Hut 8 Corp.: Form 10-K for the period ended Dec 31, 2024

Hut 8: Where Power Unlocks Potential

Hut 8 is an energy infrastructure platform that integrates power, digital infrastructure, and compute at scale to fuel next-generation, energy-intensive use cases such as Bitcoin mining and high-performance computing (“HPC”). We take a power-first, innovation-driven approach to developing, commercializing, and operating the critical infrastructure that underpins the breakthrough technologies of today and tomorrow.

Our Platform

Our platform comprises three layers: Power, Digital Infrastructure, and Compute. Together, these layers form the engine for energy-intensive technologies like Bitcoin mining and HPC (see Exhibit 1). Our integrated model positions us to capitalize on innovation-driven opportunities in an evolving energy and infrastructure landscape. Across our three layers, we strategically allocate resources and capital with the aim of optimizing returns, mitigating sector-specific volatility, enhancing speed to market, and capturing opportunities at multiple stages of the value chain. Our objective is to maximize long-term value creation for stockholders by building and sustaining competitive advantages at each layer while capturing synergies across our broader platform.

Exhibit 1. Our platform

Power. Power is the foundation of our platform. We acquire, develop, and manage critical energy assets such as interconnects, powered land, and other electrical infrastructure to address the load demands of energy-intensive applications such as Bitcoin mining and HPC. As of December 31, 2024, our Power layer comprised 1,020 megawatts (“MW”) of energy capacity under management across 15 sites in the United States and Canada, which consists of energy assets that we own, lease, or manage for third parties.

The value of high-quality energy assets continues to rise as demand grows to support both current and emerging technologies while supply remains stagnant or subscale. To meet this increasing demand, our strategy focuses on maximizing the scale of our Power layer, monetizing each megawatt in our portfolio with the use case we believe will drive the highest returns and value creation, and optimizing yield over time through value creation initiatives such as the transition of sites to new use cases. To meet both current and future demand, we continue to build and advance a scaled development pipeline. Capacity from this pipeline converts to energy capacity under management upon the execution of a purchase or lease agreement. As of December 31, 2024, our development pipeline comprised approximately 12,300 MW of energy capacity, with approximately 2,800 MW under exclusivity (see Exhibit 2).

Exhibit 2. Our development pipeline

A power-first, innovation-driven approach differentiates us from traditional data center operators, who have historically treated power acquisition as an afterthought in the digital infrastructure development process (see Exhibit 3). Our power-native team is the cornerstone of this approach, leveraging decades of collective experience at leading generation owners, utilities, and other players across the energy ecosystem to execute a disciplined development strategy. Equipped with a deep understanding of the electrical grid and its regulatory idiosyncrasies across regions as well as the demands of our load profiles and their impact on energy markets, we seek to identify and secure what we believe to be the most attractive development opportunities in the market—optimizing for scale, cost, speed to market, and long-term value creation potential.

Our management team has extensive experience across the energy, digital infrastructure, and technology sectors, with a track record of advising and partnering with major energy generation owners and utilities in power origination, commercialization, and strategic transactions. Our board of directors (the “Board”) includes current and former senior executives and advisors from a variety of relevant industries, including some of the largest energy generation and financial services companies in North America. Across our organization, we have many decades of collective experience across the development and commercialization value chain from leading companies across the energy sector, including NextEra Energy, Constellation Energy, Exelon Corporation, Clearway Energy, Invenergy, ACCIONA, J.P. Morgan, Citigroup Energy, and GE Capital.

Exhibit 3. Our framework for securing new capacity

Digital Infrastructure. The second layer of our platform is Digital Infrastructure. We design, build, monetize, and operate purpose-built facilities for energy-intensive applications with the aim of maximizing long-term returns from our Power layer. We seek to monetize each asset in our Power portfolio through a targeted, asset-by-asset approach, mirroring the model of a private equity firm managing a diverse portfolio of independent businesses underpinned by a single thesis and platform. We believe this approach enables us to maximize the return potential of individual projects while maintaining flexibility across our broader platform and mitigating secular market risk for the Company. As of December 31, 2024, our Digital Infrastructure layer comprised five Bitcoin mining data centers, five HPC data centers, and one non-operational site (see Exhibit 4). Looking forward, as markets and technologies evolve, our Digital Infrastructure layer may expand beyond its current focus areas, supporting emerging applications and diversifying our portfolio into other types of infrastructure.

Exhibit 4. Our Power and Digital Infrastructure assets

(1) Generally, percentage owned denotes our ownership of power infrastructure at owned or leased sites, whereas for HPC sites, percentage owned denotes our ownership of mechanical and electrical infrastructure at leased data center locations

(2) Electric Reliability Council of Texas (“ERCOT”)

(3) Combined cycle gas turbine (“CCGT”)

(4) Alberta Electric System Operator (“AESO”)

(5) New York Independent System Operator (“NYISO”)

Developing data centers for Bitcoin mining ASIC compute is a cornerstone of our power-first strategy, allowing us to scale our Power layer aggressively while preserving the flexibility to potentially transition assets to other high-value use cases in the future. Historically, our deep expertise in rapidly deploying low-cost Bitcoin mining infrastructure development has enabled us to energize sites within three months of breaking ground, including a site initially energized in 78 days at an all-in development cost of approximately $250,000 per megawatt, driving rapid payback periods and strong unlevered returns. Bitcoin mining developments allow us to quickly monetize power assets even in scenarios where those assets are not suitable for traditional data center workloads like AI compute in the short term due to longer commercialization timelines, land constraints, load capacity dynamics, or restricted fiber access. In essence, suitable sites can begin their lives as Bitcoin mining data centers with the potential to be repurposed for other, higher return workloads in the future, enabling us to immediately capture upside while maximizing the long-term yield of each Power asset in our portfolio.

We believe our ability to rapidly monetize and scale our Power layer through Bitcoin mining gives us a structural advantage relative to markets with more complex commercialization dynamics. Our agility in capital deployment and power monetization reinforces our ability to secure attractive development opportunities and expand our footprint often faster and more cost-efficiently than developers constrained by traditional data center development cycles.

Equally important to our power-first approach to digital infrastructure development is our focus on greenfield development, which has historically enabled us to design, build, and scale Bitcoin mining infrastructure with significant cost and speed advantages over traditional outsourced models. Our development model is driven by a robust in-house team with end-to-end expertise in engineering, procurement, and construction. By limiting our reliance on third-party developers, we reduce vendor dependencies, mitigate the risk of supply chain bottlenecks, and retain control over project design, cost, and execution. With a focus on innovation and value engineering, we aim to iterate on design and construction methodologies in real time to drive continued improvements in infrastructure flexibility, performance, capital efficiency, and returns.

Case study: How Bitcoin mining enables rapid, cost-efficient power acquisition

In early 2024, we began diligence on our Vega site in Texas, a large-scale, behind-the-meter asset with an existing substation and immediate access to some of the lowest locational wholesale power prices in North America. While the site was potentially attractive for an HPC data center, a contractual requirement to begin consuming power by Q2 2025 would have created an unrealistic timeline for an HPC data center project. To meet this deadline, we underwrote Vega as a Tier I data center for Bitcoin mining ASIC compute, enabling us to secure the site and begin development rapidly. Today, we are on track to energize Vega by Q2 2025, less than a year after acquiring the site, for an all-in development cost of less than $400,000 per megawatt and expect to generate approximately $125 million in annualized revenue through a Bitcoin mining colocation agreement at the site. Importantly, we retain the flexibility to repurpose the site for other applications to optimize long-term value.

We monetize projects in our Digital Infrastructure layer under various models, including joint ventures and hosting or colocation. Under a hosting or colocation model, we either contract with a third-party customer or, in certain cases, simulate the role of a customer for internal purposes. While the latter does not constitute customer revenue from a financial reporting perspective, it enables us to establish an in-house testing environment free from the demands and risks associated with traditional customer contracts. This approach allows us to focus on value engineering and innovation throughout the project lifecycle. This includes testing new products and technologies, piloting new design, development, and operating processes, and gathering operational insights post-energization. We can then apply these innovations and process optimizations to new projects or scale them across our existing portfolio to target higher returns on our Power and Digital Infrastructure assets.

Compute. The third layer of our platform is Compute. We acquire, monetize, and operate specialized hardware for energy-intensive technologies like Bitcoin mining and HPC, which includes the sales of cloud services to third-party customers. As of December 31, 2024, our compute layer comprised 5.5 exahash per second (“EH/s”) of Bitcoin self-mining capacity and 1,000 NVIDIA H100 GPUs for AI compute, operated through our GPU-as-a-Service subsidiary, Highrise AI.

Through our Compute layer, we build deep, firsthand expertise in the technologies addressed by our Digital Infrastructure layer in addition to capturing the economics offered by emerging markets like Bitcoin mining and HPC. By acquiring, operating, and monetizing specialized hardware, such as ASICs for Bitcoin mining and GPUs for HPC, we generate valuable operational data and insights that enable us to optimize the design, development, and operations of our digital infrastructure. This iterative process enables us to enhance performance, improve cost efficiency, and drive stronger returns over time (see Exhibit 5).

Exhibit 5: Illustrative feedback loop between our compute and digital infrastructure layers

As technology continues to evolve, so too may opportunities within our Compute layer. The applications that deliver the highest returns from our Power and Digital Infrastructure layers today may shift as new, energy-intensive technologies emerge. By actively monitoring these developments and maintaining a long-term perspective when securing Power assets and building our Digital Infrastructure layer, we aim to ensure our platform is agile, responsive to change, and independent of any single market driver. Our goal is to capitalize on these opportunities, sustain growth, and remain at the forefront of innovation well into the future.

Other. We continuously evaluate opportunities to leverage our expertise in power, digital infrastructure, and compute to enhance our risk-adjusted returns. While our primary focus remains on the three core layers of our platform, we may expand into complementary business lines that align with our strategic capabilities. Our Other reporting segment includes activities that fall outside the scope of our Power, Digital Infrastructure, and Compute layers. Revenue from this segment is currently generated through Equipment Sales and Repairs.

Our Focus on Innovation

We take an application-agnostic approach to digital infrastructure development. Our development framework centers on a tiered classification system based on redundancy and resiliency levels, rather than specific applications like Bitcoin mining or AI workloads. An application-agnostic approach allows us to innovate and deliver scalable, value-engineered solutions designed to support a range of current and future applications.

Today, our strategic focus is on developing infrastructure at both ends of our development framework. At one end are data centers built to support GPUs for HPC workloads, where uptime, resiliency, and redundancy are critical. These facilities require significant capital investment and are designed to meet the stringent requirements of mission-critical applications. At the other end are data centers for ASIC compute, where lower capital requirements and minimal redundancy requirements make low operating costs and rapid deployment the priority.

With extensive experience across the data center development value chain, we take a first-principles approach to innovation with the goal of delivering superior solutions to our end markets and customers. Our integrated model, spanning Power, Digital Infrastructure, and Compute, positions us to generate deep operational insight into the technical and commercial challenges that drive infrastructure design and performance. This end-to-end expertise allows us to develop and implement innovations that enhance performance, reduce costs, and enhance the flexibility of our digital infrastructure layer.

Case study: Pioneering a new data center form factor for Bitcoin mining ASIC compute

At our Vega site, we are pioneering a new data center form factor that challenges conventional assumptions about Bitcoin mining infrastructure and narrows the gap between Bitcoin mining and HPC data center architecture. Historically, data centers designed for Bitcoin mining relied on shelf-based deployments and forced-air cooling, making them suitable for ASIC compute but incompatible with workloads like GPU compute, which rely on rack-based deployments and, increasingly, liquid cooling. This architecture constrained infrastructure flexibility, limited potential applications, and left significant efficiency gains untapped. With our Vega project, we are disrupting this paradigm. The custom infrastructure we developed and engineered in-house for the project features high-density racks, direct-to-chip liquid cooling, and HVAC-supported air cooling. Inspired by traditional data center architecture but optimized for the economics and deployment speed of our agile Bitcoin mining infrastructure developments, this design will enable Vega to support rack-based deployments of ASIC compute at densities of 180 kilowatts per rack, surpassing even the 120-kilowatt density required by NVIDIA’s latest Blackwell GPUs. And, despite these innovations, we expect to build Vega for less than $400,000 per megawatt, a fraction of traditional data center costs, within nine months of breaking ground.

Case study: Developing and commercializing a next-generation ASIC miner

We partnered with BITMAIN Technologies Ltd. (“BITMAIN”), the world’s leading manufacturer of digital currency mining servers, to develop and launch the U3S21EXPH ASIC miner, an integral input in the design and commercialization of a new Bitcoin mining data center form factor. The U3S21EXPH will be the first ASIC miner mass-commercialized by BITMAIN to feature direct liquid-to-chip cooling in a U form factor, allowing for high-density deployments of ASIC compute in the rack-based architecture we developed for Vega.

Case study: Energizing a greenfield Bitcoin mining data center with custom containers in 78 days

In Q1 2022, after acquiring 60 acres of land in West Texas, USBTC designed, developed, and energized Bravo, a 42 MW Bitcoin mining data center, in just 78 days at an all-in cost of approximately $350,000 per MW. This project was an early proof point of our innovation-driven approach. Rather than following the outsourced development model common among operators, we designed and built the site from the ground up, optimizing for speed, cost efficiency, and long-term performance. A key differentiator was our collaboration with a manufacturer to develop custom-modified containers engineered for the environmental conditions of West Texas, including extreme heat and dust exposure. These enhancements improved cooling, airflow, and operational efficiency, ultimately leading the manufacturer to mass-commercialize the design based on our innovations. Bravo established our internal benchmark for rapid, cost-effective infrastructure deployment, a standard we further advanced with our Salt Creek project, which we completed at an all-in cost of approximately $250,000 per MW. ​

Our Technology-Driven Operating Philosophy

We have adopted a technology-driven operating philosophy, implementing scalable, data-driven processes that enhance the efficiency of our human capital, decrease operating expenses, and reduce the marginal costs of expanding our operations. To support these objectives, we have developed a proprietary software suite comprising three specialized applications (see Exhibit 6). Recognizing that energy costs represent a significant component of our overall cost structure, we have also established a dedicated data science function focused on developing advanced decision-making algorithms at the server level. This team uses thorough profitability modeling to guide curtailment decisions, optimize energy consumption, and improve returns within our Compute layer.

Exhibit 6: Our proprietary software suite

Case study: How Reactor optimizes energy consumption and drives Compute layer returns

As mining economics continue to evolve, our objective is to optimize profitability and returns rather than less meaningful headline metrics like hashrate and fleet efficiency. Factors such as the deployment of new, higher-breakeven machines, which increase energy costs per unit of Bitcoin mined, and Bitcoin network halving events, which reduce block rewards, make efficiency and power optimization critical to driving returns from our Compute layer. To offset self-mining gross margin compression following the Bitcoin network halving in April 2024, we leveraged Reactor, our proprietary energy curtailment software, to dynamically manage power consumption across our sites. This supported a ~28% decline in our average energy cost per kilowatt-hour (kWh), from $0.040 in Q1 2024 to $0.029 in Q3 2024, enabling us to preserve self-mining economics in a post-halving environment.

Our Investment Approach

We invest in power, digital infrastructure, and compute assets that we believe will generate strong risk-adjusted returns, strengthen our competitive position, and drive long-term shareholder value creation. Our investment approach is defined by rigorous underwriting, disciplined capital allocation, and active portfolio management. As we expand and diversify our business, we expect that more predictable and financeable, lower-cost-of-capital segments will form a larger share of our revenue mix.

Underwriting and Diligence. Before deploying capital, we generally undertake a comprehensive, data-driven due diligence process to evaluate risk-adjusted returns across financial, operational, commercial, legal, macroeconomic, and geopolitical dimensions. Our framework incorporates scenario modeling, stress testing, and sensitivity analysis to quantify downside risk and assess long-term value creation potential. Across our platform, we generally invest only when expected returns are projected to meet or exceed disciplined thresholds for value creation. Beyond financial metrics, we prioritize opportunities that support our broader strategic objectives, enhance operational performance, and strengthen our competitive differentiation. Each opportunity is assessed for its potential to unlock platform synergies, drive scalable efficiencies, and reinforce our competitive position.

Portfolio Management. We take an active approach to portfolio management, driven by a dedicated portfolio management team that works cross-functionally to identify and address both asset-level and platform-wide value creation opportunities. Our approach includes targeted initiatives such as infrastructure upgrades, land expansion, and site-level use case transition. We leverage real-time energy market intelligence and analytics to optimize power costs, mitigate against volatility, and capitalize on arbitrage opportunities. We also maintain active engagement with governing bodies and grid operators to navigate regulatory complexities and to ensure the long-term reliability of our power assets and the grid.

Our Capital Strategy

Our capital strategy centers on two objectives: securing the lowest possible cost of capital and minimizing enterprise risk. We aim to maintain a robust, liquid balance sheet that enables us to explore creative financing approaches and prioritize non-dilutive sources of funding whenever possible.

Financing. We strive to optimize our cost of capital by taking a disciplined approach to capital formation and leveraging a range of financing instruments at the corporate and project levels. At the corporate level, we aim to balance equity issuance with strategic leverage in alignment with our view of the Company’s intrinsic value. While we remain sensitive to dilution, we recognize the importance of retaining the flexibility to raise capital when compelling growth opportunities arise or when market conditions are favorable. To support this, we employ tools such as at-the-market (“ATM”) and share buyback programs, which we view as strategic levers to optimize stockholder value and enhance our ability to navigate market volatility. These tools enable us to fund growth initiatives and navigate the markets in which we operate. At the project level, we structure financing to align with the distinct objectives and needs of each opportunity we pursue. While traditional project financing has historically been unavailable for Bitcoin mining infrastructure development, we believe it is a viable option as we expand into HPC data center development.

Treasury Management. Our treasury management strategy aims to enhance balance sheet flexibility and optimize capital efficiency as we pursue capital-intensive growth initiatives such as digital infrastructure development. A key component of our proactive approach to treasury management is our strategic Bitcoin reserve, which totaled 10,171 Bitcoin with a market value of $949.5 million as of December 31, 2024. Built primarily through a fundamentals-driven production strategy, our holdings serve as a flexible asset that can be monetized through options strategies, pledges, sales, or other mechanisms to optimize return on invested capital. We make decisions to utilize Bitcoin held in reserve on a case-by-case basis. By aligning our capital and operating strategies, our reserve is designed to create a flywheel effect that accelerates value creation across the business (see Exhibit 7).

Exhibit 7: Flywheel effect accelerates value creation across capital and operating strategies

Our Team

We aim to attract top talent and provide an environment where our teams are inspired to do their best work. We had 222 full-time employees in the United States and Canada as of December 31, 2024. We also hire part-time employees, temporary employees, or consultants as necessary, and we consider our relations with our employees to be good.

Competition

Driven by the proliferation of energy-intensive applications such as Bitcoin mining and HPC, demand for energy capacity continues to outpace supply. For example, HPC workloads require high-density infrastructure with capacity demands multiples greater than many legacy data centers can provide, while Bitcoin mining remains a competitive market that requires operational efficiency and low-cost energy at scale. At the same time, grid interconnection bottlenecks have further constrained access to power and digital infrastructure development, while supply chain disruptions and regulatory constraints have extended lead times for critical infrastructure, including GPUs, ASICs, turbines, generators, and transformers.

In this supply-constrained environment, we believe success depends on the ability to secure scarce assets like power, data center equipment, and customers. We compete with digital infrastructure developers and large-scale Bitcoin miners for access to powered land and key inputs for facility development, such as building materials, data center equipment, and skilled labor. Additionally, we compete with cloud services providers and digital infrastructure developers for customers and specialized hardware. Within Bitcoin Mining, we participate in mining pools that compete for block rewards. See “Risk Factors—Risks Related to Our Business and Operations—We may not be able to compete effectively against our current and future competitors.”

Nonetheless, we believe we have established a defensible competitive advantage through our power-first, innovation-driven strategy, which is underpinned by a power-native team with deep access to power markets, an application-agnostic framework for digital infrastructure design, end-to-end greenfield development capabilities, and our ability to use Bitcoin mining infrastructure development to rapidly and cost-effectively secure and monetize power.

Customers and Partners

We provide cloud and colocation services to customers across technology, financial services, government, media, and other industries. As of December 31, 2024, we served over 250 customers through our five enterprise-grade data centers in Canada.

At the corporate level, we actively seek to partner with developers of digital infrastructure and large-scale consumers of load capacity, leveraging our expertise in power-intensive computing to drive infrastructure expansion and efficiency. Our current partners include a Fortune 200 energy generation company, a multinational financial services firm, and a leading institutional investor. For example, in June 2024, we received a strategic investment from a fund managed by Coatue Management, L.L.C. (“Coatue”) to support the build-out of AI infrastructure and in September 2024, we launched a next-generation ASIC miner, developed in collaboration with BITMAIN as part of a broader technological and commercial innovation partnership.

Intellectual Property

We actively use specialized hardware and software for our operations. In some instances, source code and other software assets may be subject to an open-source license, as much technology development in this sector is open source. We intend to adhere to the terms of any license agreements that may be in place for these works.

We rely upon intellectual property protections, including trade secrets, trademarks, and copyright, and license the use of intellectual property rights owned and controlled by others. We have submitted one non-provisional patent, which is currently under review by the U.S. Patent and Trademark Office. In addition, we have developed and may further develop specific proprietary hardware, software applications, or other intellectual property, and may choose to seek patents or other protections in the future.

Regulatory Landscape

The laws and regulations applicable to our offerings are evolving and subject to interpretation and change. We operate in a complex and rapidly evolving regulatory environment and we are subject to a wide range of laws and regulations enacted by federal, state, provincial, and local governments, governmental agencies, and regulatory authorities, including the SEC, the Commodity Futures Trading Commission (“CFTC”), the Federal Trade Commission, and the Financial Crimes Enforcement Network of the U.S. Department of the Treasury (“FinCEN”), as well as similar entities in Canada and other countries. Other regulatory bodies, governmental or semi-governmental, have shown an interest in regulating or investigating companies engaged in the blockchain or digital asset businesses.

For example, businesses that are engaged in the transmission and custody of Bitcoin and other digital assets, including brokers and custodians, can be subject to FinCEN regulations as money services businesses as well as state money transmitter licensing requirements. The potential application of these policies to Bitcoin mining continues to evolve.

Bitcoin and other digital assets are subject to anti-fraud regulations under federal and state commodity and/or securities laws, and digital asset derivative instruments are regulated by the CFTC and SEC. Certain jurisdictions, including, among others, New York, and a number of countries other than the United States, have developed regulatory requirements specifically for digital assets and companies that transact in them. Furthermore, regulations may substantially change in the future and it is presently not possible to know how regulations will apply to our business, or when they will be effective. For example, in January 2025, the SEC announced the launch of a new crypto task force focused on developing a regulatory framework for crypto assets and related goals. In addition, the recent U.S. presidential election and change of administration could have a significant impact on the digital asset industry and our business in the United States. For example, in January 2025, the President signed an Executive Order titled “Strengthening American Leadership in Digital Financial Technology,” which, among other things, stated that the current administration’s policy will be “to support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy” by “providing regulatory clarity and certainty” regarding digital assets and blockchain technologies.

