NEW YORK, April 25, 2023 — 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 financial results for the twelve months concluded on December 31, 2022. Despite challenging market conditions, MFH has made remarkable strides in both its financial performance and business operation. This includes expanding revenue streams, minimizing company losses, enhancing liquidity, and optimizing business operations by adopting a global structure headquartered in the United States and diversifying the board structure. These measures have collectively fortified the Company’s market position, paving the way for future growth and expansion.
Full Year Financial Highlights
- GAAP revenue – MFH generated total revenue on a consolidated basis in the amounts of $863,438 for the year ended December 31, 2022, and $670,171 for the year ended December 31, 2021. The increased revenue comes from the cryptocurrency mining business and expansion of consultation services.
- GAAP operating expenses – MFH’s total operating expenses decreased significantly from $13,273,814 for the year ended December 31, 2021, to $5,368,222 for the year ended December 31, 2022. The narrowing expenses comes from the adoption of new business strategy, efficiency of the management and operation, optimizing of the compensation structure etc.
- GAAP net loss – MFH’s net loss decreased significantly from US$21,665,704 for the year ended December 31, 2021, to US$5,634,971 for the year ended December 31, 2022.
- GAAP gross profit – MFH’s gross profit increased from $32,508 for the year ended December 31, 2021, to $517,162 for the year ended December 31, 2022.
- As of December 31, 2022, the Company held 125.8584797 Bitcoins with a book value of $5,972,282; 2,005,537.50 USD Coins with a book value of $2,003,332; and 104762.0706 Filecoins with a book value of $315,376.
Full Year Business Highlights
- Improved Company liquidity and funding conditions to support operations and growth. The successful completion of three rounds of financing in the fiscal year of 2022, totaling $13.15 million, demonstrated investor confidence in the Company’s prospects. These funds will be used to accelerate the Company’s growth plans and further solidify its position as a leader in the cryptocurrency mining and distributed computing space.
- Expanded business lines. The Company diversified its business in the second half of 2022 and made significant progress in expanding its operations. The Company’s future business plan includes three main areas: distributed computing and storage services business, digital consultation services, and blockchain technical services business. On July 15, 2022, MFH incorporated Mercurity Fintech Technology Holding Inc. in the U.S., which plans to develop distributed computing and storage services and digital consultation services.
- Position for the long-term growth with cryptocurrency mining machines and web3 infrastructure. The Company’s strategic investments in state-of-the-art cryptocurrency mining machines and web3 infrastructure building technology are made with an aim to own mining machines capable of gathering, processing, and storing vast amounts of data, and to further solidify the Company as a pioneer in the creation of the Web3 framework.
- Dismantling of the VIE structure and shifting toward a global structure headquartered in the United States. This progress enables the Company to better navigate regulatory challenges in the cryptocurrency and blockchain industry and tap into a broader range of potential customers and partners. Furthermore, the move enhances the Company’s reputation and credibility as a serious player in the industry and is likely to attract more investors, partners, and customers.
- A diversified board structure and expertise. MFH announced appointment of new directors to the board, the new board brings a wider range of perspectives, experiences, and expertise to the table. This can lead to better decision-making, improved risk management, and the ability to capitalize on new opportunities.
Mr. Shi Qiu, the Chief Executive Officer (“CEO”), commented, “The progress we have made in 2022 despite the challenges we faced is a testament to our resilience and commitment to excellence. Our successful financing rounds and strategic investments in cryptocurrency mining machines and web3 infrastructure building technology have positioned us well for continued growth and success in the years ahead; Our efforts in restructuring the Company have borne fruit, as demonstrated by the reduction in net loss and also operating expenses; We shifted towards a global structure, which positions us to take advantage of the vast opportunities presented by the North American market. We are confident that our global presence will enable us to better serve our clients and expand our offerings; Finally, we diversified our business offerings to include a broader range of services, including those focused on reciprocal synergies between blockchain and traditional finance. We believe that this expansion will not only provide us with new growth opportunities but will also allow us to better cater to the evolving needs of our clients. Looking forward, the Company is poised to maintain its position as a leader in the industry and deliver long-term value to our shareholders.”
Full Year Financial Results
For the Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Revenue: MFH generated total revenue on a consolidated basis in the amounts of $863,438 for the year ended December 31, 2022, and $670,171 for the year ended December 31, 2021.
