ended June 30, | |||||||
| 2022 | 2021 | ||||||
| Revenues | |||||||
| Technical services | - | 6 | |||||
| Digital asset mining | 783 | - | |||||
| Total revenues | 783 | 6 | |||||
| Cost of revenues | (1,292 | ) | - | ||||
| Gross profit | (509 | ) | 6 | ||||
| Operating expenses: | |||||||
| General and administrative | (1,247 | ) | (6,612 | ) | |||
| Provision for doubtful accounts | (4 | ) | - | ||||
| Loss on disposal of intangible assets | (30 | ) | - | ||||
| Impairment loss of intangible assets | (573 | ) | (373 | ) | |||
| Total operating expenses | (1,854 | ) | (6,985 | ) | |||
| (Loss)/income from operations | (2,363 | ) | (6,979 | ) | |||
| Interest income, net | - | 1 | |||||
| Other income/(Expenses), net | (1 | ) | - | ||||
| Loss from disposal of VIEs | (5 | ) | - | ||||
| (Loss)/income before provision for income taxes | (2,369 | ) | (6,979 | ) | |||
| Income tax benefits | - | - | |||||
| (Loss)/Income from continuing operations | (2,369 | ) | (6,979 | ) | |||
| Discontinued operations: | |||||||
| Loss from discontinued operations | - | (8,317 | ) | ||||
| Net loss | (2,369 | ) | (15,296 | ) | |||
| Net loss per ordinary share | ||||||
| Basic | (0.00 | ) | (0.00 | ) | ||
| Diluted | (0.00 | ) | (0.00 | ) | ||
| Weighted average shares used in calculating net loss per ordinary share | ||||||
| Basic | 5,143,716,229 | 3,404,459,129 | ||||
| Diluted | 5,143,716,229 | 3,404,459,129 | ||||
MERCURITY FINTECH HOLDING INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(US dollars in thousands)
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
Net loss | (2,369 | ) | (15,296 | ) | ||||
| Other comprehensive loss | ||||||||
| Change in cumulative foreign currency translation adjustment | 20 | 6 | ||||||
| Comprehensive loss | (2,349 | ) | (15,290) | |||||
MERCURITY FINTECH HOLDING INC.
CONSOLIDATED BALANCE SHEETS
(US dollars in thousands)
| June 30, 2022 | December 31, 2021 | |||||
ASSETS: | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | 205 | 441 | ||||
| Accounts receivable, net | - | - | ||||
| Prepaid expenses and other current assets, net | 11 | 1,295 | ||||
| Amounts due from related parties | - | 2 | ||||
| Current assets of discontinued operations | - | 4 | ||||
| Total current assets | 216 | 1,742 | ||||
| Non-current assets: | ||||||
| Intangible assets, net | 7,409 | 8,197 | ||||
| Goodwill | ||||||
| Deferred tax assets | ||||||
| Total non-current assets | 7,409 | 8,197 | ||||
| TOTAL ASSETS | 7,625 | 9,939 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||
| Current liabilities: | ||||||
| Accrued expenses and other current liabilities | 88 | 218 | ||||
| Amounts due to related parties | 932 | 1,123 | ||||
| Current liabilities of discontinued operations | - | 31 | ||||
| Total current liabilities | 1,020 | 1,372 | ||||
| TOTAL LIABILITIES | 1,020 | 1,372 | ||||
Commitments and contingencies | ||||||
| Shareholders' equity: | ||||||
| Ordinary shares | 50 | 49 | ||||
| Additional paid-in capital | 668,539 | 668,184 | ||||
| Accumulated deficit | (663,135 | ) | (660,766 | ) | ||
| Accumulated other comprehensive income | 1,151 | 1,100 | ||||
| Total shareholders' equity | 6,605 | 8,567 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 7,625 | 9,939 | ||||
MERCURITY FINTECH HOLDING INC.
Reconciliation of Non-GAAP financial measures to comparable GAAP measures
(US dollars in thousands)
| Six Months Ended June 30, | |||||||
| 2022 | 2021 | ||||||
Loss from continuing operations | (2,369 | ) | (6,979 | ) | |||
| Net loss attributable to Mercurity Fintech Holding Inc. | (2,369 | ) | (15,296 | ) | |||
| Amortization of acquired intangible assets (a) | - | - | |||||
| Provision for income tax expenses (b) | - | - | |||||
| Share-based compensation (c) | 356 | 6,126 | |||||
| Impairment loss from continuing operations (d) | 573 | 373 | |||||
| Impairment loss attributable to Mercurity Fintech Holding Inc. (d) | 573 | 8,480 | |||||
Non-GAAP (loss)/income from continuing operations (a)(b)(c)(d) | (1,440 | ) | (480) | ||||
| Non-GAAP net (loss)/income attributable to Mercurity Fintech Holding Inc.(a)(b)(c)(d) | (1,440 | ) | (690) | ||||
| Notes: | |||||||
| (a) Adjustment to exclude amortization of acquired intangible assets | |||||||
| (b) Adjustment to exclude provision for income tax expenses | |||||||
| (c) Adjustment to exclude share-based compensation | |||||||
| (d) Adjustment to exclude impairment loss | |||||||
FAQ
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