As the regulatory and legal environment evolves, we may become subject to new laws and regulations, which may affect Bitcoin mining and other activities. For instance, various bills have been proposed in the U.S. Congress related to our offerings, which may be adopted and have an impact on us. In January 2023, the U.S. House of Representatives announced its first ever Financial Services Subcommittee on Digital Assets and its intention to develop a regulatory framework for the digital asset industry. Bipartisan leadership of the Senate Banking Committee announced that goal as well. The U.S. Treasury Department has also requested additional authorities to address such risks.

We are unable to predict the impact that any new standards, legislation, laws, or regulations may have on our business at the time of filing this Annual Report. For additional discussion regarding the potential risks existing and future regulations pose to our business, see “Risk Factors.”

Additional Information

Our principal executive offices are located at 1101 Brickell Avenue, Suite 1500, Miami, FL 33131. We were incorporated in the State of Delaware on January 27, 2023 for the purposes of effecting the Business Combination.

Our website address is www.hut8.com (http://www.hut8.com) and our investor relations website is located at www.hut8.com/investors (http://www.hut8.com/investors). Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available on our investor relations website free of charge as soon as reasonably practicable after they are filed with the SEC. The information contained on our website is not included in, nor incorporated by reference into, this Annual Report. Reports filed with the SEC also may be viewed at www.sec.gov (http://www.sec.gov).

A description of the risks and uncertainties associated with our business is set forth below. You should consider carefully the risks and uncertainties described below, together with the financial and other information contained in this Annual Report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. If any of the following risks or uncertainties actually occur, our business, financial condition, and results of operations could be materially and adversely affected. In that case, the market price of our common stock could decline and you may lose all or a part of your investment. The risks discussed below are not the only risks we face. Additional risks or uncertainties not currently known to us, or that we currently deem immaterial, may also have a material adverse effect on our business, financial condition, and results of operations.

Risks Related to Our Business and Operations

Failure of critical systems related to our offerings and/or infrastructure could have a material adverse effect on our business, financial condition, and results of operations.

The critical systems related to our offerings and infrastructure are subject to failure. Failure of any of our critical systems, including a breakdown in critical plant, equipment or services, routers, switches or other equipment, power supplies, or network connectivity, whether or not within our control, could result in service interruptions to us or our customers and/or damage to equipment, which could significantly disrupt the normal business operations of our customers, harm our reputation, and reduce our revenue. The destruction or severe impairment of any of the facilities operated by us could result in significant downtime. For certain of our business lines, our ability to attract and retain customers depends on our ability to provide a reliable service, so even minor interruptions in service could harm our reputation and negatively impact our business, financial condition, and results of operations.

Our infrastructure and offerings are subject to temporary or permanent interruption by factors that include but are not limited to:

• power loss or plant downtimes;
• equipment failure;
• human error and accidents;
• theft, sabotage, and vandalism;
• failure by us or our suppliers to provide adequate service or maintain equipment;
• network connectivity downtime and fiber cuts;
• service interruptions resulting from server relocation;
• security breaches of infrastructure;
• improper or inadequate building maintenance;
• physical, electronic, and cybersecurity breaches;
• animal incursions;
• fire, earthquake, hurricane, tornado, flood, and other natural disasters;
• extreme temperatures;
• water damage;
• public health emergencies; and
• terrorism.

The occurrence of any of these events may have a material adverse effect on our business, financial condition, and results of operations. Moreover, service interruptions and equipment failures may expose us to potential legal liability. As the services provided by us may be critical to our customers’ business operations, any disruption in services could result in lost profit or other indirect or consequential damages to our customers. Although customer contracts typically contain provisions limiting our liability, there can be no assurance that a court would enforce any contractual limitations on our liability in the event that one of our customers brings a lawsuit against us as the result of a service interruption that they ascribe to us. The outcome of any such lawsuit would depend on the specific facts of the case and any legal and policy considerations that we may not be able to mitigate. In such cases, we may be liable for substantial damage awards, which could have a material adverse effect on our business, financial condition, and results of operations.

Our business may be heavily impacted by geopolitical, social, economic, and other events and circumstances in the United States, Canada, or elsewhere.

Our business may be heavily impacted by geopolitical, social, economic, and other events and circumstances in the United States, Canada and elsewhere. These include natural disasters, pandemics (like the COVID-19 pandemic), geopolitical tensions, acts of terrorism, hostilities or the perception that hostilities may be imminent, military conflicts and acts of war (such as the Russia-Ukraine conflict) and related responses, including sanctions or other restrictive actions, interest rate fluctuations, inflationary issues and associated changes in monetary policy or potential economic recession, commodity prices, legislative and regulatory changes, foreign currency fluctuations, international tariffs, fluctuations in capital markets, and broad trends in industry and finance. For example, equipment necessary for our operations and our offerings is manufactured in large part outside of the United States. There is currently significant uncertainty about the future relationship between the United States and other countries, including Canada, Mexico, China, the European Union, and others, with respect to trade policies, treaties, tariffs, and taxes. These events and circumstances are largely outside of our influence and control and, while the impact of such events or circumstances is not presently known, any of them could adversely affect our business, financial condition, and results of operations. See “Risks Related to Certain Regulations and Laws, Including Tax Laws—Our operations are subject to various regulatory, governmental, and technological uncertainties.”

We may not be able to compete effectively against our current and future competitors.

The industries in which we operate are highly competitive and continuously evolving. We expect competition to further intensify as existing and new competitors introduce new offerings or enhance existing offerings and as the industries that we operate in continue to grow. As we continue to expand in our existing markets and enter new markets, we compete against an increasing number of companies operating both within North America and abroad, that may be more established or have greater financial and other resources and/or expertise.

Driven by the proliferation of energy-intensive applications such as Bitcoin mining and HPC, demand for energy capacity continues to outpace supply. For example, HPC workloads require high-density infrastructure with capacity demands multiples greater than legacy data centers can provide, while Bitcoin mining remains a competitive market that requires operational efficiency and low-cost energy at scale. At the same time, supply chain disruptions and regulatory constraints have extended lead times for critical infrastructure, including GPUs, ASICs, generators, and transformers. Grid interconnection bottlenecks have further constrained access to power and digital infrastructure development. In this evolving landscape, we compete directly with cloud services providers, digital infrastructure developers, and large-scale Bitcoin miners. The nature of competition varies across the layers of our platform:

• Power: We compete primarily for access to powered land.
• Digital Infrastructure: We compete primarily for customers, as well as key inputs for facility development, including building materials, data center equipment, and skilled labor.
• Compute: We compete primarily for customers, specialized hardware, and Bitcoin rewards.

Taken as a whole, we believe success depends on the ability to secure, monetize, and optimize power capacity at scale. We believe we have established a defensible competitive advantage through our power-first, innovation-driven strategy, which is underpinned by a power-native team with deep access to power markets, an application-agnostic framework for digital infrastructure design, end-to-end greenfield development capabilities, and our ability to use Bitcoin mining infrastructure development to rapidly and cost-effectively secure and monetize power. However, these factors might not provide the competitive advantage we anticipate, or if they do, such competitive advantage might not endure. If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, financial condition, and results of operations could be adversely affected.

We are subject to risks associated with our need for significant electrical power.

Our operations require significant amounts of electrical power and our business, financial condition, and results of operations may be impacted by the unavailability of power and price fluctuations in the power market. Market prices for power, capacity, and other ancillary services are unpredictable and tend to fluctuate substantially. Unlike most other commodities, electric power can only be stored on a very limited basis and generally must be produced concurrently with its use. As a result, power prices are subject to significant volatility due to supply and demand imbalances, especially in the day-ahead and spot markets. Power availability and prices may also be materially impacted by other factors outside of our control, including:

• changes in generation capacity in our markets, including changes in the supply of power as a result of the development of new plants, expansion or reduction of existing plants, the continued operation of uneconomic power plants due to state subsidies, or additional or reduced transmission capacity;
• environmental regulations and legislation;
• electric supply disruptions, including plant outages and transmission disruptions;
• changes in power transmission infrastructure;
• fuel price volatility;
• fuel transportation capacity constraints or inefficiencies;
• development of new fuels, new technologies, and new forms of competition for the production of power;
• changes in law, including judicial decisions;
• weather conditions, including extreme weather conditions and seasonal fluctuations, including the effects of climate change;
• changes in commodity prices and the supply of commodities, including natural gas, coal, and oil;
• changes in the demand for power or in patterns of power usage;
• economic and political conditions;
• supply and demand for energy commodities;
• supply chain disruption of electrical components needed to transmit energy;
• availability of competitively priced alternative energy sources;
• ability to procure satisfactory levels of inventory; and
• changes in capacity prices and capacity markets.

Such factors and the associated fluctuations in power availability and prices could affect wholesale power generation profitability and cost of power for our operations. We currently draw power from various power sources, which include the New York Independent System Operator (“NYISO”) grid, the Electric Reliability Council of Texas (“ERCOT”) grid, and the City of Medicine Hat. We also operate, through a joint venture with Macquarie Equipment Finance Ltd, a subsidiary of Macquarie Finance Group Limited (“Macquarie”), four natural gas power plants in Ontario. Power grids, including those we rely on, and power plants or facilities, including those we operate, subject us to a variety of risks, including the breakdown or failure of equipment, accidents, security breaches, viruses or outages affecting information technology systems, labor disputes, obsolescence, delivery/transportation problems, disruptions of fuel supply, and performance below expected levels. These events may impact our ability to conduct our businesses efficiently and lead to increased costs, expenses, or losses.

Although we maintain limited backup power at certain sites, it may not be feasible to run our operations on back-up power generators in the event of a restriction on electricity or a power outage. Planned or unplanned outages at the power grids that we rely on or at our power generation facilities may require us to purchase power at then-current market prices, either to continue our operations or satisfy our commitments, which could have a negative impact on the cost structure of our operations. Failure to do so could subject us to penalties and damages. To the extent we are unable to receive adequate power supply and are forced to reduce or cease our operations due to the unavailability or cost of electrical power, our business, financial condition, and results of operations would be adversely affected.

Furthermore, there can be no assurance that power suppliers will service our facilities or that once we have entered into a power purchase agreement, such supplier will continue to provide us with power for any period of time. These agreements may be terminated, or we may lose access to power under certain other circumstances, and we may not be able to find an adequate replacement at a reasonable cost, or at all, especially in light of the limited availability of power and grid constraints in many markets. The inability to secure a power purchase agreement or the termination of a power purchase agreement could have a material adverse effect on our business, financial condition, and results of operations.

Moreover, there may be significant competition for suitable locations with access to affordable power as we look to expand our operations. See “Risks Related to Our Growth—Our construction of new data centers, data center expansions, or data center redevelopment could involve significant risks to our business.”

We may be exposed to cybersecurity threats and breaches.

Threats to network and data security are increasingly diverse and sophisticated and security breaches, computer malware and computer hacking attacks have been an increasing concern. Despite our efforts and processes in place to prevent them, our computer servers and systems may be vulnerable to cybersecurity risks, including denial-of-service attacks, physical or electronic break-ins, employee theft or misuse and similar disruptions from unauthorized tampering. As techniques used to breach security change frequently and are generally not recognized until launched against a target, we may not be able to promptly detect that a cyber breach has occurred, implement security measures in a timely manner or, if and when implemented, we may not be able to determine the extent to which these measures could be circumvented. Recent developments in the cyber threat landscape include use of artificial intelligence (“AI”) and machine learning, as well as an increased number of cyber extortion and ransomware attacks, with the potential for higher ransom demand amounts and increasing sophistication and variety of ransomware techniques and methodology. Further, any adoption of AI by us or by third parties may pose new security challenges. A party who is able to compromise the security measures on our networks or the security of our infrastructure could misappropriate the proprietary or sensitive information of us, our customers, or our employees, or cause interruptions or malfunctions in our operations or our customers’ operations. We also may be required to expend significant capital and resources to protect against such threats or to alleviate problems caused by cyber breaches in our physical or virtual security systems. Any breaches that may occur in the future could expose us to increased risk of lawsuits, regulatory penalties, loss of existing or potential customers, damage relating to loss of proprietary information, harm to our reputation, and increases in our security costs, which could have a material adverse effect on our business, financial condition, and results of operations. Furthermore, we hold our Bitcoin with third-party custodians. If our custodians are exposed to a cyberattack or breach, we may temporarily or permanently lose access to some or all of our Bitcoin, which would have a material adverse effect on our business, financial condition, and results of operations. See “Risks Related to Our Capital Needs and Capital Strategy—We may be subject to additional risks associated with holding Bitcoin for our own account.” The cybersecurity regulatory landscape continues to evolve and compliance with the proposed reporting requirements could further complicate our ability to resolve cyberattacks. Although we maintain insurance coverage for certain cyber risks, such coverage may be unavailable or insufficient to cover our losses.

We are subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by insurance.

Our operations are subject to many hazards and operational risks inherent to our business, including:

• general business risks;
• the presence of construction or repair defects or other structural or building damage;
• operating large and often hazardous pieces of equipment;
• any noncompliance with or liabilities under applicable environmental, health, or safety regulations, or requirements or building permit requirements;
• any damage resulting from natural or manmade disasters; and
• claims by employees, contractors, customers, or the general public as a result of exposure to potentially dangerous environments at or near our operations.

The measures we take to protect against these risks may not be sufficient. The realization of any hazard or operational risk may result in business interruption, liability, or litigation. We maintain an amount of insurance protection that we consider adequate, but we cannot provide any assurance that our insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which we may be subject and, even if we do have insurance coverage for a particular circumstance, we may be subject to a large deductible and maximum cap. We carry liability, property, business interruption, and other insurance policies to cover certain insurable risks to our company. We select the types of insurance, the limits, and the deductibles based on our specific risk profile, the cost of the insurance coverage versus its perceived benefit, and general industry standards. Our insurance policies contain certain industry standard exclusions for events such as war and nuclear reaction. A successful claim for which we are not fully insured could materially harm our business, financial condition, and results of operations. For example, we are currently party to a securities class action claim. To the extent that we are unsuccessful in defending against this claim, we may owe an amount in excess of our insurance coverage, which could have a material adverse effect on our business, financial condition, and results of operations. Further, due to rising insurance costs and changes in the insurance markets, we cannot provide any assurance that our insurance coverage will continue to be available at all or at rates or on terms similar to those presently available. Any losses not covered by insurance could have a material adverse effect on our business, financial condition, and results of operations.

Most of our infrastructure is located on leased premises and the termination or higher renewal rate of our leases could have a material adverse effect on our business, financial condition, and results of operations.

Most of our infrastructure is located in leased premises and there can be no assurance that we will remain in compliance with the leases, that the landlord will continue to support our operations, and that the leases will not be terminated despite negotiation for long term lease periods and renewal provisions. When the initial terms of our existing leases expire, in some instances, we have the right to extend the terms of our leases for one or more renewal periods. Upon the end of our initial term or, if applicable, the renewal periods, we would have to renegotiate our lease terms with the applicable landlords. If renewal rates are less favorable than those we currently have, we may be required to increase revenues to offset such increase in lease payments. Failure to increase revenues to sufficiently offset these projected higher costs could adversely impact our operating income. We may also not be able to renew such leases at all. The termination of a lease could have a material adverse effect on our business, financial condition, and results of operations.

We may face the risk of Internet-related disruptions.

Our digital infrastructure and compute offerings are dependent upon access to the Internet. We are not an Internet provider, and as such, we rely on third parties to provide us with access to the Internet. There can be no assurance that Internet providers will service our data centers or that once a provider has decided to deliver Internet connectivity to our data centers, it will continue to do so for any period of time. If we face a significant disruption in Internet connectivity, we may be required to reduce the impacted operations or cease them altogether. If this occurs, our business, financial condition, and results of operations may be materially and adversely affected.

Our success depends on key personnel whose continued service is not guaranteed.

We depend on the efforts of our key personnel, including our senior leadership, many of whom have strong technology, finance, real estate, and/or power expertise and industry reputations. They are important to our success for many reasons, including that they attract investors and business and investment opportunities and assist us in negotiations with investors, lenders, existing and potential customers, and industry personnel. If we lost their services, our business and investment opportunities and our relationships with lenders and other capital markets participants, existing and prospective customers, and industry personnel could suffer. As the number of our competitors increases, it becomes more likely that a competitor would attempt to hire certain of these individuals away from us. The loss of any of these key personnel would result in the loss of these and other benefits and could materially and adversely affect our business, financial condition, and results of operations.

We also depend on the talents and efforts of highly skilled technical individuals. Our success depends on our continuing ability to identify, hire, develop, motivate, and retain highly skilled technical personnel for all areas of our business. Competition in our industry for qualified technical employees is intense, and the availability of qualified technical personnel is not guaranteed. We cannot assure you that we will be able to attract or retain the personnel we require. If we are unable to identify, hire, develop, motivate, and retain such personnel, it could have a material adverse effect on our business, financial condition, and results of operations.

We are an early-stage company with limited operating history.

We are an early-stage company currently and have a limited operating history. Although we have achieved profitable quarters in the past, we have not maintained consistent profitability from period to period, and no assurances can be made that we will achieve consistent profitability in the near future, if ever. Accordingly, you should consider our business prospects in light of the costs, uncertainties, delays, and difficulties frequently encountered by companies in the early stages of development. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that we may be unable to:

• successfully implement or execute our business plan, or demonstrate that our business plan is sound;
• adjust to changing conditions or keep pace with increased demand;
• attract and retain an experienced management team; or
• raise sufficient funds to effectuate our business plan.

We are required to obtain, maintain, and comply with the terms and conditions of government permits and approvals.

We are required to obtain, maintain, and comply with the terms and conditions of numerous permits and licenses from federal, state, provincial, and local governmental agencies. The process of obtaining and renewing necessary permits and licenses can be lengthy and complex and can result in the establishment of conditions that make the project or activity for which the permit or license was sought unprofitable or otherwise unattractive. In addition, such permits or licenses may be subject to denial, revocation, or modification under various circumstances and may be impacted by legal and regulatory changes. Failure to obtain or comply with the conditions of permits or licenses, or failure to comply with applicable laws or regulations, may result in the delay or temporary suspension of our development or operations.

We may not be able to attract and retain customers across our platform.

To date, we have generated a significant share of our Power and Digital Infrastructure revenue from a small number of customers. Any failure to meet expectations could result in the cancellation or non-renewal of these customer contracts and loss of associated revenue, which could have a material adverse impact on our business, financial condition, and results of operations. In addition, as of December 31, 2024, we served over 250 customers through our five enterprise-grade data centers in Canada. There can be no assurances that we are able to retain our existing customers and attract new customers across our platform for a number of reasons, including if:

• there is a reduction in the demand for our offerings due to macroeconomic factors;
• there is a reduction in demand for our offerings due to a broader secular reduction in demand for such offerings in the underlying industries in which we operate;
• we are unable to provide offerings or launch new offerings that meet the needs of existing or potential customers;
• we fail to effectively market ourselves and our offerings to potential customers;
• we fail to price our offerings attractively;
• we provide offerings that are deemed by existing and potential customers to be inferior to those of our competitors;
• we fail to meet customers’ ongoing and evolving program qualification standards, based on a range of factors, including available power, preferred site design specifications, security considerations, and connectivity;
• businesses decide to build and/or operate sites internally as an alternative to the use of our offerings;
• we fail to successfully communicate the benefits of our offerings to potential customers; and
• we are unable to strengthen awareness of our brand.

If we are unable to obtain customers at favorable terms or at all, it could have a material adverse effect on our business, financial condition, and results of operations. Furthermore, any event leading to the early termination of a customer contract, including customer bankruptcy or force majeure events that disrupt facility operations or damage customer infrastructure, could result in the loss of revenue associated with those contracts. If we were unable to offset lost revenue, it could have a material adverse effect on our business, financial condition, and results of operations.

Failure to price our customer contracts correctly may lead us to operate these contracts at a loss.

Our ability to generate a profit on customer contracts, in part, requires that we accurately forecast costs over the contracted time-period. Failure to do so could have a material adverse effect on our business, financial condition, and results of operations.

Risks Related to Our Growth

New offerings or lines of business may subject us to additional risks.

We are a development stage company with a small management team and are subject to the strains of ongoing development and growth, which will place significant demands on our management and operational and financial infrastructure. To remain competitive with peers, we may need to modify aspects of our business model or we may implement new offerings or lines of business, from time to time. For example, this past year, we acquired, through a joint venture with Macquarie, four natural gas power plants in Ontario and launched a GPU-as-a-Service vertical with the inaugural deployment of 1,000 NVIDA H100 GPUs. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed or where the operational requirements of new offerings or lines of business differ substantially from existing offerings or lines of business. We cannot offer any assurance that these or any other changes will be successful or will not result in harm to our business. In developing and marketing new offerings or lines of business or expanding our current offerings or lines of business, we may invest significant time and resources. Initial timetables for the introduction and development of new offerings or lines of business may not be achieved and profitability targets may not prove feasible. External factors, such as compliance with regulations, competition, and shifting market preferences, may also impact the successful implementation of a new offering or line of business. In addition, our personnel and technology systems may fail to adapt to the changes or we may fail to effectively integrate new offerings or lines of business into our existing operations and we may lack experience in managing new offerings or lines of business. In addition, we may be unable to proceed with the operations as planned or compete effectively due to different competitive landscapes. Even if we expand our businesses into new jurisdictions or areas, the expansion may not yield intended profitable results. Furthermore, any new offering or line of business could have a significant impact on the effectiveness of our internal control system. Failure to successfully manage these risks in the development and implementation of new offerings or lines of business could have a material adverse effect on our business, financial condition, and results of operations. Furthermore, we cannot provide any assurance that we will successfully identify all emerging trends and growth opportunities in the market. As a result, we may not capture those opportunities. Such circumstances could have a material adverse effect on our business, financial condition, and results of operations.

We may not adequately respond to price fluctuations and rapidly changing technology.

Competitive conditions within the industries in which we operate require that we use sophisticated technology in the operation of our business. These industries are characterized by rapid technological changes, new product introductions, enhancements, and evolving industry standards. New technologies, techniques, or offerings could emerge that might offer better performance than the technologies we currently utilize, and we may have to manage transitions to these new technologies to remain competitive. We intend to continue to invest in hardware, equipment and technology at our facilities. We may not be successful, generally or relative to our competitors, in timely implementing new technology into our systems, or doing so in a cost-effective manner. During the course of implementing any such new technology into our operations, we may experience system interruptions and failures during such implementation. Furthermore, there can be no assurances that we will recognize, in a timely manner or at all, the benefits that we may expect as a result of our implementing new technology into our operations. As a result, our business, financial condition, and results of operations may suffer.

Our construction of new data centers, data center expansions, or data center redevelopment could involve significant risks to our business.