Cost of Revenue: MFH generated total cost of revenue on a consolidated basis in the amounts of $1,380,600 for the year ended December 31, 2022, and $702,679 for the year ended December 31, 2021.
Operating expenses: MFH’s operating expenses consist of sales and marketing expenses, general and administrative expenses, provision for doubtful accounts, (loss)/income on disposal of intangible assets and impairment loss of intangible assets. MFH’s total operating expenses were $13,273,814 and $5,368,222 for the year ended December 31, 2021 and 2022.
Goodwill impairment loss: $8,107,013 goodwill impairment loss generated by the VIE entities subject to divestment is shown as loss/income from discontinued operations in the consolidated income statement for the year ended December 31, 2021. The balance sheet at the end of 2021 and 2022 resulted in no goodwill impairment loss.
Loss from disposal of subsidiaries: Due to the extremely adverse regulatory measures taken by the Chinese government in 2021 in the field of digital currency production and transaction, the Company’s board of Directors decided on December 10, 2021, to divest the Chinese companies of the related business controlled through VIE agreements, and the divestiture was completed on January 15, 2022. The financial statements of the Company for the year ended December 31, 2022 recognized the loss from disposal of VIEs as $4,664. No disposal of subsidiaries occurred in 2021.
Interest Income, net: MFH’s interest income consists primarily of the interest income from MFH’s cash and short-term deposits with banks and compensation received for payments MFH made on behalf of the divested business. MFH generated $5,118 interest income in 2022 and $1,083 interest income in 2021. MFH did not incur borrowing interest expenses in 2021 and 2022.
Other Income/(expenses): Other income consists primarily of the gain generated from the government subsidies. MFH generated $1,248 other income in 2022 and $143 other expenses in 2021.
Net loss: MFH’s net loss was US$21,665,704 for the year ended December 31, 2021 compared to US$5,634,971 for the year ended December 31, 2022. Among them, MFH’s loss from continuing operations was US$13,305,382 for the year ended December 31, 2021 compared to US$5,634,971 for the year ended December 31, 2022, MFH’s loss from discontinued operations was US$8,360,322 for the year ended December 31, 2021 compared to US$ nil for the year ended December 31, 2022.
Full Year Operation Results
In August 2021, MFH added cryptocurrency mining as one of MFH’s main businesses going forward. MFH entered into cryptocurrency mining pools by executing a business contract with a collective mining service provider on October 22, 2021 to provide computing power to the mining pool and derived USD$664,307 related revenue in 2021 and USD$783,089 related revenue in the first half of 2022.
Due to the extremely adverse regulatory measures taken by the Chinese government in 2021 in the field of digital currency production and transaction, MFH’s board of directors decided on December 10, 2021 to divest the Chinese companies of the related business controlled through VIE agreements, and the divestiture was completed on January 15, 2022. The disposal of the VIE entities generated a loss of $4,664.
In late February 2022, Wei Zhu, MFH’s former acting Chief Financial Officer, former Co-Chief Executive Officer, and a former member and Co-Chairperson of the Board, and Minghao Li, a former member of the Board, were suspected of certain criminal offenses unrelated to MFH’s operations and were detained by the Economic Crime Investigation Detachment of Sheyang County Public Security Bureau, Yancheng City, Jiangsu Province, People’s Republic of China, leading to MFH’s hardware cold wallet and all cryptocurrencies held by Wei Zhu being seized and impounded by the Public Security Bureau.
Due to the dismantling of the VIEs and the cessation of all business related to the digital asset transaction platforms, as well as the temporary difficulties brought to us by the incident that MFH’s cryptocurrencies were out of control, the original Chinese technical team also left in the first half of 2022, and MFH failed to rebuild the technical service team in the second half of 2022. As a result, MFH’s blockchain technical services business did not generate any revenue in 2022.
In the second half of 2022, the management and board of the Company changed, and the future business plan was recalibrated as a result. The Company’s business will include: 1) Distributed computing and storage services business, including cryptocurrency mining and distributed computing and storage services for more other applications; 2) Digital consultation services, providing digital payment solutions, asset management, and a continued expansion into online and traditional brokerage services; 3) Blockchain technical service businesses, providing the designing and developing of digital asset transaction platforms, digital asset quantitative investment software and other innovative and derivative services based on blockchain technologies.
