Sam Tabar: And Mike, if you just recall, when we initially announced the business, we did put out a binding term sheet with that customer, which provided up to 4,096 GPUs. So, we’ve executed about half of that, but that sort of indicates, their sort of immediate desire, for that quantum. And it could theoretically stretch above that, but it’s pretty, the contract is more plug and play, to scale up to that number.
Erke Huang: And look, I’m sure plenty of people, are thinking about the AI unit economics. Gross margins are substantially higher than, as I mentioned, than our core mining business, even at current prices. The overhead is very limited. Our Q1 financials, will provide detail on the achieved margin profile. So, we do target a sub two year payback period, however.
Operator: Thank you, Sam. Thank you, Mike. Shall we go to the next question? Next we have Kevin Dede from H.C. Wainwright. Kevin, please go ahead.
Kevin Dede: Can you guys hear me okay?
Sam Tabar: Yes. Hi, Kevin.
Kevin Dede: Hi.
Sam Tabar: Yes, we hear you. Feel free to ask your question.
Kevin Dede: Okay. Yes, I was hoping you could dive in a little bit on the Ethereum Flywheel, please, Sam. Just maybe talk about what you allocated for the year, what you expect to allocate next year, what sort of returns you see, maybe a little bit on your decision between, native staking and liquid staking, which tokens you prefer to use. And ultimately the contribution and piggybacking off Mike’s line of thinking, the capital allocation process there?
Sam Tabar: Sure, let me just discuss conceptually and philosophically. We’ll get into the numbers in a moment. Bit Digital invented a business model, where we call it the Bit Digital Flywheel, where we take the rewards from Bitcoin, we put a material portion of that into Ethereum, then we stake a lot of that Ethereum, then we take the staking rewards and we pour that back into our operations. That is a business model, as far as I know, no one has ever done, and we’ve invented that. Also, one thing, another thing that’s unique, as I mentioned in our call, is that we have probably the largest, if not one of the largest ETH stacks in any public company in the U.S. There is a lot of value in that. I’ve been personally in the Ethereum space for many years, and there’s functionality that Bitcoin doesn’t have.
Bitcoin is digital gold, Ethereum has smart contracts, you could basically rewrite the entire financial system with Ethereum. There are two very different things, both equally of value. In terms of how we allocate, in terms of how we allocate our Bitcoin to Ethereum, I’m going to leave that for Erke.
Erke Huang: Yes, we continue to convert Bitcoin to Ethereum, and Ethereum’s generating about 4% of revenues. And now, majority of our staking, I would say 95% plus, is through native staking. Because the – but the waiting time to get into native staking is one day, and exiting out is one day as well. So it’s very liquid. The only reason we’re trying liquid staking, sorry, we’re using native staking now. The only reason, we’re doing – sorry liquid staking was, because there was a line of getting into, there was a time it took about two months, but now it’s very liquid. So I anticipate going forward, we’ll still use native staking as a primary source for staking.
Sam Tabar: Yes, and Kevin, I mean, you just wouldn’t expect it to grow as a proportion of revenue, just with the advent of the Bit Digital AI revenue stream. And just in terms of forecasting, I mean, it’s a mid-single-digit yield, but that’s in ETH terms. So I mean, the revenue contribution is very contingent on the ETH price at the end of the period.
Erke Huang: I should remind everybody on the call that there’s no halving event in Ethereum or in AI.
Kevin Dede: Yes, Sam. In fact, Ethereum’s deflationary at this point. Can you just sort of ballpark where the numbers fell out for the year, because I didn’t get a chance to see them? Understand less emphasis on it going forward, given all the other options you have. Makes perfect sense. Next sort of line of questioning, Sam, if you indulge me, would just be on the financing of the GPUs that you have thus far and the contribution, or the investment you need to make going forward, to hit the numbers that you want. I think some of it you’re sharing and some of it you’re not. Maybe you could, just sort of help us understand, how that’s working out?
Sam Tabar: Yes, we think about that pretty deeply. I’m going to have Erke, our Chief Financial Officer, talk about the financial weights on that.
Erke Huang: Yes, so the current contract had been all paid out. We paid $55 million for the GPUs and about 20% as from the [Seldes-Bach] agreement that we had with the third-party. And going forward, like I stated on this call earlier, we’re going to do some lending against those equipments. That’s one option. And two, we’re likely to use the same sort of Seldes-Bach agreement with potential partners. And three, use our cash on balance to fund the growth. So to reach $100 million revenue target, we would need to invest around $60 million, or so in current prices. And we have enough sufficient options in this moment.
Kevin Dede: Erke, if I may, I’ve got to congratulate you on your ability, to move right up the Super Micro demand chain. And I was wondering if you might be able to speak to that. How is it that you were able to position Bit Digital and Sam for that matter, against all the other competitors, you have demanding these machines? I think that is an understated, or an underappreciated advantage that Bit Digital brings to the AI space. Maybe you could elaborate on that?