In order to sustain our growth in certain of our existing and new markets, we may have to expand an existing data center, lease a new facility, or acquire suitable land, with or without structures, to build new data centers. Expansions or new builds are currently underway, or being contemplated, in new and existing markets. These projects expose us to many risks which could have an adverse effect on our business, financial condition, and results of operations. Global supply chain and inflation issues have exacerbated many of these risks and created additional risks for our business. Some of the risks associated with the development, redevelopment and construction of data centers include:

• construction delays;
• power and power grid constraints;
• lack of availability and delays for data center and/or power equipment, including items such as generators and switchgear;
• unexpected budget changes;
• increased prices for and delays in obtaining building supplies, raw materials, and data center equipment;
• labor availability, labor disputes, and work stoppages with contractors, subcontractors, and other third parties;
• unanticipated environmental issues and geological problems;
• delays related to permitting and approvals to open from public agencies and utility companies;
• unexpected lack of power access;
• delays in site readiness leading to our failure to meet commitments made to customers planning to expand into a new build; and
• unanticipated customer requirements that would necessitate alternative data center design, making our sites less desirable or leading to increased costs in order to make necessary modifications or retrofits.

We may experience rising construction costs as a result of increasing costs of labor and raw materials, supply chain and logistic challenges, and high demand. Furthermore, delays, difficulty finding replacement products, continued high inflation, and additional or unexpected disruptions to our supply chain could significantly affect the cost of our existing or anticipated projects. Site selection is also a critical factor in our expansion plans. There may not be suitable properties available in our markets with the necessary combination of high-power capacity and fiber connectivity, or selection may be limited. We expect that we will continue to experience limited availability of power and grid constraints in many markets as well as shortages of associated equipment because of the current high demands and finite nature of these resources. These shortages could result in site selection challenges, construction delays or increased costs.

If we do not accurately predict our facility requirements, it could have a material adverse effect on our business, financial condition, and results of operations.

The costs of developing, leasing, and maintaining our facilities may constitute a significant portion of our capital and operating expenses. In order to manage growth and ensure adequate capacity for our planned and existing operations while minimizing unnecessary excess capacity costs, we continuously evaluate our short- and long-term infrastructure requirements. There can be no assurance that we accurately predict our short- and long-term requirements and that existing or future market demand will be sufficient to fill this capacity. If we overestimate our capacity requirements or the demand for our offerings and therefore secure excess capacity, our operating margins could be materially reduced and we could experience operating losses. If we underestimate our facility requirements, we may not be able to service our and our customers’ expanding needs and may be required to limit our growth opportunities or new customer acquisition, which could have a material adverse effect on our business, financial condition, and results of operations.

We may acquire other businesses and/or assets or form strategic alliances or joint ventures that could negatively affect our operating results, dilute shareholder ownership, increase debt, or cause us to incur significant expenses.

We have previously engaged in strategic transactions, including the completion of the Business Combination, and, as part of our growth strategy, in the future, we may pursue additional acquisitions of businesses and/or assets and/or enter into strategic alliances or joint ventures. However, we cannot offer any assurance that any such acquisition or partnership will be successful. We may not be able to identify suitable partners or acquisition candidates and may not be able to complete such transactions on favorable terms, if at all. If we complete any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business. In addition, in the event that we acquire any existing businesses, we may assume unknown or contingent liabilities.

Any such acquisitions also could result in the issuance of stock, incurrence of debt, contingent liabilities, write-offs of intangible assets or goodwill, restructuring and other related expenses, or litigation, any of which could have a negative impact on our business, financial condition, and results of operations. Integration of an acquired company may also disrupt ongoing operations and carry substantial compliance burdens and costs, which may limit our ability to realize the anticipated benefits of such acquisitions, and which may require management resources that would otherwise be focused on developing and expanding our existing business. We may experience losses related to potential investments in other companies, which could materially and adversely affect our business, financial condition, and results of operations. Furthermore, the benefits of any acquisition, strategic alliance, or joint venture may also take considerable time to develop, and we cannot be certain that any particular acquisition, strategic alliance, or joint venture will produce the intended benefits in a timely manner or to the extent anticipated or at all.

We face risks associated with the King Mountain JV and the Far North JV and may face similar risks in the future by entering into other joint ventures.

Joint ventures inherently involve a lesser degree of control over business strategy and operations, thereby potentially increasing the financial, legal, operational, regulatory, and/or compliance risks associated with them, and require the diversion of financial and management resources from existing operations or alternative opportunities. We may be dependent on partners, controlling shareholders, management, or other persons or entities who control the joint venture and who may have business interests, strategies, or goals that are inconsistent or competitive with ours. Furthermore, joint venture partners receive access to our intellectual property and other resources, which introduces the risk of theft and/or exploitation.

For example, we own a 50% membership interest in the King Mountain JV. Decision-making control over the King Mountain JV’s actions rests in a committee of four member managers, with two from Hut 8 and two from our partner. If the member managers from Hut 8 and our joint venture partner are not aligned with respect to business interests, strategies, or goals, or if the member managers from Hut 8 and our joint venture partner cannot reach agreement in decision-making processes, there is a risk that we may not be able to operate the King Mountain site optimally from a financial, legal, operational, regulatory, and/or compliance perspective. If this situation materializes, it may have a material adverse effect on our business, financial condition, and results of operations.

Although we expect that our interest in the King Mountain JV and in our joint venture entity, Far North Power Corp. (“the Far North JV”), in partnership with Macquarie will result in benefits to us, we may not realize those benefits. Business decisions or other actions or omissions of the partners, controlling shareholders, management, or other persons or entities who control them may adversely affect the value of our interest in our joint ventures, result in litigation or regulatory action against us, and may otherwise damage our reputation and brand. Our ability to realize value from our joint ventures may be limited by applicable securities laws and regulations. If we fail to address the foregoing risks or other problems encountered in connection with current or future joint ventures, it could have a material adverse effect on our business, financial condition, and results of operations.

We operate in the United States and Canada and may further expand our operations internationally, which may expose us to risks associated with doing business internationally.

We currently operate in the United States and Canada and may further expand our operations internationally. As a result, we are and may become increasingly exposed to risks inherent in conducting business outside of the United States. These risks include the following:

• adverse changes in foreign currency exchange rates;
• increased difficulty in protecting our intellectual property rights and trade secrets, including litigation costs and the outcome of such litigation in jurisdictions outside the United States;
• increased exposure to events that could impair our ability to operate internationally with third parties such as problems with such third parties’ operations, finances, insolvency, labor relations, manufacturing capabilities, costs, insurance, natural disasters, public health emergencies, or other catastrophic events;
• unexpected legal or government action or changes in legal or regulatory requirements;
• difficulties in managing, growing, and staffing international operations;
• social, economic, or political instability;
• potential negative consequences from changes to taxation or tariff policies;
• challenges to the transfer pricing of cross-border intercompany transactions;
• increased difficulty in ensuring compliance by employees, agents, and contractors with our policies as well as with the laws of multiple jurisdictions, including international environmental, health, and safety laws and increasingly complex regulations relating to the conduct of international commerce, including import/export laws and regulations, economic sanctions laws and regulations, and trade control; and
• increased exposure to cybersecurity risks in foreign jurisdictions that may materially and adversely affect our business, financial condition and results of operations.

We may incur significant expenses as a result of our international operations, and we may not be successful in converting those expenditures into increased profitability. Our failure to successfully manage these risks could harm our international operations and have an adverse effect on our business, financial condition and results of operations.

AI technologies are constantly evolving, and any flaws in or misuse of AI, even if committed by other third parties, could have a negative impact on our business, reputation, brands, and the general acceptance of AI solutions by society.

AI technologies are still in a preliminary stage of development and are constantly evolving. As with many disruptive innovations, AI presents risks and challenges that could affect user perception and its adoption. Any flaws in or insufficiencies of AI, and any inappropriate or premature usage thereof, whether actual or perceived, and whether by us or by other third parties, may dissuade prospective customers from adopting AI solutions, and may impair the general acceptance of AI by broader society.

Risks Related to Bitcoin

If we fail to grow our hashrate, we may be unable to compete, and our business, financial condition, and results of operations could suffer.

Generally, a Bitcoin miner’s chance of solving a block on the Bitcoin blockchain and earning a Bitcoin reward is a function of the miner’s hashrate (i.e., the amount of computing power devoted to supporting the Bitcoin blockchain), relative to the global network hashrate. As demand for Bitcoin has increased, the global network hashrate has increased, and to the extent more adoption of Bitcoin occurs, we would expect the demand for Bitcoin would increase, drawing more mining companies into the industry and further increasing the global network hashrate. As new and more powerful miners are deployed, the global network hashrate will continue to increase, meaning a miner’s percentage of the total daily rewards will decline unless it deploys additional hashrate at pace with the growth of global hashrate. Accordingly, to compete, we believe we will need to continue to acquire new miners, both to replace those lost to ordinary wear-and-tear and other damage, and to increase our hashrate to keep up with a growing global network hashrate. However, there can be no assurance that we will have the resources to acquire new miners and increase our hashrate in order to maintain the profitability of our mining operations. See “—We may be unable to purchase miners at scale or face delays or difficulty in obtaining new miners at scale.”

Furthermore, predicting the growth in network hashrate is extremely difficult. Generally, we would expect hashrate increases to be correlated with increases in Bitcoin price, but that has not always been the case, including during recent periods of time during 2022 and 2023. To the extent that hashrate increases but the price of Bitcoin does not, there can be no assurance that we would be able to recover our investment in the hardware and processing power required to upgrade our mining operations, and the results of our Bitcoin mining operations will suffer.

We may be unable to purchase miners at scale or face delays or difficulty in obtaining new miners at scale.

Our Bitcoin mining operations can only be profitable if the costs, inclusive of hardware and electricity costs, associated with mining Bitcoin are lower than the price of the Bitcoin mined at the time of sale. As the cost of obtaining new miners increases, the cost of producing Bitcoin also increases. For example, miners experience ordinary wear-and-tear from operation and may also face more significant malfunctions caused by factors which may be beyond our control. Additionally, as technology evolves, we may acquire newer models of miners to remain competitive in the market. The continual upgrade and refresh of mining machines requires substantial capital investment, and we may face challenges in doing so on a timely basis based on the price and availability of new miners and our access to adequate capital resources.

In the past, we have observed periods of shortage in new miners available for purchase and a delay in delivery schedules for new miner purchases. There is no assurance that miner manufacturers or any other equipment manufacturers will be able to keep pace with potential surges in demand for mining equipment. It is uncertain how manufacturers will respond to increased global demand and whether they fulfill purchase orders fully and in a timely manner. Supply chain issues or geopolitical matters, including the relationship of the United States and Canada with China and other countries may also impact equipment manufacturers’ ability to fully and timely fulfill purchase orders. In the event that miner manufacturers or other suppliers are not able to keep pace with, or fail to satisfy, demand, we may not be able to purchase miners or other equipment in sufficient quantities or on the delivery schedules required to meet our business needs. For example, if delivery of our recently purchased BITMAIN Antminer S21+ miners is delayed or prevented, our business, financial condition, and results of operations may suffer. In the past, including for our recent purchase of BITMAIN Antminer S21+ miners, miner manufacturers have required advance deposits for miner purchases. If this continues in the future, we may need to tie up significant amounts of capital for prolonged periods before we receive and are able to deploy purchased miners to generate revenue. Should any suppliers default on purchase agreements with us, we may need to pursue recourse under international jurisdictions, which could be costly and time-consuming. The outcome of any actions initiated in such international jurisdictions, and our ability to enforce judgments (if any) issued in our favor on such jurisdictions is inherently uncertain given differences in legal systems, biases against foreign litigants in certain jurisdictions, and other factors outside our control. Furthermore, there is no guarantee that we would succeed in recovering any of the deposits paid for such purchases, which could materially and adversely affect our business, financial condition, and results of operations.

Our reliance on third-party mining pool service providers, including Foundry and Luxor, for our mining revenue payouts may have a negative impact on our business, financial condition, and results of operations.

We receive Bitcoin rewards from our mining activity through third-party mining pool operators, including Foundry and Luxor. Mining pools allow miners to combine their processing power, increasing their chances of solving a block and getting paid by the network. We provide computing power to mining pools, which use this computing power to operate nodes and validate blocks on the blockchain. The pools then distribute our pro-rata share of Bitcoin mined to us based on the computing power we contribute.

Under our mining pool agreements with Foundry and Luxor, our daily payout is calculated based on our hashrate contribution delivered to the pool in the applicable calculation period, after deducting the applicable pool fee, if any. Our pool fee in relation to these agreements is currently below 1.0% of our daily payout.

Should one of our pool operator’s systems suffer downtime due to a cyberattack, software malfunction or other similar issues, it will negatively impact our ability to mine and receive Bitcoin mining rewards. Furthermore, we are dependent on the accuracy of the mining pool operators’ record keeping to accurately record the total processing power provided by us and other mining pool participants to the pool for a given Bitcoin mining application in order to assess the proportion of that total processing power we provided. While we have internal methods of tracking both our processing power provided and the total used by the pool, the mining pool operator uses its own recordkeeping to determine our proportion of a given reward. We have little means of recourse against mining pool operators if we determine the proportion of the reward paid out to us by the mining pool operator is incorrect, other than leaving the pool. If we are unable to consistently obtain accurate proportionate rewards from our mining pool operators, we may experience reduced reward for our efforts, which would have an adverse effect on our business, financial condition, and results of operations.

The further development and acceptance of the Bitcoin network and other digital assets is subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of Bitcoin and other digital asset systems may adversely affect our business, financial condition, and results of operations.

The use of digital assets to, among other things, buy and sell goods and services and complete transactions, is part of a new and rapidly evolving industry that employs digital assets, including Bitcoin, based upon a computer-generated mathematical and/or cryptographic protocol. The growth of this industry in general, and the use of Bitcoin in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of developing protocols may occur unpredictably.

During 2022 and early 2023, some well-known digital asset market participants, including Celsius Network, Voyager Digital Ltd., Three Arrows Capital, and Genesis Global Holdco LLC, declared bankruptcy, resulting in a loss of confidence in participants of the digital asset ecosystem, negative publicity surrounding digital assets more broadly, decreased liquidity, and extreme price volatility. Even if there was no direct material impact on our business from such bankruptcies, we have been and may continue to be impacted indirectly.

Furthermore, the closure and temporary shutdown of major digital asset exchanges and trading platforms, such as FTX, due to fraud or business failure, has disrupted investor confidence in digital assets and led to a rapid escalation of oversight of the digital asset industry. Thus, the failures of key market participants and systemic contagion risk is expected to, as a consequence, invite stricter regulatory scrutiny. This could have a negative impact on further development and acceptance of digital asset networks and digital assets, including Bitcoin.

Other factors that could affect further development and acceptance of digital asset networks and other digital assets include:

• continued worldwide growth in the adoption and use of digital assets as a medium of exchange or store of value;
• governmental regulation of Bitcoin and its use, or restrictions on or regulation of access to and operation of the Bitcoin network or similar digital asset systems;
• limitations on financial institutions processing funds for Bitcoin transactions, processing wire transfers to or from Bitcoin exchanges, Bitcoin-related companies or service providers, or servicing or maintaining accounts for persons or entities transacting in Bitcoin;
• changes in consumer demographics and public tastes and preferences;
• the maintenance and development of the open-source software protocol of the network, including software updates and changes to network protocols that could introduce bugs or security risks;
• the increased consolidation of contributors to the Bitcoin blockchain through mining pools;
• the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;
• the use of the networks supporting digital assets for developing smart contracts and distributed applications;
• general economic conditions and the regulatory environment relating to digital assets;
• environmental restrictions on the use of power to mine Bitcoin and a resulting decrease in global Bitcoin mining operations;
• an increase in Bitcoin transaction costs and a resultant reduction in the use of and demand for Bitcoin; and
• negative consumer sentiment and perception of Bitcoin specifically and digital assets generally.

The outcome of these factors could have negative effects on our business, financial condition, and results of operations as well as potentially negative effect on the value of any Bitcoin we mine or otherwise acquire or hold for our own account, which would harm investors in our securities.

The Bitcoin reward for successfully uncovering a block will halve several times in the future and Bitcoin’s value may not adjust to compensate us for the reduction in the rewards we receive from our mining efforts.

Halving is a process incorporated into many proof-of-work consensus algorithms that reduces the coin reward paid to miners over time according to a pre-determined schedule. This reduction in reward spreads out the release of digital assets over a long period of time resulting in an ever smaller number of coins being mined. At a predetermined block, the mining reward is cut in half, hence the term “halving.” For example, the mining reward for Bitcoin declined from 6.25 to 3.125 bitcoin on April 19, 2024. This process is scheduled to occur once every 210,000 blocks, until the total amount of Bitcoin rewards issued reaches 21 million.

As the number of Bitcoin awarded for solving a block in a blockchain decreases, our ability to achieve profitability becomes more difficult. While the Bitcoin price has had a history of price fluctuations around the halving of its rewards, there is no guarantee that the price change will be favorable or would compensate for the reduction in mining reward. If a corresponding and proportionate increase in the trading price of Bitcoin or a proportionate decrease in mining difficulty does not follow these anticipated halving events, the revenue we earn from our Bitcoin mining operations would see a corresponding decrease, which would have a material adverse effect on our business, financial condition, and results of operations. If the award of Bitcoin rewards for solving blocks and transaction fees are not sufficiently high, we may not have an adequate incentive to continue mining and may decrease or cease our Bitcoin mining operations.

The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or other alternatives.

The development and acceptance of competing blockchain platforms or technologies may cause industry participants and consumers to abandon Bitcoin. As Bitcoin is the only digital asset we mine, we could face difficulty adapting to emergent digital ledgers, blockchains or alternatives thereto. This could prevent us from realizing the anticipated profits from our investments. Such circumstances could have a material adverse effect on our business, financial condition, and results of operations and the value of any Bitcoin we mine or otherwise acquire or hold for our own account.

Our operations, investment strategies, and profitability may be adversely affected by competition from other methods of investing in Bitcoin.

We compete with other users and/or companies that are mining Bitcoin and we also face significant competition from other users and/or companies that are processing transactions on one or more digital asset networks, as well as other potential financial vehicles, including securities, derivatives or futures backed by, or linked to, digital assets through entities such as exchange-traded funds. Market and financial conditions, and other conditions beyond our control, may make it more attractive to invest in other financial vehicles, or to invest in Bitcoin directly, which could limit the market for shares of our common stock and reduce its liquidity. The emergence of other financial vehicles and exchange-traded funds have been scrutinized by regulators and such scrutiny and the negative impressions or conclusions resulting from such scrutiny could be applicable to us and impact our ability to successfully pursue our strategy or operate at all, or to establish or maintain a public market for our securities. Such circumstances could have a material adverse effect on our business, financial condition, and results of operations and potentially the value of any Bitcoin we mine or otherwise acquire or hold for our own account, and harm our investors.

The characteristics of Bitcoin have been, and may in the future continue to be, exploited to facilitate illegal activity such as fraud, money laundering, tax evasion, and ransomware scams. Furthermore, the exchanges on which Bitcoin trades are relatively new and, in most cases, largely unregulated and may therefore be more exposed to fraud and failure than established, regulated exchanges for other assets. Such circumstances may result in a reduction in the price of Bitcoin and can adversely affect our business, financial condition, and results of operations.

Bitcoin and the exchanges on which Bitcoin trades are relatively new and, in most cases, largely unregulated. Certain characteristics, including the speed with which Bitcoin transactions can be conducted, the ability to conduct transactions without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, the irreversible nature of certain Bitcoin transactions, and encryption technology that anonymizes these transactions make Bitcoin, and digital currencies generally, particularly susceptible to use in illegal activity such as fraud, money laundering, tax evasion, and ransomware scams. Furthermore, many Bitcoin exchanges do not typically provide the public with significant information regarding their ownership structure, management teams, corporate practices, or regulatory compliance. As a result, the marketplace may lose confidence in, or may experience problems relating to, Bitcoin exchanges, including prominent exchanges handling a significant portion of the volume of Bitcoin trading.

While we continue to maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering and sanctions laws, if we are found to have transacted with bad actors that have used Bitcoin to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and may be prohibited or restricted from engaging in further transactions or dealings in Bitcoin. Furthermore, negative perception, a lack of stability in the broader Bitcoin markets, and the closure or temporary shutdown of Bitcoin exchanges due to fraud, business failure, hackers, malware, or government-mandated regulation may reduce confidence in Bitcoin and result in greater volatility in the prices of Bitcoin. A number of Bitcoin exchanges have been closed due to fraud, failure, or security breaches. In many of these instances, the customers of such Bitcoin exchanges were not compensated or made whole for the partial or complete losses of their account balances in such Bitcoin exchanges. To the extent investors view our common stock as linked to the value of our Bitcoin holdings, such a negative perception of Bitcoin exchanges could have a material adverse effect on the price of our common stock.

It may be illegal now, or in the future, to acquire, own, hold, sell, or use Bitcoin or other digital assets, participate in blockchains or utilize similar digital assets in one or more countries.

Although currently digital assets generally are not regulated or are lightly regulated in most countries, countries such as China have taken harsh regulatory action to curb the use of digital assets and may continue to take regulatory action in the future that could severely restrict the right to acquire, own, hold, sell, or use these digital assets or to exchange them for fiat currency. For example, in 2021 China instituted a blanket ban on all digital asset mining and transactions, including overseas digital asset exchange services taking place in China, effectively making all digital asset-related activities illegal in China. In certain nations, it is illegal to accept payment in Bitcoin or other digital assets for consumer transactions, and banking institutions are barred from accepting deposits of Bitcoin. Such restrictions may adversely affect us as the large-scale use of Bitcoin as a means of exchange is presently confined to certain regions globally. Such circumstances could have a material adverse effect on our business, financial condition, and results of operations and potentially the value of any Bitcoin we mine or otherwise acquire or hold for our own account, ultimately harming investors.

A failure to properly monitor and upgrade the Bitcoin network’s protocol could damage that network and an investment in our securities.

As an open-source project, Bitcoin does not generate revenues for its contributors, and contributors are generally not compensated for maintaining and updating the Bitcoin network protocol. The lack of guaranteed financial incentives for contributors to maintain or develop the Bitcoin network and the lack of guaranteed resources to adequately address emerging issues with the Bitcoin network may reduce incentives to address the issues adequately or in a timely manner. To the extent that contributors may fail to adequately update and maintain the Bitcoin network protocol, there may be a material adverse effect on our business, prospects, or operations and potentially the value of any Bitcoin we mine or otherwise acquire or hold for our own account.

There is a possibility of Bitcoin mining algorithms transitioning to “proof of stake” validation, which could make us less competitive and adversely affect our business, financial condition, and results of operations.

“Proof of stake” is an alternative method in validating digital asset transactions. Should the Bitcoin network shift from a “proof of work” validation method to a “proof of stake” validation method, mining would require less energy and may render companies, such as ours, less competitive. Furthermore, if our miners or other mining infrastructure cannot be modified to accommodate changes in rule or protocol of the Bitcoin network, our business, financial condition, and results of operations will be significantly affected.