On July 15, 2022, MFH incorporated Mercurity Fintech Technology Holding Inc.(“MFH Tech”) to develop distributed computing and storage services (including cryptocurrency mining) and digital consultation services. On August 23, 2022, MFH Tech signed a Consulting Agreement with a Chinese media company, pursuant to which MFH Tech will serve as an independent contractor in order to facilitate the Client to conduct its initial public offering, and derived USD$80,000 related revenue in 2022.
On December 15, 2022, MFH entered into an asset purchase agreement with Huangtong International Co., Ltd., providing for the acquisition and purchase of Web3 decentralized storage infrastructure, including cryptocurrency mining servers, cables, and other electronic devices, for an aggregate consideration of USD$5,980,000, payable in MFH’s ordinary shares. The investment is made with an aim to own mining machines capable of gathering, processing, and storing vast amounts of data, to advance the cryptocurrency mining business, and to further solidify us as a pioneer in the creation of the Web3 framework.
On December 20, 2022, the assets began to be used for Filecoin mining operations and derived USD$348 related revenue in 2022.
About Mercurity Fintech Holding Inc.
Mercurity Fintech Holding Inc. is a digital fintech group powered by blockchain technology. The Company’s primary business scope includes digital asset trading, asset digitization, cross-border remittance, and other services, providing compliant, professional, and highly efficient digital financial services to its customers. The Company recently began narrowing its focus on Bitcoin mining, digital currency investment and trading, and other related fields. This shift has enabled the company to deepen its involvement in all aspects of the blockchain industry, from production to circulation.
Forward-Looking Statements
This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results.
For more information, please contact:
International Elite Capital Inc.
Vicky Chueng
Tel: +1(646) 866-7989
Email: mfhfintech@iecapitalusa.com
MERCURITY FINTECH HOLDING INC.
FORMERLY KNOWN AS JMU LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN U.S. DOLLARS, EXCEPT FOR NUMBER OF SHARES AND PER SHARE (OR ADS) DATA)
| For the year Ended December 31, | ||||||||||||||
| Note | 2022 | 2021 | 2020 | |||||||||||
| ( as restated ) | ( as restated ) | |||||||||||||
| Revenue: | ||||||||||||||
| Technical services | – | 5,864 | 1,402,300 | |||||||||||
| Cryptocurrency mining | 783,438 | 664,307 | – | |||||||||||
| Consultation services | 80,000 | – | – | |||||||||||
| Total Revenue | $ | 863,438 | $ | 670,171 | $ | 1,402,300 | ||||||||
| Cost of Revenue: | ||||||||||||||
| Technical services | – | – | (79,150 | ) | ||||||||||
| Cryptocurrency mining | (1,361,600 | ) | (702,679 | ) | – | |||||||||
| Consultation services | (19,000 | ) | – | – | ||||||||||
| Total Cost of Revenue | $ | (1,380,600 | ) | $ | (702,679 | ) | $ | (79,150 | ) | |||||
| Gross profit | $ | (517,162 | ) | $ | (32,508 | ) | $ | 1,323,150 | ||||||
| Operating expenses: | ||||||||||||||
| Sales and marketing | (35,000 | ) | – | – | ||||||||||
| General and administrative | (2,156,063 | ) | (10,351,357 | ) | (1,156,574 | ) | ||||||||
| Provision for doubtful accounts | (3,138 | ) | (1,750,909 | ) | – | |||||||||
| (Loss)/income on disposal of intangible assets | (29,968 | ) | 121,020 | – | ||||||||||
| Impairment loss of intangible assets | 9 | (3,144,053 | ) | (1,292,568 | ) | (835,344 | ) | |||||||
| Impairment loss of goodwill | – | – | – | |||||||||||
| Total operating expenses | $ | (5,368,222 | ) | $ | (13,273,814 | ) | $ | (1,991,918 | ) | |||||
| Operating loss from continuing operations | $ | (5,885,384 | ) | $ | (13,306,322 | ) | $ | (668,768 | ) | |||||
| Interest income, net | 5,118 | 1,083 | 7,983 | |||||||||||
| Other income/(expenses), net | 1,248 | (143 | ) | (32,533 | ) | |||||||||
| Loss from disposal of subsidiaries | 1 | (4,664 | ) | – | – | |||||||||
| Loss before provision for income taxes | $ | (5,883,682 | ) | $ | (13,305,382 | ) | $ | (693,318 | ) | |||||
| Income tax benefits | 11 | 248,711 | – | – | ||||||||||
| Loss from continuing operations | $ | (5,634,971 | ) | $ | (13,305,382 | ) | $ | (693,318 | ) | |||||
| Discontinued operations: | ||||||||||||||
| Loss from discontinued operations | 1 | – | (8,360,322 | ) | (957,955 | ) | ||||||||
| Net loss | $ | (5,634,971 | ) | $ | (21,665,704 | ) | $ | (1,651,273 | ) | |||||
| Net loss attributable to holders of ordinary shares of Mercurity Fintech Holding Inc. | $ | (5,634,971 | ) | $ | (21,665,704 | ) | $ | (1,651,273 | ) | |||||
MERCURITY FINTECH HOLDING INC.