If a malicious actor or botnet obtains control of a majority of the processing power active on any digital asset network, including the Bitcoin network, the blockchain may be manipulated in a manner that adversely affects an investment in us.

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining on any digital asset network, including the Bitcoin network, it may be able to alter the blockchain by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. In such alternate blocks, the malicious actor or botnet could control, exclude, or modify the ordering of transactions, though it could not generate new digital assets or transactions using such control. Using alternate blocks, the malicious actor could “double-spend” its own digital assets (i.e., spend the same digital assets in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintains control. To the extent that such malicious actor or botnet did not yield its control of the processing power on the Bitcoin or other network, or the Bitcoin or other community did not reject the fraudulent blocks as malicious, reversing any changes made to the blockchain may not be possible.

Miners ceasing operations would reduce the collective processing power on the Bitcoin network, which would adversely affect the confirmation process for transactions (i.e., temporarily decreasing the speed at which blocks are added to the Bitcoin blockchain until the next scheduled adjustment in difficulty for block solutions). If a reduction in processing power occurs, the Bitcoin network may be more vulnerable to a malicious actor obtaining control in excess of 50% of the processing power on the Bitcoin network. Although there are no known reports of malicious activity or control of the Bitcoin blockchain achieved through controlling over 50% of the processing power on the network, it is believed that certain mining pools may have exceeded, and could exceed, the 50% threshold. The possible crossing of the 50% threshold indicates a greater risk in that a single mining pool could exert authority over the validation of Bitcoin transactions. To the extent that the Bitcoin or other digital asset ecosystems, including developers and administrators of mining pools, do not act to ensure greater decentralization of Bitcoin or other digital asset mining processing power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin or other network will increase, which may adversely impact our business, financial condition, and results of operations.

Forks in the Bitcoin network may occur in the future, which may affect the value of Bitcoin held by us.

Contributors can propose refinements or improvements to the Bitcoin network’s source code that alter the protocols and software that govern the Bitcoin network and the properties of Bitcoin, including the irreversibility of transactions and limitations on the mining of new Bitcoin. This is known as a “fork.” In the event a developer or group of developers proposes modifications to the Bitcoin network that are not accepted by a majority of miners and users, but that are nonetheless accepted by a substantial plurality of miners and users, two or more competing and incompatible blockchain implementations could result running in parallel, yet lacking interchangeability and necessitating exchange-type transactions to convert currencies between the two forks. This is known as a “hard fork.”

The value of Bitcoin after the creation of a fork is subject to many factors, including the value of the fork product, market reaction to the creation of the fork product, and the occurrence of additional forks in the future. It may be unclear following a fork which fork represents the original asset and which is the new asset. If we hold Bitcoin at the time of a hard fork into two digital assets, industry standards would dictate that we would be expected to hold an equivalent amount of the old and new assets following the fork. However, we may not be able, or it may not be practical, to secure or realize the economic benefit of the new asset for various reasons. For instance, we may determine that there is no safe or practical way to custody the new asset, that trying to do so may pose an unacceptable risk to our holdings in the old asset, or that the costs of taking possession and/or maintaining ownership of the new digital asset exceed the benefits of owning the new digital asset. Additionally, laws, regulation, or other factors may prevent us from benefiting from the new asset even if there is a safe and practical way to custody and secure the new asset. As such, we may not be able to realize the economic benefit of a fork, either immediately or ever, which could adversely affect the value of the Bitcoin we hold as well as our business, financial condition, and results of operations.

Our automated processes with respect to curtailment may adversely affect our ability to mine Bitcoin.

We may curtail the energy used by our Bitcoin mining operations in times of heightened energy prices or, in the case of a grid-wide electricity shortage, either voluntarily or by agreement with utility providers. We may also encounter other situations where utilities or government entities restrict or prohibit the provision of electricity to Bitcoin mining operations. In these cases, our ability to mine Bitcoin may be negatively affected.

Intellectual property rights claims may adversely affect the operation of some or all digital asset networks.

Third parties may assert intellectual property claims relating to the holding and transfer of digital assets, including Bitcoin, and their source code. Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in some or all digital asset networks’ long-term viability or the ability of end-users to hold and transfer digital assets, including Bitcoin, may adversely affect the value of the Bitcoin we hold as well as our business, financial condition, and results of operations. Additionally, a meritorious intellectual property claim could prevent us and other end-users from accessing some or all digital asset networks or holding or transferring their digital assets. As a result, an intellectual property claim against us or other large digital asset network participants could adversely affect our business, financial condition, and results of operations.

Risks Related to Our Capital Needs and Capital Strategy

We are highly concentrated in Bitcoin. Bitcoin is a highly volatile asset, and fluctuations in the price of Bitcoin have in the past influenced, and are likely to continue to influence, our business, financial condition, and results of operations and the market price of our common stock.

Currently, our investments are highly concentrated in a single asset, Bitcoin. We generate revenue from Bitcoin rewards that we earn through self-mining in our facilities. We have also acquired, and may in the future acquire, additional Bitcoin through at-market purchases to build our strategic reserve of Bitcoin. However, Bitcoin is a highly volatile asset, and fluctuations in the price of Bitcoin have in the past influenced, and are likely to continue to influence, our business, financial condition, and results of operations and the market price of our common stock. Our business, financial condition, and results of operations and the market price of our common stock would be adversely affected if the price of Bitcoin decreased substantially, including as a result of:

• decreased user and investor confidence in Bitcoin, including due to the various factors described herein;
• investment and trading activities, such as (i) trading activities of highly active retail and institutional users, speculators, miners, and investors, (ii) actual or expected significant dispositions of Bitcoin by large holders, including vehicles investing in Bitcoin or tracking Bitcoin markets, and (iii) actual or perceived manipulation of the spot or derivative markets for Bitcoin or spot Bitcoin ETPs;
• negative publicity, media coverage, or sentiment due to events in or relating to, or perception of, Bitcoin or the broader digital assets industry, for example, (i) public perception that Bitcoin can be used as a vehicle to circumvent sanctions or to fund criminal or terrorist activities; (ii) expected or pending civil, criminal, regulatory enforcement, or other high profile actions against major participants in the Bitcoin ecosystem, including the SEC’s enforcement actions against Coinbase, Inc. and Binance Holdings Ltd.; (iii) additional filings for bankruptcy protection or bankruptcy proceedings of major digital asset industry participants, such as the bankruptcy proceeding of FTX Trading and its affiliates; and (iv) the actual or perceived environmental impact of Bitcoin mining and related activities, including environmental concerns raised by private individuals, governmental and non-governmental organizations, and other actors related to the energy resources consumed in the Bitcoin mining process;
• changes in consumer preferences and the perceived value or prospects of Bitcoin;
• competition from other digital assets that exhibit better speed, security, scalability, or energy efficiency, that feature other more favored characteristics, that are backed by governments or reserves of fiat currencies, or that represent ownership or security interests in physical assets;
• a decrease in the price of other digital assets, including stablecoins, or the crash or unavailability of stablecoins that are used as a medium of exchange for Bitcoin purchase and sale transactions, such as the crash of the stablecoin Terra USD in 2022, to the extent the decrease in the price of such other digital assets or the unavailability of such stablecoins may cause a decrease in the price of Bitcoin or adversely affect investor confidence in digital assets generally;
• disruptions, failures, unavailability, or interruptions in service of Bitcoin exchanges;
• cyber theft of Bitcoin from online wallet providers, or news of such theft from such providers or from individuals’ online wallets;
• the filing for bankruptcy protection by, liquidation of, or market concerns about the financial viability of digital asset custodians, exchanges, lending platforms, investment funds, or other digital asset industry participants;
• regulatory, legislative, enforcement, and judicial actions that adversely affect the price, ownership, transferability, trading volumes, legality, or public perception of Bitcoin, or that adversely affect the operations of or otherwise prevent digital asset custodians, exchanges, lending platforms, or other digital assets industry participants from operating in a manner that allows them to continue to deliver services to the digital assets industry;
• further reductions in mining rewards of Bitcoin, including block reward halving events or increases in the costs associated with Bitcoin mining, including increases in electricity costs and hardware and software used in mining, that may cause a decline in support for the Bitcoin network;
• scaling challenges, including transaction congestion or slow settlement times and higher transaction fees, associated with processing transactions on the Bitcoin network;
• macroeconomic changes, such as changes in the level of interest rates and inflation, fiscal and monetary policies of governments, trade restrictions, and fiat currency devaluations;
• developments in mathematics or technology, including in digital computing, algebraic geometry ,and quantum computing, that could result in the cryptography used by the Bitcoin blockchain becoming insecure or ineffective; and
• changes in national and international economic and political conditions.

From time to time, we have entered, and may continue to enter, into certain hedging transactions to mitigate our exposure to fluctuations in the price of Bitcoin, which may expose us to risks associated with such transactions, including counterparty risk.

From time to time, we have entered, and may continue to enter, into certain hedging transactions to mitigate our exposure to the market price of Bitcoin. Engaging in hedging transactions may expose us to risks associated with such transactions, including counterparty risk. Hedging against a decline in the values of portfolio investments caused by volatile Bitcoin market prices does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline for other reasons. Such hedging transactions may also limit the opportunity for gain if the values of the portfolio investments should increase. Moreover, it may not be possible to hedge against a particular fluctuation that is so generally anticipated by the markets that a hedging transaction at an acceptable price is unavailable. In light of these and other factors, we may not be successful in mitigating our exposure to volatile Bitcoin prices through any hedging transactions we undertake.

We may be subject to additional risks associated with holding Bitcoin for our own account.

Our Bitcoin are not insured and we do not hold our Bitcoin with a banking institution or a member of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”). Therefore, our Bitcoin are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions. Instead, we safeguard and keep our Bitcoin private by utilizing storage solutions provided by NYDIG Trust Company LLC (“NYDIG”), BitGo Trust Company Inc. (“BitGo”), and Coinbase Custody Trust Company, LLC (“Coinbase Custody”). Although our Bitcoin custodians use security procedures with various elements, such as redundancy, segregation, and cold storage, to minimize the risk of loss, damage, and theft, neither the custodians nor we can guarantee the prevention of such loss, damage, or theft, whether caused intentionally, accidentally, or by force majeure. In light of the significant amount of Bitcoin we hold, these additional risks, including security breaches or cyberattacks or the risk that our Bitcoin could be determined to be property of a bankruptcy estate, are of particular concern and any loss, whether temporary or permanent, of our Bitcoin could adversely affect our business, financial condition, and results of operations.

Bitcoin may only be controlled by the possessor of both the unique public key and private key relating to the local or online digital wallet in which they are held. We are required to publish the public key relating to a digital wallet in use once we first verify a spending transaction from that digital wallet and broadcast such information into the respective network. We safeguard the private keys relating to our Bitcoin by relying on our custody providers. However, to the extent a private key is lost, destroyed, or otherwise compromised and no backup of the private key is accessible, we will be unable to access our Bitcoin and the private key will not be capable of being restored by the Bitcoin network. Any loss of private keys relating to digital wallets used to store our Bitcoin could adversely affect our business, financial condition, and results of operations.

Further, it is possible that, through computer or human error, theft, or other criminal action, our Bitcoin could be transferred in incorrect amounts or to unauthorized third parties or accounts. In general, Bitcoin transactions are irrevocable, and stolen or incorrectly transferred Bitcoin may be irretrievable, and we may have extremely limited or no effective means of recovering such Bitcoin. As a result, any incorrectly executed or fraudulent Bitcoin transactions could adversely affect our business, financial condition, and results of operations.

Bitcoin and other blockchain-based digital assets have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. A successful security breach or cyberattack on us or our custodians could result in a partial or total loss of our Bitcoin in a manner that may not be covered by insurance or indemnity provisions of the custody agreement with a custodian who holds our Bitcoin. Access to our Bitcoin could also be restricted by natural events (such as an earthquake or flood) or human actions (such as a terrorist attack). Such a loss could have a material adverse effect on our business, financial condition, and results of operations.

In addition, we believe that existing law and the terms and conditions of our contractual arrangements with our custodians would not result in the Bitcoin held by our custodians being considered part of the custodian’s bankruptcy estate were the custodian to file for bankruptcy. However, applicable insolvency law is not fully developed with respect to the holding of digital assets in custodial accounts and, if our custodially-held Bitcoin were, in the event of a bankruptcy of any of our custodians, nevertheless considered to be the property of a bankruptcy estate, the Bitcoin custodially-held on our behalf could be subject to bankruptcy proceedings and we could be treated as a general unsecured creditor of the custodian, inhibiting our ability to exercise ownership rights with respect to such Bitcoin. Any such outcome could have a material adverse effect on our business, financial condition, and results of operations.

Furthermore, in connection with our treasury management processes, in preparing to sell Bitcoin, we may temporarily store all or a portion of our Bitcoin on various digital asset trading platforms, which requires us to rely on the security protocols of these trading platforms to safeguard our Bitcoin. While our treasury management processes are designed to mitigate exposure to trading platforms by diversifying our use of custodians and trading platforms, no security system is perfect and trading platforms have been subject to hacks resulting in the loss of digital assets in the past. Such trading platforms may be undercapitalized or over-exposed, as seen with FTX, and may not have adequate insurance necessary to cover any loss or may not compensate for loss where permitted under the laws of the relevant jurisdiction. In addition, malicious actors may be able to intercept our Bitcoin when we transact in or otherwise transfer our Bitcoin or while we are in the process of selling our Bitcoin via such trading platforms. An actual or perceived security breach or data security incident at the digital asset trading platforms with which we have accounts could harm our ability to operate, result in loss of our assets, damage our reputation and negatively affect the market perception of our effectiveness, all of which could adversely affect our business, financial condition, and results of operations.

We may experience liquidity constraints and may need to raise additional capital. We may be unable to raise the additional capital needed to operate and grow our business.

Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due. We currently settle our financial obligations out of cash and cash equivalents, including the net proceeds from the sale of common stock under our ATM program, and from the sale of our Bitcoin. We have a planning and budgeting process to help determine the funds required to support our normal spending requirements on an ongoing basis and our expansionary plans. However, the capital required to operate our business and implement our growth initiatives is substantial. As a result, we may need to raise additional funds through equity or debt financings in order to meet our operating and capital needs, fund our growth initiatives, and/or respond to competitive pressures or unanticipated working capital requirements, especially if the price of Bitcoin declines. However, we may be unable to do so in a timely manner, in sufficient quantities, or on terms acceptable to us, if at all. If we are unable to raise the additional capital needed to maintain our operations and execute on our growth initiatives, we may be less competitive in our industry and our business, financial condition, and results of operations may suffer, and the market price for our securities may be materially and adversely affected. If we were to raise additional equity financing, our stockholders may experience significant dilution of their ownership interest, and the value of their investment could decline. Furthermore, if we were to raise additional debt financing, our debtors would likely have priority over holders of equity with respect to order of payment preference. We may be required to accept terms that restrict our ability to incur additional indebtedness or take other actions, including terms that require us to maintain a specified level of liquidity or other balance sheet ratios that may not be in the interests of other stockholders.

We face risks associated with our current indebtedness, and our failure to service debt or remain in compliance with certain covenants may have a material adverse effect on our business, financial condition, and results of operations.

We and certain of our subsidiaries are party to various arrangements with lenders as described in more detail in this Annual Report, and we may become party to additional debt financing arrangements in the future. As of December 31, 2024, we had approximately $306.0 million of outstanding debt. Our level of indebtedness could have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions. In addition, the increased amount of liquidity and capital required to pay interest on our indebtedness could reduce funds available for capital expenditures, growth initiatives and other activities, which may create competitive disadvantages for us relative to other companies with lower debt levels.

Agreements governing our current debt obligations, and any debt we may incur in the future may, contain financial covenants and covenants that restrict our and our subsidiaries’ ability to take certain corporate and operational actions. As a result of these covenants, we can be limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs. Any violation by us of any of these covenants could provide the lender with the ability to accelerate the maturity of the indebtedness and exercise a variety of remedies, including foreclosing on any collateral securing the debt.

We operate in the United States and Canada and may experience currency risk as a result of our operations.

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Our functional currency is the U.S. dollar and most purchases are transacted in U.S. dollars. However, our Canadian entities use Canadian dollars as their functional currency, we incur costs in Canadian dollars, and we hold cash balances in Canadian dollars. As a result, we are exposed to fluctuations in currency exchange rates, which could negatively affect our business, financial condition, and results of operations. Management currently does not hedge our foreign exchange risk.

Banks and financial institutions may not provide banking services, or may cut off services, to businesses that provide digital asset-related services or that accept digital assets as payment.

Although a number of significant U.S. banks and investment institutions allow customers to carry and invest in Bitcoin and other digital assets, the acceptance and use by banks of digital assets, including Bitcoin, varies. However, a number of companies that provide Bitcoin or other digital asset-related services have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services. This risk may be further exacerbated in light of several high-profile bankruptcies in the digital assets industry, as well as bank failures, which have disrupted investor confidence in digital assets and led to a rapid escalation of oversight of the digital asset industry. For example, certain banks have implemented enhanced know-your-customer and anti-money laundering requirements in connection with potential digital asset customers. These enhanced requirements may make it more difficult for digital asset-related companies to find banking or financial services.

A number of companies and individuals or businesses associated with digital assets may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions. We also may be unable to maintain these services for our business.

The difficulty that many businesses that provide Bitcoin or other digital asset-related services have and may continue to have in finding banks and financial institutions willing to provide them services may decrease the usefulness of digital assets as a payment system and harm public perception of digital assets. Similarly, the usefulness of digital assets as a payment system and the public perception of digital assets could be damaged if banks or financial institutions were to close the accounts of businesses providing Bitcoin or other digital asset-related services. This could occur as a result of compliance risk, cost, government regulation, or public pressure. The risk applies to securities firms, clearance and settlement firms, national stock and commodities exchanges, the over-the-counter market, and the Depository Trust Company. Such factors would have a material adverse effect on our business, financial condition, and results of operations.

Risks Related to Certain Regulations and Laws, Including Tax Laws

Our operations are subject to various legal, regulatory, governmental, and technological uncertainties.

As of December 31, 2024, our platform included five Bitcoin mining sites in North America, four natural gas power generation facilities in Canada, five cloud and colocation data centers in Canada, and a non-operational site in Canada. We also brought online 1,000 NVIDIA H100 GPUs for our GPU-as-a-Service business. Our various lines of business operating across multiple jurisdictions subject us to extensive laws, rules, regulations, policies, orders, determinations, directives, and legal and regulatory interpretations and guidance.

Many of these legal and regulatory regimes were adopted prior to the advent of the internet, mobile technologies, digital assets, AI, and/or related technologies. As a result, some applicable laws and regulations do not contemplate or address unique issues associated with the crypto and AI economies, are subject to significant uncertainty, and vary widely across U.S. and Canadian federal, state, provincial, and local and international jurisdictions. These legal and regulatory regimes, including the laws, rules, and regulations thereunder, evolve frequently and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the crypto and AI industries requires us to exercise our judgment as to whether certain laws, rules, and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions. To the extent we have not complied, or are deemed to have not complied, with such laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on our offerings, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, financial condition, and results of operations.

Additionally, various governmental and regulatory bodies, including legislative and executive bodies, in the United States, Canada, and in other countries may adopt new laws and regulations, the direction and timing of which may be influenced by changes in the governing administrations and major events in the economy. For example, in light of the recent change in administration in the United States, there is considerable uncertainty and potential conflict regarding and among existing laws, judicial orders and bans, new presidential executive orders, regulatory frameworks, leadership changes, and enforcement priorities and strategies. Penalties for non-compliance with any of these orders or regulations may be significant. Proposed tariffs to be imposed by the United States on imports from certain countries and potential counter-tariffs in response, could lead to increased costs and supply chain disruptions. If we are not able to navigate these changes, it could have a material adverse effect on our business, financial condition, and results of operations.

Due to our business activities, we may be subject to examinations, oversight, reviews, investigations, and inquiries, many of which have broad discretion to audit and examine our business. Moreover, laws and regulations related to economic sanctions, export controls, anti-bribery and anti-corruption, and other international activities may restrict or limit our ability to engage in transactions or dealings with certain counterparties in, or with, certain countries or territories, or in certain activities. We cannot guarantee compliance with all such laws and regulations, and failure to comply with such laws and regulations could expose us to fines, penalties, or costly and expensive investigations. Any new laws, regulations, or interpretations may result in additional litigation, regulatory investigations, and enforcement or other actions, including preventing or delaying if and how we provide our offerings. Adverse changes to, or our failure to comply with, any laws and regulations may have an adverse effect on our business, financial condition, and results of operations.

We may be subject to substantial environmental or energy regulation and may be adversely affected by legislative or regulatory changes.

Our business is subject to extensive U.S. and Canadian federal, state, provincial, and local laws. Compliance with, or changes to, the requirements under these legal and regulatory regimes may cause us to incur significant additional costs or adversely impact our ability to compete on favorable terms with competitors. Our plans and strategic initiatives are based, in part, on our understanding of current environmental and energy regulations, policies, and initiatives. If new regulations are imposed, or if existing regulations are modified, the assumptions we made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional costs to adapt our plans, if we are able to adapt them at all, to such changes. Failure to comply with such requirements could result in the shutdown of a non-complying facility, the imposition of liens, fines, and/or civil or criminal liability, costly litigation, or substantial delays or modifications to our operations or strategic initiatives. Changes to these laws and regulations could result in temporary or permanent restrictions on the development or operation of our facilities or restrictions on their use. Compliance with, or opposing such regulation, may be costly. In addition, we may be responsible for any on-site liabilities associated with the environmental condition of facilities that we have acquired, leased, developed, or sold, regardless of when the liabilities arose and whether they are now known or unknown.

In addition, there continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty for our business because Bitcoin mining and AI compute, with their energy demand, and Far North, as an operator of power plants, may become targets for future environmental and energy regulation. New legislation and increased regulation regarding climate change could impose significant costs on us and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations. Further, any future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. Given the political significance and uncertainty around the impact of climate change and how it should be addressed, we cannot predict how legislation and regulation will affect our business, financial condition, and results of operations. Further, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation. Any of the foregoing could result in a material adverse effect on our business, financial condition, and results of operations.

Increased scrutiny and changing expectations from stakeholders with respect to our practices and the impacts of climate change may result in additional costs or risks.

Companies across many industries are facing increasing scrutiny related to environmental, social, and governance (“ESG”) matters. Investor advocacy groups, certain institutional investors, investment funds, and other influential investors are increasingly focused on ESG and in recent years have placed increasing importance on the non-financial impacts of their investments. In May 2021, the SEC proposed rule changes that would require public companies to include certain climate-related disclosures in their periodic reports. Furthermore, increased public awareness and concern regarding environmental risks, including global climate change, may result in increased public scrutiny of our business and our industry, and our management team may divert significant time and energy away from our operations and towards responding to such scrutiny and reassuring our employees. The implementation of the SEC’s proposed rule changes was stayed in April 2024 in response to consolidated legal challenges. However, should the rule changes ultimately become effective, in either their current or a revised form, we, as a public company, may also face increased oversight from the SEC with respect to our climate-related disclosures. If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements on our operations, our business, financial condition, and results of operations could be negatively impacted.