FORMERLY KNOWN AS JMU LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(In U.S. dollars, except for number of shares and per share (or ADS) data)
| For the year Ended December 31, | ||||||||||||||
| Note | 2022 | 2021 | 2020 | |||||||||||
| ( as restated ) | ( as restated ) | |||||||||||||
| Numerator | ||||||||||||||
| Net loss attributable to holders of ordinary shares of Mercurity Fintech Holding Inc. | $ | (5,634,971 | ) | $ | (21,665,704 | ) | $ | (1,651,273 | ) | |||||
| Continuing operations | (5,634,971 | ) | (13,305,382 | ) | (693,318 | ) | ||||||||
| Discontinued operations | – | (8,360,322 | ) | (957,955 | ) | |||||||||
| Denominator | ||||||||||||||
| Weighted average shares used in calculating basic net loss per ordinary share | 2 | 14,435,674 | 9,720,934 | 6,689,704 | ||||||||||
| Weighted average shares used in calculating diluted net loss per ordinary share | 2 | 14,435,674 | 9,720,934 | 6,689,704 | ||||||||||
| Net Loss per ordinary share | ||||||||||||||
| Basic | 2 | (0.39 | ) | (2.23 | ) | (0.25 | ) | |||||||
| Diluted | 2 | (0.39 | ) | (2.23 | ) | (0.25 | ) | |||||||
| Net Loss per ordinary share from continuing operation | ||||||||||||||
| Basic | 2 | (0.39 | ) | (1.37 | ) | (0.10 | ) | |||||||
| Diluted | 2 | (0.39 | ) | (1.37 | ) | (0.10 | ) | |||||||
| Net Loss per ordinary share from discontinued operation | ||||||||||||||
| Basic | 2 | – | (0.86 | ) | (0.14 | ) | ||||||||
| Diluted | 2 | – | (0.86 | ) | (0.14 | ) | ||||||||
MERCURITY FINTECH HOLDING INC.
FORMERLY KNOWN AS JMU LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(In U.S. dollars, except for number of shares and per share (or ADS) data)
| For the year Ended December 31, | ||||||||||||||
| Note | 2022 | 2021 | 2020 | |||||||||||
| ( as restated ) | ( as restated ) | |||||||||||||
| Net loss | $ | (5,634,971 | ) | $ | (21,665,704 | ) | $ | (1,651,273 | ) | |||||
| Change in cumulative foreign currency trans adjustment | 28,289 | 3,285 | 45,396 | |||||||||||
| Comprehensive loss | $ | (5,606,682 | ) | $ | (21,662,419 | ) | $ | (1,605,877 | ) | |||||
MERCURITY FINTECH HOLDING INC.