We may be adversely affected by physical risks related to climate change and our response to it.

Severe weather events, such as droughts, wildfires, flooding, heat waves, hurricanes, typhoons, and winter storms, and other natural and manmade events pose a threat to our operations through physical damage to facilities or equipment, power supply disruption, and long-term effects on the cost of electricity. The frequency and intensity of severe weather events are reportedly increasing as part of broader climate changes. Changes in global weather patterns may also pose long-term risks of physical impacts to our business.

We maintain certain disaster recovery and business continuity plans that would be implemented in the event of severe weather events that interrupt our operations. While these plans are designed to allow us to recover from natural disasters or other events that can interrupt our business, we cannot be certain that our plans will work as intended to mitigate the impacts of such disasters or events. Failure to prevent impact to us and our customers from such events could adversely affect our business, financial condition, and results of operations.

Our interactions with a blockchain may expose us to specially designated nationals (“SDN”) or blocked persons and new legislation or regulation could adversely impact our business or the market for digital assets.

The Office of Financial Assets Control (“OFAC”) of the U.S. Department of Treasury requires us to comply with its sanction program and not conduct business with persons named on its SDN list. However, because of the pseudonymous nature of blockchain transactions, we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s SDN list. Our policies prohibit any transactions with such SDN individuals, and we take commercially reasonable steps to avoid such transactions, but we may not be adequately capable of determining the ultimate identity of the individual with whom we transact with respect to transacting in Bitcoin. Moreover, there is a risk that some bad actors will continue to attempt to use digital assets, including Bitcoin, as a potential means of avoiding federally imposed sanctions.

We are unable to predict the nature or extent of new and proposed legislation and regulation affecting the digital asset industry, or the potential impact of the use of Bitcoin or other digital assets by SDN or other blocked or sanctioned persons, which could have material adverse effects on our business, financial condition, and results of operations and our industry more broadly. Further, we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties as a result of any enforcement actions, all of which could harm our business, financial condition, and results of operations.

The application of the U.S. Commodities Exchange Act of 1936, as amended (the “CEA”) and the regulations promulgated thereunder to our business is unclear and is subject to change in a manner that is difficult to predict.

The application of the CEA, and the regulations promulgated thereunder by the CFTC to our business is unclear and is subject to change in a manner that is difficult to predict. To the extent we become or are deemed to be subject to regulation by the CFTC in connection with our business activities, we may incur additional regulatory obligations and compliance costs, which may be significant.

The CFTC has stated, and judicial decisions involving CFTC enforcement actions have confirmed, that Bitcoin and other digital assets fall within the definition of a “commodity” under the CEA, and the regulations promulgated by the CFTC thereunder (“CFTC Rules”). As a result, the CFTC has general enforcement authority to police against manipulation and fraud in the spot markets for Bitcoin and other digital assets. From time to time, manipulation, fraud, and other forms of improper trading by other participants involved in the markets for Bitcoin and other digital assets have resulted in, and may in the future result in, CFTC investigations, inquiries, enforcement action, and similar actions by other regulators, government agencies, and civil litigation. Such investigations, inquiries, enforcement actions, and litigation may cause negative publicity for Bitcoin and other digital assets, which could adversely impact mining profitability, the value of such assets, and the price of our common stock.

In addition to the CFTC’s general enforcement authority, the CFTC has regulatory and supervisory authority with respect to commodity futures, options, and/or swaps (“Commodity Interests”) and certain transactions in commodities offered to retail purchasers on a leveraged, margined, or financed basis. Changes in our activities, the CEA, CFTC Rules, or the interpretations and guidance of the CFTC may subject us to additional regulatory requirements, licenses, and approvals, which could result in significant increased compliance and operational costs.

Furthermore, trusts, syndicates, and other collective investment vehicles operated for the purpose of trading in Commodity Interests may be subject to regulation and oversight by the CFTC and the National Futures Association as “commodity pools.” If our mining activities or transactions in Bitcoin were deemed by the CFTC to involve Commodity Interests and the operation of a commodity pool for our shareholders, we could be subject to regulation as a commodity pool operator and required to register as such. Such additional registrations may result in increased expenses, thereby materially and adversely impacting our business, financial condition, and results of operations. If we determine it is not possible or practicable to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect an investment in our business.

If regulatory changes or interpretations require our registration as a “money services business” under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act (the “BSA”), or otherwise under state laws, we may incur significant compliance costs.

FinCEN regulates providers of certain services with respect to “convertible virtual currency,” including Bitcoin. Businesses engaged in the transfer of convertible virtual currencies are subject to registration and licensure requirements at the U.S. federal level and also under U.S. state laws. While FinCEN has issued guidance that digital assets mining, without engagement in other activities, does not require registration and licensure with FinCEN, this could be subject to change as FinCEN and other regulatory agencies continue their scrutiny of the Bitcoin network and digital assets generally. To the extent that our business activities cause us to be deemed a “money services business” under the regulations promulgated by FinCEN under the authority of the BSA, we may be required to comply with FinCEN regulations, including those that would mandate us to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.

To the extent that our activities would cause us to be deemed a “money transmitter” or equivalent designation under state law in any state in which we may operate, we may be required to seek a license or otherwise register with a state regulator and comply with state regulations that may include the implementation of anti-money laundering programs, including implementing a know-your-counterparty program and transaction monitoring, maintenance of certain records, and other operational requirements.

Such additional federal or state regulatory obligations may cause us to incur extraordinary expenses. Furthermore, we may not be capable of complying with certain federal or state regulatory obligations applicable to “money services businesses” and “money transmitters,” such as monitoring transactions and blocking transactions, because of the nature of the Bitcoin blockchain. If we are deemed to be subject to and determine not to comply with such additional regulatory and registration requirements, we may cease or alter our activities and offerings.

If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), applicable restrictions could make it impractical or impossible for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.

Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. We intend to conduct our operations so that we will not be deemed an investment company. We believe that we are not and will not be primarily engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities. The SEC and its staff have taken the position that certain digital assets fall within the definition of a “security” under the U.S. federal securities laws. Although public statements by senior officials and the staff of the SEC indicate that the SEC does not intend to take the position that Bitcoin is a security (in its current form), such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court.

As a result of our investments and our Bitcoin mining activities, it is possible that the investment securities we hold in the future could exceed 40% of our total assets, exclusive of U.S. government securities and cash items, particularly if the SEC’s position on Bitcoin changes, and, accordingly, we could become an inadvertent investment company. An inadvertent investment company can avoid being classified as an investment company if it can rely on one of the exclusions or exemptions under the 1940 Act. One such exemption, Rule 3a-2 under the 1940 Act, allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which an issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis and (b) the date on which an issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. As of the date of this Annual Report, we do not believe we are an inadvertent investment company. If we do become an inadvertent investment company in the future, we may take actions to cause the investment securities held by us to be less than 40% of our total assets, which may include acquiring assets with our cash and/or Bitcoin on hand or liquidating investment securities or Bitcoin or seeking a no-action letter from the SEC if we are unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner. Liquidating investment securities or Bitcoin could result in losses.

As the Rule 3a-2 exemption is available to a company no more than once every three years, and assuming no other exclusion or exemption is available to us, we would have to keep within the 40% limit for at least three years after we rely on Rule 3a-2 and subsequently cease being an inadvertent investment company. This may limit our ability to make certain investments or enter into joint ventures that could otherwise have a positive impact on our earnings. In any event, we do not intend to become an investment company engaged in the business of investing and trading securities.

Classification as an investment company under the 1940 Act requires registration with the SEC. If an investment company fails to register, it would have to stop doing almost all business, and its contracts would become voidable. Registration is time consuming, expensive, and restrictive and may require a restructuring of our business, and we would be very constrained in the kind of business we could do as a registered investment company. Further, we would become subject to substantial regulation concerning management, operations, transactions with affiliated persons, and portfolio composition, and would need to file reports under the 1940 Act regime. The cost of such compliance would result in us incurring substantial additional expenses, and the failure to register if required would have a materially adverse impact on our business, financial condition, and results of operations. Furthermore, our classification as an investment company could adversely affect our ability to engage in future combinations, acquisitions, or other transactions on a tax-free basis.

We are involved in legal proceedings from time to time, which could adversely affect us.

From time to time, we have been, and may in the future be, a party to legal and regulatory proceedings, including matters involving governmental agencies or regulators, entities with whom we do business, and other proceedings, whether arising in the ordinary course of business or otherwise. We evaluate our exposure to legal and regulatory proceedings and establish reserves, if required, for the estimated liabilities in accordance with generally accepted accounting principles. Assessing and predicting the outcome of these matters involves substantial uncertainties and contingencies. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liabilities, or require us to change our business practices. In addition, the expenses and liabilities of litigation and other proceedings, and the timing of these expenses from period to period, are difficult to estimate, subject to change, and could adversely affect our business, financial condition, and results of operations. For a description of material legal proceedings in which we are involved, see Note 24. Commitments and contingencies to our Consolidated Financial Statements included elsewhere in this Annual Report.

In addition, responding to lawsuits brought against us and governmental inquiries or legal actions that we may initiate can often be expensive, time-consuming, and disruptive to normal business operations. Moreover, the results of complex legal proceedings and governmental inquiries could adversely affect our business, financial condition, and results of operations, and we could incur substantial monetary liability and/or be required to change our business practices.

Prior to the closing of the Business Combination, USBTC had completed a rescission offer of privately issued securities (the “Rescission Offer”).

In July 2021, prior to the closing of the Business Combination, USBTC offered to repurchase all of the shares of USBTC common stock and USBTC Series A preferred stock sold during the various fundraising rounds, as well as promissory notes with an aggregate principal amount of $5.87 million (collectively, the “Rescission Securities”). The Rescission Securities were originally purchased in private transactions by certain persons who are or were residents of California, Florida, Illinois, Maryland, Massachusetts, Pennsylvania, Nevada, New Jersey, New York, Texas, Virginia, Washington, Puerto Rico, Canada, the Cayman Islands, Hong Kong, and the United Arab Emirates at the time such Rescission Securities were purchased.

Management of USBTC became aware that (i) court orders against two of USBTC’s now-former stockholders, John Stetson and Mark Groussman, which, among other things, restrain and enjoin such stockholders from violating certain federal securities laws, may have precluded USBTC from relying on certain federal and state securities exemptions for the offerings since such stockholders may have been deemed “promoters” based on certain of their activities in one or more of the offerings, (ii) it is possible that payments made to certain persons may be deemed as a commission or finder’s fee in connection with one or more of the offerings, and (iii) given the fact that proper notification and/or other provisions for an exemption may not have been complied with, the sale of certain Rescission Securities may not have been in compliance with state securities, “blue sky” or other applicable laws. Because of the aforementioned items, it is possible that the disclosure provided to subscribers in the aforementioned offerings was incomplete. As a result, USBTC elected to conduct the Rescission Offer. All equity previously held by Messrs. Stetson and Groussman and any of their family members and/or affiliates has been sold to other equity holders of USBTC, and USBTC has taken all other actions necessary as of August 2021 so that Messrs. Stetson and Groussman no longer have any involvement with USBTC.

The Rescission Offer remained open until the earlier of (i) the date on which USBTC received written responses from all offerees and (ii) 30 days after delivery of the Rescission Offer. The Rescission Offer closed with only one holder of 126 shares of USBTC Series A Preferred Stock elected to have USBTC redeem his investment and rescind his purchase of the USBTC Series A Preferred Stock. If all securityholders were to have accepted the Rescission Offer, USBTC would have been required to pay approximately $41.2 million in the aggregate. USBTC has voluntarily paid off all of the promissory notes included within the Rescission Securities, and therefore those notes are no longer subject to potential rescission.

However, the Securities Act does not provide that a Rescission Offer will extinguish a holder’s right to rescind the purchase of a security that was not registered or exempt from the registration requirements under the Securities Act. Consequently, in the future, holders of Rescission Securities may choose to exercise their rescission rights. There is no guarantee that this will not happen, and, as such, we may remain liable under the Securities Act for the purchase price of the Rescission Securities subject to the Rescission Offer. Should additional holders of Rescission Securities seek to rescind their prior purchases or should the validity of the Rescission Offer be contested for any reason, we may not have enough cash or cash equivalents to pay any holders of Rescission Securities who may claim they continue to have a right to rescind their purchase of Rescission Securities.

We, through USBTC, are subject to orders in three states, Massachusetts, Maryland, and Virginia, and our failure to comply with federal and state securities laws and regulations in connection with the Rescission Offer could subject us to additional enforcement actions, monetary fines and penalties, disqualifications under federal securities laws, and impair our ability to raise capital in the future.

We are relying upon exemptions from the securities registration provisions of the federal and state securities laws and regulations in connection with the Rescission Offer. In relying upon such exemptions, we have the burden of ensuring compliance with such laws for the Rescission Offer, including the applicable state anti-fraud provisions. We have voluntarily disclosed the Rescission Offer and corresponded with the state securities regulators in the states of California, Maryland, New Jersey, Pennsylvania, Virginia, Massachusetts and Washington regarding the Rescission Offer and we have been advised by all such states that no further actions are necessary. Given that we believe that the Rescission Securities were exempt from registration under Section 4(a)(2) of the Securities Act, we do not believe there were any violations of federal securities laws, and as such, we have not notified any federal regulators regarding the Rescission Offer.

In connection with the Rescission Offer, the Commonwealth of Massachusetts, Office of the Secretary of the Commonwealth, Securities Division (the “Massachusetts Division”) issued a Consent Order, Docket No. E-2022-0011, on March 22, 2022 (the “Massachusetts Order”) in lieu of a hearing. The Massachusetts Order recited that the Massachusetts Division had conducted an investigation of USBTC pursuant to the Massachusetts Uniform Act, Mass. Gen. Laws c. 110A the (“Massachusetts Securities Act”) and the regulations promulgated thereunder (the “Massachusetts Regulations”), and reviewed self-reported allegations of alleged sales of unregistered securities of USBTC in the State of Massachusetts in potential violation of the Massachusetts Securities Act and Massachusetts Regulations which securities had not been determined to be exempt from registration requirements. As had been agreed by and consented to by USBTC, the Massachusetts Order, in summary, required USBTC to (i) permanently cease and desist from committing violations of the Massachusetts Securities Act; (ii) offer to rescind securities purchase transactions with five Massachusetts residents; (iii) submit the necessary paperwork and pay the necessary fees in order to register the sales to the Massachusetts residents with the Massachusetts Division; and (iv) pay an administrative fine in the amount of $1.0 million. With respect to the requirement to offer rescission, USBTC resent the Rescission Offer provided in July 2021, with additional Massachusetts-specific disclaimers, to the five Massachusetts residents, who collectively held 4,335 shares of USBTC Series A Preferred Stock, in April 2022. The Massachusetts investors reconfirmed their declination of the offer to rescind. In April 2022, USBTC paid the $1.0 million administrative fine.

In connection with the Rescission Offer, USBTC entered into a Stipulation for Consent Order, Case No. 2021-0127, on November 5, 2021 (the “Maryland Order”) in lieu of a hearing, following receipt of a Consent Order from the Maryland Securities Division of the Office of the Attorney General Division (the “Division”). The Maryland Order recited that the Commissioner had reviewed allegations that unregistered securities of USBTC were sold by USBTC in the State of Maryland in violation of Section 11-101 et seq. of the Maryland Securities Act, Md. Code Ann., Corps. And Ass’ns. (the “Maryland Securities Act”) which securities had not been determined to be exempt from registration requirements. As had been agreed by USBTC, the Maryland Order, in summary, required USBTC to offer to rescind securities purchase transactions with three Maryland residents, admit to the jurisdiction of the Division as to substance and entry of the Maryland Order, and comply with the provisions of the Maryland Securities Act in any and all such future Maryland offers and sales of securities. With respect to the requirement to offer rescission, USBTC resent the Rescission Offer provided in July 2021, with additional Maryland-specific disclaimers, to the three Maryland residents, who collectively held 1,876 Seed Shares and 126 shares of USBTC Series A Preferred Stock, in November 2021. The Maryland investors reconfirmed their declination of the offer to rescind.

In connection with the Rescission Offer, USBTC entered into a Settlement Order, Case No. 2021-00029, on October 26, 2021 (the “Virginia Order”) in lieu of a hearing, following receipt and approval of the Settlement Order from the Commonwealth of Virginia, State Corporation Commission’s (the “Commission”) Division of Securities and Retail Franchising (Richmond) (the “Virginia Division”). The Virginia Order recited that the Virginia Division had conducted an investigation of USBTC pursuant to Section 13.1-518 of the Virginia Securities Act (the “Virginia Act”) and Section 13.1-501 et seq. of the Code of Virginia, and reviewed self-reported allegations of alleged sales of unregistered securities of USBTC in the State of Virginia in violation of Section 13.1-507 of the Virginia Act which securities had not been determined to be exempt from registration requirements. As had been agreed by and consented to by USBTC, the Virginia Order, in summary, required USBTC to (i) offer to rescind securities purchase transactions with four Virginia residents; (ii) pay to Virginia a monetary penalty and fees to defray the Division investigatory costs in the amounts of $5,000 and $1,000, respectively; (iii) admit to the jurisdiction and authority of the Commission as to substance and entry of the Virginia Order, and (iv) comply with the provisions of the Virginia Securities Act in any and all such future Virginia offers and sales of securities. With respect to the requirement to offer rescission, USBTC resent the Rescission Offer provided in July 2021, with additional Virginia-specific disclaimers, to the four Virginia residents, who collectively held 750 shares of USBTC Common Stock from the USBTC Founder’s Round, 1,875 shares of USBTC Common Stock from the USBTC Seed Round and 441 shares of USBTC Series A Preferred Stock, in October 2021. The Virginia investors reconfirmed their declination of the offer to rescind.

If, for any reason, we fail to comply with the applicable state securities exemptions, or we have failed in the past to comply, we may, among other things, be subject to both investigations and administrative actions by federal and/or state regulatory agencies, administrative fines and penalties, disqualifications from use of exemptions under federal securities laws, or actions for rescission or for damages. There is no guarantee that we will not become subject to such actions in the future. Such actions, if commenced, could have a material adverse effect on our ability to raise necessary capital in the future.

While we have always endeavored to fully comply with all such laws, there is no assurance that any non-compliance will not have a material adverse effect on us.

Changes in tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.

We are subject to income taxes in various jurisdictions in the United States and Canada, and may become subject to taxation in additional jurisdictions as we expand. Our effective tax rate could be adversely affected in the future by several factors, including changes in the valuation of deferred tax assets and liabilities, changes in tax laws and regulations or their interpretations and application, changes in the geographic mix of our earnings, and the outcome of income tax audits in any of the jurisdictions in which we operate or are otherwise subject to tax.

A significant change in U.S. or Canadian tax laws and regulations may materially and adversely impact our income tax liability, provision for income taxes, and effective tax rate. We regularly assess these matters to determine the adequacy of our income tax provision, which is subject to significant judgment.

In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, the outcome of income tax audits and related litigation could be materially different than that reflected in our historical income tax provisions and accruals. There can be no assurance that the resolution of any audits or litigation will not have an adverse effect on business, financial condition, and results of operations.

Developments regarding the treatment of Bitcoin for applicable U.S. and Canadian federal, state, provincial, local, and other tax purposes could adversely impact our business.

Due to the new and evolving nature of Bitcoin and the absence of comprehensive guidance with respect to Bitcoin and related transactions, many significant aspects of the applicable U.S. and Canadian federal, state, provincial, local and other tax treatment of transactions involving Bitcoin, such as the purchase and sale of Bitcoin and the receipt of staking rewards and other digital asset incentives and rewards products, are uncertain, and it is unclear what guidance may be issued in the future with respect to the tax treatment of Bitcoin and related transactions.

Current Internal Revenue Service (“IRS”) guidance indicates that for U.S. federal income tax purposes digital assets, including Bitcoin, should be treated and taxed as property, and transactions involving the payment of Bitcoin for goods and services should be treated in effect as barter transactions. The IRS has also released guidance to the effect that, under certain circumstances, hard forks and airdrops of digital currencies may give rise to taxable events and guidance with respect to the determination of the tax basis of digital currencies. However, current IRS guidance does not address other significant aspects of the U.S. federal income tax treatment of digital assets and related transactions. Moreover, although current IRS guidance addresses the treatment of certain hard forks and airdrops, there continues to be uncertainty with respect to the timing and amount of income inclusions for various crypto asset transactions, including staking rewards, other digital asset incentives, and reward products. Generally, while current IRS guidance creates a potential tax reporting requirement for any circumstance where the ownership of a Bitcoin passes from one person to another, it preserves the right to apply capital gains treatment to those transactions, which may be favorable for investors in Bitcoin.

There can be no assurance that the IRS will not alter its existing position with respect to digital assets in the future or that Canadian federal, or applicable state, provincial, local, and other taxing authorities or courts will follow, or continue to follow, the approach of the IRS with respect to the treatment of digital assets, including Bitcoin. Generally, any alteration of existing guidance or issuance of new or different guidance may have negative consequences, including the imposition of a greater tax burden on investors in Bitcoin or imposing a greater cost on the acquisition and disposition of Bitcoin, In either case, this may have a negative effect on the trading price of Bitcoin or otherwise negatively impact our business, financial condition, and results of operations. In addition, future technological and operational developments that may arise with respect to digital currencies may increase the uncertainty of its treatment for applicable U.S. and Canadian federal, state, provincial, local, and other tax purposes.

We may not protect our intellectual property rights and other proprietary rights effectively, which would allow competitors to duplicate our offerings.

Our success and ability to compete in our markets depends, in part, upon our proprietary technology. We may not be able to obtain broad protection in the United States, Canada, or elsewhere for our existing and future intellectual property and other proprietary rights. Protecting our intellectual property rights and other proprietary rights may require significant expenditure of our financial, managerial, and operational resources. Any of our intellectual property rights and other proprietary rights, whether registered, unregistered, issued or unissued, may be challenged by others or invalidated through administrative proceedings and/or litigation. Moreover, the steps that we may take to protect our intellectual property and other proprietary rights may not be adequate to protect such rights or prevent third parties from infringing or misappropriating such rights. A third party might try to reverse engineer or otherwise obtain and use our technology without our permission, allowing competitors to duplicate our products. We cannot guarantee that others will not readily ascertain by proper means the proprietary technology used in or embodied by our products, services or technology or that others will not independently develop substantially equivalent products, services or technology or that we can meaningfully protect the rights to unpatented products, services, or technology. We cannot guarantee that our agreements with our employees, consultants, advisors, sublicensees and strategic partners restricting the disclosure and use of trade secrets, inventions and confidential information relating to our products, services or technology will provide meaningful protection.

Our products, services or technology may infringe claims of third-party intellectual property rights or other proprietary rights, which could adversely affect our business and profitability.

Our commercial success depends, in part, on our ability to operate without infringing third-party intellectual property rights or other proprietary rights. For example, there may be issued patents of which we are not aware that our products, services or technology infringe on. Also, there may be patents we believe we do not infringe on, but that we may ultimately be found to by a court of law or government regulatory agency. Moreover, patent applications, in some cases, are maintained in secrecy until patents are issued. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our services or products allegedly infringe on. For example, prior to the closing of the Business Combination, on May 11, 2023, Lancium, LLC (“Lancium”) filed a lawsuit claiming USBTC infringed upon a number of its patents with respect to USBTC’s use of certain energy software and sought unspecified compensatory damages, treble damages, and attorney’s fees and costs. On January 16, 2024, the lawsuit by Lancium was dismissed without prejudice. However, if any party asserts claims against us, litigation may have a material adverse effect on us even if we successfully defend ourselves. Any claims against us, with or without merit, would likely be time-consuming, requiring our management team to dedicate substantial time to addressing the issues presented. Furthermore, the party bringing the claim may have greater resources than we do. In lieu of expensive intellectual property litigation, we may seek one or more patent or other intellectual property licenses, but we cannot assure you that we could secure a license on reasonable terms.

Risks Related to Ownership of Our Common Stock

The market price of our common stock may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control.

The trading price of our common stock has been, and is likely to continue to be, volatile, and may be influenced by market conditions, including the risks, uncertainties, and factors described in this Annual Report and our other filings with the SEC, as well as factors beyond our control or of which we may be unaware. As a result, investment in our common stock is inherently risky and as a holder, you might not be able to sell your shares of our common stock at or above the price that you paid for them.

In addition, the price of Bitcoin has been highly volatile and unpredictable, and the trading price of our common stock has often been highly and directly correlated with the price fluctuations of Bitcoin. Specifically, we have experienced adverse effects on the price of our common stock when the value of Bitcoin has fallen, and we anticipate similar outcomes. Furthermore, if the market for Bitcoin or capital markets in general experience a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition, and results of operations. That is, the trading price of our common stock is subject to arbitrary pricing factors that are not necessarily associated with traditional factors that influence share prices or the value of non-digital assets such as revenue, cash flows, profitability, growth prospects, or business activity levels since the value and price, as determined by the investing public, may be influenced by future anticipated adoption or appreciation in value of Bitcoin, other digital assets, or Blockchains generally, factors over which we have little or no influence or control.

Factors that may contribute to market price fluctuations of our common stock include the following:

• volatility in the price of Bitcoin;
• actual or anticipated fluctuations in our results of operations and/or future prospects;
• recommendations by securities research analysts;
• changes in the economic performance or market valuations of companies in the industry in which we operate;
• addition to or departure of our executive officers, directors, and/or other key personnel;
• sales or perceived sales of additional shares of our common stock;
• operating and financial performance that vary from the expectations of management, securities analysts, and investors;
• regulatory changes affecting our industry generally and our business and operations;
• announcements of developments and other material events by us or our competitors and related market expectations;
• fluctuations to the costs of vital products and services used by us in our business;
• changes in global financial markets, global economies, and/or general market conditions, such as interest rates;
• significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors;
• litigation or regulatory action against us;
• news reports, investor speculation, social media, chat rooms, rumors, and other methods of information dissemination concerning trends, concerns, technological, or competitive developments, regulatory matters, and other related issues regarding potential developments in our business, industry, or target markets;
• the level of short interest in our stock; and
• current and future global economic, political, and social conditions.

Securities class action litigation has often been brought against companies following periods of volatility in the market price of their securities. We have been, and may continue to be, the target of similar litigation in the future. Securities litigation could result in substantial costs and damages and divert management’s attention and resources.

We have identified material weaknesses in our internal control over financial reporting, which, if not timely remediated may adversely affect the accuracy and reliability of our future financial statements, and our reputation, business and the price of our common stock, as well as may lead to a loss of investor confidence in us.

As described under Item 9A. “Controls and Procedures” included elsewhere in this Annual Report, as we prepared the consolidated financial statements for the year ended December 31, 2024, management and our independent registered public accounting firm identified the following material weaknesses:

• our control pertaining to the review was not operating effectively as it relates to the calculation of the deferred tax provision for Bitcoin held in an international jurisdiction; and
• our control pertaining to the review of a complex accounting transaction related to our BITMAIN miner purchase agreement was not operating effectively.

A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Since the material weaknesses were identified, our management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. We are taking the following actions to remediate these material weaknesses:

• replacing our existing third-party advisor who prepared and supported our review of the deferred taxes calculation with an advisor who has additional expertise in calculating deferred income taxes in the international jurisdictions in which we operate;
• replacing our existing third-party advisor who supported our review of the BITMAIN miner purchase agreement with an advisor who has additional expertise in Bitcoin-related transactions; and
• developing and implementing enhanced controls related to the review of certain of our third-party advisors with respect to their review of certain complex transactions.

We cannot assure you the measures we are taking to remediate the material weaknesses will be sufficient or that they will prevent future material weaknesses. Additional material weaknesses or failure to maintain effective internal control over financial reporting could cause us to fail to meet our future reporting obligations or could result in material misstatements in our financial statements, which in turn could have an adverse effect on our financial condition. If we are unable to confirm that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which could lead to a loss of investor confidence in us and cause the price of our common stock to decline.

Future issuances of our capital stock or rights to purchase capital stock could result in dilution to our stockholders and could cause our stock price to decline.

We have in the past, and may in the future, whether in the ordinary course of business or otherwise, issue shares of our common stock or securities convertible into or exchangeable for shares of our common stock, including as a result of the conversion or exercise, as applicable, of restricted stock units, performance stock units, or options. We have issued shares of common stock under our ATM program and may do so in the future. We may also issue shares of our common stock upon the possible conversion of our outstanding convertible note issued to Coatue Tactical Solutions Lending Holdings AIV 3 LP or in satisfaction of certain required payments or other obligations under an acquisition agreement, joint venture agreement, or other agreement. Any additional issuance of our common stock will dilute the ownership of our stockholders and may adversely affect prevailing market prices for our common stock.

We do not intend to pay dividends on our common stock for the foreseeable future.

We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and execute our strategic initiatives. As a result, we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will depend on, among other things, our business, financial condition, results of operations, cash requirements and availability, industry trends, and other factors that the Board may deem relevant. Any such decision also will be subject to compliance with contractual restrictions and covenants in the agreements governing our indebtedness. We may also incur additional indebtedness, the terms of which may further restrict or prevent us from paying dividends on our common stock. As a result, you may have to sell some or all of your shares of our common stock after price appreciation in order to generate cash flow from your investment, which you may not be able to do. Our inability or decision not to pay dividends could also adversely affect the market price of our common stock.

We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.

Under the terms of the Amended and Restated Certificate of Incorporation of Hut 8 Corp. (our “Certificate of Incorporation”), our Board has the authority, without further action by our stockholders (except as required by Nasdaq or TSX listing standards or applicable law), to issue up to 25,000,000 shares of preferred stock in one or more series with such designations, powers, preferences, special rights, qualifications, limitations, and restrictions as our Board may determine from time to time. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium to the market price, and materially and adversely affect the market price and the voting and other rights of the holders of our common stock.

Anti-takeover provisions in our governing documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and directors and depress the market price of our common stock.

Our Certificate of Incorporation, our amended and restated bylaws (our “Bylaws”), and Delaware law contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our Board. Among others, our Certificate of Incorporation and Bylaws include the following provisions:

• limitations on convening special stockholder meetings, which could make it difficult for our stockholders to adopt desired governance changes;
• advance notice procedures, which apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders;
• a prohibition on stockholder action by written consent, which means that our stockholders will only be able to take action at a meeting of stockholders; and
• a forum selection clause, which means certain litigation against us can only be brought in Delaware.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law (the “DGCL”), which prevents interested stockholders, such as certain stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations unless (i) prior to the time such stockholder became an interested stockholder, the board approved the transaction that resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned 85% of the common stock, or (iii) following board approval, the business combination receives the approval of the holders of at least two-thirds of our outstanding common stock not held by such interested stockholder.

Any provision of our Certificate of Incorporation, our Bylaws, or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

Our Certificate of Incorporation and our Bylaws include a forum selection clause, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or other employees.

Our Certificate of Incorporation and our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding brought on Hut 8’s behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to any provisions of the DGCL, our Certificate of Incorporation, or our Bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. Our Certificate of Incorporation and our Bylaws also provide that the federal district courts of the United States of America is the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. The exclusive forum provision does not apply to the resolution of any complaint asserting a cause of action arising under the Exchange Act. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. The provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation and our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect our business, financial condition, and results of operations.

We are a large accelerated filer and, subject to certain grace periods, may no longer provide scaled disclosures as an emerging growth company, which will increase our costs and demands on management.

As of December 31, 2024, we become a large accelerated filer, and are no longer an emerging growth company. As an emerging growth company, we had the option to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. Subject to certain grace periods, we may no longer provide scaled disclosure as an “emerging growth company” as defined under the Exchange Act, which will increase our costs and demands on management. In addition, we have previously availed ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes Oxley Act. However, we may no longer avail ourselves of this exemption as a large accelerated filer, which will increase our expenses and require a significant amount of management time.

Cybersecurity Risk Management and Strategy

Given the inherent and growing risks of operating our business, we recognize the importance of incorporating, monitoring, and updating cybersecurity risk programs as part of operating, management, and governance practices. Our Operations Risk Management Program has been designed to monitor and mitigate risks across our operations and assess cybersecurity risks related to customers, partners, and suppliers. Our Cybersecurity Program is an integral component of our Operations Risk Management Program. It is currently owned by our Chief Legal Officer and Corporate Secretary and will be led by a Vice President of IT and Cybersecurity, a position we are actively recruiting for. We also benefit from the insights of external third-party advisors. We believe our team, boasting extensive experience and holding various industry-standard cybersecurity certifications, capably handles a wide range of complex cybersecurity demands, including assessments, operations, and remediation across the entire spectrum of cybersecurity challenges. Our internal and external security teams collaboratively spearhead our cybersecurity efforts, focusing on standards, policy creation and implementation, architecture, and processes. Our Risk Committee, comprising senior executives and leaders from various departments, oversees and advises on technological risks confronting our business, including cybersecurity. Our internal experts and external third-party advisors assess our security posture on a regular basis, and the results of those reviews are reported to our Risk Committee and other relevant members of senior management as well as to our Board. Our Incident Response Committee, which is comprised of our leaders in the areas of information security, information technology, legal, finance, privacy, and communications, is responsible for leading our response to cyber incidents. Our Cybersecurity Incident Response Plan outlines the processes by which management and our Board monitor, detect, assess, and resolve cyber incidents. It is designed to identify material risks and appropriate procedures for managing them and ensure that necessary disclosures are made promptly to uphold transparency and compliance with relevant regulations.

We, our third-party suppliers, and our customers, along with other companies in our industry, have been subject to, and are likely to continue to be the target of, data breaches, cyber-attacks, and other similar incidents as discussed in more detail in “Risk Factors.” We have implemented a Vendor Due Diligence process to oversee and identify material risks, including cybersecurity threats, stemming from our engagement with third-party service providers. Our process is designed to ensure that vendors presenting material technology or cybersecurity risks are subjected to a rigorous privacy and security review prior to engagement and monitored continuously for compliance with our stringent security standards. Despite the efforts and investments made, not all threats may be prevented. In light of the numerous cybersecurity risks that we face, it is reasonably likely that cybersecurity threats could materially affect our business, financial condition, or results of operations. See “Risk Factors.”

Cybersecurity Governance

We encounter a range of risks and continuously conduct comprehensive evaluations to refine our risk management strategies effectively. Management is principally responsible for identifying, evaluating, and managing the risks on a day-to-day basis, under the oversight of our Board and the Audit Committee. Our Audit Committee is responsible for overseeing our enterprise risk management processes, including our guidelines and policies governing the process of risk assessment and risk management, which includes cybersecurity. In addition, our Audit Committee is presented with information at its regularly scheduled and special meetings, including on risk and security posture, privacy, security initiatives and programs, and emerging conditions, and management provides more frequent, informal communications to the Board or Audit Committee between regularly scheduled meetings, as appropriate. Our Board or Audit Committee, as applicable, reviews this information and delivers strategic feedback, offers recommendations, and, when necessary, grants authorization or directs management to mitigate specific risk exposures.

We lease our corporate offices in Miami, Florida and Toronto, Ontario along with all our data centers across Canada and the United States related to our Compute and Digital Infrastructure business segments. We maintain various leases with respect to our Bitcoin mining sites and own the 1.9 acres of land on which the Salt Creek substation sits. We also indirectly own four natural gas power plants in Ontario, Canada through an 80.1% interest in a joint venture entity, Far North Power Corp. (the “Far North JV”) in partnership with Macquarie.

We believe our existing facilities are sufficient for our current needs. In the future, we may reassess our existing facilities or add new facilities as we further expand our operations. We believe suitable space will be available on commercially reasonable terms to meet our future needs.

For a description of material legal proceedings in which we are involved, see Note 24. Commitments and contingencies to our consolidated financial statements included elsewhere in this Annual Report, which is incorporated herein by reference.

We are not presently a party to any other legal or regulatory proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, financial condition, or results of operations. However, we are subject to regulatory oversight by numerous federal, state, provincial, local, and other regulators and we are, and we may become, subject to various legal proceedings, inquiries, investigations, and demand letters that arise in the course of our business. See “Risk Factors—Risks Related to Certain Regulations and Laws, Including Tax Laws—We are involved in legal proceedings from time to time, which could adversely affect us.”

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes and the other financial information included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual business, financial condition, and results of operations could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report, particularly under “Item 1A. Risk Factors.” See also “Cautionary Statement Regarding Forward-Looking Statements.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Business Overview

Hut 8 is an energy infrastructure platform that integrates power, digital infrastructure, and compute at scale to fuel next-generation, energy-intensive use cases such as Bitcoin Mining and HPC. We take a power-first, innovation-driven approach to developing, commercializing, and operating the critical infrastructure that underpins the breakthrough technologies of today and tomorrow.

2024 Highlights

• Far North Acquisition. In February 2024, the Far North JV, a joint venture between us and Macquarie, acquired four natural gas power plants in Ontario, Canada. We have an 80.1% indirect interest in the Far North JV.
• Coatue Convertible Note. In June 2024 we issued a $150.0 million convertible note to Coatue to support the build-out of AI infrastructure.
• Vega Site. In July 2024, we entered into a power purchase agreement and other definitive agreements for a site in the Texas Panhandle with exclusive access to 205 MW of immediately available power capacity and land. The data center construction at Vega is expected to be completed in Q2 2025.
• BITMAIN Partnership and Hosting Services Agreement. In September 2024, we expanded our partnership with BITMAIN by launching a next-generation ASIC miner. The miners are expected to be hosted at our Vega site through an approximately 15 EH/s colocation agreement with BITMAIN.
• Launch of GPU-as-a-Service Business. In September 2024, we launched our GPU-as-a-Service offering under our wholly owned subsidiary, Highrise AI, Inc., through an inaugural deployment of 1,000 NVIDIA H100 GPUs.
• Anchorage Loan Conversion. In September 2024, we entered into a Debt Repayment Agreement with Anchorage Lending CA, LLC (“Anchorage”) to exchange the approximately $37.9 million outstanding balance of our loan for 2,313,435 shares of our common stock. The share price represents a 51% premium to the 20-day VWAP through September 26, 2024, the day prior to the signing of the Debt Repayment Agreement.
• Launch of At-the-Market Offering and Stock Repurchase Programs. In December 2024, we established a $500 million at-the-market equity program (“2024 ATM”) and $250 million stock repurchase program. As of December 31, 2024, we issued and sold 5,553,458 shares under the 2024 ATM for gross proceeds of $165.2 million.
• Strategic Bitcoin Purchase & Miner Fleet Upgrade. In December 2024, we purchased approximately 990 Bitcoin for $100.7 million, at an average price of $101,761 per Bitcoin, to expand our strategic Bitcoin reserve and support our miner fleet upgrade. We pledged 968 Bitcoin at a price of $104,258 each as collateral for the purchase of approximately 30,000 BITMAIN Antminer S21+ ASIC miners at $15 per terahash, securing a cost-efficient financing structure that allows us to scale operations while minimizing upfront costs.

Key Factors Affecting Our Performance

Price of Bitcoin

Our business is heavily dependent on the price of Bitcoin, which has historically experienced significant volatility. We generate revenue from Bitcoin rewards that we earn through mining in our facilities. We have also acquired, and may in the future acquire, additional Bitcoin through at-market purchases to build our strategic reserve of Bitcoin. Under ASU 2023-08, *Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“*ASU 2023-08”), Bitcoin is revalued at fair value at the end of each reporting period, with changes in fair value recognized in net income. As a result, fluctuations in the price of Bitcoin may significantly impact our results of operations.

Bitcoin network difficulty and hashrate

Our business is not only impacted by the volatility in Bitcoin prices, but also by increases in the competition for Bitcoin production. This increased competition is described as the network hashrate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the Bitcoin blockchain, and the difficulty index associated with the secure hashing algorithm employed in solving the blocks. Increased difficulty reduces the mining proceeds of the equipment proportionally and eventually requires Bitcoin miners like us to upgrade their equipment to remain profitable and compete effectively with other miners. Conversely, a decline in network hashrate results in a decrease in difficulty, increasing mining proceeds and profitability.

Block reward and halving

The current Bitcoin reward for solving a block is 3.125 Bitcoin. The Bitcoin network is programmed such that the Bitcoin block reward is halved every 210,000 blocks mined, or approximately every four years due to the Halving. This reduction in reward spreads out the release of Bitcoin over a long period of time as an even smaller number of coins are mined with each Halving. Bitcoin Halving events impact the amount of Bitcoin we mine which, in turn, may have a potential impact on our results of operations. The last Halving occurred in April 2024 and the next Halving is expected to occur in 2028.

Power Costs

Power is the foundation of our platform. We acquire, develop, and manage critical energy assets such as interconnects, powered land, and other electrical infrastructure to address the load demands of energy-intensive applications such as Bitcoin mining and HPC. We currently maintain a portfolio of competitively priced electrical power. However, there is no guarantee that we will be able to negotiate additional power agreements on similar terms, or at all. Market prices for power, capacity, and other ancillary services are unpredictable and tend to fluctuate substantially. See “Risk Factors—Risks Related to Our Business and Operations—We are subject to risks associated with our need for significant electrical power.”

Key Performance Indicators

In addition to our financial results and generally accepted accounting principles in the United States of America (“GAAP”) financial measures, we use certain key performance indicators to evaluate our business, identify trends, and make strategic decisions.

The following table presents our key performance indicators for the twelve months ended December 31, 2024 and 2023, the six months ended December 31, 2023 and 2022, and the twelve months ended June 30, 2023 and 2022.

(1) Cost to mine a Bitcoin (excluding hosted facilities) is equivalent to the all-in electricity cost to mine a Bitcoin at owned facilities and includes our net share of the King Mountain JV.

(2) Cost to mine a Bitcoin (or weighted average cost to mine a Bitcoin) is calculated as the sum of total all-in electricity expense and hosting expense divided by Bitcoin mined during the respective periods and includes our net share of the King Mountain JV.

(3) Weighted average revenue per Bitcoin mined is calculated as the sum of total self-mining revenue divided by Bitcoin mined during the respective periods and includes our net share of the King Mountain JV. The twelve- and six-month periods ended December 31, 2023 include one month of activity from discontinued operations at our Drumheller site.

(4) Bitcoin mined includes our net share of the King Mountain JV and excludes discontinued operations from our Drumheller site. Bitcoin mined excluding our net share of the King Mountain JV was 1,184 and 2,138 for the twelve months ended December 31, 2024 and 2023, respectively, 1,244 and 1,273 for the six months ended December 31, 2023 and 2022, respectively, and 2,168 and 1,636 for the twelve months ended June 30, 2023 and 2022, respectively.

(5) Energy capacity under management (mining) represents the total power capacity related to Bitcoin Mining infrastructure, including self-mining sites, ASIC Colocation agreements, and Managed Services agreements.

(6) Total energy capacity under management includes (i) energy capacity under management (mining) and (ii) all energy-related assets including Power Generation, CPU Colocation infrastructure, and non-operational sites.

(7) Number of Bitcoin in strategic reserve includes Bitcoin held in custody, pledged as collateral, or pledged for a miner purchase under an agreement with BITMAIN.

Cost to mine a Bitcoin

Our profitability in self-mining is heavily dependent upon our cost to mine a Bitcoin, calculated as all-in electricity and hosting costs divided by Bitcoin mined during the respective periods and includes our net share of the King Mountain JV. Our management reviews the cost to mine a Bitcoin excluding hosted facilities and inclusive of hosted facilities in order to assess performance under both cost structures. As of December 31, 2024, we had no Bitcoin operations in hosted facilities.

Our cost to mine a Bitcoin (excluding hosted facilities) for the twelve months ended December 31, 2024 was $27,959 compared to $13,198 for the twelve months ended December 31, 2023. The increase was primarily due to the Halving in April 2024, in addition to an increase in average network difficulty during the period (87.3T for the twelve months ended December 31, 2024 compared to 51.8T for the twelve months ended December 31, 2023). This was partially offset by a decrease in our energy cost per MWh (see below for further discussion on energy cost per MWh). Our cost to mine a Bitcoin (excluding hosted facilities) for the six months ended December 31, 2023 was $16,353 compared to $16,447 for the six months ended December 31, 2022. The decrease was primarily attributable to a decrease in our energy cost per MWh (see below for further discussion on energy cost per MWh), partially offset by an increase in network difficulty as more energy was utilized to mine a Bitcoin during the 2023 period compared to the 2022 period. Our cost to mine a Bitcoin (excluding hosted facilities) for the twelve months ended June 30, 2023 and June 30, 2022 was $14,672 and $13,161, respectively. The increase was also driven by an increase in network difficulty, which raised our energy utilized to mine a Bitcoin.

Inclusive of hosted facilities, our cost to mine a Bitcoin for the twelve months ended December 31, 2024 was $28,161 compared to $16,570 for the twelve months ended December 31, 2023. The increase was primarily due to the Halving in April 2024, in addition to an increase in average network difficulty during the period. Our cost to mine a Bitcoin for the six months ended December 31, 2023 was $18,815 compared to $16,305 for the six months ended December 31, 2022. The increase was primarily driven by an increase in network difficulty and further augmented by an increase in hosting costs per MWh (see below for further discussion on hosting cost per MWh). Our cost to mine a Bitcoin for the twelve months ended June 30, 2023 was $15,117 compared to $13,175 for the twelve months ended June 30, 2022. The increase was primarily due to an increase in our hosting rate, which became variable in the 2023 period, and an increase in network difficulty, which raised our energy utilized to mine a Bitcoin.