FORMERLY KNOWN AS JMU LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars, except for number of shares and per share (or ADS) data)
| For the year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| ( as restated ) | ( as restated ) | |||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | (5,634,971 | ) | (21,665,704 | ) | (1,651,273 | ) | ||||||
| Less: Net loss from discontinued operations | – | (8,360,322 | ) | (957,955 | ) | |||||||
| Net loss from continuing operations | (5,634,971 | ) | (13,305,382 | ) | (693,318 | ) | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Provision for doubtful accounts | 3,138 | 1,750,909 | – | |||||||||
| Impairment loss of intangible assets | 3,144,053 | 1,292,568 | 835,344 | |||||||||
| Depreciation of fixed assets and amortization of intangible assets | 28,950 | – | – | |||||||||
| Stock-based compensation | 558,395 | 8,349,862 | 286,132 | |||||||||
| Loss from disposal of subsidiaries | 4,664 | – | – | |||||||||
| Other income/(expenses) | 23,318 | – | – | |||||||||
| Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||||||
| Digital assets generated from mining business | (783,438 | ) | (664,307 | ) | – | |||||||
| Digital assets received as payment | – | (5,864 | ) | (17,863 | ) | |||||||
| Digital assets used to pay expenses | – | 2,141,375 | 6,924 | |||||||||
| Disposal of digital assets | 998,902 | 325,987 | 647 | |||||||||
| Accounts receivable, net of allowance | – | 380,510 | 835,533 | |||||||||
| Prepaid expenses and other current assets | 1,281,109 | (1,105,481 | ) | (740,150 | ) | |||||||
| Right-of-use assets | (873,878 | ) | – | – | ||||||||
| Deferred tax assets | (251,005 | ) | – | – | ||||||||
| Accounts payable | 22,075 | – | – | |||||||||
| Advance from customers | 80,000 | – | – | |||||||||
| Accrued expenses and other current liabilities | (87,867 | ) | (184,429 | ) | (161,626 | ) | ||||||
| Lease liabilities | 904,132 | – | – | |||||||||
| Net cash (used in)/provided by continuing operations | $ | (582,423 | ) | $ | (1,024,252 | ) | $ | 351,623 | ||||
| Net cash used in discontinued operations | – | (386,777 | ) | (957,591 | ) | |||||||
| Net cash used in operating activities | $ | (582,423 | ) | $ | (1,411,029 | ) | $ | (605,968 | ) | |||
| Cash flows from investing activities: | ||||||||||||
| Purchase of fixed assets | (7,222 | ) | – | – | ||||||||
| Loan to affiliate person | (25,000 | ) | – | – | ||||||||
| Net cash used in continuing operations | $ | (32,222 | ) | $ | – | $ | – | |||||
| Net cash provided by discontinued operations | – | – | 144 | |||||||||
| Net cash (used in)/provided by investing activities | $ | (32,222 | ) | $ | – | $ | 144 | |||||
MERCURITY FINTECH HOLDING INC.
FORMERLY KNOWN AS JMU LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In U.S. dollars, except for number of shares and per share (or ADS) data)
| For the year Ended December 31, | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| ( as restated ) | ( as restated ) | |||||||||||
| Cash flows from financing activities: | ||||||||||||
| Issuance of common stock | 7,900,300 | 713,082 | 300,000 | |||||||||
| Borrowings | 400,000 | 935,793 | – | |||||||||
| Cash paid for debt | (579,875 | ) | (93,091 | ) | – | |||||||
| Net cash provided by continuing operations | $ | 7,720,425 | $ | 1,555,784 | $ | 300,000 | ||||||
| Net cash provided by discontinued operations | – | 120,419 | – | |||||||||
| Net cash provided by financing activities | $ | 7,720,425 | $ | 1,676,203 | $ | 300,000 | ||||||
| Effect of exchange rate changes by continuing operations | (8,543 | ) | 2,953 | 43,374 | ||||||||
| Effect of exchange rate changes by discontinued operations | – | 403 | 2,022 | |||||||||
| Effect of exchange rate changes | $ | (8,543 | ) | $ | 3,356 | $ | 45,396 | |||||
| Increase/(decrease) in cash and cash equivalents | $ | 7,097,237 | $ | 268,530 | $ | (260,428 | ) | |||||
| Cash and cash equivalents, beginning of the year | $ | 440,636 | $ | 174,783 | $ | 435,211 | ||||||
| Cash and cash equivalents of continuing operations, end of the year | 7,537,873 | 440,636 | 142,557 | |||||||||
| Cash and cash equivalents of discontinued operations, end of the year | – | 2,677 | 32,226 | |||||||||
| Cash and cash equivalents, end of the year | $ | 7,537,873 | $ | 443,313 | $ | 174,783 | ||||||
| Supplement disclosure of cash flow information Interest paid | – | – | 4 | |||||||||