Energy and hosting cost per MWh

In addition to the cost to mine a Bitcoin, our management reviews the energy cost per MWh at facilities we own and the hosting cost per MWh at hosted facilities to better understand cost efficiency, operational performance, and identify opportunities for overall profitability improvements. Energy cost per MWh is calculated by dividing our total energy expense by the total MWh utilized at owned facilities during the respective periods and includes our net share of the King Mountain JV. Hosting cost per MWh is calculated by dividing our total hosting expense by the total MWh utilized at hosted facilities during the respective periods.

Energy cost per MWh for the twelve months ended December 31, 2024 was $32.52 compared to $40.80 for the twelve months ended December 31, 2023. The decrease was primarily driven by lower energy costs at our newly built Salt Creek site and efficient economic curtailment of miners using our proprietary Reactor software. The twelve months ended December 31, 2024 includes twelve months of combined company self-mining activity at our Alpha, Medicine Hat, and Salt Creek sites, and our net share of activity at the King Mountain site, whereas the prior year reflects eleven months of USBTC’s self-mining activity at our Alpha site and our net share at the King Mountain site as well as one month of combined company self-mining activity, including Medicine Hat and Drumheller. Energy cost per MWh for the six months ended December 31, 2023 was $44.52 compared to $73.19 for the six months ended December 31, 2022. The decrease was primarily driven by lower energy costs at King Mountain compared to our previous facility in Pecos, Texas, which we exchanged in February 2023 for extinguishment of debt. Energy cost per MWh for the twelve months ended June 30, 2023 and June 30, 2022 was $61.51 and $70.77, respectively. The decrease was also driven by lower energy costs at King Mountain compared to the former Pecos, Texas facility.

Hosting cost per MWh for the twelve months ended December 31, 2024 was $68.72 compared to $62.57 for the twelve months ended December 31, 2023. Even though we exited two sites owned by a third-party hosting provider located in Kearney, Nebraska (“Kearney”) and Granbury, Texas (“Granbury”) on April 30, 2024, the increase was due to a higher variable hosting rate (tied to hashprice) at these sites, as compared to the twelve months ended December 31, 2023. Hosting cost per MWh for the six months ended December 31, 2023 was $63.33 compared to $22.61 for the six months ended December 31, 2022. The increase was due to a higher variable hosting rate at the Delta site during the 2023 period compared to the hosting costs charged by the site’s former operator during the 2022 period. Hosting cost per MWh for the twelve months ended June 30, 2023 and June 30, 2022 were $60.47 and $56.00, respectively. The increase was due to a higher variable hosting rate during the 2023 period compared to a fixed rate during the 2022 period.

Number of Bitcoin in strategic reserve

Number of Bitcoin in strategic reserve represents the number of Bitcoin we own as of each reporting period end date, which is the aggregate number of our Bitcoin held in custody, pledged as collateral, or pledged for a miner purchase. We have the ability to leverage our Bitcoin in strategic reserve as a flexible financial asset to fund growth initiatives, optimize our balance sheet, and capitalize on emerging market opportunities. Our management uses this metric to assess the value of our Bitcoin in strategic reserve and determine when and how to deploy said reserve, including continuing to hold the Bitcoin.

As of December 31, 2024, we had 10,171 Bitcoin in strategic reserve. The majority of our Bitcoin was acquired as a result of the Business Combination. As noted in the 2024 Highlights above, we purchased approximately 990 Bitcoin in December 2024, of which 968 were pledged for a miner purchase under an agreement with BITMAIN for our miner fleet upgrade.

Number of Bitcoin mined

Number of Bitcoin mined represents the number of Bitcoin produced by our Compute segment during the respective period. Management views this metric as a direct driver of Compute revenue for the respective periods.

Number of Bitcoin mined for the twelve months ended December 31, 2024 and December 31, 2023 was 1,466 and 2,789, respectively. The decrease in number of Bitcoin mined was mainly due to an increase in network difficulty and the Halving. Number of Bitcoin mined for the six months ended December 31, 2023 and December 31, 2022 was 1,527 and 1,347, respectively. The increase in number of Bitcoin mined was mainly due to twelve months of combined company activity in 2024 compared to one month of combined company activity in 2023. Number of Bitcoin mined for the twelve months ended June 30, 2023 and June 30, 2022 was 2,610 and 1,636 respectively. The increase in number of Bitcoin mined was due to an increase in the number of miners in operation.

Energy capacity under management

Energy capacity under management comprises energy capacity under management (mining) and all other energy-related assets including Power Generation, CPU Colocation infrastructure, and non-operational sites. Energy capacity under management (mining) represents the total power capacity related to Bitcoin mining infrastructure, including self-mining sites, ASIC Colocation agreements, and Managed Services agreements. Management reviews these metrics to assess total energy capacity utilization across our operations to drive an efficient allocation of resources.

Energy capacity under management for the twelve months ended December 31, 2024 was 1,020 MW compared to 842 MW for the twelve months ended December 31, 2023. The increase was due to the acquisition of Far North, consisting of 310 MW across four natural gas power generation facilities in Canada, and Vega, a 205 MW facility that is currently under development. Energy capacity under management for the six months ended December 31, 2023 was 842 MW compared to 730 MW for the six months ended December 31, 2022. The increase was due to the addition of two self-mining facilities, Medicine Hat and Drumheller, and five cloud and colocation data centers due to the Business Combination. Energy capacity under management for the twelve months ended June 30, 2023 and June 30, 2022 were 730 MW and 92 MW, respectively. The increase was due to the addition of two Managed Service sites, Kearney (100 MW) and Granbury (300 MW), and 280 MW at the King Mountain site, also under the Managed Services line of business, partially offset by the loss of our former Pecos, Texas site, which was 42 MW. During the three months ended June 30, 2024, we concluded our Managed Services operations at the Kearney and Granbury sites. We received a $13.5 million payment from MARA Holdings Inc. (“MARA”) in connection with the termination of the property management agreements at those two sites.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we rely on Adjusted EBITDA to evaluate our business, measure our performance, and make strategic decisions. Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss), adjusted for impacts of interest expense, income tax provision or benefit, depreciation and amortization, foreign exchange gains or losses, gain on debt extinguishment, gain on derivatives, gain on bargain purchase, our share of unconsolidated joint venture depreciation and amortization, the removal of non-recurring transactions, impairment on assets, gain or loss on sale of property and equipment, loss from discontinued operations, net loss attributable to non-controlling interests, and stock-based compensation expense in the period presented. You are encouraged to evaluate each of these adjustments and the reasons our Board and management team consider them appropriate for supplemental analysis.

Our Board and management team use Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense and income), asset base (such as depreciation and amortization), and other items (such as non-recurring transactions mentioned above) that impact the comparability of financial results from period to period.

Net income (loss) is the GAAP measure most directly comparable to Adjusted EBITDA. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in such presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA in the future, and any such modification may be material. Adjusted EBITDA has important limitations as an analytical tool and you should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definition of this non-GAAP financial measure may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

For a reconciliation to our most directly comparable financial measure calculated and presented in accordance with GAAP, please see “—Results of Operations” below.

Business Segments

We have four reportable business segments: Power, Digital Infrastructure, Compute, and Other.

Power

The Power business segment consists of Power Generation and Managed Services.

Power Generation

We generate revenue from our 80.1% interest in the Far North JV, which provides capacity and energy to the electrical grid through four natural gas power plants in Ontario, Canada. The power generation facilities are connected to the Independent Electricity System Operator, which operates Ontario’s power grid, and primarily generate revenue from capacity and electricity sales. Revenue generated from capacity and electricity sales is variable and depends on several factors including generation capacity in the market, the supply and demand for electricity, and the prevailing price of natural gas.

Managed Services

Our Managed Services business provides institutional partners with an end-to-end partnership model for energy infrastructure development, including:

• Project inception: site design, procurement, and construction management;
• Project operationalization: software automation, process design, personnel hiring, and team training;
• Revenue management: utilities contracts, hosting operations, and customer management;
• Project optimization: energy portfolio optimization and strategic initiatives; and/or
• Compliance and reporting: finance, accounting, and safety.

Cash flows are generated through a fee structure that is typically fixed based on power capacity under management, with reimbursement of passthrough costs. In addition to the fixed fee, under certain agreements, further cash flows may be driven from incentive bonuses and certain energy management services.

As of December 31, 2024, we managed 280 MW of energy capacity under this program at one site in the United States owned by the King Mountain JV.

Digital Infrastructure

The Digital Infrastructure business segment consists of CPU Colocation and ASIC Colocation services.

CPU Colocation

Our CPU Colocation business spans five locations in Canada (Mississauga, Ontario; Vaughan, Ontario; Kelowna, British Columbia; and two locations in Vancouver, British Columbia) with a total energy capacity of 3 MW and more than 36,000 square feet of geo-diverse data center space powered by predominantly emission-free energy sources. Our infrastructure is designed to support a variety of compute, storage, and network workloads across traditional enterprise, B2B, machine learning, visual effects, and AI. This segment serves computing needs unrelated to Bitcoin Mining. These data centers are geo-diverse and carrier neutral with network diversity and redundancy from multiple telecommunications providers.

Our CPU Colocation business is based on a fixed-fee model. Customers pay a fixed recurring monthly fee based on a set amount of resources assigned.

ASIC Colocation

Under our ASIC Colocation business, we enter into contracts to host and operate mining equipment on behalf of third parties within our facilities. These services include the provision, if applicable, and hosting of mining equipment as well as the monitoring, troubleshooting, repair, and maintenance of such equipment. Revenues from ASIC Colocation services are generated through fees that may be fixed or based on profit-sharing arrangements, often with reimbursement for certain pass-through costs such as electricity.

During the fourth quarter of 2024, our agreement with Ionic Digital Inc. (“Ionic”) to host approximately 8,500 miners (0.8 EH/s) at our Alpha site was terminated. As a result, we ceased providing ASIC Colocation services at Alpha and utilized the site solely for self-mining purposes.

Looking ahead, we have secured a new ASIC Colocation contract with BITMAIN. The agreement features a fixed hosting fee with an option for us to purchase all or a portion of the hosted machines in up to three tranches at a fixed price within six months of energization of the relevant tranches. In July 2024, we entered into a power purchase agreement and other definitive agreements for a site in the Texas Panhandle with exclusive access to 205 MW of immediately available power capacity and land. The data center construction at Vega is expected to be completed in Q2 2025.

Compute

The Compute business segment consists of Bitcoin Mining, GPU-as-a-Service, and Data Center Cloud operations.

Bitcoin Mining

Currently, one of our largest revenue streams is derived from Bitcoin Mining (also referred to as self-mining).

Our Bitcoin Mining business spanned four sites as of December 31, 2024:

• three sites with facilities we own and/or lease, and operate: (1) Alpha (Niagara Falls, New York), (2) Medicine Hat (Medicine Hat, Alberta), and (3) Salt Creek (Orla, Texas); and
• one site that we own 50% of through a joint venture, King Mountain (McCamey, Texas).

Until April 30, 2024, we also had Bitcoin Mining operations at Kearney and Granbury. We also own a Bitcoin Mining site in Drumheller, Alberta, which has been non-operational since March 2024. The closure was due to the profitability of Drumheller being significantly impacted by several factors, including elevated energy costs and underlying voltage issues. We will consider re-energizing the site if market conditions improve.

We receive Bitcoin rewards from our mining activity through third-party mining pool operators, which allow miners to combine their processing power, increasing their chances of solving a block and getting paid by the network. We provide computing power to mining pools, which use this computing power to operate nodes and validate blocks on the blockchain. The pools then distribute our pro-rata share of Bitcoin mined to us based on the computing power we contribute.

GPU-as-a-Service

Our GPU assets are deployed under our wholly owned subsidiary, Highrise AI, Inc., at a third-party colocation site near Chicago, Illinois. This segment generates recurring revenue through payments made by the provider to us based on fixed infrastructure payments and a revenue share tied to GPU utilization.

Data Center Cloud

Our Data Center Cloud services support both public and private cloud deployments, managed backup, business continuity and disaster recovery services, and high-performance, high-capacity storage solutions. We employ a consumption-based fee structure where customers commit to a baseline level of compute, storage, network, or power usage as defined in their service agreements. Any usage beyond this baseline is typically billed incrementally, so costs are aligned with actual resource consumption and customers are afforded flexibility as their needs evolve.

Other

Equipment Sales and Repairs

We may sell mining equipment when profitable opportunities arise (e.g., if market prices exceed our procurement cost). We may also repair miners for third parties in exchange for a fee, as we have a fully equipped, MicroBT-certified repair center space at our Medicine Hat site.

Results of Operations

Twelve Months Ended December 31, 2024 and 2023

Adjusted EBITDA reconciliation:

(1) Net of the accretion of fair value differences of depreciable and amortizable assets included in equity in earnings of unconsolidated joint venture in the Consolidated Statements of Operations and Comprehensive Income (Loss) in accordance with ASC 323. See Note 10. Investment in unconsolidated joint venture of the consolidated financial statements included elsewhere in this Annual Report for further detail.

(2) Non-recurring transactions for the twelve months ended December 31, 2024 represent approximately $4.0 million of restructuring costs and $1.9 million related to the Far North transaction costs, offset by a $13.5 million contract termination fee received from MARA, and a $2.2 million tax refund. Non-recurring transactions for the twelve months ended December 31, 2023 represent approximately $9.6 million related to a sales tax accrual and $2.4 million of transaction costs related to the Business Combination, partially offset by a gain from a legal settlement of $1.5 million.

Revenue

Total revenue was $162.4 million and $96.0 million for the twelve months ended December 31, 2024, and 2023, respectively, and consisted of Power, Digital Infrastructure, Compute, and Other.

Power

Power revenue was $56.6 million and $22.8 million for the twelve months ended December 31, 2024 and 2023, respectively. This $33.8 million increase was primarily driven by (i) a $13.5 million contract termination fee received from MARA, (ii) a $11.4 million increase in electricity sales related to Far North, which we acquired in February 2024, and (iii) a $8.9 million increase in Managed Services revenue related to the Ionic Managed Services agreement, which was entered into during January 2024 and terminated effective December 2024.

Digital Infrastructure

Digital Infrastructure revenue was $17.5 million and $8.3 million for the twelve months ended December 31, 2024 and 2023, respectively. This $9.2 million increase was primarily driven by (i) a $5.2 million increase in CPU Colocation revenue, reflecting a full year of revenue recognition following the Business Combination, and (ii) a $4.0 million increase in cost reimbursements related to the Ionic colocation agreement.

Compute

Compute revenue was $80.7 million and $64.9 million for the twelve months ended December 31, 2024 and 2023, respectively. This $15.8 million increase was primarily driven by (i) a $7.3 million increase in Bitcoin Mining revenue, largely due to an increase in the average revenue per Bitcoin mined from $30,398 to $60,436, partially offset by a decrease in Bitcoin mined, due to an increase in network difficulty and the Halving event (we mined 1,184 Bitcoin during the twelve months ended December 31, 2024 versus 2,138 Bitcoin mined during the twelve months ended December 31, 2023), (ii) a $6.7 million increase in recurring Data Center Cloud revenue, reflecting a full year of Data Center Cloud operations during twelve months ended December 31, 2024 compared to one month of Data Center Cloud operations following the Business Combination, and (iii) a $1.8 million contribution from our GPU-as-a-Service offering, which launched in September 2024.

Other

Other revenue was $7.6 million and nil for the twelve months ended December 31, 2024 and 2023, respectively. This increase was primarily driven by (i) a $7.4 million increase in Equipment Sales revenue, reflecting higher demand for mining-related infrastructure, and (ii) a $0.2 million increase in Equipment Repair services revenue.

Cost of Revenue

Total cost of revenue was $86.7 million and $54.2 million for the twelve months ended December 31, 2024, and 2023, respectively, and consisted of Power, Digital Infrastructure, Compute, and Other.

Power

Power cost of revenue was $21.5 million and $7.3 million for the twelve months ended December 31, 2024 and 2023, respectively. This $14.2 million increase was primarily driven by (i) a $12.8 million increase in cost of revenue related to Far North, which was acquired in February 2024, and (ii) a $1.4 million increase in operating costs related to the Ionic Managed Services agreement, which was terminated effective December 2024.

Digital Infrastructure

Digital Infrastructure cost of revenue was $15.6 million and $4.3 million for the twelve months ended December 31, 2024 and 2023, respectively. This $11.2 million increase was primarily driven by (i) a $7.5 million increase in colocation-related costs as a result of eleven months of costs related to the Ionic colocation agreement during 2024 compared to five months of costs during 2023, and (ii) a $3.8 million increase in cost of sales related to CPU Colocation operations, including rent, electricity, and connectivity costs.

Compute

Compute cost of revenue was $45.0 million and $42.6 million for the twelve months ended December 31, 2024 and 2023, respectively. This $2.4 million increase was primarily driven by (i) a $5.5 million increase in Data Center Cloud costs, reflecting a full year of Data Center Cloud operations during twelve months ended December 31, 2024 compared to one month of Data Center Cloud operations during twelve months ended December 31, 2023 following the Business Combination, and (ii) a $1.0 million increase in costs related to our new GPU-as-a-Service offering, launched in September 2024. These increases were partially offset by $4.1 million decrease in Bitcoin Mining costs due to fleet relocation from higher cost hosted to lower cost self-mining sites and the deployment of Reactor, our proprietary energy curtailment software.

Other

Other cost of revenue was $4.6 million and nil for the twelve months ended December 31, 2024 and 2023, respectively. This $4.6 million increase was primarily driven by (i) a $4.5 million increase in Equipment Sales costs as a result of the increased volume of equipment sold, and (ii) $0.1 million in costs related to our Equipment Repair service.

Depreciation and Amortization

Depreciation and amortization expense was $47.8 million and $17.5 million for the twelve months ended December 31, 2024 and 2023, respectively. This $30.3 million increase was primarily driven by (i) higher depreciation from assets acquired in the Business Combination as we recognized twelve months of combined company depreciation in 2024 compared to one month of combined company depreciation in 2023, (ii) depreciation related to the Far North transaction, which was completed in February 2024, (iii) depreciation as a result of the development of the Salt Creek site, which went live in April 2024, and (iv) depreciation from the newly acquired assets related to GPU-as-a-Service operations.

General and Administrative Expenses

General and administrative (“G&A”) expenses were $72.9 million and $49.1 million for the twelve months ended December 31, 2024 and 2023, respectively. This $23.8 million increase was primarily driven by (i) a $10.6 million increase in salary and benefits due to twelve months of combined company expenses in 2024 compared to one month of combined company expenses in 2023 (our number of employees increased from 108 employees as of November 30, 2023, the date of the Business Combination, to 220 employees as of December 31, 2024), (ii) a $7.2 million increase in stock-based compensation due to new restricted stock unit and performance stock unit grants to retain and incentivize our talent, partially offset by no restricted stock award activity in 2024 compared to $8.5 million of restricted stock activity in 2023, (iii) a $3.9 million increase in restructuring expenses related to the Business Combination and, (iv) a $1.9 million increase in costs related to Far North acquisition.

Gains on digital assets

Gains on digital assets were $509.3 million and $32.6 million for the twelve months ended December 31, 2024 and 2023, respectively. This increase was due to the increased Bitcoin prices as of December 31, 2024 compared to the prior year period. The price of Bitcoin as of December 31, 2024 was approximately $93,354 compared to $42,288 as of December 31, 2023.

Other expense

Other expense was $8.6 million for the twelve months ended December 31, 2024, compared to other income of $12.6 million for the twelve months ended December 31, 2023. This $21.2 million increase was primarily driven by (i) a $17.7 million decrease in gain on debt extinguishment related to the Anchorage debt-to-equity conversion of $6.0 million in 2024, compared to $23.7 million debt extinguishment related to the NYDIG loan recorded in 2023, (ii) a $3.6 million increase in interest expense due to an increase in the amount of borrowing in 2024 compared to 2023, which comprised of the $150.0 million Coatue note and the additional $15.0 million drawdown from our loan with Coinbase Credit, Inc. (“Coinbase”), (iii) a $6.0 million increase in foreign exchange loss due to our net U.S. dollar monetary liability position in our Canadian dollar functional currency subsidiaries and a decline in the Canadian dollar to U.S. dollar exchange rate of approximately 8% compared to a 2% increase during the twelve months ended December 31, 2023 (the increase noted in the prior period is for the period from the Business Combination to December 31, 2023, reflecting one month of combined company results), and (iv) a $2.0 million decrease in equity in earnings of King Mountain JV due to the impact of the Halving on Bitcoin Mining revenue. These increases were partially offset by (i) a $7.3 million gain on derivatives due to an increase in the mark-to-market value of our call options and Bitcoin redemption option, and (ii) a $3.1 million gain on bargain purchase related to the Far North acquisition driven by the fair value of the net assets acquired being greater than the consideration transferred.

Income tax

Our income tax provision was $113.5 million and $0.2 million for the twelve months ended December 31, 2024 and 2023, respectively. This $113.3 million increase was primarily due to $93.0M in deferred taxes related to the gain on the fair value of our Bitcoin holdings, in addition to higher taxable income for the twelve months ended December 31, 2024.

Six Months Ended December 31, 2023 and 2022

Adjusted EBITDA reconciliation:

(1) Net of the accretion of fair value differences of depreciable and amortizable assets included in equity in earnings of unconsolidated joint venture in the Consolidated Statements of Operations and Comprehensive Income (Loss) in accordance with ASC 323. See Note 10. Investment in unconsolidated joint venture of the Consolidated Financial Statements for further detail.

(2) Non-recurring transactions for the six months ended December 31, 2023 represent approximately $2.4 million of transaction costs related to the Business Combination and $9.6 million related to a sales tax accrual.

Revenue

Total revenue for the six months ended December 31, 2023 and 2022 was $59.9 million and $46.0 million, respectively, consisting of Power, Digital Infrastructure, Compute, and Other.

Power

Power revenue was $12.6 million for the six months ended December 31, 2023, consisting of $9.6 million in fees from Managed Services and $3.0 million in cost reimbursements. Power revenue was $2.6 million for the six months ended December 31, 2022, consisting of $1.5 million in fees and $1.1 million in cost reimbursements. We began our Managed Services offerings for third parties in November 2022; therefore, the six months ended December 31, 2023 reflects a full period of activity related to Managed Services, whereas the comparative period of the six months ended December 31, 2022 reflects less than two months of activity. The six months ended December 31, 2023 also includes revenue from an interim Managed Services agreement with Celsius Mining LLC, which was signed in December 2023.

Digital Infrastructure

Digital Infrastructure revenue was $5.8 million and $14.0 million for the six months ended December 31, 2023, and 2022, respectively. Revenue for the six months ended December 31, 2023 primarily consisted of hosting services revenue from the Alpha site and included one month of recurring CPU Colocation revenue as a result of the Business Combination. Revenue for the six months ended December 31, 2022 consisted of $14.0 million in hosting services revenue. During the 2022 period, one of our hosting customers defaulted on its contract, resulting in contract termination without a refund obligation for prepaid amounts. This resulted in the recognition of $13.1 million in remaining deferred revenue related to this customer.

Compute

Compute revenue consisted of Bitcoin Mining revenue of $41.3 million and $25.7 million for the six months ended December 31, 2023 and 2022, respectively. This was driven by an increase in the average price per Bitcoin mined and one month of combined company activity after the Business Combination. The average revenue per Bitcoin mined was approximately $33,331 as of December 31, 2023 compared to approximately $20,218 as of December 31, 2022. This was partially offset by a decrease of approximately 29 Bitcoin mined, exclusive of our net share of the King Mountain JV, period over period due to increased Bitcoin network difficulty.

Other

Other revenue was $0.1 million and $3.6 million for the six months ended December 31, 2023 and 2022, respectively. Other revenue for the six months ended December 31, 2023 consisted of $0.1 million in Equipment Repair services revenue. Other revenue for the six months ended December 31, 2022 consisted of $3.6 million in Equipment Sales.

Cost of revenue

Power

Cost of revenue for Power for the six months ended December 31, 2023 and 2022 were $3.4 million and $1.1 million, respectively, primarily consisting of reimbursable payroll and other site operating costs. The increase in costs is attributable to the full six months of activity in the 2023 period compared to only two months of activity related to Managed Services in the 2022 period.

Digital Infrastructure

Cost of revenue for Digital Infrastructure for the six months ended December 31, 2023 and 2022 were $4.3 million and $0.4 million, respectively, primarily driven by an increase in the cost of hosting services, including power costs, at our Alpha site due to an increase in hosted miners at the site.

Compute

Cost of revenue for Compute for the six months ended December 31, 2023 and 2022 were $26.0 million and $23.2 million, respectively, driven primarily by a 46% increase in electricity utilized, partially offset by a lower average power rate during the period ($61.17 compared to $73.95 for the six months ended December 31, 2023 and 2022, respectively).

Other

Cost of revenue for Other for the six months ended December 31, 2023 was less than $0.1 million due to low activity, as there were no Equipment Sales. Cost of revenue for Other for the six months ended December 31, 2022 was $3.1 million due to the cost of mining equipment sold.

Depreciation and amortization

Depreciation and amortization expense was $10.6 million and $11.8 million for the six months ended December 31, 2023 and 2022, respectively. The decrease in depreciation and amortization expense was primarily driven by the lower net book value of plant and equipment after the recognition of a non-cash impairment charge during the six months ended December 31, 2022 as part of annual impairment testing, partially offset by property and equipment acquired as part of the Business Combination.

General and administrative expenses

G&A expenses were $37.5 million and $10.6 million for the six months ended December 31, 2023 and 2022, respectively. The increase in G&A expenses was driven by (i) a $9.0 million increase in stock-based compensation due to certain stock options granted and restricted stock awards that were accelerated upon the closing of the Business Combination and certain stock options and restricted stock awards that were issued and immediately vested before the closing of the Business Combination, (ii) a $3.7 million increase in salary and benefit costs due to the headcount increasing from 49 to 208 employees as part of the Business Combination and to support the Company’s growth, and (iii) a $9.6 million sales tax provision from a non-recurring state tax accrual related to a facility build out in Texas. G&A expenses for the six months ended December 31, 2023 also include one-time transaction costs of $2.4 million primarily related to the Business Combination.

Gains on digital assets

Gains on digital assets was $32.6 million and nil for the six months ended December 31, 2023 and 2022, respectively. The increase was due to our early adoption of ASU 2023-08 for the six months ended December 31, 2023, which requires us to recognize our digital assets at fair value with changes recognized in net income during the reporting period.

Impairment of long-lived assets

Impairment of long-lived assets, including right-of-use assets, was nil and $63.6 million for the six months ended December 31, 2023 and 2022, respectively. During the six months ended December 31, 2022, adverse changes in the business climate, including decrease in the price of Bitcoin to approximately $16,530 as of December 31, 2022, and the resulting decrease in the market price of miners and mining equipment, indicated that an impairment triggering event had occurred. Testing performed indicated that the estimated fair value of our miners, mining equipment, and other mining operation assets were less than their net carrying value as of December 31, 2022. An impairment charge of approximately $63.6 million was recognized, decreasing the net carrying value of these assets to their estimated fair value.

Other expense

Other expense totaled $4.5 million for the six months ended December 31, 2023 compared to $15.2 million for the six months ended December 31, 2022. The decrease of $10.7 million was primarily driven by a $6.7 million increase in equity in earnings of our unconsolidated joint venture and a decrease of $3.0 million in interest expense driven by the NYDIG debt restructuring in February 2023.

Income tax

Our income tax benefit was $0.4 million and $1.8 million for the six months ended December 31, 2023 and 2022, respectively. This $1.4 million decrease was primarily due to lower taxable income for the six months ended December 31, 2023 compared to the prior period.

Twelve Months Ended June 30, 2023 and 2022

Adjusted EBITDA reconciliation:

(1) Net of the accretion of fair value differences of depreciable and amortizable assets included in equity in earnings of unconsolidated joint venture in the Consolidated Statements of Operations and Comprehensive Income (Loss) in accordance with ASC 323. See Note 10. Investment in unconsolidated joint venture of the Consolidated Financial Statements for further detail.

(2) Non-recurring transactions for the twelve months ended June 30, 2023 represent a gain from a legal settlement of $1.5 million and the twelve months ended June 30, 2022 represent cash payments of approximately $5.3 million for certain employees and advisors related to their personal income taxes on the issuance of stock grants and a $1.0 million payment made to a government agency associated with the Rescission Offer.

Revenue

Total revenue for the twelve months ended June 30, 2023 and 2022 was $82.2 million and $73.7 million, respectively, consisting of Power, Digital Infrastructure, Compute, and Other.

Power

Power revenue was $12.8 million for the twelve months ended June 30, 2023, consisting of fees from Managed Services of $7.6 million and cost reimbursements of $5.2 million. Power revenue was nil for the twelve months ended June 30, 2022 as we launched our Managed Services offering in November 2022.

Digital Infrastructure

Digital Infrastructure revenue was $16.5 million for the twelve months ended June 30, 2023, consisting entirely of hosting services revenue. Digital Infrastructure revenue was $5.6 million for the twelve months ended June 30, 2022. We launched our hosting services business in March 2022 so the twelve months ended June 30, 2022 represents only four months of activity compared to a full year of activity in the twelve months ended June 30, 2023.

One of our hosting customers defaulted on its contract during the twelve months ended June 30, 2023, which resulted in a termination of the contract without an obligation to refund any prepayments, and we recognized the remaining deferred revenue of $13.1 million with respect to such customer.

Compute

Compute revenue was $49.2 million for the twelve months ended June 30, 2023 compared to $68.2 million for the twelve months ended June 30, 2022. While we mined approximately 532 more Bitcoin year-over-year, the average price per Bitcoin mined was approximately $22,900 for the twelve months ended June 30, 2023 compared to approximately $41,700 for the twelve months ended June 30, 2022. The increase in number of Bitcoin mined was due to additional miners in our self-mining fleet during the twelve months ended June 30, 2023 compared to the twelve months ended June 30, 2022. The increase in production was partially offset by lower Bitcoin prices and an increase in Bitcoin network difficulty.

Other

Other revenue was $3.6 million for the twelve months ended June 30, 2023, consisting entirely of Equipment Sales. Other revenue was nil for the twelve months ended June 30, 2022 as there were no Equipment Sales or Repairs during this period.

Cost of revenue

Power

Cost of revenue for Power for the twelve months ended June 30, 2023 was $1.0 million compared to nil for the twelve months ended June 30, 2022 as we launched our Managed Services business in November 2022.

Digital Infrastructure

Cost of revenue for Digital Infrastructure for the twelve months ended June 30, 2023 was $0.4 million compared to $2.4 million for the twelve months ended June 30, 2022. The decrease was driven by a $2.0 million reduction in costs related to our hosting services revenue in the twelve months ended June 30, 2023 as one of our two hosting contracts was terminated in July 2022 so we only had one hosting contract for the remainder of the period.

Compute

Cost of revenue for Compute for the twelve months ended June 30, 2023 was $38.6 million compared to $23.4 million for the twelve months ended June 30, 2022. The increase was primarily driven by additional miners being operated during the twelve months ended June 30, 2023 resulting in higher power expense and hosting expense for the miners that were hosted at third party sites.

Other

Cost of revenue for Other for the twelve months ended June 30, 2023 was $3.1 million related to the cost of mining equipment sold during the period. The cost of revenue for Other for the twelve months ended June 30, 2022 was nil, as there were no Equipment Sales or Repairs during the period.

Depreciation and amortization

Depreciation and amortization expense was $18.8 million and $11.6 million for the twelve months ended June 30, 2023 and 2022, respectively. The purchase of additional miners and other property and equipment during the twelve months ended June 30, 2022 resulted in an increase in the depreciable asset base for the following twelve-month period.

General and administrative expenses

G&A expenses were $27.3 million for the twelve months ended June 30, 2023 compared to $31.3 million for the twelve months ended June 30, 2022. The decrease was primarily driven by a decrease of $5.3 million related to payments to employees and advisors related to personal income taxes for the issuance of stock grants, and a decrease of $1.0 million related to a payment made to a government agency associated with the Rescission Offer. This was partially offset by increases in legal and professional fees during the twelve months ended June 30, 2023 due to the launch of our Managed Services business in November 2022, restructuring our debt obligations with NYDIG and Anchorage in February 2023, and fees related to the Business Combination.

Impairment of digital assets

Impairment of digital assets was $3.7 million for the twelve months ended June 30, 2023 compared to $30.3 million for the twelve months ended June 30, 2022. Impairment resulted from declines in the lowest intra-day price of Bitcoin during the period it was held.

Impairment of long-lived assets

Impairment of long-lived assets, including right-of-use assets, was $63.6 million and nil for the twelve months ended June 30, 2023 and 2022, respectively. During the twelve months ended June 30, 2023, adverse changes in the business climate, including decreases in the price of Bitcoin throughout 2022 and the resulting decrease in the market price of miners and mining equipment, indicated that an impairment triggering event had occurred. Testing performed indicated that the estimated fair value of our miners, mining equipment, and other mining operation assets were less than their net carrying value. An impairment charge of approximately $63.6 million was recognized, decreasing the net carrying value of these assets to their estimated fair value.

Legal settlement

Legal settlement was $1.5 million and nil for the twelve months ended June 30, 2023 and 2022, respectively. We filed a malpractice lawsuit in September 2021 as plaintiff. In April 2023, we settled the lawsuit for a gross amount of $3.1 million. In May 2023, we received approximately $1.5 million, net of legal fees.

Other income (expense)

Other income totaled $1.9 million for the twelve months ended June 30, 2023 compared to an expense of $6.9 million for the twelve months ended June 30, 2022. The increase of $8.8 million was primarily driven by a $23.7 million gain on debt extinguishment, resulting from the settlement of our NYDIG debt of approximately $96.7 million. As part of the settlement and extinguishment, we exchanged assets from our site in Pecos, Texas and recorded a gain on extinguishment of debt of approximately $23.7 million. The remaining increase of $6.1 million was related to the equity in earnings of the King Mountain JV, which was acquired in December 2022, partially offset by a $21.0 million increase in interest expense due to higher debt on our balance sheet.

Income tax

Income tax benefit was $1.2 million for the twelve months ended June 30, 2023 compared to an income tax expense of $5.1 million for the twelve months ended June 30, 2022. The increase in income tax benefit was primarily due to taxable loss for the twelve months ended June 30, 2023 compared to taxable income in the prior year period.

King Mountain JV

The King Mountain JV is a 50/50 joint venture with one of the world’s largest renewable energy producers. The King Mountain JV has 280 MW of self-mining and hosting operations located behind-the-meter at a wind farm in McCamey, Texas.

As of December 31, 2024, the King Mountain JV owned approximately 18,000 miners for self-mining (about 1.8EH/s) and hosted approximately 68,200 miners (about 7.7 EH/s) for a single hosting customer at its wholly-owned King Mountain site, which has a total capacity of 280 MW.

We account for the King Mountain JV using the equity method of accounting, resulting in reporting the King Mountain JV as an unconsolidated joint venture. Additionally, our 50% portion of any distributions from the King Mountain JV are used to pay down the TZRC Secured Promissory Note. See Note 10. Investment in unconsolidated joint venture and Note 15. Loans and note payable to the consolidated financial statements found elsewhere in this Annual Report for additional information on the King Mountain JV and TZRC Secured Promissory Note.

Below are the condensed consolidated income statements for the King Mountain JV for the twelve months ended December 31, 2024 and December 31, 2023, the six months ended December 31, 2023 and December 31, 2022, and the twelve months ended June 30, 2023 and June 30, 2022.

Condensed Consolidated Income Statement

Our Board and management team also evaluate Adjusted EBITDA for the King Mountain JV, which is a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss) before depreciation and amortization, and interest income. We use Adjusted EBITDA to assess the King Mountain JV’s financial performance because it allows us to compare the operating performance on a consistent basis across periods by removing the effects of the King Mountain JV’s capital structure.

Net income (loss) is the GAAP measure most directly comparable to Adjusted EBITDA. This non-GAAP financial measure should not be considered as an alternative to the most directly comparable GAAP financial measure. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in such presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA in the future, and any such modification may be material. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definition of this non-GAAP financial measure may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

Liquidity and Capital Resources

Our primary sources of liquidity include our cash, our strategic Bitcoin reserve, our equity sales, and the cash flows generated from our operations. Historically, our primary cash needs have been for working capital to support equipment financing, including the purchase of additional Bitcoin miners, growth initiatives, including infrastructure purchases, development opportunities, and acquisitions.

In 2024, we issued a $150.0 million convertible note to Coatue and drew an additional $15.0 million under our Coinbase loan. During the fourth quarter of 2024, we also made the strategic decision to retain the Bitcoin we mined in our operations rather than auto-liquidate, and purchased additional Bitcoin to bolster our strategic Bitcoin reserve.

On December 4, 2024, we entered into a Controlled Equity Offering Sales Agreement establishing the 2024 ATM, allowing us to offer and sell up to $500.0 million of our common stock from time to time. Concurrently, we launched a $250.0 million stock repurchase program enabling us to repurchase up to 4,683,936 shares of our common stock (representing 5.0% of our issued and outstanding common stock as of December 4, 2024) within twelve months of launch. During the twelve months ended December 31, 2024, we issued and sold 5,553,458 shares of our common stock under the 2024 ATM for gross proceeds of $165.2 million, incurred issuance costs of $3.2 million, and repurchased nil shares of our common stock under the stock repurchase program.

Our ability to meet our anticipated cash requirements will depend on various factors including our ability to maintain our existing business, enter into new lines of business, provide new offerings, compete with existing and new competitors in existing and new markets and offerings, acquire new businesses or pursue strategic transactions, and respond to global and domestic economic, geopolitical, social conditions and their impact on demand for our offerings.

We believe that cash flows generated from operating activities, our strategic Bitcoin reserve, and the 2024 ATM will meet our anticipated cash requirements in the short-term. On a long-term basis, we would rely on access to the capital markets for any long-term funding not provided by operating cash flows, cash on hand, and our strategic Bitcoin reserve.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

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Operating Activities

Net cash used in operating activities was $68.5 million for the twelve months ended December 31, 2024, resulting from net income of $331.4 million, offset by adjustments to reconcile net income to net cash (used in) provided by operating activities of $385.5 million and changes in assets and liabilities of $14.4 million. Net cash used in operating activities was $22.2 million for the twelve months ended December 31, 2023, resulting from net income of $21.9 million, and offset by non-cash adjustments of $52.4 million.

Investing Activities

Net cash used in investing activities totaled $188.5 million for the twelve months ended December 31, 2024, primarily consisting of $124.0 million in property and equipment purchases, $100.7 million in Bitcoin purchases for our strategic reserve, and a $39.6 million deposit for acquiring miners and mining equipment. These outflows were partially offset by $74.5 million in proceeds from Bitcoin sales. Net cash provided by investing activities totaled $87.0 million for the twelve months ended December 31, 2023, primarily consisting of $65.7 million in proceeds from Bitcoin sales, $23.0 million in cash acquired from the Business Combination, and $0.8 million from the sale of property and equipment. These inflows were partially offset by $1.5 million in property and equipment purchases and a $1.0 million cash deposit for miners.

Financing Activities

Net cash provided by financing activities was $311.9 million for the twelve months ended December 31, 2024, primarily consisting of $150.0 million in proceeds from notes payable, $162.0 million in net proceeds from the issuance of common stock through our 2024 ATM, and $22.2 million in proceeds from covered call options premiums. These inflows were partially offset by $36.8 million in loan repayments. Net cash used in financing activities was $40.9 million for the twelve months ended December 31, 2023, primarily consisting of $39.6 million in repayments of loans payable and $1.2 million in debt issuance costs paid.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of the consolidated financial statements, and revenues and expenses during the periods presented. On an ongoing basis, our management evaluates these estimates and assumptions, and the effects of any such revisions are reflected in the consolidated financial statements in the period in which they are determined to be necessary. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements. Set forth below are the policies and estimates that we have identified as critical to our business operations and understanding our results of operations, based on the high degree of judgment utilized or complexity in their application.

While our significant accounting policies are described in more detail in Note 2. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements to our consolidated financial statements included elsewhere in this Annual Report, we believe the following accounting policies and estimates to be the most critical to fully understand and evaluate this management discussion and analysis:

• use of estimates;
• digital assets;
• revenue from contracts with customers;
• impairment of long-lived assets;
• investment in equity investees;
• finite-lived intangible assets; and
• stock based compensation expense

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.

Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with revenue recognition, determining the useful lives and recoverability of long-lived assets, impairment analysis of finite-lived intangibles and digital assets, and current and deferred income tax assets (including the associated valuation allowance) and liabilities.

Market Price Risk of Bitcoin

We hold a significant amount of Bitcoin; therefore, we are exposed to the impact of market price changes in Bitcoin. As of December 31, 2024, we held 10,171 Bitcoin. The fair value of a single Bitcoin was approximately $93,354 as of December 31, 2024; therefore, the fair value of our Bitcoin holdings as of December 31, 2024 was approximately $949.5 million. Declines in the fair market value of Bitcoin will impact the cash value that would be realized if we were to sell our Bitcoin for cash, therefore having a negative impact on our liquidity.

Custodian Risk

Our Bitcoin is held with third-party custodians, Coinbase Custody, NYDIG, and BitGo, which we select based on various factors, including their financial strength and industry reputation. Custodian risk refers to the potential loss, theft, or misappropriation of our Bitcoin assets due to operational failures, cybersecurity breaches, or financial difficulties experienced by these third parties. Although we periodically monitor the financial health, insurance coverage, and security measures of our custodians, reliance on such third parties inherently exposes us to risks that we cannot fully mitigate.

Credit Risk

Credit risk arises from our practice of pledging Bitcoin as collateral in transactions with counterparties. We mitigate this risk by engaging with counterparties that we believe possess strong creditworthiness based on their size, credit quality, and reputation, among other factors. During the twelve months ended December 31, 2024, we have not incurred any material loss from such transactions. However, there remains a risk that a counterparty could default on its obligations to us, which might result in a material loss. We continually assess the credit risk associated with our counterparties and, if necessary, recognize a loss provision or write-down. Credit risk also arises from us placing our cash and demand deposits in financial institutions. Although we strive to limit our exposure by placing cash and demand deposits with financial institutions with a high credit standing, there can be no assurances that we are able to mitigate our credit risk.

Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

We have two loans that maintain a variable interest rate. The first is the TZRC Secured Promissory Note, which includes a maximum interest rate of 15.25%. The second is the Coinbase credit facility, which bears interest at a rate of 5.0% plus the greater of (i) the US Federal Funds Target Rate – Upper Bound and (ii) 3.25%. As a result, changes in market interest rates could affect our operations over certain periods and may also impact our ability to finance projects. For more information regarding the TZRC Secured Promissory Note and Coinbase credit facility, see Note 15. Loans and notes payable to the consolidated financial statements included elsewhere in this Annual Report.

In addition, our exposure to interest rate risk relates to our ability to earn interest income on cash balances at variable rates. Changes in short term interest rates are not expected to have a significant effect on the fair value of our cash account.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized, and reported within the specified time periods. The Company’s disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports that it files and submits under the Exchange Act is accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, to enable timely decisions regarding required disclosure.

As of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer, with the participation of its management, evaluated the effectiveness of its disclosure controls and procedures and concluded that they were not effective as of December 31, 2024.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, recognizes that any system of disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance rather than absolute assurance of achieving its objectives. The design of a control system must reflect resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation can provide absolute assurance that all control issues or instances of fraud, if any, will be detected. These inherent limitations include the possibility of faulty judgments, errors or mistakes, and the potential for controls to be circumvented by individual acts, collusion among employees, or management override. Moreover, the design of any control system is based on certain assumptions regarding future events, and there is no guarantee that any design will succeed under all potential future conditions. Over time, controls may become inadequate due to changes in conditions or deterioration in compliance with policies or procedures. Consequently, misstatements due to error or fraud may occur and not be detected.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Management has assessed the effectiveness of the Company’s internal control over financial reporting for the year ended December 31, 2024, based on the criteria set forth in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Under the supervision and participation of our management, including our CEO and CFO, we evaluated the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control - Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. As part of our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2024, management identified the following material weaknesses:

• our control pertaining to the review was not operating effectively as it relates to the calculation of the deferred tax provision for Bitcoin held in an international jurisdiction; and
• our control pertaining to the review of a complex accounting transaction related to our BITMAIN miner purchase agreement was not operating effectively.

The material weaknesses associated with the operating effectiveness did not result in a material misstatement to our previously issued consolidated financial statements, nor in the Consolidated Financial Statements included elsewhere in this Annual Report. Based on these material weaknesses, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2024. Our independent registered public accounting firm, Raymond Chabot Grant Thornton, has issued an audit report expressing an adverse opinion on the effectiveness of the internal control over financial reporting, which appears in Part II, Item 8 of this Form 10-K.

Management’s Plan for Remediation

Our Board and management take internal control over financial reporting and the integrity of our financial statements seriously. Management continues to work to improve controls related to the material weaknesses described above. Management will continue to implement measures to remediate the material weaknesses, such that these controls are designed, implemented, and operating effectively.

In order to achieve the timely implementation of the above, Management is taking the following actions:

• replacing our existing third-party advisor who prepared and supported our review of the deferred taxes calculation with an advisor who has additional expertise in calculating deferred income taxes in the international jurisdictions in which we operate;
• replacing our existing third-party advisor who supported our review of the BITMAIN miner purchase agreement with an advisor who has additional expertise in Bitcoin-related transactions; and
• developing and implementing enhanced controls related to the review of certain of our third-party advisors with respect to their review of certain complex transactions.

While these remedial actions are designed to correct the material weaknesses, changes to internal control over financial reporting require operation for a sufficient period of time in order for Management to evaluate and test the operating effectiveness. Management will continue to monitor and evaluate the effectiveness of the change for a sufficient period of time prior to concluding that these controls are designed and operating effectively, at which time, the material weaknesses can be considered remediated.

Changes in Internal Control Over Financial Reporting

Except for the material weaknesses and the remedial measures described above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during the year ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations on Internal Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. No evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.